Caught in a ripple effect from Sept 11

6 Sep, 2002 10:25 AM11 mins to read

By GEOFF CUMMING

The terror attacks on the United States have been blamed for everything, from a downturn in visitors to the Auckland Museum to a possible pay cut for our top rugby players.

So is it too big a stretch to blame September 11, and the American response, for the early election in New Zealand?

Helen Clark's offer of our crack SAS troops to help the United States to pursue Osama bin Laden was certainly a trigger for a dissent-ridden Alliance to tear itself apart and scupper any chance of the Coalition Government going the distance.

But, like many subsequent events which have been linked to that day, whether September 11 was cause, catalyst or scapegoat for the Alliance's unravelling is debatable.

One-off events in faraway places can have far-reaching consequences for New Zealand, from the assassination in Sarajevo of Archduke Ferdinand which triggered World War I to the 1987 sharemarket crash.

So, it was predicted, would the terrorist attacks on the symbols of American economic and military supremacy in New York and Washington.

A world economy already slowing down would be plunged into a deeper and longer-lasting recession. And New Zealand's foreign policy, anti-nuclear stance and contribution to regional defence would surely have to change as a vengeful United States moved to root out the seeds of terror in Asia and Indonesia.

But a year on, daily life in New Zealand seems scarcely different. The economy is ticking over. Air New Zealand is still flying. The All Blacks still contrive to lose against Australia at the last minute. And a Labour-led Government remains in power, albeit with unlikely new bedfellows.

Yet the attacks have changed lives in this insignificant island nation 14,400km away in many ways - some shadowy, some not yet apparent.

The impacts range from the economic ripple effects which we rode out with unexpected ease, to a heightened security awareness which inconveniences international travellers, and the illegal detention of refugees.

Our world is less free, our inter-connectedness to world affairs more obvious.

Ask Craig McMillan, so affected by the fatal bomb blast linked to al Qaeda which ended the New Zealand cricket team's tour of Pakistan that he, with fellow internationals Matt Horne and Brooke Walker, is sitting out this month's ICC knockout tournament in Sri Lanka.

Ask Mohammad Saffi. Security checks ordered after the attacks revealed that the Air New Zealand employee was a stepson of Saddam Hussein but cleared him of posing any threat. But when Saffi flew to the United States in early-July to renew his flight certificate, he was hauled in and questioned for four days.

Or ask Abdul Maasud and Mohammed Ismail, the Afghan taxi drivers who faced fraud charges relating to their claims for refugee status. Their court appearance on September 27 prompted a national security scare and they were held in isolation for a week until five months later charges against the pair were quietly dropped.

Wellington political scientist Jon Johansson is one of many academics who believes the attack on mainland America produced the most serious global "ripple" since the Cuban missile crisis.

It left policymakers facing a different set of challenges, says Johansson, who teaches US politics at Victoria University.

Helen Clark quickly seized the opportunity to repair the rift in relations with the US. This long-term critic of US foreign policy grasped the public mood and offered SAS troops within days. The offer prompted a rapid warming in relations.

At Apec in October, Clark met Bush informally and American officials told her the US would look favourably at economic links with New Zealand.

The election-year payback came in March, with her 50-minute White House meeting with Bush and the "very, very, very close friends" tag from Secretary of State Colin Powell. Political observers believe the offer of support stemmed from genuine sympathy rather than analysis of the risks and opportunities. She could not have foreseen the impact on her junior Coalition partner.

The Alliance MPs' unanimous support, in a Parliamentary vote on October 3, for the war on terrorism and New Zealand's offer of the SAS exposed the extent of the rift between the party's left-wing core and the pragmatic Anderton.

As Stephen Levine, head of political science at Victoria University, noted in July: "The real reason we are having an early election is that the members of the Alliance hated each other more than they loved governing the country.

"But what led the Alliance to break up, apart from personality clashes, was that some members of the Alliance - like the Greens - found the concept of New Zealand fighting side-by-side with the US in Afghanistan utterly repugnant."

September 11 accentuated trends that were happening anyway - the Alliance's disintegration, Air New Zealand's nosedive, the global economic downturn and renewed international impetus for free trade.

In the weeks that followed the attacks, commentators speculated that an international coalition against terror might broaden its sphere of interest to create a new world order.

Helen Clark already had the nod from US officials at Apec of support for bilateral trade.

But 12 months on, New Zealand has gained nothing concrete from trade liberalisation. "If anything, the trend has been away from that," says international affairs commentator Terence O'Brien.

In March, New Zealand steel exports worth $60 million to the US were hit by new tariff duties, ranging from 8 to 30 per cent, to prop up struggling US steelmakers. Last month 100 jobs were cut at the Glenbrook steel mill.

In April, the House of Representatives approved a US$180 billion ($386 billion) farm subsidy programme, providing new payments for commodities including milk, wool and grain.

Phil Lewin, a former head of the New Zealand embassy's trade division in Washington, says such protectionist moves represent "business as usual" in US domestic affairs.

But longer term, it's still possible that the terror attacks will prove a watershed for free trade, says Lewin, who spent four years in Washington during the Clinton presidency.

In July, the House of Representatives passed a bill giving the Bush Administration power to fast-track trade deals in the face of domestic opposition. Passing of the bill was expected to help bilateral negotiations and ease progress in the Doha round.

And the latest US proposals to liberalise agricultural trade under Doha are further cause for encouragement.

Lewin says September 11 has had "profound but largely intangible effects on the global economy and New Zealand's consciousness of its place in the global community".

"In the broadest sense I think [it] has had a unifying effect on world order and was the catalyst for the successful launch of the Doha round.

"Western economies and those of similar value systems recognised the need to get together and watch each other's backs."

The attacks have yet to point to any significant shifts in defence and foreign policy but have brought home that remoteness is no protection and that our contribution to regional security must increase.

There is heightened concern about refugees and asylum seekers trying to reach New Zealand from Indonesia, which the US sees as a potential breeding ground for terrorist cells.

Long before September 11, New Zealand was seen as a soft target for people smuggling, and for bioterrorism which could wreck the economy. The attacks added urgency to moves to beef-up border protection.

An Immigration Service policy change on September 19 meant that almost all asylum seekers were detained on arrival, either in jail or at the Mangere resettlement centre.

The High Court ruled in June that the policy breached the UN Convention for Refugees, under which asylum seekers can only be held if there is a "real risk" they will abscond or offend. The UN human rights committee has also expressed concern about the policy.

But the Government has appealed the ruling and the Immigration Service has meanwhile issued a new policy allowing for detention "where the identity of the person is unknown and, therefore, the real risks of offending or absconding cannot be ascertained at the time".

The Government will spend an extra $30 million over three years on border security and intelligence gathering. The measures include screening international passengers, better tracking of cargo, a police presence at the six major airports, increased funding for intelligence services and a dedicated police terrorism unit.

Under the Terrorism Bill before Parliament, police will gain increased powers to search computers, requiring users to reveal passwords. The bill had reached select-committee stage before the attacks.

After, clauses were added to freeze the assets of terrorists and their supporters, define terrorism and make recruitment a crime.

How real is the threat? In January, more than $1 million was spent on security at the New Zealand Open golf tournament in Paraparaumu to thwart any possible terrorist attack on Tiger Woods.

The huge operation followed delivery of a cyanide-laced letter to the US embassy in Wellington in December. Police said the letter contained enough cyanide to kill several people.

Perhaps, above all, September 11 has eroded our capacity to be surprised. In the weeks that followed the attacks, as anthrax-laced mail claimed lives in the US, more than 40 anthrax scares in New Zealand closed postal sorting centres and affected mail distribution. NZ Post said the disruption contributed to a fall in its half-year profit.

But then, September 11 has proved a convenient whipping boy for events and New Zealand is no exception. Auckland Museum cited the terrorist attacks and a decline in Japanese tourists in excusing a 20 per cent drop in visitors in November.

Only last month, Sir John Anderson, head of the National Bank which sponsors New Zealand Cricket, warned that the declining sports sponsorship market since the attacks could lead to pay cuts and less income.

His memo to the New Zealand Rugby Union overlooked that big firms were easing out of sponsorship well before the Twin Towers fell.

There were, of course, direct economic impacts on NZ. In the week following the attacks, $3.7 billion was wiped from the value of the sharemarket as the Top 40 index plunged to its lowest level in three years. The worst day came on the Monday before Wall St reopened, when $2 billion was lost and the index fell 4.6 per cent.

The slump delayed at least one float on the local exchange, that of Briscoe Group.

For Air New Zealand, the attacks destroyed any chance that it could survive the Ansett debacle without a Government bailout. Its shares nosedived. But by November, most other New Zealand stocks had regained lost ground.

Business confidence, which flows into investment and business expansion decisions and employment growth, was initially undermined. The Institute of Economic Research's quarterly survey, taken days after the event, found pessimism about our economic outlook had slumped almost to the depths plumbed after the Gulf War and the Asian crisis.

But how much was attributable to September 11 and how much to previous events, such as dotcom and falling commodity prices, which had dragged the world economy into its biggest slowdown since the early 1980s?

New Zealand was happily out of step with this slowdown, still enjoying the flow-on effects of a year-long boom in export prices. As a further boost to consumer spending, the Reserve Bank cut interest rates.

The economic sectors expected to suffer most were tourism and aviation. The number of Japanese visitors in November was half that of the previous November and American visitors fell by 11 per cent.

The industry braced itself to lose all its expected 10 per cent growth But the hit was nowhere near as bad as feared.

Domestic travel - the mainstay of the industry - stayed strong, as New Zealanders chose to holiday at home. Overseas, we began to benefit from perceptions, particularly in Europe and Asia, that we were a safe destination. "We ended up over the summer season with about 4 per cent more visitors than even our best year," says Tourism NZ chief executive George Hickton.

By March, Reserve Bank Governor Don Brash was taking back the interest rate cuts, with one eye on the booming Auckland housing market. The economy was growing ahead of projections and the New Zealand dollar was climbing.

Paul Dyer, head of investment strategy at AMP Henderson, says: "You could actually argue that the response to September 11 deferred the world going into recession. "

New Zealand's economy was also helped by an immigration boom but there is little evidence that September 11 had any effect on these figures.

It is when we board a plane that we see the legacy of the attacks in microcosm. Although reporting times vary, passengers expect more rigorous security and Government and airlines have imposed security levies. But most of us have put fear of flying behind us.

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