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Shared Roots And Globalisation - Bradford Speech

11.00am Saturday 30 June 2001

New Zealand and Australia: Moving Together or Drifting Apart?
Speech to the Otago Foreign Policy School
By Hon Max Bradford MP
Opposition Spokesperson on Foreign Affairs and Defence

Shared Roots And Globalisation

Like it or not, Australia and New Zealand are welded together by our shared colonial roots and shared adversity on battlefields around the world. They are at the heart of the ANZAC tradition.

Like Siamese twins, we are more together than apart as two nations.

The contemporary question is whether this togetherness is an inevitable state in the future. Are there other options for both countries where the world is rapidly globalising and fractionating at the same time?

Commerce and industry are globalising and merging into powerful entities.

On the other hand, many nation states are fractionating and are becoming increasingly fractious as they struggle to cope with huge changes over which they have little control.

Driven by technology and freer flows of people and capital than we have seen for perhaps a century or more, globalisation is the link between the two.

I don't intend to explore these cataclysmic events in detail in this paper, but their effects do impinge upon the Australian-New Zealand relationship and the subject of this conference.

Globalisation has palpable effects on each of our countries.

The most commonly felt is the "Disappearing Head Office" syndrome (DHOS) and the creation of Aussie and Kiwi Diaspora as our best and brightest chase opportunities presented to them by the syndrome.

Countries of our size have yet to find an adequate antidote.

Many larger countries, especially where their economies are weakly linked into a highly technological world, struggle with fractionation from within.

Much smaller states than New Zealand or Australia find the struggle to survive economically harder now than 30 years ago, especially as television and ease of travel increases the sense of gap between larger and smaller nation states.

Both categories exist within Australia's and New Zealand's respective spheres of interest. For example, Indonesia and most Pacific Island states.

Globalisation has produced its own chain of action-reaction on nation states.

Globalisation shattered the tidy security blanket of the post-League of Nations and post-Bretton Woods world, where bodies like the UN, the GATT and the IMF and World Bank created an order to regulate much of business and international activity. The regulatory ethos penetrated the legal and economic affairs of nation states to a remarkable degree.

>From the 1970s, these bodies unleashed the forces of globalisation from within themselves. Free trade became the creed of the GATT and then the WTO. The IMF vigorously promoted free capital flows and exchange rates in the 1980's as the Bretton Woods system fell apart under the pressure of divergent national growth rates.

Nor could the UN cope with emerging conflict within countries and within regions, as post-Cold War freedom removed super-power rivalry and paradoxically, stability, in many parts of the world.

The international order for which these post-World War 2 institutions were responsible has been shattered. Globalisation is forcing a rethink on their role and relevance, and quite properly so.

For example, the declining effectiveness of the UN has led to the search for other ways to achieve peace and security, mainly through regional pacts and the rise of coalition building as a means of securing and maintaining peace.

Sometimes the UN has been involved, sometimes not. Increasingly the UN's role has been to provide the moral or international legitimacy for intervention in someone else's internal conflict, these days often borne out of ethnic disaster.

The WTO is struggling with "managing" free trade, to the point where bilateral FTAs and CEPs, as well as trading blocs, are replacing the essence of the WTO's being - promoting multilateral free trade. A combination of street riots from an incongruous anti-globalisation movement, and impatience with multilateralism, is producing a heady and potentially explosive mixture.

More open borders and much more freedom in immigration policies, combined with perceptions of increasing gaps in international living standards which often surpass the reality, has led to significant problems.

The educated and skilled join the diaspora Australia and New Zealand face, while the poor and upwardly mobile take the economic refugee route in their millions. Over time, these flows of skill and potential will have the greatest impact on any country's ability to cope with the effects of globalisation.

Such flows are on top of the genuine political refugees whose position is - supposedly - protected by the UNHCR. The reality is the distinction between economic and political refugee has become so blurred that the job of immigration authorities around the world has become nearly impossible.

Globalisation and the Australian-New Zealand Relationship

I have taken a few minutes to touch on these impacts from the sea change of globalisation, because they are the wider canvas on which we have to analyze the Australian - New Zealand relationship.

How we react to globalisation as two small countries far removed from the huge developed markets such as the US and the EU, or less so from emerging markets such as China and India, will profoundly influence our ability to survive and prosper.

Are Australia and New Zealand better to each "do their own thing" or should we actively pursue a joint strategy to maximise our chances of getting the best deal for the peoples of our two countries?

To my mind this question transcends more narrowly focussed problems in our existing web of formal ties and treaties.

This is not to denigrate or dismiss key problems, for example with the CER or CDR.

Nevertheless, there is a real danger that by focussing the light on these problems and their solutions, both countries run the risk of missing key opportunities as the rest of the world passes us by.

Thus it is timely to examine where we are now, and face up to the fact that Australia and New Zealand are drifting apart, even though we are coming together as kiwis increasingly settle in Australia.

Where and Why are We Drifting Apart?

The first point to make is that the relationship is still strong.

But like many marriages where effort is not put into nurturing it, the relationship is in great danger of fizzling out in my view.

In recent times we have seen it splutter and fade in a number of key areas, with increasing tension as the economic pressures on Australia and New Zealand mount, and our views on important strategic interests diverge.

Mostly, the public doesn't see the drift. The drift occurs incrementally where each divergence can be explained away as nothing to worry about "in this case".

And that is the danger. Like cancer, the effects are cumulative and will be difficult to reverse if things are left to drift too far.

Closer Economic Relationship (CER)

The CER was born out of increasing frustration with the pre-1983 NAFTA agreement, which sought to free up trade between New Zealand and Australia.

It was only by high level political intervention and a resolute determination by the two governments of the day that NAFTA was rescued from a certain becalming.

The CER has been a major success for both countries. This is generally recognised on both sides of the Tasman, perhaps moreso in Australia. There is still unfinished business, at least in the eyes of New Zealanders, to allow full economic integration to be progressed.

The New Zealand Foreign Affairs, Trade and Defence Select Committee (FATDSC) is presently conducting an inquiry into the state of the CER.

Having already heard evidence in New Zealand, the committee recently visited Australia. It conferred widely, with parliamentary and business representatives.

The results were not encouraging for New Zealand.

Parliamentary opinion was that it would be difficult to deal with remaining issues, such as imputation credits and harmonising business and taxation laws. This was true for the most part for business opinion too, and most thought the CER had gone far enough, assuming they had thought about it.

Indeed, the sense I gained was that at both the parliamentary and business level, Australian opinion on economic issues is very much facing away from New Zealand. Our market is regarded as "mature" and there is more, much more, to be gained by putting scarce management or political effort into the Asia-Pacific and US markets rather than New Zealand.

Australian businesses protect their own more than do New Zealand businesses. Even though CER theoretically puts New Zealand businesses on the same level playing field, in practice it is more difficult for a New Zealand company to get contracts than it is for an out-of-state Australian company.

Like Avis, we have to try harder. Yet that is the market at work.

Furthermore, the reversal of economic reforms in New Zealand has "turned off" business sympathy in Australia. The advantage of greater competitiveness once enjoyed by New Zealand based companies has largely disappeared in the eyes of many Australian businesses.

The repeal of the Employment Contracts Act and its replacement with more union-friendly industrial relations legislation has done nothing to dispel this emerging view, which was extant before the change in government here.

Now that company tax rates are higher in New Zealand, with the decision by the Howard government to reduce their rate to 30 percent, New Zealand as well as Australian business has even less reason to invest here.

The inability of the NZSE and the ASX to agree on merger terms for the two countries' stock exchanges is a huge opportunity lost for both countries to better tap into world capital markets. The big loser though is New Zealand as the reality is with less than 1 percent of world capitalisation, the NZSE is almost certainly condemned to oblivion as a viable capital market for business.

If icons in business mean anything, then the current skirmishing between Singapore Airlines and Qantas over Air New Zealand's spoils will contribute to the sense we are drifting apart. The New Zealand Government has signalled a clear preference for SA rather than Qantas.

The FATDSC is also looking at the proposal for a common currency being promoted by Arthur Grimes and some New Zealand business groups.

Although the committee hasn't yet formed a view on the common currency, it is not an idea that has found much favour in Australia.

New Zealand proponents of the idea want some influence over the central bank levers that go with having your own currency. Australian interests the FATDSC spoke with do not. Their view is that the $A is viable in its own right, and if we want to let the $A circulate in (monetise) New Zealand, then "there is nothing we can do about it".

In my view the common currency proposal is not likely to get very far, and certainly not if it means Australia has to give up some of its sovereign rights to New Zealand by requiring, for example, a seat on the ANZ central bank board.

There are other proposals floating about in this area. Some parliamentary opinion here, as well as in business, believes we may be better to bypass the $A and monetise our currency with the US dollar.

If this happened, that would be a sharp divergence between our two countries.

The CER, successful as it is, has real roadblocks to further significant improvement. Any push will have to come from New Zealand, and may not succeed to any great extent relative to the political, bureaucratic and management effort put in.

The lingering question is then whether another approach might achieve better results, and receive better support, perhaps like happened when NAFTA was stalled?

People and Permanency

One area where New Zealand and Australia are moving together is in people flows. 450,000 kiwis live in Australia, about 12 percent of our population. The cross-Tasman flow is a sacrosanct right, at least so far as New Zealanders are concerned.

It is a right that has caused some friction with Australia. The vexed question of welfare benefits and New Zealanders' rights to those benefits has been the subject of long-standing difference until recently, by successive governments.

The Clark Government's signature of the Australia-New Zealand Social Security Agreement on 26 February 2001 has removed this irritant temporarily, even if it has been to the disadvantage of New Zealand citizens who work in Australia.

Nevertheless, there is a lingering resentment amongst a number of Australian opinion leaders in politics and beyond at the special access kiwis enjoy into Australia.

These leaders want New Zealanders to be subject to the same rules as any other nationality when immigration or entry is involved. It is of no matter that reciprocal rights are enjoyed by Australians in New Zealand, and that they now have an advantage in terms of access to welfare.

In particular, the Australian Minister of Immigration, Hon Phil Ruddock, is clearly opposed to New Zealand's immigration system, which he believes is an open back door to Australia without adequate controls.

So there is an emerging potential divergence in immigration policy between Australia and New Zealand that will require careful management.

Looking at the demographics of our two peoples, there is increasing divergence too. Australia is still predominantly European (though this is changing fast as Asian migrants enter), while New Zealand is rapidly "browning" with a larger indigenous population together with significant numbers from the Pacific Islands and Asia.

Defence and Security

The greatest drift in the Australian and New Zealand relationship is in defence and security.

It is the area where there is great room for friction and dispute, even though both countries know neither can do without the other.

War has always produced great distress for any country, but it also produces the strongest and longest bonds between people.

ANZAC Day is the one day both countries commemorate with passion and affection. It involves tens of thousands of young and old in remembering the bravery of 30,000 Australian and New Zealand men crammed onto a tiny enclave on the coast of the Dardenelles. Australians died at Lone Pine to take pressure off New Zealanders trying to assault Chunk Bair.

Neither gained anything but loss that day at ANZAC Cove, but they established the one enduring tie that has bound our two countries for nearly 100 years.

The cooperation and comradeship of the ANZAC tradition has been played out in many other wars and conflicts since 1918.

Perhaps that is why Australians feel so upset, if not angry, when New Zealand is perceived not to be pulling its weight on defence and security matters.

Australia does see its strategic area of interest differently from New Zealand. It has a potentially volatile border with Indonesia and South-East Asia, and has substantial interests to protect in the Indian Ocean where it is a key littoral state.

New Zealand is luckier. There is no perceived real threat to our borders, as we are surrounded by water. The South Pacific is regarded by the Government as peaceful, and it offers no threat to our security.

The first major parting of the ways between Australia and New Zealand on defence issues was the effective dissolution of the ANZUS Treaty by the last Labour Government, when the nuclear free legislation was passed.

That created real difficulties for Australia, which I do not need to traverse today.

Strenuous, and largely successful, efforts were made in the term of the last National Government to improve the defence relationship with Australia and the US, as well as a deepening of our defence ties with Singapore and Malaysia as key members of the Five Power Defence Arrangement (FPDA).

The decision to commit a full battalion to the East Timor conflict was something of a turning point in the relationship. Australia found the size of the operation was at the outer limits of their capacity, and welcomed the rapid commitment by the New Zealand Government of a large force a major ingredient to the success of the deployment. This was backed up by a unanimous resolution of the New Zealand Parliament.

The decision to replace a significant proportion of New Zealand's defence capability as set out in the 1997 Defence White Paper and the specific commitments made in July 1999 to big ticket items such as the F-16s and the armored personnel carriers were well received by Australia and the US.

But the euphoria was short-lived.

The incoming Labour-Alliance government, with enthusiastic support from the Green Party, announced the immediate cancellation of the F-16s, and eventually the disbandment of the RNZAF air combat force. The last Leander frigate will not be replaced with an equivalent vessel. The cancellation of the Sirius upgrade of the Orions was particularly unwelcome to Australia and the US.

The New Zealand Defence Force is to concentrate on a UN peacekeeping role with other force elements contained to a support role for the army, or to EEZ patrol and humanitarian work mainly in the South Pacific.

This has angered Australia as well as many of our defence partners in the region. The diplomatic niceties of public reaction have not tempered the strong views and language many have heard in private.

These strong negative views are not constrained to Australia. Singapore and the UK are bewildered and distressed by the Clark government's decisions.

Putting the government's rhetoric to one side, they interpret the actual configuration of the "new" NZDF as equipped only for relatively low-level peacekeeping, and a withdrawal from FPDA and concrete defence cooperation in the Asia-Pacific region.

The US shares this view. They and Australia see New Zealand welshing on its responsibilities, given the "arc of instability" in the Asia-Pacific region, and when potential conflict in North Asia is more real than at any time since the Korean War.

Some of the language I heard on a recent overseas trip to the US, the UK, Singapore and Australia has been strong and unequivocal.

There is more than a suspicion abroad, there is a hidden agenda in the Clark Government.

That is to take New Zealand towards isolationism and a form of non-alignment consistent with the views of the Alliance, the Greens, and many from the left wing of the Labour Party. Helen Clark springs from the left, not the right of the party.

Statements like New Zealand is "sliding towards non-alignment", we were "drifting into irrelevancy", and "the defence thing can't be quarantined...(from other aspects of our relationship)..." were unfortunately more common than not.

Does "Drifting Apart" Matter?

Based on the evidence I have seen recently, the Australian-New Zealand relationship is drifting apart quite rapidly.

Certainly there are more factors pushing us apart than pulling us together at any time since I have been in politics or in business before I entered Parliament.

This does matter to New Zealand in a profound way. We simply can't make it without friends and partners in all aspects of our relationship.

In a globalising world, New Zealand simply can't make it on our own. We need the support of others to secure beneficial trade agreements.

The move towards FTAs and CEPs rather than the "comfort food" of multilateral trade negotiations through international bodies like the WTO or even regional bodies, means we will be judged by our performance as a nation state much more.

John Howard's statement that there will be "international and domestic consequences" of our defence decisions is a salutary reminder of the "interconnectedness" of all aspects of the Australian and New Zealand relationship.

Quarantining particular aspects might have been acceptable international practice in the past, but it appears not to be now.

That is the reality small countries like New Zealand have to work within, and not pretend they don't exist.

How Should We Move Together?

Australia faces many of the problems we do.

Globalisation puts many of the same pressures on Australia as it puts on New Zealand.

The DHOS syndrome is affecting that country, and it will only get greater momentum.

Australia will face the emerging trade blocs in the Asia-Pacific region with as much impotency to influence the outcome as New Zealand has.

Australia is pursuing FTAs with as much vigor as New Zealand is.

Australia is faced with the reality that it can't really carry the defence and security burden it has chosen without others.

In my view, both Australia and New Zealand are at a crossroads.

We are drifting apart at present, even if Australia is unconcerned by it at present.

My conclusion to the question posed by this conference is clearly that Australia and New Zealand are drifting apart.

Having reached that conclusion, the next, perhaps more important, question is; what are we going to do about it?

A New Paradigm?

Australia and New Zealand need to find a new paradigm to get the relationship on a new footing, which will allow us to face the challenges and opportunities of globalisation together much better than we can do separately.

I don't believe we can do it off the back of CER or of CDR. They are mature, internally focussed relationships.

We need something more outwardly focussed, to the Asia-Pacific region and to the Americas.

Both these areas are moving painfully towards a form of CEP, but a CEP is just a trading bloc with walls by another name. Australia and New Zealand can't afford to be left outside.

I believe Australia and New Zealand need to establish new working relationships at business, governmental, parliamentary and cultural levels to provide that new outward looking focus.

Perhaps an outward looking focus will help overcome the remaining problems with CER, as business accommodates to dealing with much larger markets than our own.

Perhaps an outward looking focus will help cement a cooperative defence and security policy, which removes the friction plaguing it at present.

Perhaps an outward looking focus will remove the increasing irritant of New Zealanders feeling as though they second-class citizens at home, in Australia, and abroad.


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