With Panetta’s Visit, US – NZ Defense Relationship Evolving Amid Pacific Rebalancing

Last Saturday, US Secretary of Defense Leon Panetta left for his third trip to the Asia-Pacific this year, scheduling stops in Japan, China and New Zealand.  Panetta’s visits to Japan and China are attempts to smooth relations between the states, and the trip to New Zealand is a follow-up from the visit earlier this year to Washington, DC by NZ Defence Minister Jonathan Coleman.  The trip will be the first time in 30 years that a US Defense Secretary has visited New Zealand, and marks a change in regional strategic dynamics.  A critical part of the Obama Administration’s rebalancing in the Asia-Pacific includes repairing and deepening strategic relationships with New Zealand (among other smaller and medium-sized states) and to sustain opportunities for regular, high-level dialogue.  While New Zealand does not have a sizeable defense force to contribute to US-led operations, the small democracy is a valuable ally that can serve as an ‘honest broker’ and voice of legitimacy in the Asia-Pacific.

 Pivoting for the Pacific’s Sake? Not Likely.

Recently, New Zealand has received undue attention from American diplomats and cabinet secretaries because the US has much to gain politically and economically (if not militarily) from the bilateral relationship.  Whether the National or Labour Party is in government, New Zealand has a reputation both regionally and internationally as a state with a strong pacifist orientation that advocates for its values and the wellbeing of its Pacific neighbors.  As a founding member of and voice within the Pacific Islands Forum, New Zealand can be a significant agent for American interests during the leaders’ meetings.  Moreover, New Zealand’s promotion of US naval patrols, development assistance, trade relations, diplomatic connections and so forth would enable the US to exercise greater power projection in the region.

 The 1984 Labour government’s nuclear-free announcement reflected in part New Zealand’s continuous desire for an independent foreign policy based on “conflict avoidance and resolution, humanitarian assistance, human rights, and environmental defense.”  The declaration prohibiting American nuclear ships from their ports was a policy move that was necessitated by public opinion and new Labour supporters and representatives.  Since its proclamation, the nuclear-free policy has been largely nonpartisan. 

 While the strategic dimension of US-NZ relations faltered from the 1980’s, it never disappeared, and was supplemented by intelligence collaboration.  In addition to a strong commitment to special forces training and deployment (particularly the New Zealand Special Air Services), the intelligence-sharing between the US and New Zealand has remained significant since 1946. Despite disagreement with the US government over the invasion of Iraq, intelligence sharing remained consistent.  In fact, after 2001, New Zealand increased its intelligence budget by 30 percent while decreasing its overall defense budget.

 Maritime defense, domain awareness, and disaster rescue operations are essential areas of mutual concern for New Zealand and the US in the Pacific, particularly given the Christchurch earthquake, China’s soft loans to Pacific island nations, and overfishing.  For the first time in 28 years, the New Zealand Defence Force participated in the Exercise Rim of the Pacific (RIMPAC) in July-August, the largest international maritime exercise.  Interoperability is a key component of the Obama Administration’s foreign policy in the Pacific, and as Nathan Smith writes, the exercises served both diplomatic and more practical purposes for New Zealand and Australia.  Security concerns for New Zealand focus on the sea lines of communication due to heavy reliance on maritime trade; the country’s small blue-water navy is primarily geared for search and rescue and maritime interdiction.  Despite not being allowed to berth ships in Pearl Harbor due to the nuclear-free policy (in contrast to former foes Japan and Russia), Kiwi sailors did not seemed fussed, and took advantage of the nightlife offered by Honolulu.

 As we have seen through the signing of the Wellington and Washington Declarations, the current National Government is in agreement with the Obama Administration’s Pacific rebalancing.  Moreover, the close relationship between US Assistant Secretary of State Kurt Campbell and NZ Ambassador to the US Michael Moore, and the work US Ambassador to NZ David Huebner has done in Wellington are examples of peoples and governments that seek mutual benefits and understanding.

 Improving understanding rather than compromising on ideals

A question that NZ Defence Minister Coleman will face in meeting with Secretary Panetta is how much more New Zealand will be able to commit to the bilateral relationship without sacrificing its ideals.  There will almost surely be a small demonstration in Wellington during Secretary Panetta’s visit about the TPP, or anti-US policies led by local anarchists from Aro Valley, as there is during most high profile visits.  However, in most cases it seems that the New Zealand government knows when and when not to compromise on foreign policy issues, with bipartisan support for free trade agreements.

 New Zealand can leverage an improved defense relationship with the US to secure better terms for the Trans-Pacific Partnership Agreement (TPP) and other future trade agreements (including a potential US-NZ FTA as sought by New Zealand).  The latest negotiation terms for the TPP are not public; however controversial public issues being debated concern intellectual property rights and copyright law, both of which have been met by public protests and contestation from New Zealand and Australia.  If the US gets what it wants in terms of defense initiatives, it may soften some of the demands of the TTP and open a path to a US-NZ FTA.

 Setting the nuclear-free policy aside, both National and Labour governments have been fairly amicable to US defense relations.  So what more could New Zealand gain from a “stronger and deeper bilateral defense relationship” as set out in the Washington Declaration?  With both sides facilitating the establishment of “regular, senior-level, strategic policy dialogues between the US DoD and NZ Ministry of Defence and NZDF,” New Zealand can not only legitimate the US strategic involvement in the region but can continue to bolster its own authority.  Welcoming perhaps the strongest ally with shared values and democratic ideals can serve to boost Kiwi clout and spur domestic confidence.

 Development assistance in the Pacific is another area of mutual interest with opportunity for growth.  Australia provides half of all official development assistance to Papua New Guinea and Pacific island countries (AUD$1.17 billion) and New Zealand spends more than half of its country programs budget on Pacific island countries. At the latest Pacific Islands Forum, the US showed that it is ready to lift a portion of the development aid load in the Pacific; US Secretary of State Hilary Clinton announced $32M in new aid programs 18 years after ending such programs in the Pacific.

 As former Director of the Central Intelligence Agency, Secretary Panetta should be attuned to the value that New Zealand provides as a voice and ear in the Asia-Pacific.  One Kiwi commentator wrote that New Zealand should be weary of his arrival in the country, and that the US will ask too much from Kiwis.  However, the RIMPAC ship porting issue notwithstanding, strategic and diplomatic relations between the US and New Zealand have moved forward since 2007.  Leadership of both states are keen to return to an era of stronger defense ties to help guarantee their security and to enhance stability in the Pacific.  Having met already this year in Washington, DC, the meeting this week between defense bosses is likely more of a touch point to ensure regular high-level dialogue occurs.  With the Washington Declaration in place and successes to build on from the past year, the additional avenues for deepening defense cooperation may be limited but may be milestones nonetheless.

Advertisements

Review of Pacific Plan Essential for an Effective Pacific Islands Forum

Between 31 July and 3 August, the Pacific Islands Forum Secretariat meetings in Fiji set a tone for the forthcoming leaders’ meetings in the Cook Islands at the end of August.  Much of the media focus surrounding the Pacific has centered on the US involvement in the dialogue as part of its rebalancing, and to a lesser extent, Australia and New Zealand’s changing relations with Fiji.  As the Secretariat meetings have indicated, however, reforming the Pacific Plan to reflect the contemporary political, economic and security conditions in the Pacific will be critical for this year.  Issues of labor mobility and trade integration within the Pacific Islands region will be critical to the continued development and success of the Pacific Plan and the Pacific as a whole. 

A product of the 2004 Auckland Declaration, the Pacific Plan is a ‘living document’ that enables initiatives to adapt with the framework. The Pacific Plan has four pillars aimed at enhancing economic growth, sustainable development, good governance and security of the Pacific through regionalism.  Securing actions at the national level has been a paramount concern given the diversity of states and disparity in wealth.

One goal in reviewing the current Pacific Plan should be to improve labor mobility in the region. This goal is steadily gaining traction, but policymakers need to take care to avoid some of the negative aspects of temporary migration and to provide more sustainability.  The Australian Pacific Seasonal Work Pilot Scheme and New Zealand Recognised Seasonal Employer Scheme have been workable models to increase remittances among the island states.  In fact, there are recruiting firms throughout the Pacific that promote workers for both New Zealand and Australian schemes (see, for example, http://www.workreadyvanuatu.com).    

However, the seasonal worker schemes create multiple dependencies on unskilled labor.  Horticulture, viticulture and other industries that have seasonal labor needs are more inclined to take on labor with less ability to make demands for rights and benefits; furthermore, migrant labor provides a pool of labor potentially unavailable or unwilling to do the grunt work required in those industries.  Migrants, on the other hand, become dependent on impermanent, unskilled and unpredictable work.  While remittances are highly valued as essential Pacific economies, the type of work created for seasonal workers is currently not the most sustainable either in terms of returning home as a skilled migrant or with a secure income.   

Such an exchange of labor could be expanded to all Forum Island Countries (FICs) in a way that encourages training and the exchange of skills. (See, for example, doctor exchanges between Venezuela and Cuba as a progressive idea; it hasn’t worked well in practice however due to strong ideological fervor among both states).  For a more skilled and sustainable Pacific economy, training is needed outside of the temporary program, and protections are needed against exploitation.  Migrants and temporary workers are typically the most disadvantaged in in terms of labor rights and the Pacific has the potential to produce a more equitable regional model.

Like the issue of labor mobility, creating a common market and pursuing free trade in the Pacific are goals that require careful attention.  Both Australian and New Zealand foreign ministries have explicitly stated that their approach to the Pacific Agreement on Closer Economic Relations (PACER) Plus negotiations differs from their traditional approach to free trade agreements; rather than focusing solely on their states’ commercial interests, Australia and New Zealand aim to promote the development and capacity of FICs.  The two regional powers additionally must maintain competitiveness with potential trade agreements that FICs make with the European Union. 

With ever-increasing collusion among trade, development and foreign policies, taking steps toward free trade agreements is a precondition for aid and greater access to NZ and Australian markets.  The goal of PACER Plus is to start with free trade within the FICs to demonstrate their abilities to cope with such policies.  One problem encountered by the region is that the principles of free trade clash with certain traditional Pacific principles (e.g. property rights).  Regionally, community development solutions such as bulk purchasing invite avenues for creativity and take into consideration the nature and interests of Pacific Island states.

Globalization and the changing international political landscape are creating an increasingly competitive environment in the Pacific.  As the region draws greater attention from China and the US for its geostrategic position and natural resources, the Pacific Islands Forum and its member states should secure a more formidable voice, particularly on issues that impact the region.  An effective review and renewal of the Pacific Plan then must include two of the most noteworthy subjects for development, improved labor mobility and closer economic relations.

Facing Regional Challenges & Pursuing Opportunities: Pacific Day 2012

On 23 May 2012, the Embassy of New Zealand in Washington, DC hosted the annual celebration of ideas, food and culture from the Pacific Islands region.  Photos of the event can be found on the New Zealand Embassy Facebook pagePacific Day has typically focused on getting different groups together in celebration of Pacific food and culture.  With the US turn to the Pacific and the strengthening of the Pacific Partners Initiative, Pacific Day 2012 had an equal focus on the social, political and economic issues important to the region.  The event began with a seminar moderated by Ernie Bower of the Center for Strategic and International Studies that included a keynote address by New Zealand Foreign Minister, Honorable Murray McCully.  A panel discussion addressed the impact and concerns of small states, climate and environmental issues, and the role of powers in the Pacific.  The reception featured entertainers from Australia, Hawai’i, Fiji, New Zealand and Samoa, as well as food and beverages from Australia, Hawai’i, the Federated States of Micronesia, Fiji, Guam, the Marshall Islands, New Zealand, Palau and Papua New Guinea.  The independent nation-states and territories from the South Pacific enjoy their differences but at different times celebrate a shared history and geography.  Other than geography, the smaller states of the Pacific face strikingly similar challenges and opportunities, hence it is beneficial for them to collaborate with states such as the US, New Zealand and Australia. 

For the major powers in the Pacific, the current outlook for the region is one of cooperative engagement and closer dialogue.  Australia, New Zealand and the US have all, in one way or another, promoted the “Pacific Century.”  As these powers seek to further engage with the Pacific, the Pacific Islands Forum will become more prominent in connecting Pacific states throughout the Asia-Pacific.  The Pacific Islands Forum meeting in Auckland in September 2011, was the first time that the three US Pacific territories – Guam, Northern Marianas and American Samoa – were granted observer status.  The focus of Pacific Day was not just on the major powers, but on examining the roles of the smaller states and the issues pertinent to the region.

In addition to the geopolitical issues that find their way into the news, Pacific nations are collaborating on pressing economic and environmental issues like sustainable fishing. In his keynote address, Hon. Murray McCully proposed that the only fisheries in the world that are not overfished are those in the South Pacific.  While China and the Philippines fight over territory and cause international incidences with fishing boats, states in the Pacific are working to connect their fisheries policies.  The South Pacific Tuna Treaty is currently being renegotiated. Pacific states are working with Australia, France, New Zealand and the US to stem illegal fishing through Operation RAI BALANG. The Pacific Islands Forum Fisheries Agency continues to work on new and existing issues.  The World Wildlife Foundation recently praised the efforts of Parties to the Nauru Agreement with their strengthened fisheries management measures to promote sustainable fishing.  Since several Pacific Island states – with Kiribati being a leading example – rely upon the resources caught from their Exclusive Economic Zones, a major concern has been how best to ensure revenues from primary industries are spread amongst states’ residents. While several panelists offered that question, answers as to how profits might “trickle-down” were in short supply. 

Pacific Island states are also pursuing environmental and energy policies.  Kate Brown from the Global Island Partnership gave an example of how Pacific Island states are being creative in their environmental protection policies.  In Palau, a $15.00 “Green Fee” collected upon departure is used to support the country’s natural resource conservation efforts within the Protected Areas Network.  The fee was initiated in 2009, and has collected well over 2 million US dollars.   In addition to protecting the environment, improvements in sustainable energy and dealing with the effects of a changing climate remain significant.  With assistance from others, Tokelau will soon be moving from relying solely upon fossil fuels to relying upon solar power for 90% of its energy. At the UN climate talks in Durban last year, Tokelau challenged other states to follow its lead. Durwood Zaelke of the Institute for Governance and Sustainable Development pointed to other strategies being utilized to mitigate climate change in the Pacific: black carbon is the worst polluter in the Pacific, and innovative methods are being used to capture it; the Climate and Clean Air Coalition to Reduce Short-Lived Climate Pollutants is making headway, and there are hopes it will benefit island states in the Pacific.  Very recently, the Secretariat of the Pacific Community signed grant agreements with the Government of Australia to support work in climate change adaptation and educational assessment.  As Ms. Brown reiterated, island nations around the world are looking to the examples being set in the Pacific for environmental management as well as effective multilateral collaboration. 

Pacific nations face a range of security issues from governance to international crime and disaster relief that are best tackled through regional partnerships. As Patrizia Tumbarello from the International Monetary Fund stated, the cost of running a government in the Pacific Island region is higher than in other parts of the world due in part to their small populations. A lack of investment due to transport and infrastructure issues, reliance on diesel energy, and distance from neighbors and larger markets impede economic security and stability.  The consistent linking of Pacific Island states to Australia, New Zealand and economies in Asia adds resilience to their economic and social networks.  Tackling transnational crime and human trafficking and enhancing information sharing were the goals of US Secretary of Homeland Security Janet Napolitano’s recent trips to New Zealand and Australia; in New Zealand, Secretary Napolitano signed a Joint Statement on Combating Trafficking in Persons in the Pacific Islands Region with Immigration Minister Nathan Guy, and signed a Joint Statement to Strengthen Border Security, Combat Transnational Organized Crime, and Facilitate Legitimate Trade and Travel with Customs Minister Maurice Williamson.  In addition, development aid, disease prevention and disaster management go hand in hand with economic and more traditional security issues.  Australia provides half of all global Official Development Assistance (ODA) to Papua New Guinea and Pacific island states, representing almost 25 per cent of total Australian ODA; similarly, over half of all New Zealand’s total development aid is provided to its neighbors in the Pacific.  Taken holistically, the security of the Pacific island states cannot be guaranteed on their own.  As CSIS Non-resident Fellow Eddie Walsh mentioned in his briefing, Pacific states must be part of the greater Asia-Pacific in their economic, security and political networks.

The guests in attendance at Pacific Day 2012 – like the nations they represented – had an interest or even a stake in the prosperity of the Pacific.  Diplomats, representatives of nonprofits and corporations, scholars, journalists, students and members of the public attended the festive affair focused on celebrating all things Pacific and promoting cooperation amongst neighbors.  The nation-states of the Pacific maintain unique economic, political and social structures; yet because of their small size and geographic location they understand the significance of multilateral institutions such as the Pacific Islands Forum and the need to collaborate with Western regional powers Australia, New Zealand and the United States and Asian powers like China.  In a recent statement, the Secretary General of the Pacific Islands Forum Secretariat proclaimed that “Pacific countries cannot be left isolated from regional economic integration initiatives in the Asia-Pacific region.”  Mutual advances toward sustainable fisheries, development, and economic, human and physical security, may lead to a more prosperous Asia-Pacific region. 

Partners in the Pacific: Reflecting on a History of Internationalism

During my latest visit to Wellington in February of this year, I had hoped to find some interesting and unique local or regional books that I could not acquire in Washington, DC.  On my last day, I decided to stop in Arty Bees Books on Manners Street.  To my surprise, I found the first ever study of New Zealand’s defense system, Defending New Zealand: A Study of Structures, Processes and Relationships (1993), by one of my former professors at Victoria University, Dr. James Rolfe.  While some of the empirical information is no longer current, the book provides a snapshot of New Zealand defense environment and policymaking. In parts it tells a tale similar to (and is almost as witty as) the 2012 Australia New Zealand Army Corps (ANZAC) Lecture at Georgetown University given by New Zealand Ambassador to the US, Honorable Mike Moore.  Ambassador Moore’s speech was more sentimental and as you would expect did not focus on the thrills of policymaking, but drew on the experience of the ANZACs in WWI to reflect on contemporary international affairs. Both Dr. Rolfe and Ambassador Moore contend that New Zealand is internationalist at heart, never impartial, and prefers an institutions-based environment to level the field. 

As we commemorate ANZAC Day, with services held across the globe, we gain insight into the sacrifices of small states in defense of their allies and outside of their homeland.  American exceptionalism has taken US troops around the world in what seems to be perpetual conflicts, emergencies and wars both in support of others and defense of American ideals.  In New Zealand and Australia, however, defense takes on a different meaning.  My instant favorite excerpt from Rolfe’s classic text is as follows:

 Undoubtedly politicians do not believe that there are votes to be gained in pushing for increased defense expenditure, especially at the expense of housing, health or education.  But it is not likely that responsible politicians believe that the armed forces, with the resources allowed, could not achieve the tasks set for them. More likely there is a belief, unspoken or even unacknowledged, that there is no real need for armed force in the modern international order.  But just in case we are wrong, we will have a token organization which can be produced to work in conjunction with a larger state or group of states.  In the meantime, we will make unverifiable statements about our willingness and capability to operate as necessary in the region. (Rolfe, 1993: 167)

While September 11 changed the patterns of much of the West, defense is not necessarily a vote-winning topic for New Zealand politicians.  In New Zealand “when attention is focused on the activities of the armed forces, the question of cost is inevitably raised and from this follows the question of need.” (Rolfe, 168)  With few enemies (other than people bringing quarantined items through airport security), relatively small populations and a unique geography in the Pacific, New Zealand and Australia focus much of their regional energy into trade partnerships, maintain an ever closer security relationship with each other and rely heavily on the US. 

That being said, as Ambassador Moore pointed out, New Zealand has been a keen participator in international events and conflicts, as ANZAC Day reminds us. “During the First World War, 42 percent of New Zealand males between the ages of 19 and 45 fought, with a casualty rate of 58 percent. 40 percent of Australian males fought with a casualty rate of 68.5 percent.  Similar figures were true of the Second World War.”  In conflicts and in peacekeeping operations from Afghanistan to Bougainville to the former Yugoslavia, “you will find New Zealanders and Australians.”

In Defending New Zealand, Rolfe’s interpretation of New Zealand defense policy still rings true to Ambassador Moore’s explanation: the state’s defense interests are mainly concerned with the external environment.  On the one hand, this focus is “a reflection of the truism that a military threat, to the extent that one is perceived, could only come from overseas.”  On the other hand, New Zealand believes, as does the US, that using military force in neighboring regions “to assist in stability and security will in turn reinforce stability and security in the immediate region to the benefit of New Zealand’s ultimate security”. Because of the sacrifices made throughout history and its focus on international engagement, New Zealand policymakers understand that the country’s security cannot be solely determined within Oceania. (Rolfe, 1993: 3)

While New Zealand diplomats have historically punched above their weight and have been a strong progressive voice that at times caused tensions (especially with the issue of being nuclear-free), all democratic states should be keen to have New Zealand; the state is stable, outspoken and an active regional player of the Asia-Pacific.  Furthermore, the justifications for such outward foreign and defense policies should be lauded.  According to Rolfe, the internationalist outlook of New Zealand is recognition that, as a small state, if it wants to influence the world it must participate in the world.  “It argues that there are greater benefits to participation than there are costs, and what costs there are, are costs which any member of the international system should bear.” (Rolfe, 1993: 5)  For Ambassador Moore, “War is not inevitable but neither is peace….Patient, prudent, principled, predictable engagement at every level is the only golden rule.”

 

Chinese Firm’s Investment Challenged – Crafar Farm Deal on Hold

Recently, the High Court of New Zealand overturned a decision by the Overseas Investment Office to allow Chinese company Shanghai Pengxin to purchase the Crafar Farms, sparking worries about the ability to attract future FDI, maintaining positive trade relations with China, and the situation’s implications for future partial sales of state owned assets. A new decision should be reached within days, with some foreseeing the inevitability of the sale due to the potential increased export business driven by Shanghai Pengxin’s connections. The court ruling in NZ and the frenzies surrounding the potential farm sale demonstrate our simultaneous fascination for and wariness of China. With significant experience in FDI and trade agreements, China can easily perceive the public relations issues and react with public diplomacy and economic incentives. This brief post is the first of a series examining the Crafar Farms case.

 China is NZ’s second-largest export market, and NZ is the only developed country with a free trade agreement with China. The Overseas Investment Office’s initial decision to approve Shanghai Pengxin’s purchase of Crafar Farms, then, according to some was swayed by Chinese lobbyists or an effort to keep trade relations blooming. In August 2011, Treasury and OIO officials met with the Chinese political consul to discuss foreign investment rules in NZ, but apparently did not discuss the Crafar Farms deal. In order for foreigners to gain ownership of ‘sensitive assets’, they must prove that their ownership will provide ‘substantial and identifiable benefits’ to NZ; Shanghai Pengxin attempted to display benefits, which were agreed to by locals and importantly, Fonterra. In the High Court ruling, however, Justice Miller stated that an overseas buyer not only has to prove such benefits to NZ, but they must “offer a deal more beneficial than any local sale”. In this case, he ruled that the OIO overstated the benefits which Shanghai Pengxin would offer to NZ. Tim Watkin illustrates:

“Like some robed bouncer, he’s told Shanghai Pengxin – and all potential foreign investors – that we have a dress code in this country and if they want to come in they’d better polish their shoes and put on their best suit. And given the value of productive farm land to our country’s wealth, our national identity and our great-grandchildren’s prosperity, that’s probably not a bad view to take.”

 In fact, the OIO decision originally established the following:

“The Chinese Government recently confirmed that it saw New Zealand as an attractive place for investment and was encouraging Chinese companies to invest in strategic assets such as dairy farms. If this Application is refused without convincing reasoning linked to non-compliance with the Act or the Regulations (which we submit is not the case), that decision will be widely reported both domestically and internationally and will be likely to send a negative message about New Zealand’s attitude towards Chinese investment and about whether the commitments made in the New Zealand-China FTA are being honoured.

“The transaction will also confirm New Zealand’s compliance with the New Zealand-China FTA and therefore enhance New Zealand’s strategic interests.”

 Strategic assets such as farm land will continue to be sold in NZ, and in fact much farm land has already been sold to foreigners as of late; over the past 18 months, 72 farms were sold to foreign buyers out of a total pool of 10,000 dairy farms and 35,000 sheep and beef farms. This statistic was noted by PM John Key in reaction to a new poll stating that 76 percent of voters want tougher restrictions on sales of land, including farms, to foreigners. With the media publicity, High Court ruling, trade relations with China being so critical and the significance of the dairy industry to the NZ economy, the Crafar Farm deal has struck a chord with New Zealanders that the Government is attempting to mask. Given that the potential New Zealand buyers are trying hard to win over the public and the courts, and that the Chinese government created a new fund to assist with financing international takeover bids, the public perception of the value of foreign direct investment will likely become a more consistent topic. The NZ Government, then should be transparent in its influence with foreign investors when they are in direct competition with locals for strategic assets.