New Zealand, Australia and China’s rise

Author: Robert Ayson, Victoria University, Wellington

New Zealand’s Prime Minister John Key recently returned from a major visit to three of East Asia’s most important countries. He visited China, with whom New Zealand already has a Free Trade Agreement, the Republic of Korea, with whom Wellington is seeking to conclude FTA negotiations, and Vietnam, another growing Asian economy which New Zealand would like to see become a full partner in the Trans-Pacific Partnership.

It is no surprise that Prime Minister Key’s message to the New Zealand public was in tune with his own earlier career in foreign exchange markets: the big issue is positioning New Zealand so that it is best able to participate in Asia’s economic expansion. This, of course, is not a new theme for trade-dependent New Zealand. But Mr Key reinforced the Asian focus of Wellington’s outlook by noting in one interview that since becoming Prime Minister he has visited every single Asian country in which New Zealand had a High Commission or Embassy, all except for India and Indonesia. By contrast, he added, among the countries of the European Union he had only visited the United Kingdom.

New Zealand’s reliance on Asia for a good deal of its economic future is overshadowed by the benefits that the Australian economy has been gaining from East Asia’s dynamism, including the buoyant minerals and energy sectors. A recent study conducted for the Asia New Zealand Foundation confirmed the significantly higher Australian reliance on Asia within its overall trade profile. According to that study a staggering 80 per cent of Australia’s exports (by value) in 2008 headed to East Asian markets: the corresponding figure for New Zealand was just under 40 per cent. One might therefore expect that Australia would be even more comfortable than New Zealand is with the power transition which is occurring in Asia as a result of the continuing growth of the region’s rising economies, and also with Asia’s increasing place in the global system (which the debt mountains faced by the United States and a number of European countries might only increase).

But the picture seems rather different. Of the two countries, New Zealand – currently less dependent for its prosperity on a changing Asia – seems more comfortable with that change. As many New Zealanders perceive it, Australia’s ambivalence is demonstrated by the 2009 Defence White Paper, which is taken (rightly or wrongly) as an important signal of Australia’s sense of strategic discomfort with aspects of China’s rise. These New Zealanders might also expect, and they might be right, that their own government’s forthcoming White Paper will not attach quite the same sort of attention to concerns about China’s defence modernisation. They might tend also to think that while the Key government has continued its predecessor’s efforts to improve New Zealand’s security relationship with the United States, Wellington has less reason to be concerned about a changing strategic balance including any signs that America’s freedom to project power into Asia was being challenged.

Australia faces the prospects of a trade-off down the line between its own much closer security relationship with the United States and its increasingly close economic relationship with China. These two relationships are more intense than New Zealand’s and the potential bargain between them is more challenging. We should expect that Australians will find the region’s transformation more vexing than it will appear to their New Zealand counterparts. And Australians may have had more exposure to the reality that regional countries are dealing with more than one rising China, the burgeoning market and the more assertive strategic actor being but two of these personalities. This awareness of China’s complex persona may have been accelerated by former Prime Minister Rudd’s sometimes challenging experiences in Australia’s relationship with Beijing.

New Zealand’s approach is not as simple as some might have it, and it is certainly not one-dimensional, including in the economic realm. The sensitivity some kiwis are showing over the prospect of Chinese ownership of large dairy farms is a smaller but still significant version of Australian hesitancy over the sale of important mineral concerns to Chinese companies. In both cases, international policy often begins at home. And many of those New Zealanders who instead naturally welcome the benefits that greater interaction with China brings also feel the need for strong institutions in which regional countries can seek jointly to cope with the changing balance in Asia.

This suggests that there is a fascinating mix of similarity and difference in the approach the two trans-Tasman powers are taking towards China’s rise which remains the the main feature of the changing distribution of power in Asia. Closer study of these similarities and differences would seem to be warranted. How important are size and geography? What about self-regard including Australia’s medium power ambitions and New Zealand desire to maintain a distinct profile for itself in the region? Was Hedley Bull, Australia’s leading international relations scholar, right on the money three and a half decades ago in an address to a conference in the United Kingdom when he observed that the first principle of New Zealand’s foreign policy, ‘never acknowledged, is that New Zealand should not get out of step with Australia’ and that ‘The second principle is that New Zealand should maximise all opportunities for appearing to be out of step.’

Robert Ayson is Professor of Strategic Studies at Victoria University of Wellington where he directs the Centre for Strategic Studies.