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Goff: China-US Relations - Implications for New Zealand

Foreign Affairs Spokesperson


China-US Relations: Implications for New Zealand

Bell Gully HP Tower, 171 Featherston Street, Wellington (5:30pm)

Executive Chair of the Asia Forum, Farib Sos, Excellencies, Ladies and Gentlemen.

Thanks for the invitation to speak with you this evening.

I have been asked to talk about China-US relations, and what implications this has for us.

The contest for power between two countries, the United States and China, dominates international relationships in the 21st century.

The United States since 1945 has been and continues today to be the incumbent world power. It is the world’s largest economy, with GDP still three times that of the new second largest economy, the Peoples’ Republic of China.

In military terms, it is easily the most predominant. Its military expenditure is more than that of the total military spending of the next dozen biggest countries combined.

From the collapse of the Soviet Union in the 1990s, it became the world’s only super power.

China, however, is undoubtedly the world’s rising power and fast becoming a super power.

From the communist revolution in 1949 to the late 1970s, it rated at best as a potential world power because of its population and geographic size. Humiliated for a century by colonial powers, it was weakened by its long conflict with Japan, by civil war and by the political disruption of the Cultural Revolution.

But in the more than three decades since 1979, China has achieved economically what it took Great Britain 120 years to achieve and the US nearly half a century.

Growing at a rate of more than 10% a year, it has now surpassed Germany and Japan to be the world’s second largest economy.

In 2003 the GDP of the US was eight times that of China’s. By 2011 it was only three times as large.
Its influence has grown accordingly. Within the 21 countries of APEC, six now have China as their major trading partner, another nine have China as one of their top five trading partners.

These countries, including Australia and New Zealand, have a stake in China’s economic success. This gives Beijing great strategic leverage.

Many countries, including our own, recognise that China’s continued growth through the Global Financial Crisis has insulated us and Asia-Pacific from the more damaging effects of the crisis.

Economic growth has contributed to China’s ability to grow and modernise its military. Its military expenditure and capability still remains just a fraction of that of the US. However, its construction of an aircraft carrier, its stealth fighter planes, its expanded navy and its ballistic missile defence system capable of striking distant US aircraft carriers has put the US on notice that it is no longer unchallenged.

The difference in the political values held by the two powers, the history of conflict between them and competition for influence has created tension and the potential for conflict.

Allowing that tension to degenerate into conflict is not in the interest of either country, nor is it in the interests of the region or world.

The Cold War between the United States and Soviet Union in 1962 at the time of the Cuban missile crisis brought the world to the edge of nuclear conflict and potential catastrophe.

The division of the world into two competing sectors undermined international stability and security, wasted investment in an arms race and held up economic and social cooperation and progress.

It is in all of our interests that the relationship of the two current biggest powers be based on cooperation rather than conflict.

For that to happen, China has to convince the US that it is not a threat to the latter’s security and not out to undermine its core interests.

Reciprocally, the US has to convince China that its objective is not regime change in that country nor to contain China or to harm its core interests.

In each country there is a degree of uncertainty, distrust and fear about the motivations of the other.

Some US strategic thinkers see China’s objectives as being to displace the US as the pre-eminent power in the Western Pacific and exclude the US economically from Asia.

There is a fear that China’s authoritarian regime could become nationalistic and expansionist.

There are Chinese strategists on the other hand, who see the US as a damaged super power determined to block the restoration of China to its rightful international position. They see the US as seeking through treaty arrangements and military deployments to encircle and contain a growing China.

There is a deep resentment of the presence of US spy planes and ships along China’s Western seaboard.

In a recent Brookings Institute publication, US analyst Kenneth Lieberthal and Chinese policy analyst Wang Jisi say the level of strategic distrust between the two countries has become so corrosive that if not corrected it risks them becoming open antagonists.

A political insider in China’s establishment, Wang argues that China’s leadership sees competition between the countries as a zero sum game with China the long term winner as the US economy declines.

Yet neither side wants the relationship to deteriorate into conflict. In January last year when Hu Jintao visited President Obama in Washington the two issued a joint statement committing to a ‘positive cooperative and comprehensive US-China relationship’.

The US said it welcomed a strong prosperous and successful China that plays a greater role in world affairs.

China in turn welcomed the US as an Asian Pacific nation that contributes to peace, stability and prosperity in the region.

While the statements were carefully scripted, they should be welcomed.

Competition clearly exists between the two countries for influence. Each ideally would like to have the predominant influence and prestige in world affairs. Both see the world in different ways and from the viewpoint of their own self-interest. Their views are often in conflict.

In economic affairs, the US is sharply critical of China’s under-valued currency, lack of action against intellectual property theft, and dumping.

The rhetoric against these is already increasing from both Candidates in the US presidential campaign.

On security issues the US is critical that China has not joined international action in a more decisive way against Iran’s uranium enrichment, North Korea’s possession of nuclear weapons and Syria’s leadership’s killing of its own people. It expresses concern about cyber-attacks from China.

The US is critical of China’s record on human rights and minority nationalities.

China for its part attacks the sale of arms by the US to Taiwan and the US blocking the reunification of Taiwan with the mainland.

It sees the US’s military policies, treaties and deployments in Asia as trying to hem in China, and intrude in its exclusive maritime economic zone. It regards pronouncements on human rights as interfering in China’s domestic affairs.

But since the incident near Hainan Island in 2001 involving Chinese fighter jets and a US spy plane, tensions have not approached a crisis point.

The situation in Taiwan has calmed following the re-election of the KMT in Taiwan which has curbed talk of independence from China promoted by the DPP leadership.

Both sides appear to recognise the risks of catastrophic conflict.

Changes in China’s economic policy have brought it into the mainstream, including a market economy, joining the WTO and the yuan has been re-valued upwards by 40% in recent years.

There is acknowledgement of economic interdependence from both sides. China is after all the largest foreign holder of US Treasury securities in which it has invested around $1.2 trillion (US).

The combination of China’s reliance on exports to the US and its purchase of US debt has given it a major stake in the health of the US economy.

Former Secretary of State, Henry Kissinger, has argued that the US Chinese relationship should not be considered a zero sum game, nor should the emergence of a prosperous and powerful China be assumed in itself to be an American strategic defeat.

Both sides appear to acknowledge that genuine effort at cooperation is better than falling into a cold war pattern of negative rhetoric and brinkmanship which could result in conflict.

Mutual economic dependency and pragmatic leadership on both sides would help to achieve a relationship that is competitive but not in conflict.

The US is facing major economic constraints and is committed over the next decade to cutting military expenditure by $487 billion. It doesn’t need tensions which would lead to a new arms race. It needs rather to focus on reinvigorating its own economy and reducing its fiscal deficit.

China for its part recognises that its economic progress has been made possible by absence of a threat of international conflict and a stable environment.

Notwithstanding its success, it needs to address the huge social and economic challenges caused by massive urbanisation, a growing disparity between its developed coastal fringe and undeveloped interior, and an aging population.

From New Zealand’s and the world’s perspective, constraining the possibility of conflict between the two powers and encouraging a more cooperative relationship are imperatives.

Along with Australia, New Zealand for the first time in its history finds itself in a situation where its strategic security relationships based on commonality of political values and history do not match its strategic economic interests.

Neither of our countries would wish to choose one set of strategic interests over the other.

That is also the case for other countries in Asia-Pacific.

It suits countries in the region to have good relations with both super powers and to resist pressure to choose between the two.

Many view China from the background of a history of competition and conflict with that country. They also have a strong desire born from colonial times not to be dominated or instructed on what to do by the US or any other power.

They want the US to be active in the region to achieve an equilibrium of power. They welcome the Obama regime’s pivot towards Asia but they don’t want the United States to crusade or seek confrontation with China.

As John Chipman Executive Director of the Annual Shangri-La Defence Dialogue in Singapore put it:

Most Asians are keen on a multipolar Asia and fear that China likes multipolarity on the global level but is less keen on it in the region. Equally many are worried that if the US gets the tone and content of its policy wrong then there could be unnecessary US-China tensions.

New Zealand enjoys a longstanding and positive relationship with the US. But like other sovereign nations, it is or should be determined to make its own decisions about what it sees to be in its own interests and in the interests of a fair and rules based international order. It welcomes the opportunity to cooperate more closely with the US including in military training but it is unlikely to and should not seek reinstatement of a military alliance that would tie its hands.

We welcome the involvement of the US in the Trans-Pacific Partnership and a free trade agreement from which both sides can benefit, but not on all the terms that the United States would like to impose in negotiations.

New Zealand should not and I believe does not see the TPP as an agreement exclusive of other countries or as a means to contain China’s economic advance. Rather Labour initiated it and sees it as a means of achieving APEC’s Bogor goals and a Free Trade Agreement of Asia-Pacific for all countries in the region Our ideal would be a totally inclusive high quality multilateral trade agreement through the WTO.

In terms of China we welcome its economic progress as both lifting its people out of poverty and being of benefit to New Zealand and the region.

We remain the only developed country to have a Free Trade Agreement with China and that gives us an advantage over our competitors.

New Zealand’s trade with China has doubled since I signed the FTA on behalf of New Zealand in April 2008 and could double again in the next five years. The gap between our exports to and imports from China has narrowed, and come more into balance.

We need to work more closely with China to coordinate development assistance to the Pacific. China now contributes more aid to the Pacific Islands than New Zealand and we are keen to ensure that we cooperate to optimise development potential in the area.

Our political system is fundamentally different from that of China, and we have real concerns in the area of human rights.

New Zealand needs to continue its dialogue with China. It goes without saying that we do not have the power to tell China what to do. China resents the tone of the US’s approach to its treatment of human rights more than the message. We need to continue to make our case quietly but insistently and offer our cooperation in changes that must come from within China itself.

New Zealand since 1945 has been a champion of an international rules-based system for resolving conflict and making global decisions multilaterally through the United Nations.

We need along with other like-minded smaller countries to continue to promote the need for the world’s most influential countries to cooperate and to work multilaterally to address pressing international issues relating to security, disarmament and the environment that affect all of us.

Thanks very much for the chance to discuss these issues with you this evening.


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