Written By: - Date published: 7:30 am, November 16th, 2017 - 41 comments
Categories: australian politics, China, Globalisation, helen clark, International, jacinda ardern, labour, Politics, trade, us politics - Tags:
Does anyone remember the time that Helen Clark accepted refugees from the boat sunk off the northern Australian coast, the Tampa?
I was there as she was speaking in a Titirangi hall during 2001 where she got the call making the ask from Australian Prime Minister John Howard. She made the decision live on stage to take in those refugees to assist Australia (and as well as being humane, it made for awesome electoral politics!).
There’s a pretty strong parallel to the Tampa response, and what Prime Minister Ardern is seeking to do with another set of refugees also rescued from off the Australian coast, and it has a lot to do with offering more of what a small nation can offer within international diplomacy. Making the offer at APEC and again at ASEAN is pretty high profile stuff. Right in the middle of giant countries like Canada, the United States and Japan at APEC and ASEAN, sometimes small nations like New Zealand can be seen to make a difference.
This is what these international track-meets are for. Among other things, it reasserts that international rules and norms established under multilateral frameworks like the UN and APEC are necessary for the smooth functioning of the world’s countries below the giants of this world, whereas a small move from a giant can be exceedingly damaging to smaller countries no matter its intention.
This approach to rules-based international engagement is in stark contrast to the United States currently. From the Paris Accord to Unesco to the TPP, President Trump has a record of withdrawing from international agreements and institutions. The North American Free Trade Agreement and the Iran deal are both at risk. The Trump administration has a preference for using the scale of the US for bilateral deal-making rather than working through multilateral institutions.
Others, from Japan to the European Union, are stepping up their efforts to support multilateral institutions. But this is challenging in a multi-polar world when big-power interests vary significantly. Chinese cheerleading for globalisation, for example, should be interpreted cautiously. Although the statements of support are welcome, China’s support for an open international system is asymmetric, reflecting its mercantilist preferences – and its willingness to weaponise trade policy to advance its strategic interests at a national level.
Even in a more complex external environment, small countries lie ours can build advantage by combining the “artificial scale” of regional groupings with creative strategic positioning. This does not eliminate the risk of small countries being hurt by big powers, but we shouldn’t be fatalist.
Another multilateral rules-based organisation, the World Trade Organisation, has become a locus of big-power competition. China has benefited from WTO membership since 2001, and there seems to be a view in the Trump administration that the WTO does not serve US interests. The US is stopping the appointment of WTO appellate judges to hear trade disputes: One of the core functions at the WTO may grind to a halt.
Separately, the EU is discussing tightening restrictions on Chinese acquisitions of European firms.
The open, rules-based trade system upon which small countries like ours truly depend is under real pressure. In many large economies, there is growing political demand to more explicitly defend national interests. Big powers seem increasingly inclined to use their muscle strengthened by nationalist and isolationalist sentiment, integrating international economics with their strategic agenda.
Taken together, these big-country moves against international rules-based agreements suggest a marked shift in the functioning of the global economic and political system. Some of the immediate effects are masked by a recovering global economy, and markets do not seem concerned about structural institutional risks. But this is no reason for complacency. The extent of the weakening of international institutions may only become apparent in times of stress.
Small countries like ours, from Singapore to New Zealand, have prospered in a rules-based system that has provided consistently improved access to markets as well as reducing their exposure to predatory behaviour by larger economies.
You can see the importance of the WTO to solving trade disputes often in our favour, using agreed international rules, rather than simply being ignored or trade-retaliated by the larger powers, here:
New Zealand won another such case against Indonesia only five days ago.
But a more discretionary system is emerging, in which governments of large powers play a more deliberate role: from the preference for bilateral deal-making to the development of big-power national champions. Small countries like us are exposed to these developments, and we will need to continue adapting to this changing context.
There are a few ways in which small countries can respond, some of which are extensions of current behaviour. First, being embedded in regional economic and security groupings – like the EU and Nato, or CPTPP – to provide market access and to allow small economies to “bulk up” in international engagements, from negotiating free trade deals to developing a security posture.
Second, diversifying economic and political relationships to avoid concentrated exposures, and to allow for creative balancing. Prime Minister Clark’s work to gain the Chinese Free Trade Agreement was instrumental to balancing the historic weighting with the United States and Australia and diversifying to Chinese interests.
And third, developing a strong national value proposition – such as strong competitive advantage, key infrastructure and new technologies – which makes you valued by other countries. New Zealand has been consistently weak in this set of areas while many other smaller nations have been much, much clearer in articulating it and become the stronger for it.
Historically Helen Clark with the Chinese FTA and with refugee intake, and now potentially Jacinda Ardern with the CPTPP and with refugee intake offers, show that it is possible to remain positive about the outlook for a small country operating within the direct ambit of exceedingly large and powerful countries. It’s still possible, among an era of competing great powers, to be confident in the future positioning of us littlies.