If Not Nostalgia, Then What?

VIEWS FROM OUTSIDE THE APIARY: IAN FLETCHER

The world’s rules-based order has been disrupted. Ian Fletcher surveys the new geopolitical playing field and explores New Zealand’s, limited, options.

Canadian Prime Minister Mark Carney says there is a “rupture” to the world order – so where does that leave New Zealand? Photo: Policy Exchange, CC BY 2.0, via Wikimedia Commons

The past ten days has seen a lot of commentary about Mark Carney’s speech at the World Economic Forum meeting in Switzerland on January 20. Carney is the Prime Minister of Canada. His speech was a reaction to what he called the “rupture” in the world order as Trumpian America has become more feral, more obviously self-serving, and has deliberately disrupted the rules-based order that the US had established and sustained since the end of WW2.

Carney argued that “middle powers” (big countries smaller than the US and China) should face facts, and come together to organise their affairs through enlightened cooperation. He ended with the observation that there was no going back: “Nostalgia is not a policy”.

What about New Zealand? There’s no doubt that we have been huge beneficiaries of the post-WW2 order. We have enjoyed peace and security in the shadow of the US and Australia. We have gained from gradually improving market access in recent decades. We have been able to trade and finance ourselves through a financial system that had the US dollar at its heart. Risks have been few, costs have been small and the benefits have been great.

Is it all over, as Carney claims: is it a real ‘rupture’ in the global order? His argument is that the rules-based order that we have supported over the past 80 years was actually dependent on overwhelming US military and financial power, ensuring order and (selectively) punishing those who broke the rules. Now that the US is saying that it only cares for its own narrow self-interest, this system is exposed as one based on power, not principle. The principles remain, but they are empty words without force behind them.

I find this analysis persuasive – I think the US gained immensely from its former position as an ‘enlightened’ superpower, but having turned away from that role it won’t easily be able to regain the trust of its former allies. It’s clear that the US now feels weaker than it did, and this abandonment of its global role is a mark of relative weakness and of psychological retreat.

But it leaves a mess behind. Countries like Australia, Canada, the UK, New Zealand and much of Europe now find ourselves still dependent on the US for a lot of intelligence and logistics related to defence. But it’s now both unreliable and shockingly expensive to replace. So, there is a quietly desperate scramble going on to both appease the US (to buy time), and to find affordable alternatives. Carney’s call for middle power cooperation reflects this dilemma.

Where does that leave New Zealand? We can see the appeasement process at work: Winston Peters (as Foreign Minister) has taken the management of the relationship with the US as a priority. We tolerated the imposition of US tariffs last year with scarcely a murmur. When Anna Breman, the new Reserve Bank Governor, joined other central bank heads criticising the US administration for its judicial persecution of the Chair of the Federal Reserve, Winston Peters delivered her a public dressing down.

Appeasement makes sense. There’s no point picking a fight we can only lose. It’s not in New Zealand’s interest to draw attention to ourselves in a context where the US would almost certainly be less tolerant than in the past. Public moralising will aggravate the relationship, and expose New Zealand to actual harm. So, Winston is probably right so far. He’s buying time, ensuring “every decision and anything we say advances the collective interest of the New Zealand people” [his words; my emphasis].

But what about the future? There are two broad choices we face. The first is nostalgia. We can hope Carney is wrong, that Trump goes away and the old order is put back in place. This might happen. But even if it does, Carney’s truth remains: the post-war system was based on a fiction, that the rules-based order existed independently of US power. We all now know that’s not true. We are in a world that’s much harsher and less predictable than we thought.

The other choice is to plan for a less ordered world. We can – as we have in the past – cosy up to Australia, and shelter behind them. That makes us dependent, more or less as we are now. It wouldn’t be too bad, although we would need to accept the gradual loss of autonomy that would follow. We would really become “a non-voting state of Australia” as one New Zealand official once described it. Given our history, this is the easy choice and it’s probably the choice we will make. We end up like Ireland – nice, but irrelevant except as a backdoor to somewhere more important. If we were honest with ourselves, we should consider actual federation with Australia.

Or, if that seems too much, we could take a bit more responsibility, and invest more in our own security and independence – other countries our size can do that, and prosper (think Finland, or Singapore). That would be expensive and involve a big commitment by the whole country. But it would buy us some genuine independence and some bargaining power.

There remains one big uncertainty for New Zealand: the future of the world’s trading and financial systems. The World Trade Organization’s multilateralism and predictable dispute settlement system is struggling, and we must expect to have to do a lot more bilateral market access – which will not suit us as much, but it’ll be what we’re stuck with. And it’s not clear how the world’s financial system will change, although no one is yet seriously betting against the dollar. Again, Australia beckons.

Where does that leave us? We used to claim we had an independent foreign policy, but it was all under the shelter of the US and its allies: really, independent opinions without costs or consequences. Now we may find we really do have an independent policy, but that we have to bear the costs. Australia looms, whatever way we look.

Ian Fletcher is a former head of New Zealand’s security agency, the GCSB, chief executive of the UK Patents Office, free trade negotiator with the European Commission and biosecurity expert for the Queensland government. These days he is a commercial flower grower in the Wairarapa and consultant to the apiculture industry with NZ Beekeeping Inc.