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R 120708Z FEB 10
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 0354
INFO RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHBUL/AMEMBASSY KABUL 0023
RUEHBY/AMEMBASSY CANBERRA 0096
RUEHPB/AMEMBASSY PORT MORESBY 0019
RUEHSV/AMEMBASSY SUVA 0010
RUEHWL/AMEMBASSY WELLINGTON

C O N F I D E N T I A L SECTION 01 OF 06 WELLINGTON 000057 
 
SENSITIVE 
NOFORN 
SIPDIS 
 
E.O. 12958: DECL: 2020/02/12 
TAGS: MOPS MARR PGOV PREL ECON ETRD EFIN NZ FJ NH AS XU
AF 
SUBJECT: EAP/ANP Deputy Director Gets Read-Out on New Zealand 
Defense, Trade, Economy 
 
CLASSIFIED BY: Robert Clarke, DCM, Department of State, US Embassy 
Wellington; REASON: 1.4(B), (D) 
 
¶1.  (SBU) Summary.   During February 7-9 visit, Australia, New 
Zealand, and Pacific Island Affairs (EAP/ANP) Deputy Director 
Stephen Schwartz met with a number of academics and Government of 
New Zealand officials on a range of subjects, including New 
Zealand's economic situation, the Trans-Pacific Partnership (TPP), 
Pacific Island issues, non-proliferation, counterterrorism, and 
bilateral defense relations.  Ministry of Defence Deputy Secretary 
Brook Barrington said the New Zealand Government understands the 
U.S. military policy review was a big step and sees the outcome as 
positive.  In the event of a media inquiry, he urged coordination 
between the United States and New Zealand on a response.  Ministry 
of Foreign Affairs (MFAT) Pacific Island Affairs officials reviewed 
ongoing tensions with Fiji and do not foresee an easy or timely end 
to the Regional Assistance Mission for the Solomon Islands (RAMSI). 
MFAT trade officials emphasized New Zealand is gearing up for TPP 
discussion in Melbourne and hopes the meeting will be an 
opportunity to begin building an overarching framework for the 
agreement.  MFAT counterterrorism and non-proliferation officials 
also welcomed closer cooperation with the United States and 
expressed particular interest in partnering with the United States 
in conducting counterterrorism capacity building activities in 
South Asia, Southeast Asia, and the Pacific Island regions.  In a 
separate meeting, New Zealand Institute of Economic Research 
Principal Economist Shamubeel Eaqub said that New Zealand's economy 
is on the "cusp" of recovery but still very fragile.   During a 
briefing at the Centre for Strategic Studies: New Zealand, 
Professor Robert Ayson said New Zealand has a strong sense of the 
Pacific Island region as its "backyard" but lacks a sense of its 
role in Asia.  End summary. 
 
 
 
Military Policy Review - Need to Coordinate on Media Message 
 
--------------------------------------------- ---------------------- 
-------------- 
 
¶2.  (C) In a meeting with Ministry of Defence Deputy Secretary of 
Defence Policy and Planning Brook Barrington, EAP/ANP Deputy 
Director Stephen Schwartz emphasized that the U.S.  military policy 
review was a big step for the United States and expressed his hope 
that the results remains strictly between the two governments.  He 
also underscored that the substance of the review and possible 
follow on activities would be addressed during the upcoming visit 
of DAS Frankie Reed and DASD Robert Scher.  Barrington replied that 
the New Zealand Government understands that it has not been an easy 
process for the USG, and the end result is "a tribute to the 
commitment, perseverance, and good sense" of those involved.  He 
also emphasized that "no one on our side sees the results as 
anything but positive."  In addition, no one in the New Zealand 
Government is "enthusiastic" to see the results in the media. 
Barrington said that the New Zealand Government will not "front 
foot" the issue, but one or two journalists in New Zealand will 
likely raise the question.  He added that "we want to make sure our 
script and your script are the same" and urged the USG to work 
closely with his government to create a unitary response to be used 
in the event the issue is raised. 
 
 
 
Afghanistan 
 
--------------- 
 
¶3.  (C) Barrington said that the New Zealand Government views the 
provincial reconstruction team (PRT) in Bamyan as a clear success 
and is pleased New Zealand's Special Air Service (SAS) has remained 
reasonably busy there.  The challenge now is to manage the drawdown 
from Bamyan "in a way that will not diminish the good work done." 
He also emphasized that the New Zealand Government has signaled 
that there will be a shift in 2010 towards "civilianization" of New 
Zealand's contributions to Afghanistan.  "With a more secure 
environment, we need to now shift to building society," said 
Barrington, and the New Zealand Government believes this is in 
compliance with the McChrystal report.  He also confirmed that New 
Zealand will soon appoint an ambassador in Kabul. 
 
WELLINGTON 00000057  002 OF 006 
 
 
Other Defense Issues 
 
------------------------- 
 
¶4.  (C) Barrington noted that the Ministry of Defense will soon 
present a defense policy White Paper to the Cabinet Strategy 
Committee, which will emphasize the themes of increasing 
uncertainty and the decreasing ability of international 
institutions to deal with global issues.  One area of concern for 
New Zealand is the rise of China and whether that will have 
positive or negative implications.  Barrington added that he 
personally saw Chinese behavior in Copenhagen as "deeply 
troubling." The paper and ensuing discussion will help New Zealand 
shape their defence forces with appropriate characteristics and 
provide adequate funding to deal with issues on the horizon.  On 
the issue of Fiji, Barrington said that Bainimarama's Government is 
New Zealand's biggest political problem in the region.  "The longer 
that government is in power, the easier it is (for them) to justify 
their existence," said Barrington.  He said that New Zealand has 
suffered calculated attacks from the Fiji Government, more so than 
Australia, and the Fiji Government thinks such attacks serve a 
purpose.  Barrington added that he sees the Fiji's latest 
announcement to suspend pensions of anyone who opposes the 
Government as deeply troubling.  "This will only give Bainimarama 
more power to shut down dissent." Regarding Vanuatu, Barrington 
said New Zealand has some philosophical concerns about the rise and 
possible autonomy of the paramilitary forces.  Schwartz said the 
USG shared those concerns but was pleased to hear Vanuatu's prime 
minister say the previous week that his government fully intended 
to keep the Mobile Force as part of the police force. 
 
 
 
2010: Challenging Year for the Pacific Islands 
 
--------------------------------------------- ------------- 
 
¶5.  (C) Ministry of Foreign Affairs and Trade (MFAT) officials, 
Pacific Division Director John Adank and Deputy Director Ruth 
Nuttall said they appreciate the close cooperation with the United 
States in the region.  Adank said a bilateral visit to Papua New 
Guinea by Secretary Clinton would be viewed positively across the 
Pacific Island region.  New Zealand puts a "very high priority" on 
relations in the region, according to Adenk.  New Zealand officials 
also worry that 2010 could be a "perfect storm" of problems in the 
Pacific.  Tonga faces difficulties as it tries to pass electoral 
reforms.  Papua New Guinea may face a "meltdown issue" over 
liquefied natural gas.  Nuttall added that Solomon Islands will 
hold elections in mid-2010 and former PM Sogavare could return to 
power.  She said the Solomons would likely "disintegrate" without 
the safety and security provided by RAMSI and given this precarious 
state, New Zealand does not foresee an early or final exit of 
RAMSI.  Samoa is struggling to rebuild.  Adenk said that these, 
among other issues, cause New Zealand to advocate for robust U.S. 
engagement in the region. 
 
 
 
New Zealand's Recognized Seasonal Employer (RSE) Scheme a Regional 
Bright Spot 
 
--------------------------------------------- ---------------------- 
------------------------------------- 
 
¶6.  (C) On the issue of Vanuatu, Nuttall said that New Zealand 
relations had flagged a bit in recent years, but now New Zealand's 
Recognized Seasonal Employer (RSE) work scheme had revived the 
relationship and has been a great success.  Schwartz noted that 60% 
of the passengers on his flight from Port Vila to Auckland were RSE 
laborers.  (Note: New Zealand's RSE scheme allows workers from 
certain developing countries, mostly Pacific Island nations, to 
work temporarily in New Zealand's horticulture and viticulture 
industries.  The program is also designed as a means to provide aid 
to designated developing countries.  The onus is on the developing 
nation to ensure that participants are trained and qualified for 
the program.  End note.)  Nuttal said that the RSE program has 
worked well with Vanuatu's traditional culture, and the Vanuatu 
Government ensures that the opportunities to participate are 
divided up equally throughout the country.  The program has in many 
 
WELLINGTON 00000057  003 OF 006 
 
 
ways encouraged the Vanuatu Government "to get its act together," 
said Nuttal. 
 
 
 
Fiji Remains Particularly Problematic for New Zealand 
 
--------------------------------------------- ---------------------- 
--- 
 
¶7.  (C) According to Adenk, Fiji remains a major focus of New 
Zealand foreign policy, especially the reestablishment of a 
"diplomatic footprint".  During the November 2009 U.N. General 
Assembly meeting, New Zealand officials believed they had reached 
an understanding with Fiji officials on the "normalization" of 
diplomatic exchanges.  Hence, they were caught off guard when Fiji 
shortly after expelled New Zealand's third Head of Mission. 
Currently, New Zealand only has a second secretary and a New 
Zealand AID official posted in Fiji.  Adenk said that the two sides 
are engaged again on the issue and agreed to exchange counselor 
level positions.  Fiji had put forth an acceptable nominee and 
then, after Foreign Ministers McCully and Kubuabola met in Nadi, 
switched the nomination to Lieutenant Colonel Neumi Leweni, a 
senior military leader in Fiji who is banned from New Zealand under 
the country's travel restrictions.  Adenk emphasized that New 
Zealand has chosen to ignore the second nomination.  Adenk added 
that the Leweni nomination "clearly came from the military 
establishment" and said he hopes Kubuabola can make headway in 
getting back to the original nomination.  Despite the difficulties, 
New Zealand is committed to continuing diplomacy with Fiji and 
hopes the rest of the world will continue to engage the country and 
bring it back to democracy.  Adenk underscored, however, that New 
Zealand will not change its sanctions until it sees better 
behavior.  Schwartz reviewed U.S. policy towards Fiji, which 
includes a ban on most development and military assistance, visa 
restrictions for coup and government leaders, and regular 
humanitarian assistance activities. 
 
 
 
New Zealand Set to Lay TPP Groundwork in Melbourne 
 
--------------------------------------------- ---------------------- 
- 
 
¶8.  (SBU) On the issue of the Trans-Pacific Partnership (TPP), MFAT 
Free Trade Agreement Unit Negotiator Matthew Hawkins and America's 
Division Economic Officer Gareth Pidgeon emphasized that New 
Zealand views the TPP as a way to solidly "lock" the United States 
into the region.  Hawkins added that New Zealand understands the 
domestic target of "messaging on TPP coming from the United States 
on job and export creation." According to Hawkins, the P4 agreement 
was a good starting point, and now New Zealand supports the eight 
members moving forward.  There will always be space to "add new 
rooms" and "renovate existing rooms" (existing trade agreements 
between the partners) once we have the foundation right and of 
"high quality," said Hawkins.  Hawkins also noted that although 
Vietnam is currently not attending as a full member in the 
discussions, and New Zealand is keen to see Vietnam participate in 
future rounds as a full member.  New Zealand sees Vietnam's full 
participation in the TPP as a catalyst to Vietnam implementing key 
internal reforms. 
 
 
 
¶9.  (SBU) As for March talks in Melbourne starting March 15, New 
Zealand hopes to come first to an understanding of what the eight 
countries hope to achieve and then build on that common 
understanding.  Hawkins said New Zealand wants all parties to 
openly discuss their goals and focus on a comprehensive framework 
and not rush into the technical negotiations too quickly.  Hawkins 
said New Zealand has identified a small but representative 
delegation for Melbourne to make the conversation productive yet in 
a position to not get "bogged down" in the weeds. 
 
 
 
New Zealand Welcomes Closer Cooperation on Disarmament and 
Counterterrorism 
 
WELLINGTON 00000057  004 OF 006 
 
 
--------------------------------------------- ---------------------- 
---------------------------------------- 
 
 
 
¶10.  (SBU) MFAT International Security and Disarmament (ISED) 
Division Deputy Director Jeff McAlister and Deputy Director for 
Disarmament Jillian Dempster emphasized that New Zealand welcomes 
closer cooperation on both counterterrorism and disarmament issues. 
On disarmament, Dempster said New Zealand is pleased with U.S. 
multilateral efforts and would like to find more avenues of working 
together.  Dempster noted that MFAT International Security and 
Disarmament Division Director Hamish Cooper will likely attend the 
Global Nuclear Security Summit, scheduled to take place in April in 
Washington and would welcome any outside meetings. 
 
 
 
¶11.  (C) On counterterrorism issues, New Zealand McAlister said 
that New Zealand would like to hold bilateral counterterrorism 
talks with the United States.  He said New Zealand is just 
beginning to designate entities beyond the UN list and will likely 
announce four entities soon.  Because of its freedom of information 
laws, New Zealand counterterrorism officials mainly look to see if 
there is a direct threat to New Zealand or its interests and must 
build a solid case.  Hence, any non-UN designated entity must be 
fairly New Zealand-centric.  Besides triggering travel bans and 
financial restrictions, designating any non-UN entity "creates a 
criminal offense" under New Zealand law and cannot be done lightly. 
According to McAlister, New Zealand is actively engaged in capacity 
building exercises on counterterrorism in the Pacific Island and 
Southeast Asia regions and would like to be involved in any 
regional meetings.  McAlister also said that New Zealand recently 
added funding to conduct counterterrorism capacity building 
activities in South Asia and would welcome the opportunity to work 
with the United States in this effort. 
 
 
 
New Zealand's Economy Has Come a Long Way - But More Can Be Done 
 
--------------------------------------------- ---------------------- 
------------------------- 
 
¶12.  (SBU) New Zealand Institute of Economic Research Principal 
Economist 
 
Shamubeel Eaqub emphasized that New Zealand still needed progress 
in two areas to make the economy globally competitive: 
strengthening entrepreneurial incentives for individuals and 
improving management of its natural resources.  He explained that 
New Zealanders are often content with modest business success - not 
willing to expand and/or invest at home or abroad, which hampers 
the country's overall growth.  On resource management, Eaqub noted 
that "New Zealand does not yet have the right balance." New 
Zealand's Resource Management Act puts "too much emphasis on 
environmental protection" at the expense of economic expansion. 
Eaqub also said that New Zealand needs to do a better job of 
attracting foreign direct investment (FDI), with its attendant tech 
transfer and innovation.  Currently the country tends to attract 
more portfolio investment. 
 
 
 
Trade is Essential for New Zealand's Economic Growth 
 
--------------------------------------------- ---------------------- 
--- 
 
¶13.  (SBU) Eaqub emphasized that New Zealand is heavily dependent 
on trade for economic growth and has therefore vigorously pursued a 
policy of opening opportunities for New Zealand goods and services 
abroad through free trade agreements (FTA).  New Zealand has also 
made a dramatic change in its main trading partners.  Over the past 
twenty years, the distance of travel for New Zealand goods has 
halved as trade has shifted away from the United Kingdom to the 
Asia Pacific.  In the past few years, the country has concluded 
FTAs with a number of economies, including China, Hong Kong, 
 
WELLINGTON 00000057  005 OF 006 
 
 
Malaysia, and the Gulf Cooperation Council.  It is also pursuing 
FTAs with Korea, Japan, India, and Russia.  Eaqub noted that 
statistics have shown that FTAs generally have a large impact on 
New Zealand's economy; the large increase in trade volume with 
China following the conclusion of an FTA in 2008 being the most 
notable one.  Eaqub said that although the 60 percent jump in trade 
following the FTA signing could not fully be attributed to the 
agreement, it was still significant given the global economic 
downturn.  However, "China was easy because it wanted what we have, 
and there was little competition for our agriculture products." 
Eaqub did not think a trade agreement with the United States would 
bring quite the same results since there are already many U.S. 
products that would compete with New Zealand's exports.  New 
Zealand's economic ties with Australia are particularly important 
since it is the destination for 30 percent of New Zealand's exports 
and a source of 40 percent of New Zealand's visitors.  Eaqub 
asserted that Australia's relatively strong economic performance 
and effective economic stimulus during the global economic crisis 
"saved" New Zealand from a worse recession and from spending more 
of its own money on a fiscal stimulus package. 
 
 
 
New Zealand Is Coming Out of Recession - But Full Recovery Will Be 
Slow 
 
--------------------------------------------- ---------------------- 
--------------------------- 
 
¶14.  (SBU) According to Eaqub, New Zealand's economy dipped into 
recession before the global financial crisis due to the impact of 
drought on New Zealand's agriculture sector.  The country's already 
tight credit market ironically helped it through the financial 
crisis since credit reforms were already underway, and individuals 
and companies had already begun to deleverage.  New Zealand saw a 
10 percent decline in housing prices, but home values have now 
recovered to their peak value before the crisis.  Eaqub pointed out 
that the reason for the quick bounce back was that New Zealand did 
not have the same subprime mess or vacancy rate issue as the United 
States.  It only had a problem of oversupply, which was very 
localized.  Despite the positive economic signs, Eaqub stressed 
that New Zealand is only on the "cusp" of recovery, and the economy 
is still very fragile.  For example, credit growth to business is 
still negative.  There is no pick up in hiring, and retailers are 
not restocking yet.  Until people act on their optimism, there will 
not be a full return to growth.  Eaqub emphasized that, even then, 
recovery will be slow over the next "three to five" years.  Even 
though New Zealanders have begun to deleverage, it will still take 
time for them to reduce debt to a more manageable level.  (Note: 
New Zealand's debt to income ratio is currently around 160 percent. 
End note.) 
 
 
 
New Zealand Keen on Global Issues, Unsure of its Role in Asia 
 
--------------------------------------------- ---------------------- 
----------- 
 
¶15.  (SBU) Victoria University of Wellington Professor Robert 
Ayson, discussed New Zealand's view of itself in the world and how 
that view influences security-related decisions.  Ayson also serves 
as the Director for the Centre for Strategic Studies: a small think 
tank that encourages debate about strategic issues.  Ayson 
emphasized that New Zealanders are strong "internationalists" and 
often have a high degree of exposure to the outside world.  They 
want New Zealand to get involved in the outside world and are 
highly interested when New Zealand does get involved.  However, 
sustaining interest in foreign engagement can be difficult unless 
there is a humanitarian or U.N. component.  According to Ayson, 
when Australia and the United States become involved in a foreign 
issue, New Zealanders are the first to ask how they can also become 
involved.  New Zealanders are also keen on keeping the balance in 
the Asia Pacific area from shifting.  Ayson said Kiwis do not see 
it as a matter of keeping external influences out; it is about 
creating checks and balances.  New Zealand is too small to have a 
significant influence on regional architecture so keeping the 
United States engaged in the region is central to its strategy. 
 
WELLINGTON 00000057  006 OF 006 
 
 
¶16.  (SBU) New Zealand also has a strong sense of the Pacific 
Island region as its "backyard", and it has an interest in global 
issues in general.  However, New Zealand lacks a sense of itself 
vis-a-vis Asia and does not have a sense of "Asia is just over 
there."  New Zealanders still strongly identify with Europe.  For 
example, they prefer to vacation there and students tend to judge 
themselves by European standards.  Ayson suggested that maybe such 
views of Asia are held because New Zealand feels "protected" or 
shielded by Australia or because New Zealand feels like it is 
simply not large enough to make a difference.  Ayson said he is 
trying to inspire more thinking about New Zealand's role with 
respect to Asia, particularly in light of China's rising power in 
the region.  New Zealand structures its security interests 
accordingly.  For example, the country's military capabilities are 
focused on handling smaller issues in the Pacific Island region 
and/or contributing to peacekeeping operations further afield. 
However, New Zealand, unlike Australia, does not maintain useful 
military assets if a larger conflict were to break out in Asia. 
According to Ayson, this world view is also why New Zealand urges 
the United States to be actively engaged with regional diplomacy in 
the Pacific Island area, but New Zealand generally takes a more 
"hands off" approach with U.S.  relations in Asia. 
 
 
 
¶17.  (U) This cable was cleared by EAP/ANP Deputy Director Steve 
Schwartz. 
HUEBNER