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Is it just the China choice?

Auckland, New Zealand | Source: Unsplash

Declan Hourd

The rise of China has brought with it a swathe of changes to the foreign policy environment of the Southwest Pacific. The Belt and Road Initiative is a policy scheme that only China could develop, using its economic muscle to bankroll trillions of dollars’ worth of infrastructure programs across the Global South, thus issuing a challenge to the historic American dominance of the region. Furthermore, the contours of the Chinese domestic economy and its titanic population make it the world’s most desirable market to penetrate.

For both Australia and New Zealand, China has been a common source of economic growth as a destination for its high-quality agricultural products. However, the geopolitics surrounding China’s rise has soured, ushering in the current climate of great power competition which has pitted two different political cultures against each other. In this current climate, democracies, particularly Western democracies, have begun to form a loose coalition that aims to repel the more coercive aspects within the authoritarian leanings of the Communist Party of China. This intention is particularly personal from an Australian perspective because of its worsening relationship with Beijing and the economic hardship incurred from coercive tariff measures. The perceived tensions across the trans-Tasman increased when the New Zealand Trade Minister, Damien O’Connor, recommended that Australia show more “respect” and “diplomacy” towards China. These comments have since been rolled back by Wellington.

Continuing from this incident, it was shocking to much of the Western world that New Zealand, often considered as inseparable from Australia, issued subdued statements in diplomatic language that supported Canberra without condemning Beijing on the mishandling of the COVID-19 pandemic and the ongoing state-sponsored genocide of Uyghurs. Subsequently, opinion pieces accused New Zealand of being a Chinese puppet and pondered rethinking New Zealand’s place within Five Eyes, an important multinational intelligence-sharing organisation.

YDS reporting by Sameera Pillai describes how reliant New Zealand’s economy is on Chinese consumption and concludes this as the main motivation for its conservative and diplomatic approach, which as a consequence, puts Wellington out of step with its allies. While this is true, it is, however, not the whole story. I argue that perceptions of New Zealand are often obscured by its strong friendship with Australia, resulting in international onlookers, and Australians, assuming that New Zealand’s foreign policy concerns, culture, and economy are so aligned with Canberra that they may as well be identical. This assumption is not baseless, because the dyad agrees on many issues and has developed an effective partnership through their strong historical relations.

The perception of drifting foreign policy objectives indicates a lack of context surrounding New Zealand’s role in the region and unrealistic expectations of conformity is cause to increase disunity between Canberra and Wellington. To unpack some of these differences, a clear picture of the economic differences between Australia and New Zealand is required. As for the political arena, this tension is being caused within the context of great power competition. Consequently, analysis emphasises China policy because, as the rising power, Beijing is challenging pre-existing norms across a multitude of policy settings. However, New Zealand also interacts with the United States according to its own interests resulting in periods of distinct policy difference. Interrogating historical examples of divergent policy decisions offers insight into the political pressures that create them, particularly, as they relate to the experiences of today.

Economies: Food and Iron

On the economic front, the Australian economy has always been the superior of the pair and better connected to a broader international market. As mentioned previously both economies have been dependent on the hungry Chinese market. The most important difference between the two is that two of the most critical New Zealand exports as of the 2019-2020 financial year, excluding tourism, are the agricultural products of dairy, worth NZD16.5 billion, and meat and edible offal, worth NZD 8.3 billion. These are seen as luxury goods that can be substituted by similar products from other sources.

Furthermore, agricultural industries are some of the most heavily subsidised and protected industries across the world, which makes it difficult for agricultural exports to gain access to foreign markets. For example, as Australia negotiates free trade agreements with India and the European Union, these processes have stalled because of agricultural protectionism in both jurisdictions. China, however, is a unique market because the enormity of its population has forced the country to become a net importer of food. Many investments along the Belt and Road aim to secure food supply, like investing in pork production infrastructure in Argentina and exploring Arctic fish stocks. As such, China makes itself an attractive and accessible destination for the surplus of high-quality foodstuffs from both Australia and New Zealand.

The Chinese tariffs on Australian goods were targeted at similar replaceable agricultural products, with the notable exclusion of coal. However, over this period of increased tension, the export prices of Australian iron ore rose. Mineral and fuel exports are the top earners in the Australian economy bringing in AUD 245.8 billion in 2019-2020, and nearly half of this income came from iron ore exports. This ore is an Australian product that Beijing cannot replace in the quantity it demands for its own domestic expansion and fuelling Belt and Road infrastructure projects. Similarly, coal, both thermal and metallurgical, play an integral role in sustaining its energy needs for industry and facilitate the creation of Chinese steel. Even though Beijing imposed tariffs upon Australia, it still continues to buy the minerals it needs from Australia. In the year since those tariffs were introduced, Australian coal continues to be a hot commodity with recent reporting indicating that prices have gone up to record-breaking highs.

Despite China being the number one export destination of both countries, the magnitude of Australian trade with China and the rest of the world is much greater than its New Zealand equivalent. The Department of Foreign Affairs and Trade recently published 2019-2020 financial year statistics, with Australian exports to China amounting to AUD 167.6 billion and its exports to Japan reaching AUD 56.2 billion. New Zealand’s exports to the same destinations in the 2019-2020 financial year, according to Stats NZ, total NZD 19.8 billion and NZD 4.56 billion to China and Japan respectively. This is a titanic difference between the two countries and a vital piece of context that is sometimes lost in analysis. From an economic viewpoint, Australia is indispensable to Chinese infrastructure projects, and broadly, minerals are a much harder product to substitute or replace. As such, Canberra can literally afford to be more forthright with its opinions regarding China because it has products in high demand that are sold to a variety of markets which can cushion the economic fallout from disagreeing with Beijing. This is something New Zealand cannot do.

The American Choice

It would be expected that Australia and New Zealand hold similar outlooks regarding the United States. However, one of the most surprising historical foreign policy moments of disunity between Wellington and Canberra is over Washington, specifically, the South Pacific Nuclear Free Zone (SPNFZ), otherwise known as the Treaty of Rarotonga, ratified in 1985. The source of disagreement between the two countries was the implementation of one article in the treaty rather than its broad subject matter. The SPNFZ prevents signatories from manufacturing, stationing, or testing nuclear weapons and it also prevents the dumping of nuclear waste in the South Pacific.

The source of disagreement is Article 5, which allows signatories to exercise their own judgement regarding foreign vessels that could potentially be carrying nuclear weapons. Australia chose to allow American vessels access to its ports without checking for nuclear weapons, while New Zealand wanted to subject American vessels to this check. From an American perspective, this was an unacceptable proposition because there would have been strategic implications for its competition with the Soviet Union. Despite pressure from Regan’s White House, Wellington refused to compromise on this issue. Consequently, the United States suspended its ANZUS obligations to New Zealand in 1986. This suspension would only be lifted in 2012. This incident demonstrates the willingness that New Zealand has to preserve its political autonomy by articulating a position that is different from Australia and then stand by it when faced with pressure from a greater international power such as the United States.

This moment also represents an important distinction in the regional outlook of New Zealand. Another reason why Prime Minister David Lange was insistent upon enforcing this clause was to gain favour with the Pacific Island states that surround it. American, British, and French nuclear tests had been carried out in the Pacific prior to the signing of this treaty, and these tests have resulted in long term health detriments to the regular inhabitants of the various islands. As New Zealand frankly acknowledges it cannot compete with Australia in terms of economy, it looks to preserve its moral authority in the region. Subsequently, to maintain Wellington’s influence in the South Pacific, it aims to cultivate soft power by earning a reputation for being cooperative and to be seen actively standing up for the interests of the Pacific Islands by strictly enforcing the Rarotonga Treaty. These are outcomes that Australia has not pursued with the same vigour.

Another prominent example of New Zealand differentiating itself from Australia is the 2003 invasion of Iraq. Australia sent troops and New Zealand did not. Despite vocal protestations against the war by then Prime Minister Helen Clark, Wellington would send a small force of non-combat military engineers post-invasion. According to government cables leaked by WikiLeaks in 2010, this decision was made to ensure Fonterra, a New Zealand-based agribusiness, did not lose its lucrative contract with the then-active UN Oil for Food program because of pressure from the United States. Here, New Zealand compromises its values because of possible economic pressure that could be exerted on it by an external power. This decision made by Wellington in 2003 regarding Washington is reminiscent of Wellington in 2021 navigating its relationship with Beijing. New Zealand constantly walks the tightrope of strategic autonomy and economic prosperity, making pragmatic decisions to maintain this balance. In the face of economic coercion without any perceivable benefits to its position in the South Pacific, it makes sense for New Zealand to protect its economic prosperity.

Australia’s Security Tilt

Having described the protection of trade as a high priority of New Zealand, what makes it different from Australia? After all, Australia faces similar geographic isolation and its economy relies on the trade of exports. The difference is the prominence of security in Australian foreign policy. This is a function of geography and historic lessons. The fall of Singapore and the Japanese advance through Indonesia and Papua New Guinea during World War II was an existential threat on Australia’s doorstep that reinforced notions of isolation. This memory of the threat from Asia collides with Australia’s continental size and small population, creating great logistical difficulties regarding its defence. To resolve long-standing strategic anxiety, the concept of the ‘great and powerful friend’ that acts as a security guarantor has become a defining feature of Australia’s foreign policy to shore up its perceived vulnerability. The first friend of this calibre was Britain, and after World War II, the United States filled this role. Both historically and presently, Australian foreign policy aims to do three things to minimize the likelihood of conflict: (1) keep the Americans engaged, (2) maintain its regional power status in the South Pacific, and (3) be active in Asian geopolitics, particularly in maritime Southeast Asia.

In the current environment, these objectives have meant an enthusiastic adoption of the Indo-Pacific framework by Australia, leading to enhanced cooperation with India, Indonesia, and Japan, with Canberra working to retain US supremacy in the region, and to develop robust domestic defence capabilities. To supplement these goals and publicly demonstrate commitment, the foreign policy attitudes of Washington can often be found reflected in speeches of Australian policymakers. Of course, this is not to say that Canberra’s foreign policy is designed in the White House; Australia very often acts independently. For example, Australia was the first country in the world to ban Huawei from participating in the construction of 5G infrastructure, a move that was later adopted by the US and elsewhere. However, because Australia views American engagement in the Indo-Pacific as an essential component of its own defence and regional security, it works to be compatible with American viewpoints.

Two speeches made by Prime Minister Scott Morrison demonstrate the adaptability of Australian rhetoric to maintain consistency with the United States. The first is the 2019 Lowy Institute lecture titled “In our interest”, where Morrison discussed "negative globalism" and the perceived restraints upon sovereignty by international organisations - this demonstrated ideological compatibility with the Trump White House, whose foreign policy regime was founded on neo-isolationism and efforts to portray the World Trade Organisation (WTO) as dysfunctional. The second speech followed the transition to the Biden administration, with Morrison giving a speech at the Perth USAsia Centre prior to travelling to the 2021 G7 summit. Titled, “A world order that favours freedom”, he discussed a range of issues including WTO reforms, working within a coalition of "like-minded nations", and he made an unambiguous declaration in favour of a regional order led by the United States. Both reform and multilateralism are clear priorities of the Biden foreign policy agenda. Despite stark thematic differences, both speeches clearly identify Australia’s position with the United States and unambiguously highlights one role Australia will have in the Indo-Pacific, which is up-holding the rules-based international order that Beijing is often perceived to be subverting.

Analysis of speeches given from Wellington also highlight how core foreign policy objects are articulated. Prime Minister Ardern recently addressed the New Zealand Institute of International Affairs Annual Conference, where the focus was on the adoption of the Indo-Pacific into Wellington’s foreign policy lexicon, something that it has been slow to do. Arden emphasised that New Zealand’s Indo-Pacific framework aims to be inclusive, which is a value that feels underrepresented in the often hawkish statements from Australia. The underlying implication here is that despite the commitment to the Indo-Pacific framework and the usage of the term in congruence with its democratic partners, New Zealand will continue to cultivate a productive relationship with China. Arden also highlighted that New Zealand will continue to hold the Pacific at the forefront of its foreign policy efforts even after adopting the Indo-Pacific framework which tends to focus on issues in Southeast Asia.

The Australian emphasis on security plays out across similar trans-Tasman policies. Both countries have recently published new strategies to engage with the South Pacific, the Australian Pacific Step-Up and the New Zealand Pacific Reset. The South Pacific is an incredibly diverse region and though every country has a different history with Australia and New Zealand, many of these countries face similar issues. Broadly, both the Step-Up and the Reset aim to change the tone of the foreign policy they conduct in the region and address challenges including climate change, education, public health, gender equality, and sustainable development. An important difference is that the Australian formulation of this policy incorporates a robust range of security programs that include training military and police personnel, international crime, cyber security, and establishing maritime borders. These are programs that Wellington supports, and often participates in, but does not promote with the same intensity as Canberra.

Beyond Differences

The current difference between Australia and New Zealand’s China policy is motivated by the reliance on Chinese consumption. New Zealand has fewer customers for its goods than Australia does, and none as large as China. Dramatic analysis would paint Wellington as drifting into Beijing’s sphere of influence. However, New Zealand practices a foreign policy that is more pragmatic than Australia and it should not be surprising that a sovereign nation makes decisions according to its needs. Knowing this should dispel fears of developing substantial or irreconcilable differences on either side of the Tasman Sea.

The compatibility that Australia and New Zealand have cultivated over time will see these two countries cooperate and agree on issues more often than not. In May 2021, the Australia-New Zealand Leaders Meeting was held in Queenstown, New Zealand. The joint statement produced after Arden and Morrison met highlights the depth of interconnectedness covering joint responses to climate change, migration, innovation, and people-to-people interactions. In the question-and-answer session following this meeting, Prime Minister Arden described the state of the Trans-Tasman relationship by stating that, “We will have our disagreements from time to time, but those disagreements are taken in the spirit of openness, and ultimately friendship. We are much bigger than our differences.” It is this sentiment that should serve as a reminder of the overarching sensibilities and political compatibility that Australia and New Zealand share that will always allow it to overcome transient differences in foreign policy.


Declan Hourd is a recent Master of International Relations graduate from the University of NSW. He is interested in exploring the geopolitics of the Indo-Pacific and what that means for the people who live there. He is also the YDS Regional Correspondent for New Zealand and the Pacific.