“First Steps” - Pre-budget speech

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New Zealand’s foreign policy has long been characterised by the strength of its independent voice. As the Prime Minister said in Paris, ‘we are self-deprecating people, quick to downplay our relative importance, but in spite of that, one that has never been afraid to use its voice.’ From Peter Fraser’s advocacy for a new international system in the aftermath of war to this government’s leadership on climate change, that voice has been strongest when New Zealand’s deeply held values have been projected onto the world stage. As a small nation of fewer than five million people, skilled diplomacy has proven to be an essential part of protecting our vital national interests and securing domestic prosperity.

That voice has never been more important to protect our interests in a troubled world and support the family of Pacific nations who share our neighbourhood. That voice is ultimately the voice of New Zealand citizens. Tonight’s speech seeks to explaining to our citizens why restoring lost capacity in the Ministry of Foreign Affairs and Trade is an example of the Coalition Government tackling difficult problems, and why the Coalition views it as a priority that New Zealand’s independent foreign policy is placed on a sound footing.

In a March speech to the Lowy Institute in Sydney our Government’s Pacific reset was announced. That speech set out the principles underpinning a re-energized Pacific strategy, one built upon understanding, friendship, mutual benefit and a collective ambition to achieve sustainable results in collaboration with our Pacific neighbours. Also signalled in the speech was the government’s intention to ‘shift the dial’ to provide impetus for the reset. Today’s pre-budget announcement puts necessary flesh on the bones of that strategy to accentuate our turn away from a failing status quo to embrace positive change.

The Pacific reset is part of a wider foreign policy designed to make New Zealand a safer and more prosperous nation. Foreign policy is in this sense not divorced from domestic policy but married to it. This evening the crucial relationship between foreign and domestic policy will also be discussed within the context of the forthcoming Budget’s focus on social wellbeing and the government’s determination to restore lost capacity after almost a decade of fiscal retrenchment and drift.

The International Strategic Picture

My colleague, the Minister for Trade and Export Growth, David Parker, cited in a recent opinion piece the words of former Prime Minister Peter Fraser at the San Francisco conference in 1945. Fraser said on that occasion he was “speaking for a country which, although small in area and population, has made great sacrifices in two world wars. I speak for the New Zealanders who died and are buried thousands of miles from their own land in the cause they believed to be just. I speak for the New Zealanders yet to be born. It is my deep fear that if this fleeting moment is not captured the world will again relapse into a period of disillusionment, despair and doom. This must not happen.’

As a Foreign Minister who has recently visited the memorials in Flanders and in Singapore which record the sacrifice and service of New Zealanders the sentiment of Fraser still rings true.

Fraser’s voice also helped moved nations in 1945 to establish a new international system just as another former Prime Minister Gordon Coates, a decade earlier, helped advance the economic and constitutional development of New Zealand when participating at the Imperial Economic Conference. Both voices still echo today as New Zealand seeks to uphold and improve an international system under strain. We are at a turning point where the importance of protecting our interests in the face of converging geo-political and trade challenges is ever greater, as global rules are under threat, and as geopolitical changes are calling into question the primacy of the system. Some countries are seeking to reshape global rules and institutions in ways that do not always support our interests or reflect our values, hence we must remain vigilant and prepared to assert our interests and values.

The modern global challenge

These systemic challenges to global governance are making it even harder to grapple with global problems such as climate change. Implementing the Paris Agreement is the 21st Century’s existential challenge, with the very fate of some island nations dependent on concerted collective action to preserve their territory, their identity and their people’s wellbeing.

New Zealand also looks out into a world facing increasingly complex and dynamic security challenges: challenges to sovereignty, nuclear proliferation, terrorism, cyber-crime, and interference in countries’ domestic affairs, transnational crime and humanitarian crises. The rules-based international system is struggling to adapt to the magnitude of challenges faced.

Turning to trade, crucial to New Zealand’s economic and social progress, the opportunities opening up in some markets are tempered by changing international winds, including protectionism, which have blown across some of our major trading partners. Threats of trade wars coincide with a weakening of the WTO’s ability to progress and enforce trade rules. These trends could significantly constrain New Zealand’s future opportunities.

That is worrying, particularly as trade has been declining as a percentage of GDP despite the previous Government’s pledge to increase it. The country’s recent trade achievements and the push we are making in London, Brussels and elsewhere may in retrospect appear relatively easy compared with managing the disruption caused to economic interests by a return to protectionism and zero-sum approaches to global trade.

Closer to home, the South Pacific has become an increasingly contested strategic space. Our voice has been weakened during the past decade at the same time as Pacific nations face a myriad of challenges they are not, in many cases, well equipped to tackle. The wider Asia-Pacific region is also showing signs of strain at the very time when regional stability has never been more critical to maintaining New Zealand’s security and prosperity.

Our eyes are wide open to these trends. In the Government’s view we are at an inflection point at this moment in history and as Peter Fraser said, ‘this must not happen.’ So, how well is our foreign ministry placed to respond?

The State of Our Foreign Ministry

The Ministry of Foreign Affairs and Trade acts in the world to make New Zealanders safe and more prosperous. Its identity is rooted in our country’s values, and in highly professional service as it advances New Zealand’s interests, as it represents the nation’s face and voice overseas. Yet the Ministry has effectively faced a ten-year funding freeze before Budget 2018. The Ministry also faced budgetary haircuts, or so-called efficiency returns back to the Government which peaked at nearly $24 million per annum, but they were cuts by any other name.

Almost a decade of underfunding has started to bite, undermining our ability to maintain New Zealand’s independence as an international actor projecting our distinct values. An enormous amount of expertise and experience was lost as a consequence of the last government’s badly bungled restructure. The country’s network of foreign posts expanded but without funding to adequately resource them. The resulting hollowing out of the ministry has left New Zealand with only 248 diplomats across 58 posts, weakening our ability to advance our interests and influence others. To cite one example underscoring this point; in Manila, Philippines, New Zealand has just two diplomats in its Embassy. Australia’s Embassy has more than ten times that number. That is a gross difference irrespective of relative populations, and New Zealand’s interests are no fewer than Australia’s. Resources are essential to influence, and both for New Zealand have waned.

Returning as Minister last year it quickly became obvious that a change of course was required. Leading a modified status quo would not suffice. The time for fiddling around the edges was over. We quickly recognized the new government needed to make significant new investments in our foreign diplomacy capacity to serve and protect our interests as well as arrest the shameful decline in New Zealand’s overseas development assistance. To not restore this lost capacity would see a decline in credibility as our words became harder and harder to support through our deeds. That is an intolerable situation, eroding, as it does, our sovereignty and independence, as well as our global reputation while risking our hard won security and prosperity.

First steps in rebuilding our place in the world

Today the government can announce its first steps to reverse this situation. We have committed to $150 million, over four years, additional operational spending for MFAT in Budget ‘18. This will among other objectives create 50 new full time positions to begin to restore our diplomatic presence across our missions, most particularly in the Asia-Pacific region. The new staff will also strengthen our ability to represent our economic interests. As a trading nation this is critical for us. This investment will also begin the process of rebuilding our reach and deepening the core of expertise in Wellington to support our diplomatic impact.

Second, we have committed new capital spending of $40 million bolster New Zealand’s overseas offices, including funding for one new diplomatic mission, in Scandinavia, and ensuring that our network of embassies is robust and secure.

The political and policy synergies between New Zealand and the Scandinavian democracies are significant and the government has provided $4.8 million in capital spending over four years to re-establish an embassy in Sweden’s capital. With shared democratic traditions, including proportional representation electoral systems, shared values, and political cultures that have produced a balance between freedom and equality which is the envy of most other nations, New Zealand and the countries of Scandinavia can do much more together in the world.

Over $115 million is set aside for APEC 21. The previous government agreed to host the event and the current government is also committed to it. This funding will cover the next three years of preparation. Fiscal prudence and planning for the least disruption possible for Aucklanders and the rest of the country is the lodestar for what will prove to be a showcase of New Zealand’s regional leadership. Once the total costs are better understood a further budget bid will be made next year in anticipation of a successful event in 2021.

In keeping with New Zealand’s commitment to engage with Asia we are also announcing a funding increase of five million over four years for the Asia-New Zealand Foundation.

Pacific Reset

In recently announcing the Pacific reset, the Government signalled its intention to refresh its approach to relations with our Pacific neighbours, shifting from a donor-recipient relationship into genuine and mature political partnerships. Two main constructs drive the Pacific reset:

Respectful, back to basics diplomacy , as evidenced by the highly successful Pacific mission earlier this year; hosting reciprocal bi-lateral visits from island leaders, and; convening a special meeting for Pacific leaders attending CHOGM; all underpinned by the principles of mutual-respect and partnership, and;

Restoring the Ministry’s lost capacity and ‘shifting the dial’ on overseas development assistance.

Nine years on from when last minister, it was shocking to learn that New Zealand’s official development assistance budget, as a share of Gross National Income, had fallen from .30 percent to a paltry .23 percent. This left New Zealand open to criticism that we have abandoned our neighbourhood. More troubling is that the previous government weakened our hand in the Pacific at the very time the region has become a more crowded and contested strategic space.

Today that stops. We said we would ‘shift the dial,’ and we have. This includes additional spending of $714.22 million over the four year budget cycle. It represents a 30 percent increase in overseas development funding, immediately shifting the ODA dial to 0.28 percent and away from the disastrous path that would consign overseas development assistance to 0.21 percent of GNI by 2021.

0.28 percent is only the government’s first step. Further increases will be sought in future budget rounds with the goal of further lifting the ODA.

The government acknowledges that the quantum sums for overseas development assistance are large so it is important to explain to New Zealand taxpayers why this investment is necessary for their wellbeing.

First and foremost, our identity is anchored in the Pacific and it is fitting and proper that we foster our fraternal bonds with our Pacific neighbours. What is good for them is good for us. We all know that if we look after each we are all better off, more prosperous, and therefore more secure.

Second, New Zealanders support development assistance. When last Foreign Minister a UMR survey showed 76 percent of the public supported giving overseas assistance. Across the Tasman, the Sydney Morning Herald last week reported survey research which showed a majority of Australians also agreeing that their Government has an obligation to help poorer countries. Support on both sides of the Tasman reinforces a shared sense of altruism but it is also good economics because prevention is better than cure.

Take a recent example. After ethnic violence broke out in the Solomon Islands in the late 1990s a regional assistance mission, to which New Zealand contributed as a partner, was launched. RAMSI ended up costing our taxpayers over $150 million. That’s an expensive ambulance at the bottom of the cliff.

Prevention saves money. Preventative health strategies save far more taxpayer health dollars downstream by tackling health problems early. In the same way, development assistance helps to maintain a safer and more prosperous New Zealand over time, saving money that would otherwise be required in future defence budgets or in border control.

We strongly believe in being part of a Pacific that is free from military competition, a Pacific that remains free from the shafts of strife and war that affect many other parts of the globe. Put simply – if we’re not there some other influence else will be.

Identity, security and long term investment are joined by a moral dimension underpinning support for overseas assistance. It’s about doing what is right. The focus of the government’s first Budget is social wellbeing – and rightly so given the Coalition’s choice to change away from an inadequate status quo inherited from the Key/English Governments. The wellbeing of families is front and centre for this government.

Overseas development assistance is therefore a proper extension of looking after family, in this case New Zealand’s wider family of Pacific Islands. It is also good economics.

Influence through long term investment is key to our ODA strategy and it allows the government to target those areas where we can make the most difference in the region. The purpose of development assistance is to help our Pacific family be self-sufficient. That means having honest conversations with Pacific leaders about how good governance and transparency, open media, fostering participation, domestic cohesion and developing resilience all help nurture their economic prospects, and thereby their independence.

That is what differentiates New Zealand’s approach from those who seek to influence by fostering economic dependence. That is not and will never be the New Zealand way.

Ours is instead a targeted approach and here is an outline of the areas where New Zealand can make the most difference:

Climate Change

Like Peter Fraser in 1945, Prime Minister Ardern is also speaking for New Zealanders yet to be born, self-evidently so. Her generation’s challenge on climate change is also my generation’s commitment to make our footprint count for good.

Turning to the adaptive work needed in the Pacific in response to climate change, it must be said that the challenges New Zealand faces to transition its economy in response to climate change pales against the existential threat faced by some island states. Investment in practical projects, like the climate resilience project to reclaim land for urban development in Kiribati, will help protect Pacific homelands and cultures, and also reduce migration challenges in the years to come.

Climate change is also increasing the frequency of destructive natural disasters, such as cyclones. New Zealand is committed to working with the Pacific to strengthen resilience to disasters which overnight can wipe 30 percent off a Pacific country’s GDP. When disasters do occur, we are committed to responding quickly and comprehensively. We will always stand with our Pacific members in their hour of need.

Multi-lateral Contributions through ODA

Restoring lost capacity also relates to another foreign policy imperative – our financial contributions to the multi-lateral institutions which support developing countries, and which bring help to those ravaged by war and natural disasters.

With a continuous parliamentary democracy since 1854, New Zealand’s experience is a proud one and it informs our voice when we speak in foreign capitals or to regional and global forums. However, that voice will only be heard if it is respected.

Other nations judge us on whether we pull our weight. Preventing environmental, humanitarian and international crises and maintaining equilibrium in the international order needs every country’s financial support, so we are determined that New Zealand’s voice will be backed with credible resources and thus have more weight in the rooms where it matters.

New Zealand currently lies at the bottom of the OECD in terms of its contribution to multi-lateral institutions. That is shameful. To influence others this has to change. So New Zealand will boost its funding to organisations like the World Bank and the Asian Development Bank as well as to UN agencies.

New Zealand can play a significant role in the Pacific. But its challenges are mounting, and we alone cannot address them all. We want our like-minded partners to focus more on the Pacific, a message the government has delivered in Australia, around the Pacific, in Tokyo, Brussels and in London at CHOGM. That message is part of a strategy to gain greater comparative strength from pooling energies and resources with partners who uphold the values of transparency, good governance and democracy.

An increased effort in the Pacific and enhanced funding of multi-lateral institutions is also important to strengthen New Zealand’s credibility with other nations and deepen key bilateral relations. This dimension is especially true for our relationship with Australia, the region’s largest donor, and the country closest to us at a time when we’ve never needed each other more.

International Security and New Zealand Presence on the International Stage

The budget package for foreign affairs announced today is about strengthening our voice and showing that New Zealand is a country that engages with the world, contributes to solving global challenges, defends its interests and promotes its cherished values.

The package will allow us to change course and beef up our diplomatic engagement across a range of fronts, such as on regional security issues on the Korean Peninsula, with other parts of Asia, and of course in the Pacific.

Further afield, while military deployments form part of our efforts to promote stability in Africa and the Middle East, contributing more to global humanitarian support in places like Syria and Iraq is a necessary corollary to these efforts.

New Zealand has always pulled its weight in conflicts and wars and that will continue, although the shape and composition will necessarily adapt as situations evolve.

Conclusion

Those who experienced the calamitous effects on our society of two world wars understood that if leaders did not grasp the historical moment then the system could once again spiral downwards to disastrous effect. New Zealand is a small state reliant on a well-functioning rules-based international system to promote our interests. The warning that New Zealand is at an inflection point is not one lightly given.

New Zealand therefore needs eyes wide open about how to adapt to and navigate through a narrowed space as the challenges and the demands of us by others become ever more pressing. It will take skill and resources to secure our future.

Today’s announcement represents only the first steps of an adaptive foreign policy response. The Pacific reset and shifting the dial on ODA signals the government’s intent and seriousness about the need to do so.

The government’s boost in funding for the Ministry of Foreign Affairs and Trade also recognises that its capacity needs to be restored so that the impact of New Zealand’s independent foreign policy is strengthened.

The government also knows that our sovereignty – freedom from interference or the control of others – is the essence of that independence. Protecting it relies upon our own self-respect and self-reliance. New Zealand’s voice, and through it, its independent foreign policy, will be stronger today because we are regaining our self-respect and can thus enhance our self-reliance.

Ladies and gentlemen, we have taken our first steps.

ENDS