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While Australia chooses a muscular relationship with a newly aggressive China, ours is a quiet but determined independence, says Anne-Marie Brady

While Australia chooses a muscular relationship with a newly aggressive China, ours is a quiet but determined independence, says Anne-Marie Brady

By Anne-Marie Brady

In the last few months, China has singled out and humiliated Australia with targeted economic sanctions and verbal attacks. Canada and Sweden have also been the subject of similar bullying in the last two years.

In Chinese this is called “killing the chicken to scare the monkeys”.

Pundits in Aotearoa New Zealand have been nervously observing China’s hazing of Australia, fearful that we will be next. So far, New Zealand exporters are actually profiting from China’s spat with Australia. And there are no signs of a significant deterioration in the broader relationship. Yet the New Zealand media jump at any indication of the Chinese government’s displeasure.

Why is commentary in New Zealand so jumpy about our economic and political relations with China? Australia doesn’t have much to worry about from an economic point of view and just needs the courage to ride out the political noise.

Sure, the CCP government has imposed punitive tariffs on Australia’s wine, beef and barley exports, and held up shipments of lobster and coal. But Australia’s iron ore exports to China are the second highest ever recorded. Prices reached a seven-year high last week.

China relies on Australian minerals for stimulus efforts to kickstart their Covid economy. Westpac chief economist Bill Evans says the Australian economy will do well in 2021, thanks to strong consumer spending, falling unemployment and four per cent economic growth. He says that this will offset China's sanctions on agriculture; which will find other markets. China’s economic sanctions against Australia hurt Chinese consumers and also have a wider economic cost. While the CCP government’s tariffs on barley will cost Australia around $330 million, the impact on China is estimated at about $3.6 billion, as Chinese breweries rely on Australia’s quality barley for beer production.

The CCP’s actions are also damaging China’s already weak soft power. We can expect the bullying to fizzle out, just like other times when China targeted states like Norway and Denmark. Meanwhile, Australia has attracted strong international support and sympathy in the face of China’s bullying, with efforts such as a global campaign to buy Australian wine launched by the Inter-Parliamentary Alliance on China.

We are positioned in a better place

New Zealand has a solid foundation of positive political relations with Beijing, which should mean that any matters of contention can be discussed and resolved amicably. When then National Party leader Simon Bridges visited China in September 2019, he was told by a senior Politburo leader that New Zealand-China relations were at a “historic best” - under the Ardern first term government.

Last week, in his first phone call to New Zealand’s new foreign minister, Nanaia Mahuta, Chinese Foreign Minister Wang Yi repeated an often-said flattery that New Zealand-China relations were an “example” to other states.

New Zealand’s relationship with China is certainly unique, and unlike any we have with other states. But China is not as some would have it, New Zealand’s “friend”. Nor is it an ally.

“Friendship” (youyi) is a loaded term for the CCP. “Friend of China” is a phrase used to describe foreigners who toe the Party line or cooperate on specific policies. In 2003, New Zealand signed a Comprehensive Cooperative Relationship Agreement with China. Then in 2014, New Zealand and China signed a Comprehensive Strategic Partnership Agreement. In March 2017, under a National Party government, New Zealand signed the non-binding Memorandum of Arrangement (MOA) on Strengthening Cooperation on the Belt and Road Initiative (BRI) - essentially an agreement to discuss.

Since the MOA was signed, New Zealand diplomats and politicians have discussed BRI with China on a number of occasions, but it has not gone any further than talk - to China’s barely veiled annoyance. BRI is an effort to create a China-centered global order, which CCP analysts refer to as Globalisation 2.0. The Ardern government has adjusted its thinking on the extent to which it wants to get involved in BRI. In response, China appears to be delaying signing the FTA upgrade, which would grant New Zealand the same terms of trade as the Australia-China FTA. In 2008, New Zealand rushed to be the first Western country in the world to sign an FTA with China, but Australia held back and got a better deal in 2015.

Nonetheless, in the twelve years since the New Zealand-China FTA was signed, New Zealand has expanded relations with China well beyond trade, to finance, telecommunications, forestry, food safety and security, education, science and technology, tourism, climate change and Antarctic cooperation, as well as military and police cooperation. In December 2019, New Zealand’s China trade peaked at close to 30 percent of overall exports. Rather than being a good thing, increasingly it is understood that too much exposure to the China market brings many risks for New Zealand.

Assessing our trade dependency

The recognised definition of trade dependency is when a nation is 50 percent dependent on one market. New Zealand is dangerously dependent on the China market in some sectors. New Zealand is strategically dependent on China for 513 categories of goods; and 144 of them have applications in critical national infrastructure. New Zealand is the second most dependent on China for strategic goods of all the Five Eyes states (0.1 of a percentage point behind Australia). Meanwhile, 33 percent of New Zealand’s dairy exports, 41.9 percent of meat exports, 80 percent of logs and timber exports, 95 percent of lobster exports, and 46.5 percent of wool exports go to China. 28.5 percent of New Zealand’s international education income comes from China. This matters, as we know that more than any of our other markets, there is great political hazards in dealing with China. While there are also many opportunities, it is wise not to be over-dependent on it.

Though many worry that a negative turn in political relations with China will effect New Zealand’s economic relationship, a 2014 report for New Zealand’s Reserve Bank pointed out that the economic importance of China to New Zealand is actually less about direct trade links. Rather, of greater concern is China’s impact on the terms of trade - the global prices of the things New Zealand buys and sells. Thus the extent to which the Chinese economy slows or rises, has a direct impact on New Zealand’s prosperity, regardless of the extent of New Zealand’s exposure to their market.

Assessing the political risks

New Zealand does have some political differences with China. Several of them are so sensitive that our politicians actively avoid discussing them publicly.

China’s political interference is one of New Zealand’s top national security concerns. Yet the minister in charge of national security, Prime Minister Jacinda Ardern, has said very little about it in public, clearly preferring a policy of do and don’t say. The first term Ardern government shepherded a quiet case-by-case recalibration of the New Zealand-China relationship, passing a series of new legislative changes on overseas investment and political donations but calling them “country agnostic”. We can expect to see more such legislation in this second term Ardern government.

A further sensitive issue in New Zealand-China relations is the extent to which we allow Chinese telecommunications access to our telecommunications network and market.

Under the terms of the Telecommunications (Interception Capability and Security) Act 2013, passed under then Minister of Communications Simon Bridges, New Zealand excluded Huawei from the core of first 3G and then 4G for telecoms companies Spark and Vodafone. Only 2degrees has full Huawei kit.

Huawei has close links to the PLA and China’s Ministry of State Security. Its ownership structure links it to the CCP United Front Work Department, whose core activity is intelligence-gathering and running assets. Huawei Technologies NZ now holds 40 percent market share of New Zealand’s mobile network equipment.

Huawei entered the New Zealand telecoms market in 2005, as the main financial backer of 2degrees, who are majority owned by a Māori consortium. In 2018, acting on the Telecommunications Act, the GCSB rejected Spark’s proposal to involve Huawei in their roll out of 5G. 5G poses new technological challenges that, unlike 3G and 4G, cannot be mitigated against. The Telecommunications Act provides plausible deniability for the New Zealand government. Spark and Vodafone are now working with Nokia for their 5G roll out.

South Pacific tension points

China’s growing military interests in the South Pacific and Antarctica are a further sensitive issue that can’t be discussed publicly. New Zealand diplomats have worried for more than fifteen years that China’s debt diplomacy and expansion of military links to our Pacific neighbours undermines New Zealand’s influence in the region. New Zealand security depends on our Pacific neighbours being peaceful and independent and Antarctica free of conflict.

New Zealand is an export-based economy and relies on air and shipping lines being kept open. So the PLA’s announcement that it is planning an ADIZ in the South China Sea, where close to 70 percent of New Zealand trade transits, is a further point of tension between New Zealand and China.

The Ardern government has spoken up publicly about several other issues of concern with China: the crackdown on the democracy movement in Hong Kong, the cruel treatment of the Uighur people, and the Chinese foreign ministry spokesperson posting disinformation about Australia. Sometimes New Zealand has issued statements on these contentious issues on its own, and sometimes with other like-minded states. Each time New Zealand has emphasised the values that underpin our foreign policy and the multilateral rules-based international order, on which our security relies. 

The Covid-19 pandemic has strengthened the power of China, and greatly weakened that of the US, UK, and EU. New Zealand, like other small and medium states, is trying to survive in a dire strategic environment. Managing the economic, social and political fallout of the Covid pandemic is one of the top priorities of Ardern second term government’s domestic and foreign policy.

How we are dealing with the threats

The differences New Zealand has with China can’t be wished away. Unlike the 1987 anti-nuclear dispute with the USA, New Zealand is not dealing with a partner that understands, and however begrudgingly, accepts, the concept of “loyal opposition” and an independent, values-based foreign policy. The Ardern government, like previous governments before it, is using deliberately ambiguous tactics to deter an increasingly aggressive partner, at a time when the rules-based order is being eroded on a daily basis. Our exporters are right to be worried about market access to China. China started decoupling from Western economies more than 15 years ago, when it banned companies like Facebook, Twitter, and YouTube. Now under Xi Jinping, China has adopted an ambitious plan to become self-sufficient in food and many other products.

On multiple levels, New Zealand is now pulling closer to other small and medium states to provide economic, political, and strategic support, mitigating the China risk and the ongoing absence of US global leadership.

In June 2020, Trade Minister David Parker announced a post-Covid long term trade recovery strategy, highlighting market opportunities in the EU, UK and South America. New Zealand has joined an informal group of "First Mover" nations, countries which had done well in suppressing Covid-19 and wanted to swap notes on re-opening. New Zealand was invited to join an agreement for essential cross-border travel between Korea, Canada, Singapore, and Australia. New Zealand is making good progress in concluding an FTA with the European Union, and an FTA with the United Kingdom will soon follow. New Zealand diplomats are continuing to work on passing a New Zealand-United States FTA. New Zealand with Costa Rica, Fiji, Iceland, Norway and Switzerland are in negotiations for the Agreement on Climate Change, Trade and Sustainability (ACCTS), which uses enforceable trade disciplines on fossil fuel subsidies. New Zealand has partnered with Australia to offer practical assistance to Pacific island neighbouring states to help them deal effectively with Covid-19.

The strategic challenges we face now are huge. Aotearoa New Zealand can maintain our independence and prosperity by forging new partnerships, strengthening bonds with like-minded states, and hedging on trade.


@Anne_MarieBrady is an expert on Chinese domestic and foreign policy, NZ foreign policy, polar and Pacific politics. More here. Her most recent books are: Small States and the Changing Global Order: New Zealand Faces the Future (Springer, 2019) and China as a Polar Great Power (Cambridge University Press, 2017).

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42 Comments

13
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it is actually wise not to be dependent on any market at all- this lesson should have been learnt decades ago when England joined the EU abandoning both NZ and Australia as key trading partners. the advantage Australia has is it has Iron Ore- something China Values and isnt accessible all over the world, the price of ore has doubled in the last 6 months which is offsetting the loss of exports to China of Barley, Lobsters, Timber etc.

NZ doesnt have a leverage product like Ore (except possibly honey- although this is not a critical item to the Chinese economy like Iron Ore is) all of NZ's products can be sourced from elsewhere in the world.

There is no doubt that NZ will anger China in someway at sometime and its important that NZ diversifies to new markets sooner rather than later, but also export businesses prepare for the fact that at some stage they too will be on the list of banned products and to survive they will need to either pivot to other markets or downscale their volume of products.

NZ does have one product that could be called a Leverage product - Dairy. It is well regarded by Chinese consumers (although not indispensable). Most of our exports ( barring Hort, logs and seafood) are already close to TFQ limits so diversifying away is not just a matter of shifting markets. Downscaling production merely hurts NZ more than the intended consumer overseas. With the Brexit shenanigans in limbo this is a far greater threat atm.
Time NZ exporters looked to Russia.

Dairy isnt a leverage product, whilst NZ product is demanded by the chinese (built on the Kiwi reputation of green grass, low pollution and good marketing by Fonterra) - there are plenty of other countries supplying in higher volumes than NZ. The reason dairy prices have fallen since 2015 is due to the supply from the US, Europe and turkey coming online adding more supply for the Chinese Market. Contrast this to Australian Iron Ore where the only other major producer is Brazil and Australias quality of ore is significantly higher than Brazils resulting in a higher grade of steel for lower consumption of ore. I mentioned Honey becasue NZ manuka honey is exclusive to NZ- but whilst a desired product in China its not a critical product for the Chinese economy.

24
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It is good to hear from Anne-Marie Brady, a very brave lady who has stood up to considerable political pressure. This article makes very interesting reading and a couple of points are very concerning, and she also misses out on strengthening her arguments as well I believe.

She says;"Now under Xi Jinping, China has adopted an ambitious plan to become self-sufficient in food and many other products." So if we cannot sell our food and diary products to the Chinese what then? Some will say no problem a significant portion of our diary factories are owned by the Chinese. But will Xi Jinping's goal allow for sources located outside mainland China, or is there a more ominous warning here?

And national resilience is not just about markets for our products, but also about providing employment for Kiwis, and not just the highly educated ones, but those who leave school with little to no qualifications. And to be able to pay them a reasonable wage. So resilience is a bigger topic than just trading partners

16
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Yes - "It is good to hear from Anne-Marie Brady, a very brave lady who has stood up to considerable political pressure."
It would also be interesting to know all the partnerships and deals that NZ Universities & Polytechnics have with Chinese Universities - where IP is shared, access to influence inside NZ institutions, the PLA and CCP are fully informed, and NZ qualifications being delivered inside China with NZ certification.

Even accepting that NZ establishments would publish their relationships - who actually cares??

A fair few Nzers, actually

Ann Mari's comments on China are very lopsided and her advice is very toxic to NZ's future.

Her lines are identical to those from Mr Pompeo's.

A simple investigation on her source of funding will lead you to the CIA.

18
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You could get your mates around to check out Anne Marie's computer again Xing. Her comments are only toxic to China trying to use money to bully people they think they are tougher than. CCP couldn't even beat India on their Himalayan border. They haven't been able to invade Taiwan in spite of threatening to since 1948. They couldn't beat South Korea in 1950-52, or Vietnam just after the Yanks left. Their threatening posturing has certainly not ever been backed up by military might, and with their totally, grossly corrupt military bosses, never will be.

HAHA

15
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Xing I found the article to be informative, but my question is why does China have an issue with people who report the facts that are backed up with evidence?

Good grief. Facts backed up with evidence are the CCP's and Mr Xi's worst enemies. That is why they have many issues with them.

The CCP is not about 'facts'. They're about hoodwinking their population for as long as they can and making out like bandits in the meantime.

11
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OK, can you be specific about which of her claims are misleading or unfair?
Or evidence for your claim about the CIA?

xingmowang,

Produce some evidence of your assertion. If you can't, then I would like to see you removed from this forum.

I actually don't know why they have not banned this CCP shill/propaganda machine. (although does provide a reliable laugh on anything related to China :P )

May be CCP is sponsoring this website???

No, no, no. Banning Xing is the opposite of the right thing to do. The more Xing's obvious lies are publicised the better. The only problem is that it is no challenge at all to refute them.

I agree. And some of his/her past comments are fine and have had my thumbs up. His/her problem seems to be unwillingness to admit absolutely any failing by the Chinese Communist party and its leader for life. Given China's many successes over the last 30 years it should be possible to support its government without sounding so stupid.

Should we be expecting your name to appear on this list?

https://www.skynews.com.au/details/_6215946537001

Hopefully our security service is investigating Xing.

Hopefully our security service is investigating Xing.

The monkey analogy reminds me of the creating external threats, problems, and issues to try and hide your own internal threats, problems, and issues analogy. Trade with China comes and goes. Trade with USA comes and goes. Trade with UK comes and goes, and looks like it may well be on the up and up in the near future. Trade with Japan, Korea, Europe etc etc ad nauseum. It is just part of the entertainment. In the Aussie debacle, the biggest threat is to all the Chinese owned businesses in Aussie. Not ethnic Chinese Aussies, but shareholders domiciled in China. Yet more great fun.

The Ardern government, like previous governments before it, is using deliberately ambiguous tactics to deter an increasingly aggressive partner, at a time when the rules-based order is being eroded on a daily basis.

There's no such thing as an "int'l rules based order." You're making that up. There is international LAW, however, and the only ones undermining that are western states & proxies waging unnecessary wars.

I have no skin in the game here having been born abroad but speaking to New Zealanders they are uneasy about China. The root of this seems to be the way the CCP conducts its internal political business, Kiwis think of the government as fundamentally corrupt and view many of their actions as immoral. More recently their singling out of Australia for 'special treatment' has been particularly unhelpful to their image.

My warning to New Zealand as a foreigner would be different however, the historic arc of Chinese governments (be they dynastic, dictatorial or communist) has always been one of territorial expansion followed by rapid collapse and retreat. I see no reason to believe this time will be different.

Trade wise this misses the difference between commodity spec items of trade and all else (say consumer branded product, or IP based).

China effectively closed to non commodity spec trade. People who attempt loss of their shirts.
Call it absences of
Rule of law.
Property rights.
(Free markets - free to enter) too.

Any non commodity spec trade product business plan is DOA. As for their inward investment here try an employee survey to surprise...
Non frontier firms, more otherwise.

Thanks for the warning on my plan to export shirts to China.

It is bad business to have one client that is so important it is make or break for you if that business stop buying. So now we have China and Aussie in the top 2, https://tradingeconomics.com/new-zealand/exports-by-country . Collectively they account to 45% of our export revenue.

Hear hear, but market diversification with who? India? Indonesia? Vietnam?

Legit question.

Our principal exports are commodities and of low value. We export timber to China but import Chinese made furniture. We export milk powder but import medical grade lactose for filling medicines (pse correct me if I am wrong). Over the next generation the country needs to find a high value product where we can compete. God knows what that will be....

We produce medical grade lactose in NZ plus import lactose to meet demand. The specialist factory is the only New Zealand plant able to produce pharmaceutical lactose of such high quality that it can be inhaled. https://www.nzherald.co.nz/business/fonterra-takes-deep-breath-with-lact...

What it could be is extremely high quality food, grown organically and GE free (not interested in arguments for or against GE it is the customer who will demand it, if they are seeking the highest of quality), extensively farmed.
We really need to do the sums on producing hydrogen from Tiwai Pt.
And we need to toss the idea of growing the population being a good thing, it isn't, not any more

Our food is already high quality. The main problem with going organic is that growers will have to accept lower yields, something the banking cartel wouldn't be too fond of

And enviro loons have to accept a greater area of farmland under cultivation to produce the same volume of food. If you want more wild spaces maximise yeild per ha.

Intensive farming and environmental protection are mutually exclusive. To reduce environmental harm, we must produce what the land is best suited to and accept yields that can be produced sustainably. Unfortunately, most farming systems won't allow this type of paradigm shift due to debt.

Please enlighten us Xing, on the trail from Anne-Marie Bradley's funding to the CIA. No bullshit, just facts with evidence please, Xing.

"Why is commentary in New Zealand so jumpy about our economic and political relations with China?".
Jumpy or kowtowing?? The state of NZ media. Stuff/NZherald - reports on Eric Swalwell's fart sounds - but not on his links to Chinese spy Christine Fang.
https://www.thetimes.co.uk/article/chinese-honey-trap-spy-was-close-to-d...
https://www.stuff.co.nz/entertainment/tv-radio/117557742/fart--or-was-it...

It is as much about the economic and political relationship as it is over dependence on a non-democratic country which has unequivocally demonstrated it's willingness to flex it's muscles to bully other countries. The concern is that should we decide to pick a path that China does not like, the the consequences will be dire for us.

Currently China likely sees us as a midge, too small to be particularly concerned about, but with the potential to be annoying. We are endeavouring to be neutral, but culturally we are rooted in the anglosphere. Plus strategically we are in a geographically potentially important position, that makes our location desirable.

After all the trade pressure on Australia I was so pleased to hear China squealing like a stuck pig since there has been such a large increase in what they pay for iron ore. One hopes that this was a deliberate move on Australia's part and that Rio Tinto and BHP have enough control of the world market to tighten the noose a little further. Long term we all need to slowly and progressively reduce the food and raw materials that we sell China. Nothing alarming or rash. Just a slowly reducing level of trade and dependency. Taper this off at something under 10%.

NZ already deeply addicted, to cheap money with the land swap. Diversify market to.. poor countries? YR..

If you think you are mates with a big powerful bully you are foolish.
Sooner or later their gaze will turn on you.