A Partnership Across the Pacific
The United States and New Zealand are natural partners across the Pacific. The two countries have come a long way together. U.S. Marines fought bravely with New Zealand troops in World War II. After the war, the partners joined Australia in San Francisco to sign the ANZUS treaty with a commitment to safeguard peace and security in the Asia Pacific.
At the core, the U.S. and New Zealand commitment to safeguard peace and security in the Asia Pacific never wavered and it is as relevant today as it was then.
Despite an important disagreement over nuclear issues in the 1980s, a perspective that has become part of New Zealand’s identity, our two countries have refocused on common interests and aligned values.
The last decade and a half witnessed a remarkable renewal in our bilateral ties, the result of creative diplomacy and shifting geopolitical tectonic plates, in which old disagreements were tabled, respect given to differing views, and a close relationship renewed.
The two nations have focused on increasing political and security ties, growing economic cooperation, and expanding connections between their people.
A new period of cooperation began after the United States was attacked on September 11, 2001. New Zealand contributed troops to support the war effort in Afghanistan. Two years later, Wellington sent engineers to back U.S. led military engagement in Iraq following a UN Security Council call for humanitarian assistance.
As it became clear that the most important economic opportunities and security challenges of the 21st century will be centered in Asia, leaders in Wellington and Washington worked to renew and enhance ties.
The 2010 Wellington Declaration marked a key step in the normalization of security ties. It called for regular foreign ministerial and political-military discussions, a significant elevation of relations.1 The Washington Declaration 18 months later consolidated those gains by establishing a regular bilateral strategic dialogue on security matters and renewed joint military training exercises.2
The countries are now focused on exploring new levels of cooperation to meet 21st century threats. That includes a recognition that a strong economic foundation is fundamental to achieving lasting peace and promoting prosperity in the Indo-Pacific.
The United States and New Zealand have committed to furthering their economic relationship through the Trans-Pacific Partnership, but more needs to be done to expand bilateral and regional cooperation in trade, finance, development, and economic capacity building.
U.S. and New Zealand foreign policy officials and business leaders know that a precondition for a safe and prosperous Asia is a law based regional architecture that includes China, India, and all of ASEAN. China’s economic emergence challenges the region’s policy makers and bureaucracies to quickly adapt to new realities, and also presents Beijing with the existential test of balancing its economic dominance with nationalism and defining a sustainable security posture.
Like the rest of the Asia, New Zealand’s economic ties with China have changed Wellington’s international relations calculus. In 2013, five years after New Zealand signed a free trade agreement with China, it overtook Australia to become New Zealand’s largest trading partner.
The new economic paradigm means New Zealand’s security partner and guarantor and its most important economic partner are perceived to be in geostrategic competition.
Officials in Wellington are confident they will be able to maintain strong, effective ties with both Beijing and Washington, a position that U.S. officials say they understand.
New Zealand’s close ties with both China and the United States should focus its foreign policy. Wellington is investing in regional economic and security architecture that gives China and India room to feel secure and to lead, while engaging the United States as a primary security and economic partner. New Zealand is a bridge and a broker. It can play a critical role in addressing regional security challenges.
Economics is the Foundation for Security
New Zealand’s size compelled an intuitive understanding that political security is linked to economic well-being. The nature of its economy requires it to rely on trade and investment with foreign partners to drive economic growth. As a matter of survival, Wellington has negotiated FTAs with a total of nine countries, mostly in the Indo-Pacific.
In 2005, Brunei, Chile, Singapore, and New Zealand negotiated the P-4 trade agreement, which was later expanded to 12 countries, including the United States, and renamed the Trans-Pacific Partnership.
Wellington recognized early that engaging in a trade agreement with the United States would help align New Zealand’s interests with U.S. strategic objectives and allow each to leverage their respective strengths.
While security ties are being enhanced, economic relations have not yet reached their potential. Both countries share an interest in vastly expanding trade and investment ties, which will support continued expansion of security cooperation.
The TPP offers both countries their overdue FTA, and helps them promote a rules based trading system as the best option for economic integration across the Indo-Pacific.
Once the TPP is completed, the two countries will work together with partners to encourage other countries in the region, including China, India, and all ASEAN countries to join in this rules based approach.
Agricultural products and natural resource commodities make up roughly half of New Zealand’s exports, although the service sector plays an increasingly important role. New Zealand’s goods exports to the United States were $3.5 billion3 in 2013 while its imports reached $3.2 billion. New Zealand’s biggest exports to the U.S. are meat, dairy products, and wine, while its major U.S. imports are aircraft and sophisticated machinery.
The stock of U.S. direct investment in New Zealand stood at $9.5 billion in 2012, an increase from $7.9 billion the previous year, but still nowhere near potential. Most U.S. direct investment is in the finance, insurance, and manufacturing sectors. Much of New Zealand’s investment in the United States is in information technology, software, healthcare services, and agriculture.
New Zealand and the United States will see bilateral trade significantly increase if a comprehensive TPP is completed. Small and medium sized companies, particularly from innovative sectors, stand to benefit from clear rules and investor protections in the agreement. Some Wellington officials argue that New Zealand could serve as a bridge for U.S. multinationals to enter the global supply chain, thanks to Wellington’s FTAs with China, Malaysia, Hong Kong, and ASEAN. Completion of TPP is expected to increase these opportunities.
Some of the largest gains for New Zealand from the TPP are expected to be dairy and meat exports, particularly to the United States.
New Zealand’s participation in both the TPP and other trade agreements gives the country a critical opportunity to influence the trading architecture in the Asia Pacific.
A new generation of innovative New Zealand entrepreneurs who are creating companies focused on information technology, business services, and visual effects are making inroads in the United States. New Zealand information technology startups find the United States a critical market if they hope to break into the larger global economy. Because of cultural affinities and ease of doing business, New Zealand can be a bridge for U.S. firms using the global supply chain running through Asia.
New Zealand as a Bridge between Asia and the Pacific
Despite its relative geographic isolation, New Zealand is well integrated into Asia and the Pacific, and can serve as a bridge for the U.S. to the region. In fact, New Zealand and Australia have played a seminal role in linking the Indo-Pacific to the Pacific. New Zealand and Australia play an important role as members of both the East Asia Summit and the Pacific Island Forum.
New Zealand is well positioned to partner with the United States to help shape a region that best serves both countries’ common interests.
In some instances, it is more palatable for New Zealand to promote ideas in international or regional forums than it is for the United States due to its large size or the wariness of other nations. In areas such as preparations for the United Nations Climate Change Conference in France in December 2015, it can be more effective for New Zealand to pitch ideas with partners than it is for the United States.
New Zealand’s interests as a small country in a predictable rules-based international system and U.S. interests in ensuring adherence to international norms as a means of managing the rise of strategic competitors overlap in a multitude of important ways.
New Zealand and the United States know that deeper political and security engagement in the Indo-Pacific is critical to their national security.4 Regarding the rise of China, both countries agree that the international system will benefit if Beijing adheres to international norms.5 They both champion freedom of navigation and a peaceful resolution of the disputes currently unfolding in the South China Sea.
A specific area that has been identified for U.S. firms to play a significant role in the Asia Pacific through New Zealand is opening wholesale warehouse stores that sell discount merchandise and low cost construction materials. These stores would create competition and drive down the prices of food, clothing, household goods, and construction supplies, and also link products produced in New Zealand into their global sourcing networks.
In a new initiative to boost trade between the cities of Guangzhou in southern China, Los Angeles, and Auckland, the mayors of the three cities signed a Tripartite Economic Alliance agreement in November 2014 to promote economic cooperation. This type of cooperation benefits all parties, and could serve as a model for future opportunities that look to leverage New Zealand’s economic ties to Asia.
New Zealand and the United States have come a long way in normalizing and enhancing their political, security, and economic ties over the past decade. As the two countries reflect on the next generation of ties, a number of steps should be taken to deepen bilateral political, security, and economic relations.
Politics and Security
- President Obama should visit New Zealand. A visit would generate significant levels of goodwill in the country. The last U.S. president to visit New Zealand was Bill Clinton who attended the APEC summit in 1999.
- Elevate climate change coordination to a new level in global forums and specifically in the Pacific islands. The two countries are already working together to build international support for an ambitious agenda and outcomes at the United Nations Climate Change Conference in France in late 2015, but they should do more in the PIF.
- Set specific goals for non-proliferation and regional security coordination. With New Zealand’s holding a non-permanent seat in the UN Security Council, the two countries could cooperate on nuclear nonproliferation and security, a priority to both countries and an area in which they have significant agreement.
- Elevate coordination to strengthen & connect ASEAN, EAS, PIF & APEC. Based on the core norms of the two partners, they should have a sense of urgency in working together to strengthen regional organizations such as ASEAN, EAS, PIF and APEC. Building capacity, creating agendas focused on key strategic issues, and sharing ideas between forums will enhance national interests for both New Zealand and the United States. Enhance resourcing and focus on health, climate change, water quality, illegal fishing, and maritime domain awareness.
Investment and Trade
- Secure a comprehensive TPP as soon as possible. Wellington and Washington should work to ensure that a high-standard TPP agreement is completed before the APEC Leaders Meeting in Manila in November 2015 and then support one another and TPP partners to ratify a good deal before March 2016.
- Articulate a vision for linking all EAS countries to TPP. Leaders in both countries should immediately begin to articulate a strategic vision for welcoming all member countries of the East Asia Summit to be “on-ramped” to TPP. Leadership in this area will reassure key countries that all EAS participants can agree that a strong economic foundation is a necessary condition for enduring regional security.
- Reform immigration rules to promote cooperation. Good progress has been made with APEC level facilitation, but the two countries need to aggressively reform immigration rules to promote closer economic ties. The U.S. government should grant New Zealanders E-category visas that would make it easier for its entrepreneurs and investors to get authorization to work in the United States.
- Ratify WTO Agreement on Government Procurement. New Zealand should immediately ratify this agreement to allow its firms, alone and with U.S. partners, to compete for U.S. government projects.
The Next Level: New Zealand Investing Beyond the Beltway
The bilateral U.S.-New Zealand relationship moved to a new level following the Wellington and Washington Declarations—at least on the political and security front.
Broadening and building a nationwide constituency for strengthening U.S.-New Zealand ties is an important new foreign policy and business priority.
We need a paradigm shift to comprehensive commercial, financial, and development cooperation, including a vision for integrating our economies. Negotiating and approving a far-reaching TPP will move the two countries forward, but the trade agreement itself will not result in more effectively integrating our economies.
New Zealand’s Engagement with Top U.S. States
Both countries should use this momentum to take relations to a deeper, more granular level.
This is particularly important for New Zealand’s approach to the United States. In the American system, significant political power is centered at the state level. Governors act as chief executive officers for the 50 states. They focus on and track key performance indicators related to exports, imports, investments, foreign students attending their educational institutions, and tracking constituencies with links to other countries. Governors, in turn, often become the most important political leaders in the United States.
In addition, for members of Congress in both the U.S. Senate and House of Representatives, input from their constituents remains the strongest influencer on decision-making. New Zealand would benefit commercially and politically from expanding its relationships outside of Washington.
Savvy partners of the United States such as the United Kingdom, Germany, Japan, and others have recognized that states are crucial to their long-term strategies to deepen ties with the United States.
New Zealand should adapt its own strategy and target states with the greatest opportunities to expand trade and investment ties, while building connections with the next generation of American political leadership.
Developing closer diplomatic, political, and business ties with governors of states with significant business, education, or people-to-people ties with New Zealand and the Pacific would enhance New Zealand’s ability to leverage strong ties with the U.S. government and maximize the value of the TPP by driving new economic partnerships.
New Zealand’s ties with California and Washington are already strong at many levels. Some states that Wellington might focus on in the years ahead include Texas, Illinois, Pennsylvania, Virginia, and Georgia.
At the same time, the United States should develop similar plans for broadening outreach in New Zealand by working with local leaders and helping to connect them to U.S. counterparts. A good foundation of work has already been laid in this area, but with focused cooperation, both Wellington and Washington can make a strategic investment in taking their ties to a new level.
Time to Build
Our research confirms that our ties are close, our history is connected and even fraternal, but we have a shared compelling interest to do more together. We have not lived up to our potential, particularly in the area of economic cooperation. It is time to change that. Doing so will bring great opportunities and enhanced security to citizens in both countries.
1 “Wellington Declaration on a New Strategic Partnership between New Zealand and the United States,” U.S. Department of State, media note, November 4, 2010, http://www.state.gov/r/pa/prs/ps/2010/11/150401.htm
2 “Washington Declaration on Defense Cooperation between the Department of Defense of the United States of America and Ministry of Defense of New Zealand and the New Zealand Defence Force,” June 19, 2012, http://www.defense.gov/news/WashingtonDeclaration.pdf
3 All figures are in U.S. dollars.
4 The White House, “Remarks by President Obama in Address to the United Nations General Assembly,” September 24, 2013, https://www.whitehouse.gov/the-press-office/2013/09/24/remarks-president-obama-address-united-nations-general-assembly.
5 U.S. Department of State, “The Future of U.S.-China Relations,” testimony by Daniel R. Russel, assistant secretary, Bureau of East Asia and Pacific Affairs, before the Senate Foreign Relations Committee, Washington, DC, June 25, 2014, http://www.state.gov/p/eap/rls/rm/2014/06/228415.htm.