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Chair’s report to the NZUS Council’s Annual General Meeting covering the US election, priorities, climate and trade.

Leon Grice
Chair, NZUS Council

The 2020 pandemic, which looks like it will endure well into 2021, has changed everything including the NZUS Council. At time of writing every day 150,000 people in the United States are infected with SARS-CoV-2 and nearly 250,000 have died. In contrast, 1500 New Zealanders have been infected and 25 have died. The New Zealand Government’s elimination strategy has, to date, been successful. And the New Zealand economy has adapted and proven to be flexible and government emergency support to date has minimised the damage. Tourism, hospitality, and education sectors have been hit hard in the last year.

Looking forward there are increasing concerns that increased shipping and air freight costs, damaged supply chains and border and immigration restrictions will damage our ability to generate jobs and wealth. There are also concerns for our exporters that recessions in our trading partners will reduce demand and prices accordingly.

There is a strong correlation between international connections and productivity. We need global capital, particularly active US investment and investors as they understand and can support the fastest sectors of the New Zealand economy, particularly the intellectual property rich growth sectors. We also need American highly skilled migrants to be able to come in and grow these sectors and create jobs and create new industries for New Zealanders. These are problems that will need to solved soon as more and more sectors come under pressure. Job cuts hurt and our heart goes out to our members and their employees who have had the hard task of retrenching to survive, particularly Air New Zealand, one of New Zealand’s greatest brands and international ambassadors. As much as job cuts hurt, we should not lose sight that jobs we do not create because of missed opportunities are still jobs lost.

Our core business is international connections, specifically with the United States. We exist to advance the NZ US bilateral relationship for the New Zealand interest and the interests of all our members. In 2021 we will need to increase our focus on these issues and strive to maintain and grow our US connections and constructively advocate for government settings and policies that allow for the NZ US relationship to grow, particularly border settings.

It would be fair to say that we have sustained key relationships in 2020 but we haven’t grown our network here and the US substantially, as we intended, and our policy projects, while still relevant have taken a back seat to the most important global issue.

We have, like everyone, developed new social media skills and learned how to work using videoconference tools and we have got better at that and Jordan Small has been curating a highly relevant and valuable programme of online events. For 2021 we can and will leverage these new skills to grow the connections and strengthen our policy and advocacy agenda.

President elect Joseph Biden and Vice President elect Kamala Harris
What can New Zealand expect from a Biden Administration? Covid-19, climate change, trade, multi-lateral institutions, Indo-Pacific security and the China relationship are all on the agenda.
As Ambassador Scott Brown noted on the night of the US election what we have witnessed in the US is a great celebration of democracy. President-elect Joe Biden and President Trump and their campaigns fought hard to increase the turn-out and the US got the highest voter participation since 1908.

The Trump/Pence campaign increased their popular vote from nearly 63 million (46.1%) in 2016 to over 71 million. The Biden/Harris campaign increased the Democrat popular vote from nearly 66 million (48.2%) in 2016 to over 75.6 million. Eight million and nearly ten million, respectively. This is incredible and it is what decided the election. You can understand why it is difficult for President Trump to comprehend the outcome of the election as he would have hit or exceeded all his targets and still lost.

President-elect Biden’s victory speech was pitched perfectly calling for America to come together and that his presidency will be about unity.

“For all those of you who voted for President Trump, I understand the disappointment tonight. I’ve lost a couple of times myself. But now, let’s give each other a chance.”

The call implicitly recognised that 71 million American voters had supported President Trump, for many reasons, and he was offering to represent their interests and concerns, particularly the Obama-Trump voters in the States who missed out on the asset inflation boom and wealth uplift of the coastal States.

His speech touched specifically on acting on the pandemic, the economy, healthcare, systemic racism, the climate and building an inclusive democracy.

It suits politicians and the media to use hyperbole to describe the most recent election. Evidently it was a “bitter election” and the US has never been more “divided” and more “partisan”. These are unhelpful words and misleading statements. It can suit politicians to whip and motivate their supporters with iconoclasm and the same dynamic sells newspapers, increases social media engagement and wins advertising dollars.

A leading current affairs reporter working for our state broadcaster, on arrival to cover the US election, first went to a West Virginia gun store to find the most cartoonish depiction of rural support for President Trump he could find. It was gratuitous. We would protest if foreign media went to a Mataura pub to characterise New Zealanders political attitudes. His story does not help build understanding in New Zealand of US politics, which is the largest, most cohesive federal democratic system in the world. For those that have lived in the US, yes, politics matters, and Trump and Biden supporters care deeply about the issues. But like here in New Zealand, US voters from the left and the right work, live and play together and the vast majority keep things appropriately in perspective. In media coverage and social media that more humdrum reality rarely gets a look in.

Joe Biden took back the key “blue wall” states of Michigan, Wisconsin and Pennsylvania and along with Arizona and Georgia he flipped five States and won the electoral college by the same margin as Donald Trump in 2016. The Biden/Harris ticket has the mandate to govern effectively and the President-elect more than any other has the skills, the experience and the charm to work with a Republican majority Senate, if it remains that way after the Georgia run-off elections.

The President is chief executive of a democracy. His political, security, trade and economic agenda and what is possible will be a function of his persuasive powers in his own party as well as Congress, the Courts and the court of public opinion.

With that context, let’s examine the New Zealand interest particularly those high priority issues that we can speculate will form the agenda for President-elect Biden and Prime Minister Ardern on their first call.

Domestic policy first
The message coming out of Team Biden is that the priorities of the new Administration are to, first and foremost, to address the problems at home, strengthen relationships with friends, allies and partners (and that includes New Zealand) and then address broader international issues.

The most pressing and most urgent problem at home is COVID-19 and Biden has already formed an expert taskforce to address this challenge as winter is set to make a bad situation worse. For New Zealand, the United States with its pre-eminent research capability and vast resources is leading the charge, along with British and German universities and biotech companies. It seems clear that New Zealand’s first vaccines will come from the US after Pfizer announced that its vaccine has proven 90% effective in its Stage 3 trials. It is understood that Moderna will be next with a similar mRNA vaccine. With respect to COVID-19 testing the US is also developing many new tests, some more effective than others. Rutgers, Yale and Illinois universities are doing impressive work developing an effective saliva test and New Zealand epidemiologists are starting to talk more about saliva testing to bolster New Zealand’s defences. Prime Minister Ardern may seek the President-elect to join the vaccine alliance, Covax, and to enhance connections between New Zealand health science and the US.

As noted above, COVID-19 and New Zealand’s closed borders have put serious constraints on the flow of US investment capital and immigration lawyers and advisers have quantified that $2.8 billion of capital is currently blocked by the cessation of processing a few hundred investor migrant visa applications.

Aligned commitment to climate change action
On climate change it seems that Biden means action. He said during the campaign he would rejoin the Paris Agreement. It signals a return by the US to multi-lateralism. He also campaigned on banning fracking on federal lands, stopping the Keystone XL pipeline and he has set a goal of a 100% clean energy economy and net-zero emissions by 2050. Prime Minister Ardern will welcome all these moves and look forward to working closely with the United States. President Biden will also put pressure on every major country to increase their climate targets. That may up the ante on China to do more than its comparatively modest Paris commitments and lead to increased pressure in the US China relationship. On the other hand, he may look to use climate change as the one area for increased US China cooperation while pursuing a consistently competitive stance towards China on security, human rights and foreign policy.

Trade optimism
On trade we should be both realistic and optimistic. The fact is, even without an FTA, the US is a major trade partner and the NZ US Council’s deep dive monthly trade reports continue to show robust two-way goods trade and the US remains our most important market and source of capital for our “weightless export” industries. The importance of this was underlined by University of Auckland thinktank Koi Tū: The Centre for Informed Futures who have just released a November 2020 report that calls for a slate of policies to support the growth of an innovation economy for the 21st century.

A new US Trade Representative will be appointed, perhaps less focused on the issues of US steel and more committed to working collaboratively on WTO reform and, hopefully, with a restored disputes resolution function. Biden is more comfortable with multilateralism and may be more likely to look for compromises that bridge the divisions between the US and China and, also, with Europe. We can expect the US WTO reform position to be no less resolute, but with a focus on a successful resolution. Many of the reforms the US seeks have been publicly supported by New Zealand trade negotiators.

There is no doubt there was growing support among Republican Senators and Trump Administration officials for a bilateral free trade agreement with New Zealand. Ambassador Scott Brown worked tirelessly on this agenda on the Hill and directly into the Administration and he was making progress. The question is whether a Biden USTR will pursue a bilateral or plurilateral strategy to trade or both. The Biden climate policy notes that trade agreements need to address environmental concerns. That presupposes there will be trade agreements and Biden has consistently been a free trade advocate in his political career. A conversation with Prime Minister Ardern on how TPP and now the CPTPP can address labour and environmental issues could be fruitful. Her experience could help Biden develop a template for addressing the free trade concerns of progressives in the Democrat party. We should not forget that President

Trump secured NAFTA 2.0 (USMCA) with the support of US unions.
The Brits have been tweeting recently about the successful conclusion of a round two negotiation for a NZFTA and presenting it as a stepping-stone towards entry into the CPTPP. Perhaps that is a way forward for the US. A Biden Administration may seek to privilege its closest friends and allies, which could be another type of plurilateral deal or set of deals. A realist’s perspective is that the Office of the USTR, whether appointed by a Democrat or Republican President is a tough trade negotiator and K-Street mercantilist interests have always had out-sized influence during any negotiation. That was the New Zealand experience during the final hours of the TPP negotiations as our dairy ambitions were trimmed by US dairy interests.

China, the competitor
And then there is China. Biden said recently that Russia was the US’s biggest adversary and China was the US’ biggest competitor. Over the last two years, all of the NZUS Council engagement with delegations and meetings with Senators, Congresspeople, think-tankers, and foreign policy experts all had a common theme that China is now a threat to the United States. The bipartisan US view is that the previous era of engagement and inclusion was not accompanied by Chinese liberalisation and its economy is geared, through government central plans and supports, to achieve dominance in globally significant, strategic sectors. And domestically, China’s record on human rights has continued to worsen.

President Trump regularly denounced China as an adversary, particularly after the emergence of COVID-19. Yet his trade deal with China was widely regarded as unimplementable by most informed trade commentators. President Trump’s business instincts drove him to look at the problem as a series of negotiated deals that would re-establish a balance. The Washington establishment’s analysis was that the problems caused by a rising China are not likely to magically disappear with a series of deals. President-elect Biden will have to operate within that bipartisan, consensus view on China and it seems that US will be set to consistently pressure China in order to contain over-reach.

President-elect Biden’s choice of the term “competitor” to describe China implies he is not seeking the settings of a Cold War with China. One defeats an “adversary”, and competes and pressures a “competitor”. It is a carefully chosen term, better suited to an era of consistent and tough pressure on China. Clearly, Biden will oppose China’s ambitions if they impinge on the economic or military security of the US and its friends and allies. A President attuned to working with Congress and across the aisle is more likely to be able to sustain a pressure campaign on his competitors and adversaries.

Credit where it is due
Foreign Minister Murray McCully, Foreign Minister Winston Peters, Ambassadors Mark Gilbert, Scott Brown, Mike Moore and Rosemary Banks all deserve credit for their tireless efforts in deepening the relationship. Ron Mark also proved to be one of New Zealand’s most successful defence ministers. He oversaw large and practical defence purchases that will increase our interoperability with Australia, the US and other regional security partners. The P8s and C-130s will ensure New Zealand can continue to play an important role in the Pacific.

In the last two years we made significant progress with the passage of the Kiwi Act by Congress and other legislation and ever closer security ties. We also laid the foundations for the start of negotiations for a digital trade agreement and ultimately a free trade agreement.

Thank you also to our executive and advisory board members, particularly our advisory board chair, Fran O’Sullivan and our new members Chapman Tripp and Endace. A very special thank you to all the members that have stood by the Council and its mission through this most difficult time.

A great Ambassador
Thank you to Ambassador Scott Brown and your motivated and great team at the US Embassy. Scott and Gail, you did your country proud representing the United States of America. This week, Prime Minister Ardern said that New Zealand and the United States have a strong relationship, and she looks forward to making it stronger. She is exactly right.

This article is based on the Chairman’s Report provided to the NZUS Council’s AGM 2020 on 19 November 2020.

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