Stephen Jacobi: Passion play on the world stage

The success of the Rugby Union in bringing the World Cup to New Zealand shows that if you really put your mind to something, you can achieve it.

Yet in the same week we received that great news, we engaged in some classical talking past each other with the United States. What is it that we really want from the US relationship?

A free-trade agreement, clearly, even though time is against us on that score, at least in the short term, with the President's negotiating authority due to expire in 2007. If it takes more than a year to negotiate a free trade deal with China, it will take as long with the US.

A pre-election survey undertaken by Business NZ ranked a free-trade agreement with the US as the fourth most significant top-of-the-mind issue for business, after skills, Government spending and energy.

But is a free-trade agreement the real thing? In fact there is an even bigger picture and one in which the US, as the world's leading source of ideas, innovation and technology, could play a key part if we really want.

That picture was shown a few weeks ago in the latest report published by the New Zealand Institute. Entitled No Country is an Island, the report looks at what needs to be done to sustain this country's present rates of economic growth.

We've done pretty well over the last 15 years but two-thirds of the growth generated since 1990 has been due to increases in the number of hours worked. The challenge now is to lift labour productivity; instead of simply relying on more of us working, we need to work smarter and increase the value generated from each hour worked.

The institute points to the small size and scale of the domestic economy and suggests that increased productivity can only be brought about by greater integration in the world economy. Expanding the size of the economy through increased international engagement, in terms of New Zealand firms exporting or investing abroad, will be a critical part of raising labour productivity in a substantial and sustained way.

Now the US is not the only focus of our international engagement, nor should it be. Having learned the lesson in the 1970s, of having all our eggs in one UK basket, New Zealand looks today in all directions for export growth and investment. Free-trade agreements with China and the Association of South East Asian Nations under negotiation need not be at the expense of other international linkages.

The point is that within the mix of export markets now and in the future the US looms large. Two-way trade with the US is valued at more than $8 billion. The US is New Zealand's second export market overall, the largest export market for dairy products, beef and seafood, the second largest purchaser of manufactured goods and among the top five markets for sheepmeat, forest products, fruit and vegetables.

The US is the second largest source of imports and the third largest source of tourists who in the year to March 2005 spent $615 million (the highest daily spenders). The US contributes about 12 per cent of all foreign direct investment.

Although we are prone to overlook it, these impressive statistics point to an economic relationship that is in good shape. Add to this the range of other interactions between our citizens, officials, researchers, scientists, students and, yes, even our defence forces, which take place on a daily basis and you have a relationship that already has a broad base.

The question, in the light of the institute report, is whether this is enough.

The level and growth of New Zealand exports and outward investment lags behind other developed countries and our current account deficit at 8 per cent of GDP is among the highest. It's hard to escape the fact that New Zealand will have to do a lot more in the future if we want to develop that high-skill, high-productivity, high-wage economy.

That's the real thing about the relationship with the US and the answer to those in our community who, against the background of differing views on nuclear issues and the war in Iraq, question whether we need the US at all. The uncomfortable fact is that we need the US more than they need us.

While our shared values in democracy and individual freedom and our shared interests in global security cannot be denied, New Zealand needs the US above all because of the role US ideas, investment and technology can play in the further development of our economy. We need to find a winning formula to ensure that the relationship can continue to flourish, even where there are differences.

If the real thing is a relationship with the US that contributes positively to New Zealand's economic future, what can be done to expand the already significant ties we have? Here's a five-point plan to be going on with. We should:

* Focus on the big picture of shared values and interests and not let ourselves get sidetracked on what continues to divide us. There is much to celebrate in the relationship and much also that can be expanded.

* Unite our efforts by ensuring that government agencies, business and other non-government organisations co-operate actively to ensure that all opportunities to do more together are taken up. The New Zealand United States Council, as a non-partisan organisation funded by business and the Government, was established largely for this purpose.

* Invest in the relationship by allocating resources to activities and projects in the US and New Zealand that deepen the sense of mutual value between the two countries. We already have an excellent example in the work of the Fulbright Foundation, which funds student and scholar exchanges in both directions.

* Keep our options open: New Zealand has every interest in the closest possible relationship with the US but other relationships, particularly in the Asian region, are also important not just in themselves but in terms of the value placed in our insights in the region by the US. Taking a leadership role in promoting private-sector development in Apec or being the first developed country to negotiate a free-trade agreement with China positions New Zealand as a player and keeps us in the room when key decisions are being made.

* Be confident. Engaging with the US need not imply the surrender of our national identity. Referring to the nuclear-free legislation, Mike Moore observed recently that the US was more likely to abolish the death penalty and outlaw guns before Kiwis change. US Ambassador Bill McCormick has said it would be useful for both countries to create a new future for the relationship; a future free from the echoes of the past and always looking forward.

We need to be able to move forward in dialogue confident that we are doing so in a way that reflects New Zealand values and interests.

When asked what it was that secured the World Cup hosting, several commentators have stressed the passion that New Zealanders have for the game. Passion is as useful in politics and business as it is in sport. Maybe if we are passionate about New Zealand's interest in a broad-based and dynamic relationship with the US we might just get it.

* Stephen Jacobi is executive director of the New Zealand United States Council.