Risks to New Zealand's security as global outlooks change, region becomes 'central theatre', new foreign ministry report says

"The future looks grim."

That's the standout assessment in a new document released by the Ministry of Foreign Affairs and Trade (MFAT), which finds a shift in the Pacific's strategic balance and competition in the region - primarily driven by China's more assertive foreign policy - poses a risk to New Zealand's security.

The ministry said the globe is experiencing "heightened strategic tensions and considerable levels of disruption and risk", with New Zealand just as affected as others due to its interconnectedness, the changing nature of the Pacific and the evolution of new threats.

It said the period to 2035 "will likely be challenging for New Zealand and the Pacific region".

Conflict in the wider Indo-Pacific region "could occur" and security considerations "already dominate" some countries' thinking, the report says.

This changing geopolitical landscape could have severe implications for New Zealand, with less opportunity to focus on economic priorities and a requirement to spend more energy and resources on defence and security imperatives.

"With the Chinese government's assertive foreign policy, the Democratic People's Republic of Korea's nuclear capability and aggressive rhetoric and increasing geopolitical engagement across the Pacific, the wider Indo-Pacific region is now the central theatre for increasing strategic competition." 

While New Zealand may find new opportunities, "in the short to medium term, the future looks grim" and New Zealand will "find it more difficult to advance some of the issues it cares deeply about".

These new assessments are found in MFAT's Navigating a shifting world document released this week, intended to help build the public's understanding of the changing global strategic environment, emerging issues and how New Zealand intends to respond to them.

It looks at the period between now and 2035, which MFAT said will be a "more uncertain and complex time for New Zealand. 

"New Zealand will need to navigate a wider array of global threats and increased risks. The ministry needs to understand where the challenges and opportunities lie for New Zealand and advise the Government accordingly."

The report, which was dropped unceremoniously on MFAT's website, follows Prime Minister Chris Hipkins' trip to China and a major foreign policy speech in Wellington last week

Hipkins is currently in Europe, where he has spent the past two days focused on New Zealand's new Free Trade Agreement (FTA) with the EU but is now shifting his mind to the NATO Leaders' summit in Lithuania.

Here, he wants to speak to other world leaders about "matters of global importance", including the war in Ukraine. New Zealand isn't a member of the North Atlantic alliance but has a longstanding partnership with it, which has become tighter in recent years as the West considers how to deal with Russia as well as China's growing assertiveness.

These geostrategic issues form the backdrop to three "big shifts" happening in the international order, according to the MFAT report. These are:

  • A shift from rules to power, meaning a shift to a "multipolar world" where international rules are "more contested" and the "relative power between states assumes a greater role in shaping international affairs"
  • A shift from economics to security, whereby economic relationships are "reassessed in light of the increased military competition in a more securitised and stable world"
  • A shift from efficiency to resilience, reflecting countries focusing on building greater resilience and addressing social and sustainability issues
"The wider Indo-Pacific region is now the central theatre for increasing strategic competition."
"The wider Indo-Pacific region is now the central theatre for increasing strategic competition." Photo credit: Getty Images.

The lay of the land

New Zealand is described in MFAT's report as a "country of contrasts". Aotearoa is both Pacific and seen as "Western", it's independent but lacks hard power, it's principled and pragmatic, it's geographically distant but also well-connected.

This final point, our interconnectedness - including through our range of trade agreements - means New Zealand is not immune to global trends and "an increasingly complex international environment". 

The report says this means the period to 2035 will be "challenging" for New Zealand and the Pacific, which is "no longer strategically benign".

"Many of the assumptions in relation to global and regional affairs that have underpinned New Zealand's foreign policy for a generation or more are coming under real and sustained pressure.

"The appeal of liberal democracy has waned in many countries and global cooperation and multilateral solutions on issues of importance to New Zealand cannot be taken for granted. Most recently, there has been a lack of leadership on key global issues, including the early response to COVID-19 and action to limit global warming to 1.5C."

Trade liberalisation and international cooperation - two things New Zealand relies on and promotes heavily - can no longer be depended upon, the report says.

Security issues, including in the Indo-Pacific, mean the international system has reduced capacity to tackle "more existential challenges", like climate change, which are already "major stressors for Pacific countries".

Economic pressures, arising from Russia's invasion of Ukraine and COVID-19, are also hitting countries - while the pace and scale of technological change will have "both positive and negative disruptive effects". The rise in populism and distrust in institutions is fuelled by mis- and disinformation, which may mean leaders prioritise domestic politics and countries lack the capacity to respond to other issues.

The big shifts

These developments are the backdrop to the three "big shifts" that will affect New Zealand.

With regard to the shift from rules to power, the report says the world is transitioning to a "multipolar" order with a number of competing powers, some of which don't see their interests reflected in the current international set-up.

"Certain countries are increasingly exercising hard power to test the limits of the rules-based international system, at the expense of rules that serve smaller countries."

The clearest example of this, the report identifies, is Russia's invasion of Ukraine. New Zealand has condemned the action of the UN Security Council member and former Prime Minister Jacinda Ardern describing it as "an affront" to the multilateral institutions New Zealand relies on.

"The shift away from rules towards relative power has been underlined by Russia's invasion," the report says.

"While there has been strong international condemnation of its actions, it has also reinvigorated hard power dynamics, such as nuclear deterrence and increased defence spending."

The report also highlights Beijing as "more assertively" pursuing diplomatic, trade, security and development initiatives aimed at "enhancing China's influence, shaping international approaches, challenging existing international rules and norms, and promoting China's vision in these areas".

Other issues "challenging the international agenda" include an "increasingly nuclear capable" North Korea, the "negative trajectory" of the Iran nuclear deal, and countries' interests in the Southern Ocean and Antarctica.

"Together, these trends are generating a growing sense of disruption and uncertainty in international affairs and it is becoming clear that they are limiting the scope for cooperation on a range of international issues. And while multilateral institutions will remain vital, the vision and ambition for these institutions are shifting."

This is "deeply unsettling" for countries relying on the current order, the report says, adding it could lead to "particular risks" for small liberal democracies like New Zealand.

Given New Zealand has benefited from the current system and has interests in international trade, oceans and disarmament, the country "has a strong stake in fighting to defend and maintain" the rules-based order.

Foreign Affairs Minister Nanaia Mahuta.
Foreign Affairs Minister Nanaia Mahuta.

But as this happens, countries are needing to spend more time thinking about their security and are reassessing the exposure that comes with trade relationships, the report says.

In the Indo-Pacific, the report says there has been a "tilt towards prioritising security considerations". 

"Countries in the region are finding it more and more challenging to both protect their economic relationships from wider foreign policy concerns and balance economic imperatives with critical political and security considerations."

China is the "primary driver of strategic competition", the report finds, leading to "increased regional tensions" - such as in the South China Sea and Taiwan Strait - and shifts in foreign and defence policy in the region.

According to the report, the changes may undermine current groupings in the region or lead to new ones forming.

"The risk of a shift in the strategic balance in the Pacific is now a present and serious concern in the region. This presents a risk to Pacific countries' ability to chart their own future, to the stability of the region, and to New Zealand's own security. 

"Pacific countries and regional organisations are facing pressures and feeling the impacts, especially in the face of a more assertive China. New Zealand has a strong interest in supporting Pacific priorities, including the Pacific's ability to assert and pursue its interests." 

The report says this means New Zealand faces a "less stable wider Indo-Pacific region where inter-state conflict could occur and security considerations already dominate key partners' thinking".

"New Zealand may face situations where terms of trade are impacted as importers and exporters need to absorb market disturbances and/or seek less lucrative but more stable markets. 

"As geopolitical and security considerations loom larger, New Zealand will be less able to prioritise economic priorities and will likely need to devote more energy and resources to defence and security imperatives, including to shore up economic resilience."

Given China's assertiveness and human rights crackdowns, questions have been raised over whether New Zealand should rely so heavily on it for trade. China is New Zealand's largest trading partner. 

The Prime Minister focused much of his recent trip to China on highlighting that New Zealand is open for business, but he also raised human rights - not to the degree some wanted - and then last week said in a speech that New Zealand shouldn't put all its eggs in one basket.

The report says improving the diversification of trade relationships as the international focus shifts to economic reliance over economic productivity could be a challenge for New Zealand.

Even with a robust strategy, constrained access for key exports to the EU and the US means "a significant proportion of New Zealand's exports will continue to go to China over the next decade".

The US economic influence and competitiveness may also decline if it doesn't participate in existing plurilateral trade arrangements in the Indo-Pacific, the report says, a potential nod to the United States not being part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

"While the US's newly established Indo-Pacific Economic Framework initiative is a welcome addition to its Indo-Pacific regional engagement, limitations of scope (e.g. market access is not included in the Framework) mean it will not fully bridge this gap."

Newer FTAs have had a wider agenda, including standards on sustainability, gender and animal welfare, the report says.

"This broadening of the trade agenda to work more deliberately to deliver for a wider proportion of society potentially reflects a paradigm shift and a refreshed social strategy that will increasingly shape the direction of international trade policy."

Given New Zealand has an "innovative trade policy", a strong set of FTAs and is at the "forefront" of the international trade agenda, New Zealand is "well positioned to accommodate and even lead some of these economic shifts and, in turn, promote more constructive and future-oriented trade".

What NZ needs to do

Despite the challenges expected between now and 2035, the ministry believes there are opportunities for success.

As well as being clear on its foreign policy interests, New Zealand should be:

  • Clear-eyed on risk and trade-offs - Te Mātai Huarere: Where trade-offs are needed, they should be based on clear-eyed assessments of what is at stake, the risks involved, the second and third-order effects, and the likely best overall responses. 
  • Tactical and strategic - Ngā Nuka me ngā Rautaki: Given that risks - especially now - are not individual and linear but systemic and compounding, one eye must stay on the issue at hand and another on the larger context.
  • Rigorous on what works - Te aronui ki ngā kaupapa matua: The ministry will need to maximise the impacts of the resources and effort we have available. The scope for discretionary effort will be slight

The report says the ministry believes there will have to be a "greater foreign policy effort" to defend New Zealand's interests.

"There are opportunities for positive gains in this new strategic context but the ministry is facing more obstacles as we seek to drive progress on things that matter. At times it might be difficult to maintain the status quo or prevent moving backwards."