Hon David Parker: Speech to Building the Southern Link Conference

Sir Don McKinnon, Chair of the NZ China Council and Patron of the Latin America Business Council

Ambassador of Chile HE Rodrigo Espinosa

Ambassador Wu Xi of the People’s Republic of China

Consul General of the People’s Republic of China, Mr Ruan Ping

Former Trade Minister Hon. Tim Groser

Distinguished Guests from China, Argentina and Chile and other countries

Ladies and Gentlemen,

Kia Ora Koutou, Buenos Dias, Ni Hao, Konichi wa, Hola, Ola

I am very pleased to be here this morning, and to have the opportunity to address this important conference on the Southern Link; the idea of connecting Asia and South America via New Zealand.

I’d like to set out the Coalition Government’s perspective on how the idea of a Southern Link fits into our wider strategy of increasing regional economic integration. We like to do this in ways that build general prosperity and improve the welfare of our people. I’ll also offer some thoughts on what implementation could look like.

New Zealand is a developed, trading nation geographically distant from its markets. For much of our history, our isolated geography was seen as a disadvantage. “The tyranny of distance” as Split Enz put it.  Now this is diminishing, as long haul jet aircraft technology improves links and reduces tourists’ perceptions of distance.

Our location is increasingly an advantage.  It means we can manage pests and diseases at the border in a way that few other countries can. Yet Asia and South America are now within direct flights from New Zealand. The growth of Asia has meant that for the first time in history, our location is adjacent to the fastest growing markets on the planet. Geography that was once a trading disadvantage, is now a strategic opportunity for our diversified and regionally integrated economy.

Currently 53% of New Zealand exports go to Asia and around 13% to the Americas. These rely on trans-Pacific shipping, and, for perishable goods and tourism, efficient air transport. Both forms of transport are critical to our economic well-being.  Continuing to improve the connections that allow New Zealanders and our trading partners to engage across the world helps us all.

Some people here today may recall that New Zealand first discussed the idea of greater Asia-South America connectivity in FEALAC (Forum of East Asia-Latin America Cooperation) and in APEC (Asia Pacific Economic Cooperation) in the 1990s. This is now an idea that’s time has come, for two reasons.

Firstly, trading nations in all parts of the world are seeking to access the growing economies of Asia.

Secondly, there is renewed effort to work on regional integration as a way to shore up options at a time when the international trading system is under pressure.

Both South America and Asia understand that the current global trading system is struggling. We can no longer assume that a trend towards global market openness will continue and that the rule-based trading system will always strengthen and expand. We need to find the best ways to, as President Pinera put it, “navigate the world’s tempestuous waters.”

In New Zealand, we are focused on building our resilience through diversifying our trading relationships, engaging fully in the regional economy and supporting and reforming the institutions of global economic architecture, such as the WTO, that are critical to New Zealand.

As a counterweight to scepticism about global trade it is important that international trade and development delivers genuine sustainable benefits to citizens. That has been a focus of our “Trade for All” and the revised CPTPP. We are currently negotiating FTAs with the Pacific Alliance grouping in South America, with the EU and an upgrade to our FTA with China. We continue to push forward with RCEP, all with this in mind.

We are aware of wider trends and actively seeking ways to support innovation.

Cross border e-commerce now accounts for 8% of all retail spending in New Zealand. All indications are that global e-commerce will continue to increase.

Last month we announced negotiations with Singapore and Chile towards a new and pathfinding international agreement on digital trade and the digital economy. We want to establish new trade rules and best practices for the digital era.

These talks are an opportunity for New Zealand, with South American and Asian partners, to shape fair and practical international rules for the digital economy so that our businesses and consumers can take advantage of emerging digital trade opportunities.

This initiative is consistent with our active support for the work of APEC. We are very supportive of Chile’s priorities in their hosting this year, which will continue to have an impact when New Zealand hosts APEC in 2021.

 China

New Zealand and China enjoy a strong relationship at the highest political level.

I travelled to China in May to attend the 2nd Belt and Road Forum, and to lead a delegation of senior New Zealand business people. The Coalition Government recognises that the BRI is important to China and that it aspires to meet regional needs in some areas.

The question uppermost in my mind prior to the Forum, and the question also posed by my colleagues was how the BRI, alongside the many other regional initiatives New Zealand is engaged in, could contribute to New Zealand’s sustainable and inclusive economic development.

As an independent and developed economy, with an established plan for building and funding sustainable national infrastructure, we were not seeking the hard infrastructure that has been the focus of China’s BRI in developing countries.

New Zealand’s priorities under the BRI could include best practise business regulation as well as supporting the sustainability and transparency that we see as important for economic resilience and long term development.

We welcomed President Xi’s speech to this year’s Belt and Road Forum when he committed to address international concerns around transparency, debt and environmental sustainability. A BRI geared to supporting sustainable infrastructure in countries that require it, but which also values wider regional input and participation in ensuring open, competitive and transparent business environments, would be of genuine value in shaping regional development and commerce.

South America

Our relations with South America are linked to our relations with Asia.  We are sometimes competitors for customers but we share common interests in trade policy, open market access, quarantine systems and stable business environments.  Key institutions such as APEC and agreements like the CPTPP bring us together.  So does investment between our economies. International education also brings our young people together and creates enduring relationships which benefit our societies.

New Zealand’s current business relations in South America were built by pioneers, equipped with ambition and imagination, who have established relationships. New Zealanders have always been interested in South America, but as air services expand, we are visiting each other in growing numbers.  There are now direct flights in contast to my first visit to South America when I was much younger, which included several stops including – fortunately – Easter Island. Our political and cultural relationships are deepening, and high quality economic agreements are being developed. Our trade volumes with South America are modest, but they are growing.

South Americans are also becoming more interested in Asia, and New Zealand is well placed to be a channel for that engagement.

New Zealand is positioned in what the aviation sector term a “funnel”, meaning that we are positioned as a natural collection point for passengers and airfreight from East and South East Asia, and Eastern Australia, to move them on to South America, and vice versa. Flight times on the routes from mainland Asia to western South America through New Zealand are less than many flight times transiting through Europe or the USA.

Since the introduction of direct Air New Zealand flights to Buenos Aires in 2015, the numbers of Argentinian tourists visiting New Zealand from Argentina has increased five-fold [to 22,368 visitors in 2018].

LATAM services are also providing important direct links between Santiago and Auckland, and onward to Australia and Asia through code-sharing, further increasing cross-Pacific connectivity.

In our discussions with South American governments we know that they are seeking to diversify their trade and to build domestic incomes and productivity. Patterns of trade are changing. In 2017, 20% of Latin America and Caribbean exports went to Asia, up by 18% from the year before. This diversification from traditional intra-Americas trade and investment builds the resilience of Latin America.

Southern Hub

For our government, we recognise that this hub concept and effective regional integration is underpinned by strong regional institutions and our strong bilateral relationships.

New Zealand has invested a great deal in our relationships on both sides of the Pacific.  We are well connected to the large economies of Asia, to Japan, China, South Korea and the countries of ASEAN, among others, as well as to the western and southern countries of South America critical to the Southern Hub: Chile, Argentina, and Peru.

As new South America and Asia partnerships have emerged, New Zealand’s geographical position at the mid-point between two important and developing regions offers a distinct advantage to all parties.

This brings us back to the focus of this conference. What do we need the Southern hub to do?

At its simplest level, a hub should facilitate seamless and convenient exchange of goods and travel for people between the eastern and western sides of the Pacific.

In this sense, New Zealand offers a clear alternative to crowded Northern hemisphere airports.

Hubbing through New Zealand is efficient for the Asia Pacific region. Issues that need to be resolved politically can be addressed directly by engaged and nimble governments.

A growing New Zealand aviation hub could support growing tourism between Asia and South America; further develop services for those travelling between these regions; and increase the onward travel options available to all travellers.

Increased air services bring with them other possibilities.  Measured by value, our major airports are already some of our most significant cargo ports.  Air freight delivers high value, time sensitive products around the world. Increased flight capacity and frequency would benefit many exporters, including those from our regions.

Hubbing promises to strengthen regional economic integration, productivity, and competitiveness, and deepen people to people connections – goals that are supported by all regional governments.

Many of the baseline requirements are already in place for the development of New Zealand as an aviation hub, but as plans are developed more measures could be considered.

New Zealand has liberal aviation policies welcoming of international carriers.

Christchurch and Auckland International Airports already offer safe and world class terminal services and runway infrastructure, in temperate climates, and have plans for further development.

There are also issues that will need to be further considered. Good communication with government will be important.

Companies will need to assess the flight slots required for flights on trans-Pacific routes at relevant airports, to enable efficient transport, stopovers, link services and air freight transit and management.

Requirements for facilities based on the requirements of transit passengers may need further study.

We are encouraged by the enthusiasm of various countries and companies in the region to improve their connectivity with New Zealand. Examples include Peru signing off on an Air Services Agreement with New Zealand last year; positive indications on improving access for Air New Zealand in China – underpinned by recent government to government dialogues in China.

There have been a host of new airlines starting services to New Zealand in recent years, such as Philippine Airlines, and with other airlines increasing their number of New Zealand flights, such as Thai Airways and Singapore Airlines.

In short though, the conditions seem ripe for further developing the Southern link concept.

The convergence of market demand, tourism growth, and a global thirst for new experiences. We also need to cooperate on technology to manage aviation emissions.

The regulatory, customs and other groundwork required for aviation services will be important to future shipping and e-commerce links.

I hope that I have conveyed today the Coalition government’s interest in the Southern Link concept and the value that we place on our relationships with our regional partners.

The businesses represented here today will no doubt be considering the opportunities presented by the Southern Link. Just as governments need to work together to create the conditions for you to access international opportunities, there are areas, such as this, where business and government can work together to develop new opportunities.

To the representatives of governments, this is a concept where New Zealand’s support for open markets, rules-based trading systems, and increasing regional integration provide clear mutual benefits.  We are firmly focused on the particular role that New Zealand can play linking two great regions. We think it would benefit us all.

Finally, to the New Zealand China Council – congratulations on this conference. I wish you well for your discussions today and look forward to hearing about the next steps.