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A bridge too far.

Headline: A bridge too far. – 36th Parallel Assessments

Jiaozhou Bay/Qingdao-Haiwan Bridge, China. Photo: Feel the Planet (feel-planet.com).

The Labour-led government in New Zealand has settled on a new mantra when it comes to addressing the US-China rivalry. It claims that New Zealand is ideally situated to become a bridge between the two great powers and an honest broker when it comes to their interaction with the Southwest Pacific. This follows the long-held multi-party consensus that New Zealand’s foreign policy is independent and autonomous, and based on respect for international norms and multinational institutions.

The problem is that the new foreign policy line is a misleading illusion. It ignores historical precedent, the transitional nature of the current international context, the character and strategic objectives of the US and the PRC and the fact that New Zealand is neither independent or autonomous in its foreign affairs.

The historical precedent is that in times of conflict between great powers, small states find it hard to remain neutral and certainly do not serve as bridges between them. The dilemma is exemplified by the island of Melos during the Peloponnesian Wars, when Melos expressed neutrality between warring Athens and Sparta. Although Sparta accepted its position Athens did not and Melos was subjugated by the Athenians.

In stable world times small states may exercise disproportionate influence in global affairs because the geopolitical status quo is set and systemic changes are incremental and occur within the normative framework and around the margins of the system as given. When international systems are unstable and in transition, small states are relegated to the sidelines while great powers hash out the contours of the emerging world order—often via conflict. Such is the case now, which has seen the unipolar system dominated by the US that followed the bi-polar Cold War now being replaced by an emerging multi-polar system aggregating new and resurgent powers, some of which are hostile to the West.

In this transitional moment the US is in relative decline and has turned inward under a Trump administration that is polarizing at home and abroad. It is still a formidable economic and military power but it is showing signs of internal weakness and external exhaustion that have made it more reactive and defensive in its approach to global affairs. China is a rising great power with global ambition and long-term strategic plans, particularly when it comes to power projection in the Western Pacific Rim. It sees itself as the new regional power in Asia, replacing the US, and has extended its influence world-wide.That includes involvement in the domestic politics and economic matters of Pacific Island states, including Australia and New Zealand.

China’s rise and the US decline are most likely to first meet in the Western Pacific. When they do, the consequences will be far reaching. Already the US has started a trade war with the Chinese while reinforcing its armed presence in the region at a time when China cannot (as of yet) militarily challenge it. China has responded by deepening its dollar and debt diplomacy in Polynesia and Melanesia as part of the Belt and Road initiative, now paralleled by an increased naval and air presence extending from the South and East China Seas into the blue water shipping lanes of the Pacific.

There lies the rub. New Zealand is neither independent or autonomous when it confronts this emerging strategic landscape. Instead, it has dichotomized its foreign policy. On the security front, it is militarily tied to the US via the Wellington and Washington Declarations of 2010 and 2012. It is a founding member and integral component of the Anglophone 5 Eyes signal intelligence gathering network led by the US. It is deeply embedded in broader Western security networks, whose primary focus of concern, beyond terrorism, is the hostile activities of China and Russia against liberal democracies and their interests.

On trade, New Zealand has an addict-like dependency on agricultural commodity and primary good exports, particularly milk solids. Its largest trading partner and importer of those goods is China. Unlike Australia, which can leverage its export of strategic minerals that China needs for its continued economic growth and industrial ambitions under the China 2025 program, New Zealand’s exports are elastic, substitutable by those of competitors and inconsequential to China’s broader strategic planning. This makes New Zealand extremely vulnerable to Chinese economic retaliation for any perceived slight, something that the Chinese have been clear to point out when it comes to subjects such as the South China island-building dispute or Western concerns about the true nature of Chinese developmental aid to Pacific Island Forum countries.

As a general rule issue linkage is the best approach to trade and security: trading partners make for good security partners because their interests are complementary (security protects trade and trade brings with it the material prosperity upon which security is built). Absent that, separating and running trade and security relations in parallel is practicable because the former do not interfere with the latter and vice versa. But when trade and security relations are counterpoised, that is, when a country trades preferentially with one antagonist while maintaining security ties with another, then the makings of a foreign policy conundrum are made. This is exactly the situation New Zealand finds itself in, or what can be called a self-made “Melian dilemma.”

Under such circumstances it is delusional to think that New Zealand can serve as a bridge between the US and China, or as an honest broker when it comes to great power projection in the Southwest Pacific. Instead, it is diplomatically caught between a rock and a hard place even though in practice it leans more West than East.

The latter is an important point. Although a Pacific island nation, New Zealand is, by virtue of its colonial and post-colonial history, a citizen of the West. The blending of Maori and Pacifika culture gave special flavor to the Kiwi social mix but it never strayed from its Western orientation during its modern history. That, however, began to change with the separation of trade from security relations as of the 1980s (where New Zealand began to seek out non-Western trade partners after its loss of preferred trade status with UK markets), followed by increasingly large waves of non-European immigration during the next three decades. Kiwi culture has begun to change significantly in recent years and so with it its international orientation. Western perspectives now compete with Asian and Middle Eastern orientations in the cultural milieu, something that has crept into foreign policy debates and planning. The question is whether the new cultural mix will eventuate in a turn away from Western values and towards those of Eurasia.

The government’s spin may just be short term diplomatic nicety posing as a cover for its dichotomous foreign policy strategy. Given its soft-peddling of the extent of Chinese influence operations in the country, it appears reluctant to confront the PRC on any contentious issue because it wants to keep trade and diplomatic lines open. Likewise, its silence on Trump’s regressions on climate change, Trans-Pacific trade and support for international institutions may signal that the New Zealand government is waiting for his departure before publicly engaging the US on matters of difference. Both approaches may be prudent but are certainly not examples of bridging or brokering.

While New Zealand audiences may like it, China and the US are not fooled by the bridge and broker rhetoric. They know that should push come to shove New Zealand will have to make a choice. One involves losing trade revenues, the other involves losing security guarantees. One involves backing a traditional ally, the other breaking with tradition in order to align with a rising power. Neither choice will be pleasant and it behooves foreign policy planners to be doing cost/benefits analysis on each because the moment of decision may be closer than expected.

Analysis syndicated by 36th Parallel Assessments –

MIL OSI – Source: Evening Report Arts and Media

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Confronting Sharp Power.

Headline: Confronting Sharp Power. – 36th Parallel Assessments

Source: http://akross.info/?k=List+of+magical+weapons++Wikipedia

International relations is about exercising power to achieve objectives on the global stage. The actors that do so are states, companies, non-governmental organizations or criminal and non-state political actors acting directly or as proxies. The tools they employ have traditionally included hard power, which is the threat and use of diplomatic, economic and military coercion; soft power, which involves the persuasive appeal of diplomatic, cultural and economic engagement; and smart power, which is a hybrid, carrot and stick approach where hard and soft power is combined into a package of positive and negative incentives for cooperation and dissuasion. International norms are designed to encourage soft and smart power solutions to contentious issues, with hard power used as the weapon of last resort.

Recently a new form of approach has emerged on the world scene, one that is wielded by authoritarian regimes that seek to alter or undermine the ideological consensus and institutional stability of liberal democracies. It is called sharp power.

Sharp power is an extension of smart power but with a subversive, norm-violating twist. Its purpose is to condition the internal narrative of democratic states in ways that are favorable to the authoritarian state employing it. This includes influence operations like those used by the People’s Republic of China in New Zealand, where so-called United Front organizations (such as community organizations and business associations) are employed as “magical weapons” designed to influence the way in which New Zealand political and economic elites view the world system and more specifically, to align these elites with Chinese positions on international affairs. Taking advantage of opaque campaign finance laws, financial donations have been used by Chinese front organizations as a means of currying favor in the New Zealand political system, much in the way the PRC’s so-called cheque book diplomacy has shifted foreign policy perspectives throughout the community of Pacific island states.

Sharp power also includes undertaking disruption operations where, via cyber-hacking and disinformation campaigns on social media, popular faith in the institutions governing everyday life are undermined. These include the placement of so-called fake news stories in major social media outlets, malicious hacking of banking systems and government bureaucracies responsible for basic public good provision, and hidden control of targeted media outlets. These malevolent activities run in parallel and at times overlap with traditional espionage and influence operations in a multi-faceted strategy aimed at subverting the ideological and institutional foundations of democratic societies. A loss of faith and trust in liberal democracy is seen as a win by the sharp power-wielders.

Although the government has soft-peddled the issue, the GCSB has given three warnings this year about disruption activities undertaken by foreign states that have an impact on New Zealand.

More darkly, sharp power has been deployed with murderous or criminal intent. Be it recent Russian poisoning campaigns against dissidents and renegade intelligence agents in the UK, the murder of a Saudi journalist by state agents in the Saudi consulate in Istanbul, the killing of Kim Jung-un’s half brother in the Kuala Lumpur airport or the physical intimidation of expat Chinese communities in Australia, authoritarians have grown bolder in flouting international norms on sovereignty and non-intervention. Even New Zealand may have been touched by such authoritarian interference: the burglaries of the home and office of an academic critic of the PRC’s foreign influence operations are believed to have likely been carried out at the behest or on behalf of the Chinese state since no valuables were taken while research tools and materials were. New Zealand security authorities have stated that the investigation has moved overseas and been transferred to INTERPOL, the international police agency. That means that the perpetrators are believed to have left New Zealand, something that would be unusual for local common criminals given the low level of the crime and the nature of what was taken.

But let there be no mistake: if the involve a foreign power, the burglaries of Ann Marie Brady’s home and office are crimes committed on sovereign New Zeaaland soil and therefore a step up from influence operations and into direct intimidation of a New Zealand citizen and her family.

All of this occurs against a backdrop where strong authoritarian states like the PRC and Russia have brazenly violated international norms by laying claim to, built islands on and militarily fortified reefs in international waters while ignoring international arbitration decisions against it (China in the South China Sea) or seized and annexed large swathes of a neighbors territory in the face of international condemnation (Russia is Georgia and the Ukraine). The Saudis are leading a vicious war in Yemen against Iranian-backed rebels in which war crimes are committed on industrial scale. Myanmar’s military is engaged in the ethnic cleansing of its Rohinga community, causing a multi-national humanitarian crisis. These and scores of authoritarian atrocities go unpunished because the liberal democratic world has neither the will or the capabilities to stop them. That is a weakness that authoritarians seek to exploit with their sharp power projection, and in this they may have been encouraged by the US abandonment of its support for the liberal institutional world order under the Trump administration.

The question is how to respond to the use of sharp power against New Zealand? As a small, economically vulnerable state that is dependent on trade in agricultural commodity exports, tourism and foreign student education from a number of authoritarian states, particularly the PRC, New Zealand has to tread delicately when confronting violations of its sovereignty and/or overt or covert meddling in its internal affairs. On the other hand, as a staunch supporter of the rule of law and norm adherence in international affairs as well as a long-term member of the community of mature liberal democracies, New Zealand cannot afford to cast a blind on on such offenses less it encourage more and from other actors as well. In fact, its response has to be both broad and specific, with it coupling repudiation for international norm violations as a matter of principle with specific targeted remedies taken against those who employ sharp power on New Zealand soil or against its interests.

It is a conundrum that will not be resolved easily.

Analysis syndicated by 36th Parallel Assessments –

MIL OSI – Source: Evening Report Arts and Media

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From failure, opportunity beckons.

MIL OSI – Source: Evening Report Arts and Media

Headline: From failure, opportunity beckons.

Analysis syndicated by 36th Parallel Assessments – Headline: From failure, opportunity beckons.

The Trump administration’s decision to withdraw the Trans-Pacific Partnership Agreement, a multinational trade and investment accord involving eleven Pacific Rim countries other than the US, is seen as a blow to hopes for a freer flow of goods and services in the Asia-Pacific Region. In this analytic brief we look at the potential opportunities presented to the non-US TPPA signatories by the US abrogation.

When President Trump signed the executive order withdrawing the US signature from the Trans Pacific Partnership Agreement (TTPA), he signed the death warrant of that multinational trade deal in its present form. The US was the core member of the TPPA and held the dominant negotiating position within it, so the decade-in-the-making, laboriously undertaken and vexing complex compact that was agreed to by the other eleven signatories is now all but null and void.

There are options, however, for the TPPA that may allow it to survive and thrive in light of Trump’s unilateral abrogation.

First, the other eleven member states can put the agreement into hibernation, wait for the 2020 US presidential election and hope that a more trade-oriented president succeeds Trump.

Second, they can hope that the Republican congressional leadership will force Trump to reverse his decision sometime between now and 2020. That would only occur if Trump is weakened by some failure and the GOP sensed that it could re-assert its traditional pro-trade stance at his expense. The Democrats would welcome the move for opportunistic partisan reasons even if some of its leading figures such as Bernie Sanders also oppose the TPPA and applauded Trump’s decision to pull plug on it.

Third, the members could look to themselves and re-draw an agreement that is less US-centric. Many of the provisions insisted on by the US could be reconsidered and even dropped in exchange for increased preferences for the interests of previously junior TPPA partners.

Fourth, the remaining TPPA partners could look to fill the void left by the US with another large market economy. The one that springs immediately to mind is China. That is where things get interesting, and where opportunity may lie.

China is already party to the ASEAN-China Free Trade Agreement (ACFTA) that established a regional free trade area that is the largest in terms of population and third largest in term of trade volume and nominal GDP. Some of the ACFTA signatories are also parties to the TPPA (Brunei, Malaysia, Singapore, Vietnam). This agreement is considered to be a “true” free trade agreement in the Ricardian sense because it reduces tariffs across 7,881 product categories to zero percent, with the result being that tariffs on ASEAN goods sold to China fell to 0.1 percent and those of China sold in ASEAN to 0.1 percent in the year the agreement went into force (2010)

The non-US TPPA members could opt to negotiate an agreement with ACTFA as one course of action. That may be difficult given that the TPPA is not a “genuine” FTA as much as it is an investor guarantee agreement (IGA) in which market regulations are altered to attract foreign investors and these are protected from legal liability in the event of disputes with the host state. What is not included in the TPPA are across-the-board reductions to zero tariff, and in fact many domestic industries remain protected or subsidised throughout the TPPA membership as part of the horse trading undertaken during negotiations over its central tenets. But it may be possible to reconcile the two trade deals in an effort to create a new super trade bloc on neo-Ricardian grounds.

Another option might be to invite China to the table. It has the second largest market in the world and is continues to grow at a sustained and rapid pace in spite of the vicissitudes of the world economy over the last two decades. It is making the transition from export platform to a mixed domestic mass consumption/value-added export model, and it has previously expressed interest in joining the TPPA. The US blocked consideration of China’s membership because it saw the TPPA as the economic equivalent of the military “pivot to Asia” announced by the Obama administration, that is, as a hedge against Chinese economic, diplomatic and military influence in the Western Pacific Rim in what amounts to a new Containment Policy in the Asia-Pacific.

With the US gone, China has an opening and the remaining TPPA members have an opportunity. The TPPA will have to be renegotiated, but it is likely that the non-negotiable provisions insisted by the US will not be supported by the Chinese and can be dropped in the effort to entice their interest. In turn, China might have to accept something less than blanket reductions in uniform tariffs and agree to a tariff reduction regime that is more segmented and scaled in orientation and gradual and incremental in application (i.e. more product or industry specific and phased in over a longer period of time). That is clearly within the realm of possibility, as is Chinese agreement to other TPPA provisions stripped of their US-centric orientation.

China has already signalled its intentions in this regard. President Xi used this year’s Davos Forum to preach the virtues of free trade and global commerce, arguing against protectionism as an impediment to international understanding and exchange. China has proposed the creation of a Regional Comprehensive Economic Partnership (RCEP) along the lines mentioned above with regard to an ACTFA-TPPA merger but with the provision that the US be excluded. There are many details to be ironed out but the groundwork has been laid for that to happen.

What makes the turn to a China-included trade bloc a potentially win-win proposition for remaining TPPA signatories is that the key provisions demanded by the US–changes in market regulations and preferential market entry clauses for US business interests (including changes in patent and copyright protection) and imposition of limited liability clauses in the event US businesses are sued by local governments–were those that were most resisted by domestic audiences in several TPPA member countries. Removing them not only allows the agreement to be free of those constraints but also diffuses a source of domestic opposition in countries where such things matter.

One thing TPPA states should think carefully about, especially small states like New Zealand, is the invitation to negotiate bi-lateral trade deals with the US instead of the TPPA (something just announced by the Trump administration). The historical record shows that large asymmetries in market size favour the larger over the smaller partner in bilateral trade agreements. This is due to economies of scale, market dominance, and economic and geopolitical influence derived from market size advantages. The recent track record of bilateral deals between the US and smaller states reinforces this fact. Australia, South Korea, Chile, Colombia and the Central American nations plus Dominican Republic grouped in the CAFTA scheme all have bilateral FTAs with the US. In all instances the majority benefits accrued to US-based companies and industries and the benefits accrued in the partner states were limited to specific export markets (mostly in primary goods), with little flow-on, trickle down or developmental effects in the broader national economies.

So rather than “jump on a plane” to sign a bilateral deal with the US, as one wag put it, smaller states such as New Zealand need to think hard whether the bilateral alternative with the US is more long-term beneficial than a multilateral agreement, especially when it has shown that under a certain type of administration the US is willing to renege on its commitments even if they are multilateral rather than bilateral in nature. With the Trump administration also set to review and replace the tripartite North American Free Trade Agreement with Canada and Mexico (NAFTA), it is clear that honoring commitments and maintaining continuity in trade policy is not, even if just for the short term, on the US agenda.

When one widens the lens on what the Trump administration is doing in terms of its threats to withdraw from various bi-and multinational defense agreements unless the partner states “pay more” for US protection, it becomes clear that the US is not, at least for now, a reliable international partner.

The reason is that the new US attitude to trade is part of a larger phenomenon. The neo-isolationist protectionism embedded in the “America First” approach adopted by the Trump administration has ended, however temporarily, over 50 years of bipartisan consensus in the US political elite on the merits of international engagement. Be it in trade, foreign aid or collective defense, the US policy elite, both public and private, have embraced globalisation as a means of projecting US power, influence and values world-wide. That era has come to end for the time being, and so long as Trump is successful in pursing his “America First” strategy it will continue to be so.

That may or may not make America Great Again but it could well have a negative impact on those who seek mutual benefit by engaging with it. They will be asked to do more, pay more and offer more concessions in order to be granted US favour.

In the absence of an alternative, that is an unenviable position to be in.

If alternatives are available, then the current moment in US politics provides a window of opportunity to countries that have found themselves marginalised by Trump’s policy directives.

The re-orientation of TPPA is one such opportunity because, if for no other reason, a US return to the TPPA fold in the post-Trump era will see it with much less leverage than it had up until now. Add to that the possibility of increased benefits via a renegotiated deal with the remaining and possibly new partners, and the downside of the US withdrawal seems acceptable.

From a smaller nation perspective, that is a good thing.