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Brash Speech: NZ-US Partnership Forum

New Zealand, the United States, and the Asia Pacific Region: A Common Agenda

An address by Dr Don Brash, Leader of the New Zealand National Party,
to the United States-New Zealand Partnership Forum
Washington DC, 20-22 April 2006

Mr Chairman, distinguished guests - there are far too many here to run the risk of singling any of you out -may I first extend my warmest congratulations to the New Zealanders and Americans who have put this Forum together.

Second, may I say what a particular pleasure it is to be back in Washington.

We all wonder what might have happened if we had made different career choices. In my case, I had to make an early decision as to whether I should, in effect, become a permanent, or at least long-term, Washington resident.

As a young man, just after completing my PhD at the Australian National University, I had the good fortune to receive the extraordinary news - well it was extraordinary to me - that the great Charles Kindleberger, an icon to economists in the 1960s and 1970s and whose reputation continues to this day, had persuaded the President of Harvard University Press to publish my PhD thesis.

This led, in due course, to an appointment to join the World Bank's professional staff as a development economist. In the end, after five thoroughly enjoyable years - both personally and professionally - of working inside the Beltway, I made the difficult decision to return to New Zealand to become the managing director of a new merchant bank.

It is always both interesting - but finally rather academic - to reflect on what might have been. Had I decided to remain in Washington, it is not inconceivable that I might have been sitting with you in the audience today - listening to someone else with the title of New Zealand Leader of the Opposition and aspiring Prime Minister. No doubt I would have been deeply sceptical from the vantage point of rather common views in both our communities about politicians and what motivates them.

So be it. Leaving Washington was a very tough decision for me. Leaving the position of Governor of New Zealand's central bank after 14 years to enter politics was even tougher - a decision I made almost exactly four years ago to the day.

But I'm happy with the decisions I've made, including in particular my last career move. Finally, I take the view that politics matters, and matters a lot. Harry Johnson, another American economist of iconic status internationally, once said "the only scarce resource in the world is good decisions". And good decisions are fundamentally about leadership.

Leadership and vision are words used more in this great country than in New Zealand. But I believe they are central to our country's and every country's future. It has particular bearing on the theme I have chosen today: "New Zealand, the United States and the Asia Pacific Region: A Common Agenda."

What are the big trends at play in the Asia Pacific Region? It is, in my view, primarily a good news story, with a few troubling exceptions that need to be effectively managed. As far as I can see, New Zealand and the United States are on the same page on all the big ideas that really matter - hence my view that the agenda in the Asia Pacific region is a common one to both our countries.

Let me list some of the key trends and then delve a little deeper into one or two of them.

Asia Pacific: Peace and Security

We must start with peace and security. Here I have an utterly conventional view. Without sufficient peace and security, property rights - the foundation stone of development - become deeply compromised. Investment may still take place, but essentially the entry price rises: that is why in politically unstable environments, where political risk becomes a big issue, investors tend not to even look at projects without, say, a 20% plus expected internal rate of return. Without sufficient - we don't need perfection - peace and security, it is hard to advance the long-term agenda on human rights and what might be loosely termed other "non-economic" objectives, all of which are vital to human beings everywhere.

So how are we doing in the Asia Pacific region? Well, by comparison with practically any prior generation we might choose, remarkably well. I can sum it up even in personal terms: when I was a young man, Asia was perceived by New Zealanders - and for good reason - as a source of threat. Today, the predominant perception is one of opportunity.

Obviously, there are security risks that need to be managed. The two most obviously troublesome issues relate to the probable possession of some nuclear devices in the deeply unstable and unpredictable regime of North Korea and careful management of the "cross-straits", or China/Taiwan, issue.

On the matter of North Korea and its nuclear ambitions, we have an international process in place of some complexity. It is not perfect but we have to back it, and both Labour- and National-led New Zealand Governments have played their part, alongside the huge resources the United States commits to the matter.

On the second issue, the matter of cross-straits or China/Taiwan relations, I favour a "less is more" strategy. This is not a matter for "activist" diplomacy. It is more a matter of avoiding blunders and hot-headed decisions.

This is intimately related to the China/US relationship - which while some might dispute merits the title of the "most important bilateral relationship in the world" today, there will be no dispute tomorrow. Effective management of the US/China relationship is simply crucial to everyone. And on the whole, while there have been some very difficult issues to work through, it has been managed pretty well on both sides.

With perhaps half a million Taiwanese business people operating in something like 50,000 companies on the mainland, and with the continued focus of the Chinese on the internal economic development of their country, I take a basically optimistic view.

Assuming a minimum degree of rationality prevails in Beijing and Taipei, I simply cannot see this ending badly. I suspect that one day, they, and no one else, will work out a durable and very Chinese solution.

So I can see - on this most important plane of peace and security - remarkable progress, and we have to recognise the huge contribution of the United States since 1942 to this vastly improved strategic situation.

I am very conscious that the cancer of global terrorism is an important caveat to that generally benign conclusion about the state of peace and security in the Asia Pacific region. That is a different agenda, and one where New Zealand and the United States are cooperating closely in a variety of theatres, including our military commitments in Afghanistan.

Of course we learned on September 11 that this is a war without frontiers. We have suffered some shocking incidents in our region, such as the Bali bombing which robbed many Australians and some New Zealanders of their young lives.

But I am attempting here to analyse the overall strategic health of the Asia Pacific region. Currently, I do not see the level of terrorism as on a scale that would lead me to alter the fundamental conclusion that the region today has sufficient peace and stability to continue to advance economically, politically and socially across a broad front.

Asia Pacific: The Economic Agenda

Let me turn then to the economic agenda for the Asia Pacific region. Here, the agenda of the United States and New Zealand is indeed a common one.

The narrative here is well known to all of you and I shall not dwell long on it. It is a story of extraordinary success that has spread, in the post-war era, from Japan, to what we called in the 1970s the "Tiger" economies of Singapore, Taiwan, Hong Kong, and South Korea, to embrace at least in part increasing numbers of South East Asian countries. The focus now is on China of course. The economic transformation of China is perhaps the most important in modern history, given its speed and scale, and it is happening before our very eyes.

Economic growth in Asia has brought in its wake rapidly rising living standards. Hundreds of millions of Asian people have been dragged out of absolute and degrading poverty. In the 15 years since 1990, an additional 280 million people in East and South East Asia have been lifted above the US$2 a day poverty threshold. That is considerably more than the entire population of Indonesia - the fourth largest country in the world by population.

The critics of market-led economic growth would focus primarily on the people left behind. And there are many left behind. There are globally an estimated two billion people who live on less than US$2 a day. Many of them live in the Asian region. For them, life remains a terrible daily struggle.

My answer is simple: we need to continue with further growth and development. I cannot see any solution to the problems of the many desperately poor people in the Asia Pacific region that does not require a continuation of sustained economic growth. I could give you a far more sophisticated analysis than that, but I am not sure it would add anything important to that fundamental point.

What are the key drivers behind this and what do our two countries need to do to advance this common agenda?

I have already touched on the foundation stone: maintain the relatively benign peace and security environment in the Asia Pacific region, without which this process stops dead in its tracks.

Second, we need to keep working to free up the channels of trade and investment. These are like arteries to the heart of the development process.

The biggest game in town, of course, is to complete the WTO Doha negotiations - and let me acknowledge here the contribution made by two New Zealanders present at this symposium who have played a considerable role in these negotiations.

First, the Rt Hon Mike Moore, who was Director General of the WTO when the Doha Round was launched, and who worked tirelessly to achieve a successful outcome to the Doha Round after the failure of the Seattle meeting in 1999 to find a way forward.

Second, we also have Tim Groser here, our former Ambassador to the WTO in Geneva and who chaired the agriculture negotiations in Geneva. I am delighted that he joined the National Party's caucus in Parliament at the election last year.

This is one way to illustrate my point about our common agenda, in spite of the great disparity in size between the US and New Zealand. This is about people, their commitment to the same agendas, and about shared values.

I regard the success of these negotiations as very important to the future of the Asia Pacific and thus immensely important to the United States.

I am aware of the debate taking place here on "competitive liberalisation" - that is, the concept of pursuing bilateral and regional FTAs in part because of the pressure this puts on the multilateral trade negotiations. We are both engaged in extensive FTA negotiations, and you all know that both the National and Labour Parties would put an FTA with the United States at the top of New Zealand's list of desirable FTA partners.

But there are one or two crucial caveats about FTAs that need to be borne in mind.

First, they are absolutely no substitute for multilateral liberalisation.

Thirty years ago I would have got into economic theory to make the argument.

Today, I use simpler terms, starting with the observation that there are whole areas of trade policy that you can never address through FTAs and which can only be addressed through the multilateral channel. The elimination of export subsidies for example - effectively a European policy only (although there is some complicated negotiation around some policies that others practice). No FTA is going to eliminate export subsidies. No FTA is going to develop new subsidy disciplines that mean anything. In the WTO, you are negotiating simultaneously with over 150 countries, of which around 100 are not essentially carved out by the exemption for Least Developed Countries. Compared with that mechanism, FTAs, negotiated country by country or occasionally with small groups of countries, are a relatively inefficient way of conducting negotiations.

So, no problem with FTAs - but they are complements to, not a substitute for, the main game: the WTO. Continued US leadership here is absolutely vital, and I am certain this will be maintained as we enter now the beginning of the endgame to this long negotiation.

There is also an important political dividend arising from the WTO that is often overlooked. Let me again use China to make the point.

When China joined the WTO, it accepted a rule set that imposes, through international law, limits on what China can and cannot do. These rules were developed on the basis of economic, legal and administrative norms that are the foundations of societies such as the United States and New Zealand. Binding China into that rule set is of huge political, not just commercial, significance. Yes, there are problems getting full and effective implementation of China's commitments, but year by year real progress is being made. The WTO is not a light switch that you can just turn on and illuminate a continent.

This leads me to my final set of observations about our common agenda in the Asia Pacific region. Open economic markets and open political markets are linked in complex ways. We are not seeing just progress towards open economic markets; we are seeing, as the development process proceeds, real incremental progress towards open political markets. We call this, for want of a better word, the spread of "democracy".

This is not necessarily the Anglo-Saxon model in all its full glory - these are countries with their own distinctive cultures. Even more important, this is an evolutionary process. Korea - a once deeply authoritarian regime, and not so long ago - is well down the path. Democracy is becoming increasingly entrenched these days in much of South East Asia - Malaysia, Thailand, the Philippines and, most importantly, in Indonesia. Their armies continue to have political influence but compared with even the recent past they have to a large extent retreated to their barracks. Where democratic concepts are weak or non-existent, as in the case of Myanmar, human rights abuses will be found on a widespread basis.

But democracy is an evolutionary process, not an "event". It is a mindset, more than a constitution. It will take more time to develop in the Asia Pacific region, but we are on track.

Ladies and gentlemen, I come full circle. What I have tried to talk about today is the Asia Pacific region and the agenda that I believe the United States and New Zealand share. It is an agenda finally based on common values, a shared sense of the primacy of the rule of law and, I hope, an abiding sense of friendship between our peoples.

ENDS

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