The Government is concerned that hostile foreign powers, likely our top trading partner China, might seek to use trade as a weapon against New Zealand by blocking our exports - leaving billions of dollars of trade in jeopardy.
The threat runs deeper than just trade, with officials making sure that supply chains and communications cannot be weaponised against New Zealand in a wider diplomatic, economic or security spat.
The Government, in particular Trade Minister Damien O’Connor, has been working to bolster resilience to “economic coercion” - when a country tries to use trade as weapon to achieve diplomatic or security goals.
China has a record of using trade as a weapon either in an overt or covert sense.
It blocked lobster and wine exports from Australia, apparently in retaliation to the government’s harder line on Chinese interference.
The Australian Government appears interested in New Zealand’s efforts to bolster its resilience. Documents released to the Herald under the Official Information Act show Kiwi officials briefed the Australian Government around October on New Zealand’s “domestic and international efforts to build resilience to economic coercion”.
The full documents were withheld by the Ministry of Foreign Affairs and Trade - and did not mention China by name - but extracts from three documents were released. One was notes relating to a briefing given to Australia.
The document said the New Zealand Government told Australia that “[w]e are open to a discussion regarding strengthening rules in the WTO [World Trade Organisation]”, in relation to economic coercion.
“New Zealand supports taking forward research, data gathering and analytical work on economic coercion […] and we would like to work with Australia on this,” the briefing said.
The work on economic coercion was part of the Government’s wider work on countering foreign interference, where the Mfat, the security agencies, and the Department of Prime Minister and Cabinet come together to make New Zealand more resilient.
O’Connor told the Herald New Zealand was “aware of that kind of behaviour [economic coercion] internationally, so we are working with like minded countries to make sure we are not overexposed”.
“Looking at our international connections, communications systems - usual stuff,” O’Connor said.
“What Covid has done is woken us up to the fragility of some of those supply chains and the importance of communication and working with like minded countries,” he said.
O’Connor would not be drawn on whether New Zealand had a problem because its trade was not as diversified as it should be.
“We are building diversified free trade opportunities through free trade agreements. Like the rest of the world, we have some big partners, some big players and trade opportunities - we just need to be mindful that we don’t end up with all the eggs in one basket,” he said.
The current Government has inked trade deals with the UK and the EU. It also signed up to the CPTPP, an agreement largely negotiated by the previous government.
Some warn New Zealand’s trade is already overexposed to one country with a history of using trade as a weapon: China.
China is our top trading partner, and took $21.39b of our exports in 2022. New Zealand also imported $18.93b that year.
China expert Professor Anne-Marie Brady said China had used economic coercion in Australia and Norway - and even in New Zealand.
“We’ve already have had examples of China using economic coercion against us: around January 2021 when China blocked frozen fish exports from New Zealand,” Brady said.
Brady said New Zealand had long talked about diversifying its trade.
“Our Government has been worried about this for a long time - not just the Ardern government.
“The diversification strategy was being talked about in the John Key-era. I first heard about it in 2014,” Brady said.
“It’s just common sense anyway - even if you didn’t have a partner that had a tendency to use trade as a weapon. That was the lesson that we were supposed to have learned when the UK went into the European Community [the forerunner to the European Union],” Brady said.
Former intelligence and defence policy analyst Paul Buchanan warned New Zealand was more vulnerable than Australia to China weaponising trade.
He noted that when using economic coercion with Australia, China only blocked things like wine and lobster.
“They did not go after strategic minerals which they depend on. They need Australian minerals to continue their growth to great power status,” he said.
Buchanan said New Zealand had no equivalent of iron ore that would be safe from being blocked. Most of New Zealand’s exports are “creature comforts for their rising middle class” which can be sourced from other countries.
“New Zealand does not occupy the position that Australia has when it comes to the relationship with the People’s Republic of China,” he said.
National’s foreign affairs spokesman Gerry Brownlee said “the vulnerability that everyone has always pointed to is China”, but noted that many other countries had China as a top trading partner.
“Obviously New Zealand should always seek to have as broad a range of trading opportunities as possible,” he said.
Briefings on the programme, released to the Herald were heavily redacted. Other parts of the foreign interference work programme have been previously reported by the Herald, including an attempt to tighten up the Local Government Official Information and Meetings Act to prevent councils form handing over sensitive national security information.
“Enhancing the resilience of our trade, including through diversification, is a priority under the Government’s foreign interference workplan. It is a key area under the Mfat and NZTE co-led Trade Recovery Strategy, and is consistent with the long-established direction of our trade policy efforts,” the briefing said.
O’Connor’s paper said that while it was for “businesses to decide where to invest and trade”, the Government was looking at “building coalitions and sharing best practice, and ensuring strong relationships with our major partners”.
It said he would report back to Cabinet outlining a work programme for this year to “advance resilience to economic coercion”.
Mfat is also looking at other potential problems as part of its foreign interference work.
A letter from Mfat to the Herald said the programme included “developing options to strengthen New Zealand’s export controls regime, such as legislation incorporating controls on intangible technology transfers, as part of wider efforts to protect New Zealand’s sensitive technologies”.
The issue could soon come to a head.
The United States has warned that China is close to providing military aid to Russia for its illegal invasion of Ukraine.
International media have reported that the United States is looking to sanction China if that eventuates - and it is looking for allies to sanction China too.
Although not a formal ally of the United States, New Zealand has sanctioned Russians over the war and could face pressure to support those sanctions.
The New Zealand Defence force has a budget shortfall of $130 million.