China General Interest
Rt Hon John Key, Prime Minister of New Zealand
Good morning. It’s a pleasure to be here in London and here at Asia House.
This a good opportunity to reflect on the changes in New Zealand’s economy and society over recent decades and how that has increasingly involved Asia.
Of course, New Zealand’s relationship with the United Kingdom remains fundamental.
Queen Elizabeth is Queen of New Zealand, as well as the United Kingdom.
An independent judiciary, trial by jury, freedom of speech, the election of Parliament, our system of public administration, and our most popular sports – rugby, cricket, football and netball – all come from Britain.
No foreigner could ever come to our shores and understand who we are as New Zealanders without reference to our British antecedents.
But they also could not understand New Zealand without reference to Māori culture, history and values; to our Pacific community; and, increasingly, to our place in the Asian region.
There has been a profound change in New Zealand in only half a lifetime – demographically, socially and economically, and also in the way we view ourselves and present ourselves to the world.
Forty years ago, New Zealand showed a largely white face to the world.
Today, however, a much greater proportion of the population identify as having Maori, Pacific or Asian ethnicity.
Forty years ago, our economy was heavily reliant on Britain, which took the bulk of our lamb, cheese and butter.
But when Britain joined the European Economic Community in 1973 a century of reliance on our best customer came to an end.
Today our two biggest export markets are Australia and China.
China, in particular, has grown rapidly as a trading partner, with our exports to that country almost quadrupling over the last five years, and with China becoming our biggest source of imports.
Our connections with Britain remain strong and secure – but our future prosperity and security is intimately linked with our near neighbourhood in the same way that the UK and Europe’s prosperity are linked.
For all the talk of this “Asian century”, the shift of power and influence to the Asia-Pacific region has been underway for decades, albeit at a quickened pace in recent years.
Over this period, New Zealand has built a strong relationship with Asia, which is now delivering results – all the while sustaining our important ties with Europe.
Today I want to focus on three broad areas I believe are critical to New Zealand’s integration with the Asia-Pacific region:
- First, the way our trading strengths complement each other;
- Second, the changing demographics and increasing wealth of the Asian region;
- Third, our place in the evolving architecture of the region, from political and defence groupings to free trade agreements.
I will then also look at some of the implications this evolving architecture might have for Europe’s own potential place in the region, and how New Zealand, the UK, and the EU can work together to fulfil that potential.
Trading relationships
So to the first theme – our trading strengths and how they complement each other.
Asia’s spectacular emergence in the era of independence from poverty to sustained economic growth is well documented.
Much of the region has continued to grow strongly throughout the most recent Global Financial Crisis and growth rates above 5 per cent remain common throughout the region.
Some Asian economies now enjoy higher incomes than those in Europe – and indeed New Zealand.
The rise of Asia, at the same time as our UK markets shrank, is a critical part of New Zealand’s recent economic history.
New Zealand has worked hard to be a part of Asian growth – starting with Japan in the 1960s, and continuing more recently through to China, Korea, ASEAN and India today.
In recent years the resilience of Asia – and its positive impact on our near neighbour Australia – has been critical to enabling New Zealand to ride through the Global Financial Crisis in a better state than many other advanced economies.
Earlier this year, I travelled to China to celebrate the 40th anniversary of diplomatic relations between our two countries.
Our first diplomats had to walk across the border from Hong Kong because, in those days, China had no international flights.
Now, there are daily flights between New Zealand and China, and those flights are well-used.
China has become our fastest-growing, and second-largest, source of visitors, with almost 225,000 visits over the past year.
Over the same period, New Zealanders made 68,000 visits to China, which is double the number from 10 years ago.
I would like to see even more travel between our countries as well with other countries in the Asian region.
We have been working closely with the tourism industry to provide the best possible experience for Chinese visitors. Recently we’ve introduced new extended visitor visas and made business travel between our two counties easier.
New Zealand was also one of the earliest supporters of China’s trade and economic integration with the rest of the world.
Since we signed our Free Trade Agreement with China in 2008 – China’s first with a Western country – we have traded more with China in the subsequent five years than the combined value of all previous trade between our two countries.
Since concluding that FTA, we have gone on to conclude economic agreements with Hong Kong in 2010, and with Chinese Taipei in July this year. This trifecta of agreements is unique in the world.
Just as China has grown in importance to New Zealand in recent years, we know it also occupies centre-stage in Europe’s thinking about Asia, along with its relationship to other key countries in the wider region.
The challenge for us is how we interact with a country whose culture, history and political system is so different from our own.
It means we need to equip ourselves and future generations to ensure that we can better understand one another.
That is why my government last year launched the New Zealand China Strategy.
The Strategy is about building greater coordination and effectiveness across all New Zealand government agencies that work in, and with, China.
The China Strategy has a strong trade and economic focus.
It was developed with industry groups, businesses and organisations which are involved in building New Zealand’s relationship with China.
The goals of the Strategy are:
- to retain and build a strong and resilient political relationship;
- to double two-way goods trade by 2015;
- to grow services trade – including education and tourism – by 2015;
- to increase investment;
- and to grow high-quality science and technology collaborations.
High-level visits play an integral part of our relationship, and I was pleased to be one of the first foreign leaders invited to China following Xi Jinping’s assumption of the presidency this year.
At the same time, the New Zealand China Strategy is only one of a number of strategies that we have adopted, or are working on.
We have also released strategies for India and for ASEAN.
A key element of them all is that we need diverse markets for our goods – in the same way we need diverse relationships with like-minded countries.
You will be aware that Europe is already a key market for our goods and services – at the end of last year, the EU as a bloc was still our second largest trading partner for two-way trade in goods and services.
However, our near neighbourhood, that is Asia, is playing an increasingly important role in determining our economic fortunes.
That is likely to endure, for the simple reason that the goods and services we are best at producing neatly cater to the evolving appetites and needs of Asian nations as they become more affluent, sophisticated, and discerning.
The trend is significant: For example, New Zealand now trades more in a week with ASEAN than we did in a year in the early 1970s.
An example of the opportunities offered in the region is Indonesia, our nearest neighbour in Asia, where consumption of protein is set to increase strongly in coming years, as incomes continue to rise.
When I visited there last year, Trade Minister Gita Wirjawan told me he wants to see Indonesian beef consumption rise from around two kilograms per capita per year, to 20 kilograms per year.
Meeting that demand will require an increase in beef imports and New Zealand can help with that supply. The same goes for dairy.
Asian markets have also played a critical role in the growth of two service industries – education and tourism – which have had a profound effect on the New Zealand economy.
We are a unique and desirable tourist destination and we can deliver a world-class education to the next generation of leaders across Asia.
The challenge for New Zealand is to define its place in the sophisticated network of regional production and investment networks that increasingly defines Asia.
This applies not only for food and other primary products, but also for high-value niche manufacturing which is increasingly important to us.
We are not alone in facing this challenge.
Asia is of course a critical market for the UK, and Europe, too. We see real scope for cooperation with European partners in the region.
With respect to the UK, in particular, the possibilities are definitely there, given the depth of our existing engagement.
Demographic shifts
I’d now like to move on to my second theme – the growing and more urbanised middle class in the Asian region and how it is shaping the nature of our relationship with the countries that make up the region.
Nearly two-thirds of the population of South East Asia – a region of more than 600 million people – is under the age of thirty.
That has staggering implications for future demand – and it plays very much to New Zealand’s strengths.
These youthful populations and their increasing wealth will result in higher demand for quality food and beverages, for travel and for other niche products.
But not all of Asia is young: indeed Asian nations like Japan and Korea are aging at an unprecedented rate – and in the process creating new markets for New Zealand products like nutriceuticals and health products.
India is also emerging as an important partner for the world, including the UK and New Zealand.
In 2011, I launched our New Zealand India Strategy, which I mentioned earlier. We are working hard to complete an FTA with India, with the aim of India becoming a core trade, economic and political partner for New Zealand.
Demographic change is not just an Asian phenomenon. Compared with 40 years ago, a much greater proportion of New Zealand’s population identifies as having Asian ethnicity.
A research paper published this year identified there are 160 different languages spoken in New Zealand. It also describes our biggest city, Auckland, as one of the most culturally diverse cities in the world.
Asian New Zealanders are our fastest growing ethnic group and, in a little more than 20 years, are expected to make up more than one-sixth of New Zealand’s population.
Overall most New Zealanders are comfortable living in a more multi-ethnic society, and our immigration policy helps ensure that new arrivals are able to play a positive and rewarding role in their new home.
The Government has, however, implemented initiatives – like the establishment of a Ministry of Ethnic Affairs and a foundation to promote understanding of Asia – to help ease the changes which our own society must deal with as it develops new Asian dimensions.
Regional ambitions
I’d like to turn now to New Zealand’s place in the Asian region.
New Zealand did not initially see itself as a natural fit with Asia, nor did Asian countries naturally regard us as one of their own.
But a range of factors have brought us ever closer together, to the point where New Zealand now enjoys being a confident and comfortable member of the Asia-Pacific regional community.
It’s a sign of the strength of the relationships we have built in Asia that we are able to, often alongside the EU and the UK, have open and constructive discussions across the board, including on more difficult issues like human rights.
In 2015 New Zealand and the 10 countries of the Association of Southeast Asian Nations – ASEAN – will celebrate 40 years of diplomatic relations.
Although our diplomatic relations with countries in ASEAN date back well before 1975, this formal partnering with ASEAN was part of a deliberate decision at the time given it was fledgling institution with just six of the current 10 members.
New Zealand has a long-standing commitment to security in South East Asia and an important vehicle has been the Five Power Defence Arrangements.
These were concluded with Singapore and Malaysia in 1971 and have been instrumental in building regional defence capabilities, as well as defence linkages in areas like training and joint planning with our ASEAN partners.
It complements the positive evolution of the ASEAN Defence Ministers Meeting as well as practical military-to-military cooperation through more joint exercises and workshops.
This investment in collective security, built on past ties, but with real present value is very much grounded in the values and experience we share with the countries of the Commonwealth.
We share with Europe and others a clear economic imperative to ensure the security of sea lanes through the South China Sea – through which more than half of the world’s and New Zealand’s exports pass.
Over the past four decades, Asian nations have had to find their own way forward in building a regional community.
And they are doing so with some success.
ASEAN is now very much at the centre of the East Asian region’s institutions.
The Asia-Pacific Economic Cooperation grouping, or APEC, founded in 1989, also plays an important role in bringing together major players on both sides of the Pacific, including key Asian economies.
Its aim is to promote market-based trade liberalisation and more recently to chart the way towards a single free trade agreement for the region.
The more recently established East Asia Summit, founded in 2005, has also provided a forum for leaders to discuss a range of current challenges – and we are sensitive to EU interest in this forum.
In just a few weeks, I will be heading to the APEC and East Asia Summit meetings in Bali and Brunei, which provides a great opportunity to meet with key players in the Asian region.
Further, New Zealand is pleased to now be counted among the 51 members of the Asia Europe Meeting.
Indeed ASEAN has played a pivotal role in drawing together its 10 members into a regional community, and at the same time providing a unique setting for other larger powers in the region to meet.
At a time of dynamic developments in the Asia-Pacific region, these institutions have a critical role in helping to manage the changing patterns of power and influence among the larger states in the region, and the challenge of building still closer economic integration.
Regional economic integration
Economic integration is the new frontier of New Zealand’s engagement with the Asian region – and a platform for further engagement with the UK and Europe.
Building on the high degree of integration between the New Zealand and Australian economies under the Closer Economic Relationship, New Zealand turned first to Asia to establish free trade agreements, starting with Singapore more than 10 years ago.
We have since concluded bilateral agreements with China, Hong Kong, Malaysia, Chinese Taipei and Thailand.
Asia has also been central to our multi-country trade agreements.
In 2010 a comprehensive, three-way FTA entered into force between New Zealand, Australia and ASEAN.
Negotiations are now under way to create a 16-party Regional Comprehensive Economic Partnership between ASEAN and its bilateral partners – China, India, Japan, Korea, Australia and New Zealand.
And New Zealand has also played a leading role in building on commitments entered into with Australia, Chile and Brunei under the ‘Pacific-Four’ Agreement, to develop the Trans-Pacific Partnership where negotiations involve 12 countries, including the US, Canada, Mexico and Japan.
We are investing a great deal in the success of these large regional arrangements.
And we know they are being watched closely from Europe.
We are open to, and are having on-going discussions, with our European partners around what this evolving architecture might mean for our own bilateral relationships.
In particular, it is worth recalling that only five WTO members, including New Zealand do not have either a specific preferential access arrangement into the EU or are not negotiating an FTA with the EU.
This is troubling for New Zealand and it is something I am taking up with my counterparts again during this visit.
We now find ourselves having come almost full circle.
We are increasingly integrated into the trade and economic architecture of Asia, despite very different cultural and political traditions.
At the same time, we are at risk of becoming increasingly economically distant from Europe, despite our cultural and political commonality.
That's why, for us, increasing that economic integration is so important.
The lessons New Zealand learned in the 1970s about the danger of over-reliance on a single market are as true today as they were 40 years ago.
We seek a balanced portfolio of relationships, and clearly the EU should be part of that.
It's why we continue to press for improved economic integration with Europe, just as we are pursuing it with Asian countries, through the negotiation of a comprehensive, high-quality FTA.
But it's also why we think the value of such an FTA would be of equal benefit to Europe as it would be to New Zealand.
Our integration story with Asia has taught us that modern FTAs are no longer simply about lowering tariffs for certain products, but are vehicles for economic and strategic integration into supply chains, markets and even political architecture.
New Zealand's hard-won economic and political integration with the Asia-Pacific region has transformed us.
We have gone from being a predominantly British farm sitting in splendid isolation in the Pacific Ocean into a dynamic Asia-Pacific economy, with strong European heritage and values.
In Europe, New Zealand has the goal of matching our political commonality and cooperation with enhanced economic integration.
In New Zealand, Europe has a likeminded partner in the Asia-Pacific region.
A comprehensive, high quality FTA between us is the ideal first step in that direction.
The challenge is to be well attuned to the Asian region’s way of thinking and doing business.
Inevitably, given its unique circumstances, Asia’s model of regional cooperation is quite different from Europe’s.
There are no common borders, common legal regimes or powerful central institutions.
The sense of common heritage is weak and some conflicts remain unresolved.
Dialogue and practical cooperation are critical to help bridge the economic and cultural gaps among countries.
To outsiders the current pattern of Asia-Pacific regionalism can seem untidy or ineffective.
But to New Zealand it is a realistic response to the environment and the challenges the region faces.
It is not perfect, nor is it an end-state.
We fully expect to see further evolution as Asia’s growth and development proceed, and we aim to remain a player as that evolution proceeds.
Conclusion
Ladies and Gentlemen.
New Zealand has made enormous strides over the past 40 years, particularly in our relationship with the Asian region, and we are proud of what we have achieved.
Today has given us an opportunity to reflect on those 40 years.
It has also given us the opportunity to look forward, and consider the possibilities that lie ahead for our two countries.
New Zealand is a small player on the international scene, but we continue to grow as a country.
We have an important role to play in the Asian region as a supplier of high-quality goods and services, including as a world-class education provider and highly-desirable tourism destination.
Our reputation for constructive dialogue and fair-mindedness is well understood in the region.
We are partners with the United States and China, yet in very different ways.
We have strong, multifaceted relationships with other major players, including Japan, Korea, Indonesia and India.
And we are active participants in institutions and activities centered on ASEAN, as I outlined earlier.
We see our engagement with Asia as adding yet another thread to our rich relationship with the United Kingdom and, more broadly, the European Union.
This is not a zero-sum game.
Like New Zealand, Europe is looking to Asia to bolster prospects for its future prosperity and security.
There is plenty we can be doing together.
The trick with opportunities is that you have to grasp them. That is what my Government is committed to doing.
New Zealand’s engagement in Asia is not just for us alone – it is for the ultimate goal of being part of a region that interacts well within itself, and is a constructive contributor to the wider global community.
Thank you.
Nov 3, 2013