Prime Minister Christopher Luxon’s mission to South East Asia was about shoring up New Zealand’s place in a fast-changing world and keeping it on the map.
Our little island nation was at risk of becoming irrelevant as the world reorients itself in the post-covid era and around US-China trade competition.
“The perception of New Zealand is that we are nice but we actually lack relevance, or we are losing relevance,” the Prime Minister said, in an interview on the flight back to Whenuapai.
“The reality is that we were very slow out of covid. We were much more internally focused than other countries … while the rest of the world took off very quickly”.
This isn't entirely accurate. For example, our biggest trading partner China only ended its zero-Covid policy - clumsily - in December 2022, and Japan reopened its border to tourists in October 2022. New Zealand's border was fully reopened in July 2022.
New Zealand urgently needed to demonstrate what it had to offer in a world that was becoming more complicated and volatile, Luxon said.
We are currently living through a massive reformation of geopolitics as the balance of economic, diplomatic, and military power shifts east.
This is not a new trend. Back in 2018, Kiwi diplomat Grahame Morton gave a speech warning the post-Cold War world was being “challenged by new power balances”.
The United States was adjusting the trading system to add to its strengths and protect its advantages, while the “centre of economic geography” was moving towards Asia.
New Zealand could be both a victim and beneficiary of these two trends. We were vulnerable to protectionism but well positioned for Asian economic growth.
South East Asia would be key to NZ’s political and economic interests but could be hotly contested as large countries sought to “capture” its benefits, he said.
It is not clear how closely policymakers were listening, as multiple experts told Interest.co.nz that NZ had been neglecting the region and were pleased to finally see a PM-led visit.
The new Asia
When the new Government took office late last year, the Ministry of Foreign Affairs and Trade advised refocusing diplomatic efforts on South East Asian countries.
Decades of stability were under pressure due to a strategic shift [details redacted] and countries were looking for friends to insulate them from US–China competition, it said.
NZ could benefit as closer diplomatic relationships would make it easier for exporters to sell products to the fast-growing middle class in the region.
Additionally, our economy was hugely dependent on being able to transport more than half of our exports through the contested South China Sea — where tensions are rising.
MFAT’s advice was that the Prime Minister should travel to Singapore, Thailand, Viet Nam, Indonesia, the Philippines, and Malaysia within the next two years.
Just showing up in these capital cities would demonstrate that New Zealand cares about the region and could contribute to stability in the region
Handshakes and hugs
Luxon excelled at the relationship building aspect of the trip. His instant personal connection with the leaders he met was reminiscent of his mentor John Key.
Key managed to befriend superpower leaders such as Barack Obama, Xi Jinping, and Shinzo Abe, winning influence for NZ well beyond its actual importance on the world stage.
Luxon, who is never short of corporate phrases, called this “winning mind-share”.
Jacinda Ardern also had major success on the international stage, although her connections often seemed more like fans than friends.
Some commentators thought Luxon would be a major downgrade after a series of influential leaders, from Clark to Ardern, but he may surprise on the upside.
The new Prime Minister shared enthusiastic handshakes, backrubs, and jokes with other leaders, who responded with a similarly warm welcome.
Philippines’ President Marcos Jr even invited him to stay in the palace guest house and dubbed him an “honorary Filipino” for choosing to have lunch at KFC-equivalent, Jollibee.
Besides the public displays of affection, there were a few tangible announcements that revealed where the more pragmatic interests were.
In Singapore, the cooperation agreement will be upgraded with a new section that ensures supply chains can continue to carry essential goods even in a crisis.
The two countries rely on each other to swap fuel for food. Protecting those links in the case of war, pandemic, or natural disaster will be critical to overall security.
In Thailand, vague and symbolic commitments were made to upgrade the relationship and attempt to triple trade by 2045 – an unambitious goal but a signal nonetheless.
And finally, Luxon struck a deal in the Philippines which would allow more cooperation on defence as well as grow trade 50% in the next six years.
Defending prosperity
The Philippines sees itself as being on the front line of regional competition between the US and China. It has a military alliance with the former and is in a territorial dispute with the latter.
Last month, the NZ Embassy in Manila twice stated concern about Chinese vessels firing water cannons at the Phillipines' ships and harming some of the crew.
The scuffle was over a reef island which is not even internationally recognised as being land, but has been claimed by China, the Philippines, Taiwan, and Viet Nam anyway.
Under international law, each country controls a certain amount of water around its coastline – so even an uninhabitable island can come with access to more resources.
When Luxon was making small talk with Lee Hsien Loong in Singapore, the two Prime Ministers casually discussed the city’s progress on reclaiming land for urban expansion.
Lee noted that building into the sea also expanded its territorial waters. Luxon cryptically replied there had been “some trouble with that type of behaviour in other parts of the world”.
This informal exchange was presumably a reference to China’s construction, or expansion, of these sand islands on existing reefs they are claiming as sovereign territory.
New Zealand’s interest in Western security alliances are partly about protecting freedom of navigation through the South China Sea, and more broadly, for its exports.
Luxon told Interest.co.nz that it was no longer possible to separate trade and security issues.
“New Zealand’s economic and security interests are very merged. If you don’t have a secure, peaceful, stable South East Asia – you actually can’t do the economic bits”.
He reiterated that no decision had been made about joining AUKUS Pillar II, but said he was disappointed Labour was making it a political issue now they are in opposition.
Chaos can be a ladder
In any big geopolitical structural shift, there are opportunities for those who are nimble, or just lucky, to secure for themselves a better position on the playing field.
A good example of this is NZ investment firm Morrison, which manages an NZX-listed infrastructure investor Infratil, and had a representative travelling on the trip. Chief executive Paul Newfield said de-globalisation was making the word more complex but also creating anomalies which could be advantageous.
“For example, Longroad’s close relationships with US solar manufacturers meant it was well positioned when the Inflation Reduction Act came into force in the United States,” he said.
“At the same time Gurin (Infratil’s Asian renewables platform) was able to benefit from falling equipment prices from manufacturers who found themselves shut out of the US market”.
While it was possible for individual firms to find advantages, trade restrictions and a less connected world will be fundamentally more expensive and inflationary.
Newfield said his firm was “wary” of predicting a rapid decline in global interest rates.
“We all need to be realistic that the idea that the world’s on its way towards a global free market is a relic of the past. As a small, trade-reliant nation New Zealand needs to be smart about how we navigate this new environment”.
De-globalisation
In August last year, Morgan Stanley wrote a research note for clients about how to invest in a world with competing superpowers and spheres of influence.
It said countries and companies were generally reducing their dependence on each other and attempting to shift production of key goods closer to home.
“The threads of globalization that began fraying a few years ago have been unravelling more rapidly as national security takes precedence over the efficient flow of goods and services,” they wrote.
“Realigning global commerce toward this newly multipolar world could take trillions of dollars of investment and at least a decade to fully take hold”.
While New Zealand is a friendly country to most, it is often said to be at the absolute end of the global supply chain and would be a net loser in a deglobalised world.
Larger countries are able to use industrial policy to attempt to build up domestic industries. The United States, China, the European Union, and even Australia are attempting this.
But NZ is too small to compete in this subsidy race, and so Luxon’s answer seems to be about putting more resources into improving supply chains.
Having an extremely resilient supply chain could be almost as good as having localised production. And so, a big focus of his diplomatic policy will be about supply chains.
South East Asia also has the advantage of being closer to NZ than Europe or the United Kingdom, making it slightly less vulnerable to disruptions like those seem in the Red Sea
Bigger backyard
The South East Asian countries which are now sitting on the top of New Zealand’s priority lists are also net-winners from de-globalisation — at least to some extent.
Many multinational businesses are setting up manufacturing and logistics capabilities just outside of China to reduce their exposure to geopolitical risk.
This means money is flowing into fast developing countries, such as the Philippines or Thailand, and creating a moderately wealthy middle class which can buy NZ-made products.
Luxon said exporters only need to win a niche set of consumers to support a healthy business back home which can then drive employment and pay Kiwi’s higher wages.
He wondered whether New Zealanders fully understand how trade underpins their quality of life and also public services.
“It’s not just about the money, if you don’t get the economy growing then you’ve got a two-cylinder engine trying to support a six-cylinder set of expectations for public services”.
If New Zealand is able to build strong supply chains and trading relationships with a fast-growing market, virtually in its own backyard, then it will be able to afford nicer things.
But that depends on the security situation, as well. If US-China 'competition’ becomes ‘conflict’, these new trading relationships will only partly cushion the agonising fall.
66 Comments
Actually slightly wrong emphasis there. The US built several large bases in the Philippines but were kicked out around the time Mt Pinatubo erupted. While it is true they have been invited back recently, their presence is nothing like it used to be, and is at best currently only temporary. If China doesn't back off, I can see their presence increasing, but there are sectors of Philippines society that are somewhat ambivalent to a US presence despite the clear evidence that economically it is very good for them.
We're an export dependent economy and if Luxon doesn't support opening up new markets then "his own back yard" will shrivel to nothing more than a tiny playpen. Foreign affairs was left to wither under the last regime with Mahuta being more preoccupied with forcing a co-governance agenda on local govt than supporting trade with the rest of the world.
New Zealand is heading to position itself as irrelevant - the fate of South Korea says as much.
In the past, South Korea was wooed by the G7 only because of its friendly relationship with China, which gave Seoul a higher strategic value. Now that South Korea has fully aligned with the West, proactively positioning itself against China, it is thus no longer needed by the West to make much effort to court it, Zhan added. Link
South Korea remains strategic if only for where it is positioned apropos the domino theory the West was fond to invoke beginning seventy or so years ago but here though, it is still relevant as North & South are still technically at war, seperated only by a truce. Hardly imagine that the West’s attention is so soporific to not understand that if China really wants to start in on something, prodding its vassal in the North to resume hostilities would be a very convenient fuse geographically and historically.
Except US and SK forces keep a close watch on anything across the 38th parallel. I doubt NK being able to catch them flat footed. SK air force in particular understands very well that at most they will have at best minutes to mobilise, possibly just seconds.
If they use NK it will be more likely to divert resources away from a bigger fight somewhere else.
Philippines’ President Marcos Jr even invited him to stay in the palace guest house and dubbed him an “honorary Filipino” for choosing to have lunch at KFC-equivalent, Jollibee.
Some contemptuous mocking was directed at Luxo for dining at Jollibee but the reaction from Filipinos was positive as noted above. NZ needs to get over our middle-class arrogance. JFC operates more than 6,300 stores worldwide and has multiple other franchises such as Highlands Coffee in Vietnam, the first Western-style cafe chain with 230 cafes nationwide. We have nothing else that compares.
So big ups to Luxo. Doubt going to Jollibee would have been on any itinerary for Dame Jacinda Kate Laurell Ardern GNZM. Way above that.
This means money is flowing into fast developing countries, such as the Philippines or Thailand, and creating a moderately wealthy middle class which can buy NZ-made products.
But then look at the penetration of products from countries like Korea and Japan have done in SEA. They're already well positioned, and even in the food and FMCG industries, they far outshine NZ. Korean and Japanese retailers like 7-Eleven and GS 25 have taken pole position. And in typical Asian fashion, they want to supply their own compatriots' products and brands.
Yes isolated and remote is different to bordering which only means the military exercise itself would be very different. That’s not the point though. History tells us if an aggressor determines to invade the neutrality of the target becomes meaningless. How it has to go about it obviously depends on the respective locations, logistics, length of passage and scores of other considerations. Or to put it in another hypothetical sphere, if such was the power of one warring party that if it had overwhelmed Japanese, Australian and American presence in the Pacific is it likely that it would then see fit to leave little ol’ New Zealand untouched because it had declared itself as being a neutral.
Why would we fear invasion when we literally invite the Chinese here via immigration? At some point in the near future, there will be sufficient Chinese in the country to enable them to set up a political party, and take control via MMP. That's how they win, not by launching drones from Nauru.
Agree. The world needs some independent countries with cool heads. America always operates in it’s own interests and drops countries once they get what they need. Look what happened to the Kurds and Afghan translators when they were no longer needed. We should act in our best interests and maintain an independent foreign policy, support the UN and oppose the vetos.
Interestingly the US had a plan to invade NZ in the early 1900s.
https://www.stuff.co.nz/auckland/local-news/north-shore-times/552755/US…
Let's get real. Signing the quest book is about it.the real work is done by diplomats and trade officials. We may have got some good press from adern, but I doubt it influenced trade
Ardern's junket can be best described as all fur and no knickers. She was summarily dismissed at the Forbes Women's Summit in HCMC by a local woman CEO for being unprepared and shallow. At the same time, the German govt was marching through SEA with all kinds of ammunition and treats. Guess where the attention would have been.
She is still taking up a huge part of your head JC..some would say an obsession?
Back to Luxy - He reiterated that no decision had been made about joining AUKUS Pillar II, but said he was disappointed Labour was making it a political issue now they are in opposition. Hmm cannot remember them campaigning on NZ taxpayers contributing to pay for eight Australian Nuclear Subs?
She is still taking up a huge part of your head JC..some would say an obsession?
Was a fan initially but feel very disappointed as to how things turned out. But getting back to the point, it was superficial. Now, for Luxo to spend a day each in the P'pines and Thailand is also going to be superficial. But in terms of what both did - Forbes vs Jollibee - my hat goes off to Luxo. Forbes is about ego. Jollibee is about people.
There is precedent if you like. New Zealand paid for HMS New Zealand a battlecruiser prior to WW1 precisely in consideration of its security in the Sth Pacific. Germany had a naval squadron at Western Samoa plus a base at Tsingtao. Russia was viewed as a threat hence various fortifications at various harbours. In today’s world one battlecruiser would be the equivalent of one nuke powered sub I would suggest.
I don't believe we need to go that far. But I do think we need to rebuild the strike component of the RNZAF though. Saab Gripens, F16s or some other newish 4+ generation single engine designs would do. The Mitsubishi F2 is a very capable aircraft compared to the F16. Modernise those and they would be useful. Japan optimised them for maritime ops. Not sure if their laws allow them to export though?
Not planes, drones and missiles are the thing now Murray.
Iran is really good now at the small and furious. We should talk to them
Small and furious are cheap, also able to be manufactured here.
We also need to protect shipping. Again, missiles on light platforms.
The expense of the western tech becomes a millstone. So much money, you can't do much else.
At one stage Ukraine was building a million drones.. Mostly they looked like something you would buy at The Warehouse for $100. Possibly were. But still more useful than the 20 million artillery piece. Also the Russians.
Yes I have occasionally wondered about Rocketlab. I still doubt we are a target though. If we are I imagine we would be near the bottom of the list in terms of priorities. There would be many, much higher target priorities for Russia or China than us. Their primary focus would be on hitting America siloes and strategic military sites (in USA, Asia and Europe)
You are possibly correct with China which has a very limited number of nuclear warheads. With Russia however, they have no shortage of warheads or delivery vehicles. And I would suggest that a launch facility for US military satellites might not be that low a tier on the list.
But it’s not as if they can push one button and launch all their missiles at once at thousands of targets around the world. Their first launches - in the order of perhaps a few hundred missiles and perhaps 1000 warheads - would be at highly strategic targets, by the time the Yanks hit them in response they won’t have any nuclear capability left to hit secondary targets.
Also what real strategic value is hitting a satellite launch site? It’s not negating the fact that there are stackloads of American satellites already in space
Realigning global commerce toward this newly multipolar world could take trillions of dollars of investment and at least a decade to fully take hold”.
They miss the point - there isn't a decade left for this extraction-based trading format.
We'll be at war well before then.
We'll be at war well before then. Hmmmm...
This is hands down the best talk I've heard in a long time on Taiwan, the underlying dynamics at play and what could be a solution. If you want to understand the issue, this is an absolute must-watch. It is by George Yeo, who is undoubtedly one of the outsiders who best understand China and Taiwan. He was a Singaporean cabinet minister during 21 years, including Minister for Foreign Affairs during 7 years. He's speaking in Taiwan in front of an audience made of senior ROC officials, including former president Ma Ying-jeou. He explains that as things stand China would likely win a conventional war with the U.S. over Taiwan, and the U.S. know this. And therefore it's now all about nuclear deterrence: China is working on having an assured nuclear counterstrike capability and the U.S. on denying them this. Yeo believe that China will undoubtedly obtain this counterstrike capability and when they do, it's basically over: the U.S. would lose a conventional war and couldn't credibly threaten China with nuclear warfare (because they themselves would get hit in a counterstrike). This means that, according to Yeo the status quo is "a ticking time bomb" and it is in Taiwan's interests to find a political accommodation today when they still have some negotiation leverage. Link
Oh for heavens sake. China can nuclear strike or counterstrike now, whatever that might be chosen. It is irrelevant how much might go one way or the other, or by what vehicle as any strike any target anywhere, accurate or inaccurate, will make those of 1945 look like minor dust bowls. This is not Bomber Harris vs Hermann Goering, bombs away, tit for tat, this is annihilation of civilisation in the making and it just takes, one.
Only two nations have been sufficiently bellicose to threaten nuclear strikes. Those being. Russia in the event of a perceived existential threat to their homeland arising from their invasion of Ukraine and that the UK for one could expect to be obliterated. And China mid 2021, announcing any intervention by Japan should China invade Taiwan would result in Japan receiving multiple nuke strikes. As far as I can discover no nuke threats have similarly been made against China for the same event. So what’s holding them back then.
To be relevant we need our own plan that plays to our strengths. If we don't have a solid plan, we will just be a part of other countries' plans.
We can absolutely have our own industrial policy to achieve that pla , providing we internalise the increase in demand caused by the extra investment - ie keep the expenditure primarily within our borders. We would need to use taxation and other tools to prevent the wealth created flowing offshore.
My view is that our strengths are relative safety, (mis)perceptions of clean / green, open neutral democracy, landscapes, outdoor things to do, plentiful water and soil, green electricity, and a resurgent indigenous culture.
We should actively reinforce those strengths and push to be the place that people come to learn and do research, a country that companies want to locate to, a digital hub for film / media, and a go to location for secure data centres.
Instead, we seem determined to regress to being a bad bootleg of 1970s England, and a country that asset strips it's environment so that the top few per cent can sale around on motorboats and chink glasses at vineyards.
My view is that our strengths are relative safety, (mis)perceptions of clean / green, open neutral democracy, landscapes, outdoor things to do, plentiful water and soil, green electricity, and a resurgent indigenous culture.
We should actively reinforce those strengths and push to be the place that people come to learn and do research, a country that companies want to locate to, a digital hub for film / media, and a go to location for secure data centres.
I can see the video content already. Wide pan camera shots over mountains; Maori waiata in the background and the haunting Maori flute; etc. The script hasn't changed for 30+ years. Only those holding the purse strings and selecting the various agencies to produce the same tired old narrative.
In many ways, it's become one big cliche.
NZ is hardly a tiny nation out of 200 plus nations we come on at 73rd on land mass. Bigger than England, Scotland, Wales, and Nth Ireland put together don't hear them saying tiny nation. Then add in our sea borders 5 x our land mass and we are up into top ten countries in border size. Are you saying our seas aren't worth protecting or have no value? I really do wonder how intelligent some of these people are
Population wise we are small. But you make a good point. Another part of this issue is that generations of politicians have decided our country is not worth the cost of defending. Our military has been run down to the point virtually of irrelevance. Recent purchases indicate how expensive it is to build capability. In many respects Luxon is correct. Historically NZ's relevance was measured on it capability and willingness to steep up militarily in regional defence pacts. But without a balanced military (needs a strike component to the airforce) most Asian nations appear to diminish our relevance. Helen Clark put us on that road with her self serving short sighted ideology.
As the world fractures geopolitically then any country that believes it can stay neutral and and still enjoy the same level of trade with, and protection of its nation, assets (planes, ships etc), It system from its allies is living in a dream.
For example NZ relies on the ability to ship its dairy and other products round the world for export dollars, and relies on undersea cables for connection to the world web . Who will help us defend and protect those if we insist on being neutral whilst other countries are sending their kids to protect their freedom and interests. What about our airline, people and ships?
Nuclear war is actually unlikely as the Elite wouldnt benefit from destruction of their planet. Leaders (e.g. putin) of nuclear countries are unlikely ever to face trial for their actions as the other leaders wouldnt want to set a precedent. More likely is ever increasing conventional wars..... trade wars and cyber wars.
If i was a citizen of the UK, Aus or the UK and was sending our kids off to defend our freedom, and trading with a nation that refused to do the same.. its unlikely i would extend any advantages in trade or help.for a long time
They've also decided it's not worth defending in that they've been far too eager to sell large amounts of it off into foreign ownership in some misguided belief that they themselves can profit in the short term with no longer term harm in a benign strategic environment. Even the present PM, short-sighted ideology of being far too happy to sell NZ off - thankfully restrained by others.
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