John Key MP
National Party Leader

8 April 2008

Speech to NZ Institute of International Affairs

Wellington

Ladies and gentlemen. In my first few days as Leader of the National Party I outlined my priorities for the foreign affairs portfolio.

I said that relationships between nations should, as far as possible, be unaffected by the swings and roundabouts of domestic politics, and that New Zealand, as a smaller country, heavily dependent upon international trade, could not afford that luxury.

I said I did not believe there would be major changes in our international relationships under a National Government, and that New Zealand’s nuclear-free legislation should remain.

Now, 18 months later, I think those guiding principles have been reflected in the decisions the National Party has made and in the policy we have released.

In short, under my leadership, the National Party has moved to embrace bi-partisanship in foreign policy.

Foreign policy does not belong to any individual political party. It does not belong to any Prime Minister or any government. Foreign policy belongs to the public of New Zealand and should, so far as possible, be driven by a considered evaluation of their evolving international interests and not by perceptions of narrow domestic political advantage.

In that respect, there are two overarching challenges that I believe will shape much of our foreign policy and consume much of the time and effort of Ministers for many years ahead.

Both require that we redefine our role and lift our game within our region.

First, we face the immediate challenge of improving our economic performance to retain a greater share of our brightest and best, who are currently departing our shores in ever-increasing numbers. We must stop the relative decline in living standards between New Zealand and our OECD counterparts.

To do this, we must take full advantage of our greatest strategic asset: our location on the rim of the Asian Pacific region – the powerhouse for the world economy for as far ahead as we can reasonably see.

Second, and at the same time, we must accept a significantly greater role providing leadership, support, and friendship to the nations in the Pacific, whose citizens comprise an increasing proportion of our own population. In this respect we have some special obligations, and also a unique capacity to make a difference.

Last year I briefly visited Ireland – a country to which I was a frequent visitor in my previous career. That visit reinforced for me the lessons that New Zealand should learn if we really want to stem the exodus of talent from our shores.

Thirty years ago, Ireland was a total basket case. Today, it has all of the trappings of a considerable economic success story, including the capacity to attract and retain smart, educated, enterprising people.

There were, as we were repeatedly told during my visit, three key policy initiatives which were critical to this success:

• They got the tax rates down to really competitive levels.

• They got infrastructure, especially communications infrastructure, up to an impressive standard, and

• They made sure the educational institutions were turning out graduates of the high standard demanded by the sectors that were seen as their areas of competitive advantage.

But the most important point is this: all these initiatives were deliberately targeted at leveraging off their most important strategic asset – their location on the edge of the European Union.

Leave aside some of the EU subsidies that someone will mention if I do not – the secret to Ireland’s success was location, location, location. Or, more specifically, their understanding of the potential benefits that could be harvested from that location – if they put the right policies in place.

And that, surely, must be the key to New Zealand’s economic success in the years ahead.

If we, sitting on the rim of the fastest growing region on the planet, cannot turn that geographical advantage into a significant economic success story, we have only ourselves to blame.

Ireland made much of its location on the edge of Europe to fuel the economic revolution we have seen there, and I believe New Zealand can do much the same in relation to its proximity to Asia.

As a starting point we must work to develop our bilateral and multilateral relations with the region.

Freeing up international trade over the past 40 years has been a key driver of New Zealand’s economic growth. Global negotiations on a new round of trade liberalisation are at a crucial stage, and our top trade policy priority will be to get the WTO Doha Round to deliver commercially meaningful outcomes.

But trade liberalisation involves much more than the WTO.

Since the late ‘80s there has been an explosion of bilateral free trade agreements. In the Asia Pacific region there are dozens of completed Free Trade Agreements and many more under negotiation or consideration.

The past 20 years have seen a plethora of FTAs signed between countries and groups of countries. Their very nature is that they are exclusive. The greatest risk to our economy is that we are excluded.

New Zealand’s trade policy effort must be designed to mitigate that risk.

This means that at a regional grouping level, New Zealand must contribute to the creation of the Free Trade Area of Asia Pacific (the 21 members of Apec), the Comprehensive Partnership in East Asia (that is the 10 Asean countries plus Australia, China, India, Japan, Korea and New Zealand), and, with Australia, pursue an FTA between CER and Asean.

At a bilateral level, the major gap in New Zealand’s trade policy architecture is the lack of FTAs with our major trading partners the US, Japan and Korea.

We must pursue these possibilities with all the energy and resources we can muster, including drawing on the efforts of research institutes, universities and business. It will be a long, daunting task that can be achieved only by a co-ordinated ‘New Zealand Inc’ co-operative partnership. Our future well-being depends on it.

Viewed against that background, it should be obvious why the National Party has unambiguously supported the negotiation of the Free Trade Agreement that was signed in China yesterday.

China’s economic growth for three decades has been exceptional. Millions of people have been lifted out of poverty because pragmatic reforms have unleashed the entrepreneurial drive of the Chinese people.

As China grows it will need resources to fuel its economy. This drive for timber, food, and particularly energy resources, underpins China’s growing presence in our region and highlights why this relationship is of such vital importance to New Zealand.

But let me draw again on the lesson from Ireland. What the FTA with China will give us is access on reasonable terms. But that is no guarantee of success. Like the Irish, we still need to get our tax levels competitive, our infrastructure up to scratch, and our education system delivering the graduates if we are to turn trade access into economic success.

Japan is another crucially important and longstanding relationship. It is one of our most important economic relationships. Japan and New Zealand are natural partners. We have shared values, there are strong people to people contacts and considerable investment and trade flows. While we cooperate in the East Asia Summit, APEC, The Asia Regional Forum, the Comprehensive Test Ban Treaty and the Pacific Forum, I believe we must reinvigorate the relationship with Japan and work towards a modern economic partnership agreement.

In this context I commend the initiative of the International Business Forum which is working comprehensively to do this.

There are also less traditional relationships to be worked on that will be of great importance.

India, for example, is growing economically. It has grown at the impressive rate of 9% per annum in recent years. The demand generated by India’s ever-expanding middle class is helping power world economic growth.

The opportunities for New Zealand in India in the future are huge, which is why my colleague Tim Groser has been a strong advocate for discussions regarding a free trade agreement between New Zealand and India.

Other major economies in the region, like Indonesia and Malaysia, offer enormous potential for growth in our economic relationships and the National Party is committed to exploring those opportunities.

There is scope to work harder to strengthen our functional co-operation with Asia on trade and security issues as well. We can explore new ways of engaging with regional governments on areas of common interest by encouraging, for example, our police and border agencies to be more closely networked with their regional counterparts.

Ladies and Gentlemen, National believes New Zealand must chart its own course in international affairs, and exercise a free, independent foreign policy that reflects the best interests of New Zealand and of our part of the world.

It is also clear that bilateral relationships are important, none more so than the unique relationship with our closest neighbour, Australia. This relationship, already our closest, continues to develop. It is now 25 years since CER, and we continue to become more and more integrated.

We also share many of the challenges in the Pacific, which I will come to later, and have many of the same interests in multilateral arenas.

Just two weeks ago I was in Australia where I met with Trade Minister Simon Crean. The clear message that I got was that the relationship between our two countries is strong.

New Zealand’s bilateral relationship with the United States is also of great importance to the National Party. There is great scope for the continued strengthening of the relationship between our two countries, while recognising the positions of our two governments on issues such as New Zealand’s nuclear-free legislation.

I would go so far as to say that the removal of the nuclear-free legislation from domestic political contention has gone some way towards setting the scene for the significant strengthening of the relationship that should occur between two friends who share so much in terms of language, culture, history, and sacrifice in conflict.

We want to move forward as soon as possible on areas in which we have a common interest – like defence co-operation, intelligence issues, climate change, and effective counter-terrorism strategies.

And it goes without saying that one of our major priorities is the negotiation of a free-trade agreement with the United States. I do not need to go into the details of the potential benefits to New Zealand. It is clear that a well-negotiated deal would provide substantial benefits to this country, and would diminish the advantage that Australia has achieved through the negotiation of its own FTA with the United States.

In that respect, the recent developments in relation to the P4 are promising, but I hope they are just the start of the process.

National also recognises the fine work done by the United States New Zealand Partnership Forum in developing and strengthening the relationship. In Government, National would like to move the agenda of the forum towards a formal inter-governmental dialogue.

The other key area of vital importance to New Zealand, which I alluded to earlier, is the Pacific. We all know the myriad of issues that face the region, from the struggle to develop sustainable economies, to the political instability that threatens some of these small states.

New Zealand has a unique relationship with the Pacific. 270,000 New Zealanders have Pacific origins, and these people have a personal stake in ensuring a successful future for Pacific nations.

This large number of New Zealanders of Pacific Island descent tells only part of the story.

The comparative numbers are also important. There are 130,000 Samoan New Zealanders, while the population of Samoa is 214,000. Similarly, there are 50,000 Tongan New Zealanders, while the population of Tonga is 116,000. There are 57,000 Cook Island New Zealanders and 22,000 Niuean New Zealanders – while there are only 12,300 people in the Cooks, and 1,500 in Niue.

What these numbers highlight is that New Zealand has a capacity – indeed a responsibility – to play a greater role in the Pacific.

New Zealand is, in a sense, part of the fabric of the Pacific. Our size and our own Pasifika composition uniquely equip us to show a sense of empathy and a level of engagement and leadership in this region.

There is much that New Zealand can do to improve our role in the Pacific, and the first thing is to ensure that our aid programme there is focused and targeted properly. While the National Party acknowledges that the main target of New Zealand’s aid effort is already the Pacific, we have stated that we believe a greater proportion of our budget should be targeted there.

It is also important that this aid is properly focused. New Zealand’s aid in recent years has been targeted at "poverty elimination" – the focus should be on economic development.

For example, there are real signs that the tourism sectors in many of these countries are headed for significant growth. But that growth often depends on the delivery of infrastructure, especially air services, by nations like New Zealand.

The question that now must be asked is whether we have been too focused on hand-out as opposed to hand-up strategies and whether our aid dollars can be spent in ways that will better contribute to sustainable economic activity.

The issue of political instability and, in the case of some nations, political failure is now a real challenge in the Pacific. The immediate answers to some of these problems are not obvious. But what is certain is that these nations need us to work in partnership with them to help resolve these problems.

It is a fact that New Zealand forces, both police and defence, now play a significant role in the Pacific, working with others to maintain stability and security. We need to factor into our planning the likelihood that such deployments will continue to be a significant obligation for our services.

We cannot impose our fixes on these countries, but we should work in partnership with them to reach durable solutions.

In that respect, having now imposed two referenda on the people of the Tokelau Islands in order to accommodate the accepted wisdom that small states should undergo a de-colonisation process, I hope New Zealand will now back up and ask some well-overdue questions about its obligations to small, Pacific nations, starting with a sensible way forward in relation to Niue.

I know that Parliament’s Foreign Affairs Select Committee is conducting an inquiry into relationships in the Pacific, and it will do all of us a favour if it is able, in a non-partisan fashion, to chart a course forward on these difficult questions.

I would like to briefly talk about NZAid. This is an organisation that National believes is important to New Zealand’s aid efforts in the Pacific and elsewhere. We have, however, viewed with concern some of the recent reports on it, in particular the Waring report in 2005 and the more recent report of the Auditor-General.

The Auditor-General’s report points to the expansion of our aid projects in recent years as at least partly contributing to the problems he found. This is particularly worrying when our aid budget is projected to continue to grow from $430 million to $600 million in the next few years. National is committed in government to ensuring that the issues identified in these reports are rectified, and rectified quickly.

No discussion of the Pacific would be complete without mention of the serious issue of global climate change. An incoming National Government will work with Pacific nations to address both the threats and opportunities posed by climate change.

This could include assisting Pacific nations to develop alternative energy sources. Almost every small Pacific state is now encountering serious balance of payments challenges driven by the rising cost of petroleum, with, to date, no concerted action to reduce dependence upon diesel-powered generating equipment.

These are serious and practical problems that will require serious and practical solutions within the region – solutions in which New Zealand must expect to play a substantial and leading role.

It would be difficult to give a speech on foreign policy and not discuss the role of the United Nations.

The National Party sees the United Nations as an extremely important body in world affairs, and one that New Zealand must support as a small nation with an independent mindset. Our default setting, whenever there is a serious crisis in world or regional affairs, is to ask what action the UN proposes to take. And so it should be.

You will be aware that there is some debate about the need to modernise and reform the United Nations. New Zealand, as a small nation with strong democratic credentials and a reputation as a good international citizen, is well placed to be at the forefront of that debate.

For the same reasons we should not hesitate to speak up on human rights issues.

Recently, we saw the Chinese Government use what appears to have been substantial force in Tibet on a scale and in a manner that is unacceptable to the vast majority of New Zealanders. I made it very clear that the National Party supports the right of the citizens of Tibet to peaceful protest, and wishes that the Government of China respect that right.

These unfortunate events occurred while New Zealand was concluding negotiations for the free-trade agreement with China. I made it clear that nothing we saw in Tibet affected the National Party’s support for the free-trade agreement, but neither would the free-trade agreement negotiations affect our right to speak up when we saw a small group of people who are substantially unable to defend themselves treated in a manner that we find, by our standards, unacceptable.

Ladies and Gentlemen, I hope I have given you a broad flavour of the sort of foreign policy that I want to be pursued by New Zealand’s next government.

I make no apology for saying that the broad foreign policy framework will stay the same.

I make even less apology for saying that within our region, which embraces the dichotomy of rapidly growing Asian economic wealth and the serious challenges of Pacific depopulation and underdevelopment, we must hasten our actions to deal with both the problems and the opportunities.

There are serious challenges that lie ahead that we must approach with ambition and imagination on one hand, and with compassion and a sense of responsibility on the other.

I am acutely conscious that no party and no individual can claim a monopoly on wisdom in these complex and challenging matters.

And I sincerely welcome the input that the individuals that make up this organisation can provide.

ENDS

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