New Zealand goes it alone with China
By Jim Rolfe (author)
Prime Minister Jacinda Ardern will have a high-level discussion with Australian Prime Minister Malcolm Turnbull this Friday and the role of China in the region will be on the agenda.
Discussions will take place against a background where New Zealand and Australia increasingly have subtly diverging approaches to China.
For example, New Zealand is the only “Five Eyes” western nation to sign up so far to China’s Belt and Road Initiative.
Australia, on the other hand, is in talks with the United States, India and Japan about establishing a joint regional infrastructure scheme as an alternative to China’s multibillion-dollar Belt and Road Initiative in an attempt to counter Beijing’s spreading influence.
New Zealand officials expect Australia’s “Indo Pacific” initiative to be discussed in the talks.
But what is the Belt and Road?
Jim Rolfe, is a Senior Fellow at Victoria University of Wellington's Centre for Strategic Studies. His analysis:
Last year, with little fanfare, New Zealand signed up to a strategic system that is quite different to what we have currently.
That system, known variously as ‘one belt, one road’, or the ‘belt and road initiative’ is different because, first, it is China led, and second it is economic rather than military-centred.
This is a strategic system because it will, if carried through, place China firmly in the centre of regional, indeed global, trade relationships and through them, political and potentially security relationships.
A wide definition of strategic but pertinent in this case.
The belt and road initiative, launched in 2013, aims to develop connectivity between states to promote trade and thus wealth.
The massive project, infrastructure works alone are estimated to cost more than US$2.5 tn over the next decade, is intended primarily to link East Asia with Europe by developing the trading infrastructure in land and maritime corridors between the regions.
China is the focal point of these corridors.
This is the ancient ‘Silk Road' reborn, with a maritime component to supplement the land corridors. As well, Latin America has become associated with the initiative, and its east-west transport infrastructure will converge on the Pacific coast and from there lead to China through enhanced maritime links.
African states also are considering projects to develop their transport infrastructure to link the continent more effectively by land, and then from specific nodes to link by sea to China.
This is a vast and imaginative project; really many projects under the overarching ‘belt and road’ title. Infrastructure projects will gain most attention as the transport corridors are developed, but there are four additional priorities: policy coordination; ever freer trade; financial cooperation; and social links. China is funding many of the projects and is central to the whole project.
As the projects develop individually, China will be connected to most of the world and will thus be able to both export and import goods effectively (necessary because China has a large and expanding need for both exports and imports).
The model is a ‘hub and spokes' model with China in the centre (reminiscent of the US-led 20th century Pacific military alliance system), and China will undoubtedly gain influence with all participants in the initiatives through its centrality and through its position in bankrolling the projects.
But participants will also gain.
Chinese markets will open as will markets along the transport hubs. This is an open model rather than the closed one of traditional military alliances and preferential trading agreements.
In early 2017 New Zealand signed a Memorandum of Arrangement with China linking the upgrade of the already existing free trade agreement with the belt and road initiative.
Through this, New Zealand joins more than 70 countries (few of them ‘traditional’ New Zealand allies) that have formally or informally linked themselves to the initiative.
The Memorandum is an enabling document that gives time to develop specific plans, although there is little public sign of such plans yet.
The infrastructure component of the initiative is of little direct relevance to New Zealand, although the country’s exporters may well take advantage of improved trade routes with the Eurasian land mass, and New Zealand could act as a maritime hub for trade between the South Pacific (including South America) and China.
It is in the other coordination priorities that New Zealand should be able to add more value, however. New Zealand has, for example, experience in trade facilitation, innovation in niche areas and creative skills that should allow New Zealand companies to both add to and extract value from the belt and road initiatives.
There are many questions to be asked and no doubt many cautionary words to be uttered.
The questions are as basic as ‘what’s in it for us?’ and ‘why should we become involved, given that we trade freely with most of the world at the moment?’, or as complex as ‘what will this do to our relationship with our traditional friends?’ (none of which have associated themselves with the initiative).
Cautionary words will include: ‘China can’t be trusted’; ‘China is taking over from the United States and gaining undue influence in regional affairs’; ‘China’s values are not our values’; and so on.
These questions and cautionary words should not be discounted.
The questions need to be answered, and the cautionary words need some evidence to support them.
On the face of it, the belt and road initiative is an extension of New Zealand’s long-held belief in the virtues of an open trading system.
To the extent that it expands that system, the initiative is to be welcomed.
Potential pitfalls and risks exist.
Without any analysis at all, it is obvious that the initiative could fail through lack of follow-through, as has been the fate of other Chinese-sourced development projects around the world.
There are reputational risks, there are risks that project-based corruption will affect New Zealand, there are risks that China’s domestic values will be ascribed to New Zealand, and there are no doubt many more.
Questions need to be asked and answered and potential pitfalls addressed before New Zealand becomes too deeply involved in the initiative.
If the analysis is positive, New Zealand should embrace belt and road as yet another approach to opening the world. If the analysis is not positive,
New Zealand should say firmly that this is not for us.