Liam Dann 's Opinion

Business editor of the NZ Herald

Liam Dann: US China tension a tricky challenge

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American culture is deeply embedded in NZ but growing Chinese market is already our second biggest.

China is increasingly important as a trading partner with New Zealand as our second largest trade partner and second biggest export destination, after Australia. Photo / Supplied
China is increasingly important as a trading partner with New Zealand as our second largest trade partner and second biggest export destination, after Australia. Photo / Supplied

As trade tensions between China and the US heat up, New Zealand is left staring awkwardly at the floor like the mutual friend of a newly divorced couple.

The latest awkward moment for our Government came last week after the US Government claimed Chinese telco Huawei poses a threat to national security.

In effect a US House committee accused the company of spying - an allegation which has been made before but never quite so officially.

I'm not even going to begin to debate whether that is true or whether it is simply "get tough on China" politics and trade policy game-playing.

Regardless of its truth, this is the US position. It is not a popular one with the Chinese Government although Huawei is not a state-owned company.

And as a number of US allies step back from dealings with Huawei it makes life very difficult for the New Zealand Government which has been open to the telco - a major investor in our third biggest mobile phone company and also a supplier of equipment for the ultrafast broadband build.

All the economic stats show China looming larger and larger in importance as a trading partner for New Zealand.

It is already our second largest trading partner and the second biggest destination for our exports, after Australia.

If tensions continue to grow over the coming decades, how are we going to play this? Are we going to have to pick a side? And if we do which one?

The internet is full of apocalyptic futurists so let's not get carried away with predictions of US/Chinese war - trade or military. If you look far enough in to the future anything is possible.

On the trade front, the US has proved capable of engaging in trade wars without letting it damage other relations too badly.

Anyone remember the US/EU Banana war of the late 90s?

But there are definitely tensions between the US and China - both political and economic - and it seems those tensions are likely to grow in the coming years.

Picking sides would be easy if it was all about following the money. But our economic relationship with China is far more advanced than our cultural relationship.

As the Chinese ethnic population grows and as New Zealand gets better at recognising its geographic place in the world, we are becoming more attuned to the Chinese culture.

But for at least the past 60 years US culture has been embedded deeply in the psyche of New Zealanders.

From academics fascinated by the nuances of US politics, through the mass of middle New Zealand turning out to see the latest Hollywood blockbuster or the touring rock legends, we are indoctrinated with American culture from the earliest age.

Hip hop culture that has resonated strongly with Pacific Island and Maori youth for some 30 years now - some of those hip hopping youths are no doubt well into middle age.

New Zealanders have had an especially deep understanding and affinity with US counter culture from the beat generation, through the hippies, slackers, skaters, surfers and metallers than define many of our own subcultures.

Despite the British colonial history running through the legal and political system, parts of New Zealand could pass as a mini-California or some lost Hawaiian Island that drifted off to the South Seas.

On the human rights front there is a case to be made that the US has enough issues around poverty, criminal justice and aggressive foreign policy that it isn't in great shape to be pointing any fingers at China.

But the US system, with freedom of speech enshrined in the constitution, still sits more comfortably with the attitudes of most Kiwis.

So how will we play it if at some point in the next century we are forced to make a more decisive call about our allegiance.

Last week the Government stuck to its guns and defended Huawei.

It didn't have too much choice given how embedded they are already in our telco sector.

But this could all get a lot tougher if we want to sign up to a free-trade deal with the US and as we go deeper into talks for the Trans Pacific Partnership.

The trick surely is to manage expectations on both the sides well ahead of the time when it comes to a diplomatic crunch.

We might not need a Swiss level of neutrality but we do need to convey that we are an outward looking trading nation that needs to do business with all the major players in order to make its way in the world.

It's an extremely delicate diplomatic tightrope to walk.

It is also a reminder that despite New Zealand's success in negotiating bilateral trade agreements, it is a great pity that bigger negotiations of the World Trade Organisation have not made much headway.

What the world really needs is a fairer, and less politically fraught system of free trade, one where there is less opportunity for larger partners to lean on smaller partners for trade concessions.

But those kind of planet-wide negotiations, like those which try to address global warming, remain in the too hard basket of the human race.

That leaves small nations such as New Zealand forever ducking and diving around the ankles of the super powers.

Luckily, in this part of the world we have a pretty good sidestep.

- NZ Herald

Liam Dann

Business editor of the NZ Herald

Liam Dann is the Business editor of the New Zealand Herald, overseeing all our business content in print and online. He has been a journalist for 20 years, covering business for the last 14 of them. He has also worked in the banking sector in London and travelled extensively. His passion is for Markets and Economics, because they are the engine of the New Zealand economy.

Read more by Liam Dann

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