Jim Sutton Speech To Institute Of International Affairs

NZ Institute of International Affairs, Wellington

Good morning, ladies and gentlemen.

I would like to start by thanking the Institute of International Affairs for the invitation to open this seminar. And to thank Bryce Harland from the Institute for his foresight in arranging it. I acknowledge the contributions from the Australian High Commission, the ANZ Bank, the New Zealand Dairy Board, Phillips Fox, and QANTAS, which have made this seminar possible.

Many of you will have attended the Otago Foreign Policy School and heard debates on a similar theme: New Zealand and Australia: Moving Together or Drifting Apart? The theme of this seminar is: New Zealand and Australia: Where are We Going?

Both themes seem to acknowledge that if we simply stand still, we will be overtaken by events. This may be more obvious on this side of the Tasman than the other.

Personally, I think New Zealand is always going to have to work harder in the relationship. Given the inequality of size and potential benefit, it is New Zealand that will need to drive that thinking and convince Australia of the merits of whatever answers we come up with.

But both nations have much to gain in a closer relationship ? internationally and economically.

No doubt, over the last few days many speeches have asserted that Australia is our most important partner.

Australia has become home to many of our people.

>From the outside we are often perceived as being essentially about the same things, even as a single entity.

Although in some respects, Australia and New Zealand are perhaps more different than we have been, we face similar issues. We both worry about the drift to greater economic centres of many of our businesses and skilled people.

The question is whether we each offer the other a means of addressing the challenges posed by global trends.

Since 1983 the CER Agreement has brought us closer economically. It has been reinforced by a range of other economic instruments such as the Trans Tasman Mutual Recognition Arrangement and the Joint Food Standards Agreement.

We invest heavily in each other's countries. Australia is the leading source of foreign direct investment for New Zealand - far ahead of the next most important source, the USA. And, perhaps less well-recognised, there is considerable New Zealand investment in Australia: Telecom NZ, Carter Holt Harvey, Air New Zealand, the Warehouse and the New Zealand Dairy Board are among those New Zealand companies with have significant investments in Australia.

With such investment we are seeing the emergence of true trans-Tasman companies. Fisher & Paykel is a standout example, along with some of those already named.

Internationally, New Zealand and Australia tend to have similar views. We talk a lot with each other, and find a broad complementarity of outlook, on for example, developments in the Pacific and in Asia. The deployment of our defence forces for peacekeeping purposes in Timor, Bougainville and the Solomons, reflects our joint interest in security and harmony within the region we live in. We're active together on WTO issues like the lamb dispute we've both prosecuted with the US. We are both exerting pressure to get a new round of world trade talks underway. On many occasions we lobby for each other's candidates for international offices.

But, while we have many similarities, it is likely that our national identities will continue to diverge to some degree. New Zealand's ethnic diversity is weighted more towards peoples from the Pacific. Australia's population has larger groups from southern Europe, the Middle East and Asia.

Australia has long sought to be regarded as a mid-level power, and looks nervously to its near north. New Zealand by contrast has no such aspirations and looks across the Tasman to Australia and north to the South Pacific. Our immediate geographical situation is pretty benign. Darwin was bombed in the Second World War. New Zealand was not. When these factors are combined with a significant difference in population size, and resources available to support defence forces, differing defence capabilities and requirements emerge.

Our bilateral security relationships with the USA are of course somewhat different, given our opposition to nuclear weapons. And we have somewhat more relaxed relations with some countries in South East Asia.

While we may be conscious of the many divergences between us - and even play them up to underline that we are, in fact, quite distinct countries - when others look at us from a distance, we have a lot in common. Unlike most of the neighbouring countries of Europe or Asia, we speak the same language. Unlike the countries of Europe, which tore each other apart twice last century and where internecine warfare continues in some of the countries which succeeded Yugoslavia and the former Soviet empire, we have never fought each other ? if one puts aside rugby or netball.

We are sometimes both, with or without justification, seen as anomalous within our region. We are both in the European and others group of the United Nations, despite geographical reality suggesting a different placement. The Europe/Asia summit excludes us both. Some Asian countries insist we are European; Europeans insist we are Asian. One recent New Zealand Prime Minister famously, in quick succession, declared himself to be both Asian and Irish.

CER is arguably the most comprehensive free trade agreement in existence. It is an economic agreement with an economic purpose - unlike, for example, the Treaty of Rome which established an economic community in Europe in order to maintain peace between persistent belligerants on that continent.

Europe in fact provides a number of interesting comparisons. As with Australia and New Zealand under CER, since the Treaty of Rome in 1957 an increasing number of European countries has been brought closer together economically. The 1992 Treaty of Maastricht brought monetary union and a European Central Bank. But it also went further. It had implications for social policy across member states. It envisaged the eventual framing of a common defence policy, and the establishment of the position of EU foreign policy spokesman.

But the individual European countries remain quite distinct. Inevitably some autonomy has been traded for security, particularly perhaps by the smaller members. But despite the common institutions, most Europeans clearly still regard themselves as nationals of the individual countries, not citizens of Europe. It will be interesting to see how much further Europe moves towards the United States of Europe that was envisaged by Churchill in 1946.

Australia and New Zealand have a great deal more in common than many countries within Europe have with each other. But we too need to be aware of where our individual and mutual best interests lie before we take further steps towards integration. The development of the European Union provides an interesting parallel for sovereign countries operating as parts of the same economy, without threat to the institutions of nationhood.

>From New Zealand's perspective, I think that the further integration of our two economies provides the most likely means of enabling us to maintain first world living standards, but which are increasingly creeping beyond our reach. There's increasing concern here about New Zealand's future as a branch economy. Australia shares the same disquiet, as Australian companies head overseas, seeking closer proximity to their main markets, and the cutting edge of technology.

There is more that can be done to make it easier for our businesses to operate across the Tasman. Some of that work is already underway - in the areas of business law, tax and harmonisation of regulatory environments, for example.

The possibility of a joint agency to regulate medicines and drugs, to join the bi-national body setting joint food standards is an example of harmonsation work which is underway. And the report from the Foreign Affairs, Defence and Trade Select Committee may show up further areas where integration would be advantageous.

As to a common currency - well, the jury is still out on that.

It's likely that New Zealand will continue to benefit more from this economic relationship than Australia, but even for Australia there are distinct advantages in close integration with another economy.

Our joint standing in the region is likely to be enhanced if we are perceived as a non-exclusive economic bloc, with a joint GDP the equivalent of ASEAN's. Trade agreements with CER economies may be more attractive to third parties than with us as individual countries. More so, if a link between CER and AFTA ever eventuates to double that economic weight.

Along with CER, the trans-Tasman Travel Arrangement is a cornerstone of our relationship. Freedom of movement betwen Australia and New Zealand is important and will continue to be so for many of our population. Australia has gained a large number of highly skilled New Zealanders - as well as the taxation they contribute to Austraian Government coffers. New Zealanders have gained wider employment options and the ability to prove they can swim in a bigger pond.

In February this year the New Zealand and Australian Governments announced changes to trans-Tasman social security arrangements. A new cost-sharing agreement covering payments to the elderly and people with severe disabilities will come into effect in July 2002.

For its part, Australia also decided that from 26 February 2001 new migrants from New Zealand would have to obtain Permanent Residence before gaining access to the wider range of benefits and to Australian citizenship.

The revised arrangements remove a long-standing irritant from the relationship, while preserving Trans-Tasman freedom of travel and the entitlements of the large New Zealand community already in Australia. At the same time, New Zealand taxpayers will stop reimbursing the Australian Government for invalids benefits paid to New Zealanders resident at Bondi, whose work capacity we could not readily test.

New Zealand benefits from the nearness of a prosperous and benign neighbour and Australia from being able to rely on diplomatic and military support in the region. We have worked together to try and bring peace to Bougainville and East Timor. We will continue to liaise over matters such as climate change, stability and good governance in our region, and in other international settings too. Our policies however will not always be exactly the same.

What new arrangements will there be in the future? I think it's most likely that Australia and New Zealand will intensify the economic linkages, possibly even to the extent in future of a common currency.

But I do not anticipate the emergence of a feeling of shared nationhood. Political integration would throw up an array of discontent, for debatable gains. Indeed, I cannot see that there is anything that we could gain through political unity we could not gain through closer economic integration.

What is clear though is that Australia places lower priority than New Zealand in further work on CER or other forms of integration. It will be New Zealand that needs to determine where change is needed, and to persuade Australia as to where our best mutual interest lies. If we want change we will need to push for it and convince Australia it is a good idea. Along with that, New Zealand will have to be prepared to bear the higher cost for what would be a higher benefit.

This week has seen a very unusual concentration on the relationship between Australia and New Zealand. I wish you well for your discussions today and I look forward to hearing about the debate you will have across a wide range of bilateral issues. This is a real opportunity to influence the debate on the future of this, our most important relationship.

Thank you.

Ends

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