Foreign Affairs

NZ joins US-led Covid coalition

With tensions between the US and China exacerbated by Covid-19, New Zealand’s decision to join an American-led alliance could raise eyebrows within Beijing 

New Zealand has quietly taken up a place within a US-led alliance working on a joint response to the coronavirus pandemic, with some suggesting the country’s role within the coalition may attract the ire of China.

This week, Reuters reported on efforts from the United States to restructure global supply chains, which have often relied on Chinese manufacturing, in the wake of the Covid-19 pandemic.

The news outlet quoted an American official as saying the US was pushing to create a multilateral alliance of “trusted partners”, dubbed the “Economic Prosperity Network”, which would develop common standards on areas ranging from digital business, energy and infrastructure to trade, education and commerce.

The report cited comments made to media on April 29 by US Secretary of State Mike Pompeo about work between the US, Australia, India, Japan, New Zealand, South Korea and Vietnam to “move the global economy forward” and “restructure...supply chains to prevent something like this [trade disruption] from ever happening again”.

Sources spoken to by Newsroom confirmed the existence of the alliance but said the Reuters report over-emphasised the trade-related components of discussions, which also covered health initiatives, development and aid, and other areas of importance to the Covid-19 response.

One source said senior representatives from the various nations had been holding regular discussions for six to eight weeks as the pandemic escalated to discuss the situation within their own borders and areas of potential collaboration.

The group’s membership had been formally set down, but there had been no official name given to the grouping despite Pompeo’s use of the Economic Prosperity Network.

The revival of the Quad alliance under Donald Trump has been seen by some as a means of containing China and its president Xi Jinping - could New Zealand now be part of a "Quad Plus"? Photo: Getty Images.

 Another moniker for the coalition has been “the Quad Plus”, a nod to the established alliance between the US, Japan, Australia and India which has been seen by some as a bid to contain China’s influence.

The source said the decision to include New Zealand in talks was based not on any predetermined agenda, but which countries could speak freely, share valuable information and be trusted to participate constructively.

Saunders Unsworth partner and former foreign affairs official Charles Finny told Newsroom there was logic to diversifying supply chains from a business perspective, but there also appeared to be “anti-China protectionist sentiment” driving the group’s creation.

“If we are knowingly involved in something like this and it’s more than a US wish list, then I would think there’d be at least a raised eyebrow in Beijing.”

Finny said a number of companies were already moving their manufacturing away from China to other countries in South East Asia. There was also a national security and commercial case to increase domestic production of some essential products, such as personal protective equipment and pharmaceutical products.

However, China would still need to remain one of New Zealand’s major trading partners in the years ahead, he said.

An analysis of the new grouping by the University of Western Australia’s Perth USAsia Centre described New Zealand as the most surprising addition to the Quad.

“Its inclusion is noteworthy because, despite being one of the Five Eyes nations, Wellington has generally been reluctant to be perceived as targeting China in any way.”

TPP 2.0?

The US alliance bears at least a superficial resemblance to the Trans Pacific Partnership trade deal which Trump withdrew the US from shortly after taking office -  a point made in a brief piece by the conservative US magazine National Review, which praised the idea but wryly noted: “A collection of partners on both sides of the Pacific Ocean who agree on a lot of the rules of trade and contain China’s influence makes a lot of sense. I could swear I’ve heard of that idea before, though…”

Finny said the decision to withdraw from the TPP deal was “one of the craziest things the Trump administration ever did”, given it aligned with many of the President’s goals in containing China and was strikingly similar to recent US trade deals with South Korea, Canada and Mexico. 

“There's a good chance that an economic historian writing in 50 years’ time will be saying [of the TPP withdrawal], ‘This just doesn't make sense’.”

The Economic Prosperity Network seemed an attempt to replicate the TPP, but on a bilateral basis, he said.

Asked about New Zealand’s discussions with the US and any role it might play in the Economic Prosperity Network, a spokesman for Trade and Export Growth Minister David Parker said New Zealand was in discussion with a number of countries “about the maintenance of trade during and [after] Covid-19”.

“As far as I am aware a proposal for an ‘economic prosperity network’ has not been raised in our discussions and therefore I am not in a position to comment on it,” the spokesman said.

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