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Asia is of critical importance to New Zealand’s long-term economic, political and security well-being. The region is undergoing rapid change driven by the growing economic and political influence of China and India, and the need to develop more effective regional mechanisms (“architecture”) to manage economic, political/security and societal change.
Nimble bilateral and regional responses are required from New Zealand to safeguard our national interests. New Zealand’s standing in the region is high – we are seen as a fully engaged and natural partner in Asian regionalism and as a valued friend by bilateral partners. Asia is now the destination for 35 percent of New Zealand‘s exports, a major source of investment and people-to-people links, and a key focus for New Zealand’s engagement, including work on FTAs. The current financial crisis and the slow-down in the world economy will have an impact on the region, although high Asian growth rates and strong economic fundamentals and reserves are expected to temper downside risks.
North Asia has emerged as a primary engine of global economic growth, largely driven by China. Economic integration continues, with intra-regional trade accounting for over half the region’s total trade. North Asia is geopolitically complex, characterised in particular by the potential for instability on the Korean Peninsula, and across the Taiwan Strait despite recent improvements in Taiwan’s relations with China. Progress has recently resumed in the Six Party Talks (6PT) on the verification procedure to confirm independently the content of North Korea’s declaration of its nuclear programmes. Regional rivalries, historical issues relating to Japan’s colonial and wartime legacy, and territorial disputes also affect regional relations. Japan has made significant progress with both China and the Republic of Korea to improve the tone of these relationships and set the stage for closer cooperation.
China, Japan and Republic of Korea are priority relationships for New Zealand.
Japan is the cornerstone of New Zealand’s engagement with North Asia. Japan was instrumental in helping New Zealand to secure membership in the East Asia Summit (EAS). New Zealand has strongly supported Japan’s Closer Economic Partnership in East Asia (CEPEA) initiative. We are committed to strengthening the relationship across five broad areas: economics and trade; security and defence; science and technology; the environment and climate change; and Asia-Pacific regional issues. In May 2008, the two Prime Ministers concluded a joint statement setting out a framework for closer cooperation and agreed to start a joint study of a Japan-New Zealand Economic Partnership Agreement (EPA). (See Trade Negotiations section below.) Disagreements with Japan over whales conservation and some aspects of fisheries policy require ongoing careful management.
Greater China: New Zealand’s relationship with China is in good shape. The New Zealand China Free Trade Agreement (FTA) entered into force on 1 October 2008. New Zealand remains the only developed country with which China has concluded a FTA. New Zealand has a whole-of-Government effort underway to implement the FTA. The political relationship is fundamental to New Zealand’s engagement with China. While we occasionally experience tension around human rights issues, including Tibet, and New Zealand’s management of relations with Taiwan, the relationship is solid and friendly, with frequent bilateral exchanges and high-level contact. FTA considerations have not constrained New Zealand’s regular discussions with China on human rights.top of page
New Zealand and Hong Kong have a strong and constructive relationship. We see potential to encourage further growth and diversification of bilateral trade and investment, including through partnering with New Zealand enterprises into China. There have been some discussions about resumption of Closer Economic Partnership negotiations.
While New Zealand’s one China policy limits our ability to engage with Taiwan in other than a few international fora (eg APEC and the WTO), we have a strong economic and cultural relationship with Taiwan, based on trade links, cooperation in the education and science sectors, and the growing relationship between Taiwan’s indigenous peoples and Maori and Pacific island populations of New Zealand.
Republic of Korea (ROK): New Zealand’s engagement with Korea has grown significantly over recent years under the Partnership for the 21st Century framework. Links between respective Government agencies have thickened and Korea has become an increasingly important partner in science and technology, investment and film. New Zealand and Korea are holding two rounds of preparatory talks on a Korea-New Zealand FTA in 2008. (See Trade Negotiations section below.) New Zealand has designated ROK as the focus country for its Cultural Diplomacy International Programme in 2008-09. A major event will take place in Seoul in April 2009, profiling New Zealand film, tourism, culture and lifestyle in the Korean market
Democratic People’s Republic of Korea (DPRK): New Zealand is committed to supporting the Six Party Talks (6PT) process aimed at denuclearising North Korea and encouraging its return to the international community. The US has removed North Korea’s designation as a state sponsor of terrorism and in return North Korea has resumed the disablement of its nuclear facilities. New Zealand has given some NZ$8.5 million in assistance to the DPRK since 2004, including contributions toward heavy fuel oil purchases and humanitarian aid. A scholarship programme is proposed. New Zealand has sought to ensure that any assistance is delivered contingent upon the DPRK honouring its 6PT commitments expeditiously and in full.
New Zealand’s involvement in Southeast Asia is multi-faceted. In 2007, the ten countries of ASEAN were New Zealand’s third largest merchandise export market, worth NZ$4.6 billion. The market for New Zealand merchandise has grown by 24 percent per year over the past three years.
Indonesia has emerged as one of the more dynamic and stable democracies in Southeast Asia. This year marks the 50th anniversary of the establishment of diplomatic relations between New Zealand and Indonesia. A more confident Indonesia is re-asserting its leadership role in ASEAN and is helping New Zealand to consolidate its position in the emerging regional architecture. Indonesia is also helpful in other areas, including counter-terrorism, inter-faith dialogue and the Alliance of Civilisations. It is New Zealand's largest trade partner in Southeast Asia and seventh largest export market worldwide. The New Zealand/Indonesia Trade and Investment Framework was concluded in 2007. As a result of significant reform in the Indonesian military and strengthening of the relationship in 2006, New Zealand resumed low-level cooperation with the Indonesian Armed Forces (TNI). This is being carefully managed.
New Zealand’s relationship with Thailand is underpinned by a Closer Economic Partnership (CEP). There is considerable political interchange, strong people-to-people contacts and good institutional links. We cooperate well regionally. Restrictions which New Zealand placed on the relationship following the September 2006 Thai coup were lifted following democratic elections in December 2007. The political situation remains uncertain. Further legal cases against the current government are pending. New Zealand needs to manage relations with Thailand through this period judiciously without prejudicing future opportunities. Thailand is likely to remain pre-occupied with domestic concerns. This may complicate the conduct of regional meetings as Thailand is the Chair of ASEAN until December 2009. Thailand is New Zealand’s 14th-largest export market and 10th largest bilateral trading partner, as well as our 4th most important source of fee-paying students. top of page
New Zealand’s relationship with Singapore is warm. There are few problematic issues. Trade, which is governed by the CEP agreement of 2001, is significant: Singapore is New Zealand’s 8th largest bilateral trading partner. There is currently a trade imbalance in Singapore’s favour. There is scope for New Zealand exporters to develop their market presence in Singapore. With its influential position in ASEAN and other groupings, Singapore is a key ally in New Zealand’s ambition to be considered a partner in Asian regional initiatives. The EAS and P4/US negotiation are likely to dominate attention in coming months. Remaining on Singapore’s radar screen requires work. Scientific research and creative industries have been identified as areas for closer cooperation, as well as maintaining strong defence links.
Malaysia is important to New Zealand for strategic, political and economic reasons. Historical links through Commonwealth membership, the Colombo Plan and shared security concerns provide a valuable base on which to build. The political landscape in Malaysia is changing. Malaysia is New Zealand’s 9th largest trading partner and 11th largest export market. New Zealand is seeking to develop links in value-added services in education and training, agricultural technology, biotechnology, ICT, the creative industries and tourism. The seventh round of bilateral FTA negotiations took place in September 2008 in Kuala Lumpur (see Trade Negotiations section below). New Zealand continues to have restrictions placed on the export of halal meat to Malaysia.
The recent pace of change in Viet Nam has been rapid. By 2010 Viet Nam’s economy is expected to have doubled in size from 2000 and it should have graduated to middle-income status. Viet Nam is our 24th largest export market. New Zealand exports are dominated by dairy, wood products and agricultural commodities. The services sector, especially education and consultancies, continues to thrive. Viet Nam is an increasingly popular tourist destination for New Zealanders. There is greater potential to work together in regional and international meetings. Viet Nam is keen to see development of the relationship on all fronts. Responding presents some capacity challenges for New Zealand.
The Philippines continues to face serious challenges. President Arroyo’s visit to New Zealand has acted as a catalyst for increased cooperation, including in police, defence, human rights, education and natural resource management. The Philippines is now New Zealand’s tenth largest merchandise export market. Exports have grown by 154 percent since 1999. People-to-people links are growing rapidly. An estimated 20,000-25,000 Filipinos live in New Zealand.
New Zealand has a minimal relationship with Myanmar and continues to raise human rights concerns and urge the Myanmar authorities to commit to national reconciliation through open and constructive dialogue with all political parties. Travel restrictions prevent visits by members of the ruling junta to New Zealand. We support the UN-led process aimed at improving the human rights and political situation, and consider that ASEAN countries, plus China and India, have the greatest ability to influence Myanmar positively. Myanmar remains New Zealand’s ASEAN dialogue partner until late 2009, requiring careful management.
Cooperation with Brunei, Cambodia and the Lao People’s Democratic Republic largely in the context of ASEAN forms the core of our relationships.
Timor-Leste is struggling to put in place the institutions and mechanisms of nationhood. The security environment remains fragile. New Zealand has assisted with security and development since before independence. There are around 120 New Zealand Defence Force personnel attached to the International Stabilisation Force (ISF) and 25 New Zealand Police attached to the UN Mission (UNMIT). Australia is considering whether ISF numbers can be reduced in light of the improved security situation. We are working closely with Australia on this question. Although security has improved, we assess that more work needs to be done before it will be possible for the Timorese military and police to take responsibility for security. New Zealand has favoured an extension of the UNMIT mandate when it comes up for renewal in February 2009. Offers by New Zealand (and Australia) to help Timor-Leste with advice on security sector reform have yet to be been taken up. With support of the Timor-Leste Government, the New Zealand Police are about to embark on a pilot community policing programme to support the long-term professional development of the Timorese Police, drawing extensively on New Zealand community policing experience.
India is now the world’s fourth-largest economy. In the last two decades economic growth averaged over 7 percent. India is also an increasingly assertive player on the world stage. It was in part responsible for the breakdown of WTO negotiations in July. Its ongoing refusal to sign the Nuclear Non-Proliferation Treaty (NPT) and its testing of nuclear weapons in 1998 leave it outside international norms in this area. India’s growing regional and global influence makes it an important focus for New Zealand’s efforts to broaden and deepen relations. The Governor-General visited in September 2008. The legacy of Sir Edmund Hillary continues: the Government recently announced a Sir Edmund Hillary Fellowship to facilitate one high level visit each year from India (or Nepal). India is a fast growing market both for commodities (eg coal, wool, timber) and services. Tourism from India is increasing by 10 percent a year, New Zealand’s fastest growing market in Asia. The tour by the Indian cricket team to New Zealand in January 2009 will be a further promotional opportunity. Some 4000 Indian students are studying in New Zealand, up from 200 in 1998.
New Zealand and Indian officials are continuing to work towards the early conclusion of a Joint FTA Study (see Trade Negotiations section below). The US-India Civil Nuclear Co-operation Agreement posed difficult questions for New Zealand. We worked constructively with like-minded countries (especially Ireland and Austria) to bolster the non-proliferation elements of the agreement. The finally agreed package, which included a range of non-proliferation commitments by India and the imposition of IAEA safeguards on its civilian programme, coupled with India's robust non-proliferation record, enabled a consensus to be reached within the Nuclear Suppliers’ Group in October.
Pakistan returned to democracy in 2008, after nine years of military rule. New President Asif Zardari faces a worsening economic outlook and serious political tensions, including in the border areas with Afghanistan. He will struggle to exercise control over the military and intelligence services, some of whom may be covertly supporting the Afghanistan insurgency. Pakistan has a nuclear weapons programme. Questions remain about the strength of Pakistan’s command and control arrangements especially in times of political instability. Pakistan and New Zealand have a modest relationship, focused on Commonwealth linkages. Trade is limited: there are openings in agriculture and education. Pakistan’s proliferation and human rights record remains a concern.
Sri Lanka is in the midst of an increasingly violent civil war. New Zealand has raised concerns in UN bodies about Sri Lanka’s human rights record, and is actively considering designating the LTTE (Tamil Tigers) a terrorist entity. Sri Lanka is a useful market, particularly in dairy.
After centuries of monarchy and a turbulent past eight years, Nepal became a Republic on 28 May 2008 following elections and the establishment of a Maoist government. The bilateral relationship builds on Sir Edmund Hillary’s legacy, and modest ODA contributions channelled through UN agencies and NGOs. top of page
New Zealand has political, security, economic and trade interests in being an active member of open regional institutions, structures and processes. Asian “regional architecture” has been evolving, prompted by a number of factors including Asian responses to the economic crisis of the late 1990s, and the rise of China and India.
New Zealand’s broad interest is ensuring that it is fully engaged in – and is not excluded from – the complex of developing regional structures and processes. New Zealand is an active member of the:
and is following closely the exploration of the concept of an Asia Pacific Community (APC) by the Australian Prime Minister’s Special Envoy. New Zealand has a strengthening dialogue relationship with the Association of Southeast Asian Nations (ASEAN). These processes allow New Zealand to work towards participating in a more integrated Asian community, and reinforce important relationships with countries of the region. New Zealand has a strategic interest in promoting the EAS rather than the “ASEAN plus three” (ASEAN plus China, Korea and Japan), to which we do not belong, as the basis of community development in the region.
APEC represents almost 60 percent of the world economy and 49 percent of world trade. Not a negotiating forum, its scope of work covers trade and investment liberalisation; business facilitation; economic and technical cooperation; and more recently structural reform. Post-9/11, APEC has also embraced a security agenda including counter-terrorism, secure trade and emergency/disaster preparedness. All of these structures provide opportunities for Ministerial engagement, including at Leaders’ level at the EAS and APEC summits. Peru is hosting APEC this year and Singapore will host in 2009, APEC’s 20th anniversary. Key issues for the APEC Leaders and Ministerial meetings to be held in Lima in November 2008 are: global financial and market volatility; the state of the WTO/DDA negotiations; regional economic integration issues; the rapidly emerging structural reform agenda; corporate social responsibility; environment and climate change. Other issues for discussion will include APEC reform, human security/secure trade, emergency preparedness and disaster management.
New Zealand continues to promote strengthening of the EAS through participation in regular Leaders’, Foreign and Economic Ministers’ meetings, liaison with the EAS Unit in the ASEAN Secretariat in Jakarta and contributing to regional activities. The theme for the EAS Summit in Bangkok on 17 December 2008 will be “human security”, with a focus on disaster management. Leaders can bring other pressing issues to the table, and it is expected that financial and trade/economic issues will be raised.
New Zealand’s relationship with ASEAN is progressing well, based on a “Cooperation Framework” agreed by Ministers in 2006. The Framework outlines current and possible future activities and is regularly updated. ASEAN is undergoing significant change, centred on its new Charter (giving legal status to ASEAN), which is expected to be ratified by ASEAN Leaders at their Summit in December. New Zealand has expressed an interest in having a regular Leaders’ summit with ASEAN as it develops its Charter structures and reorganises its calendar.
APEC’s adoption in 2006 of the concept of a Free Trade Area for the Asia Pacific (FTAAP) as a long-term prospect has helped to revitalise its trade liberalisation agenda. Implementing a forward work-plan to develop regional economic integration is a central APEC focus this year. New Zealand has also been supporting a “Track II” (non-governmental) study on a possible FTA covering the 16-member country EAS process (known as the Comprehensive Economic Partnership in East Asia (CEPEA)). Both these initiatives offer exciting prospects in the longer term, and could serve to link New Zealand to the economic dynamism of the region.
An “Economic Research Institute for ASEAN and East Asia (ERIA)” has recently been established to provide research in support of the EAS and ASEAN. New Zealand is represented on the ERIA Governing Board and is seeking a place on the ERIA Academic Advisory Council.
A major recent development was the announcement at the end of August of the conclusion of negotiations for the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA). The Agreement is expected to be signed at the East Asia Summit on 17 December 2008r (see Part C (e) of this brief).
The recent US decision to join the Trans-Pacific Strategic Economic Partnership Agreement between New Zealand, Chile, Singapore and Brunei (renamed “TransPac” by the US) will introduce another important mechanism into the emerging regional trade architecture.
The ASEAN Regional Forum (ARF) remains the key regional security process, comprising 27 members, from Pakistan and Sri Lanka in South and West Asia to the US, Canada and the EU. New Zealand’s interest is in contributing to and influencing the ARF’s regional security discussions and in promoting security cooperation among a diverse and unique membership. Concerns about sovereignty and non-intervention complicate the ARF’s playing a substantive role in resolving the region’s security issues. Its first practical exercise (related to disaster relief) involving the deployment of military assets is scheduled for the middle of next year. The value of the ARF is in regular dialogue helping to build regional confidence and personal contacts that can be drawn on should problems arise. New Zealand has agreed to co-chair with Indonesia and Japan a series of meetings on maritime security over the next three years. New Zealand will also contribute to the drafting of a Ministerial ‘vision statement’ to outline how the membership sees ARF evolving – in broad strategic terms – over the next 10-15 years.
The first meeting of ASEAN Defence Ministers (ADMM) was held in 2006, marking the beginnings of the ASEAN defence community. It is likely at some point in the next few years that the ADMM may develop a dialogue process with external partners (ADMM plus). There have been indications that New Zealand and Australia may be early candidates for an expanded ADMM.
New Zealand and Australia were founding members of the Five Power Defence Arrangements (FPDA) in 1971 along with Singapore, Malaysia and the United Kingdom. Although designed at the time to be a deterrent to any externally organised or supported attack on Singapore or Malaysia, the FPDA is now seen as broadly contributing to regional security. It continues to conduct sophisticated military exercises of benefit to NZDF, but has also evolved to meet a broader non-traditional security agenda, including maritime security and counter-terrorism.
New Zealand is a member of the Shangri-La Dialogue, a joint venture between the London-based International Institute for Strategic Studies and the Singapore Ministry of Defence that has met annually since 2001. The Dialogue includes the key regional players as well as major outside powers. It is the only forum to bring together Defence Ministers, defence chiefs and senior officials, occasionally along with academics, and invited media and business.
It is possible that the Six Party Talks (6PT) process on North Korea could spawn a new regional security organisation, NEAPSM (Northeast Asian Peace and Security Mechanism). New Zealand is monitoring evolution of the concept closely.
