Our foreign policy defines our relationship with the world. It includes our defence and military commitments, our trade and economic arrangements, our diplomatic relationships, and all the ways we relate to other nations. Since the 1980s, New Zealand has prided itself on having an independent foreign policy. But the world around us is changing, posing this question:

Is New Zealand’s foreign policy independent, and should it be?

This question raises a number of others, including:

• We’re a relatively small and isolated nation. Do we actually have meaningful foreign policy choices?
• What’s behind the change from an “incredibly benign” strategic environment to one that’s deteriorating?
• How can New Zealand navigate tension between ‘great powers’ like China and the US?
• Is the defence budget big enough to have the military capabilities we need?
• How do our trading interests affect our foreign policy? Are we too economically dependent on China?
• Australia is our only formal ally. What should the ANZAC relationship be in the next few years?
• What principles should guide our relationship with the Pacific?

The Inkling was created to support better conversations about important issues like this. That’s why we host thought gatherings that bring leaders and experts together, including a discussion of this topic at the Auckland War Memorial Museum on 3 November 2022.

We also inspire discussion in families, communities, and workplaces, and we’ve used our experience with that event to create this backgrounder.

It’s designed to help anyone who’d like to have a conversation about this topic so in the next sections you’ll find some material to inform and inspire your discussion—key facts and figures, as well as relevant issues and arguments.

We’d love to hear from you if you’ve used this resource and have any feedback, or if you’ve got other ideas about supporting better public conversations.

We hope you find it helpful.

KEY FACTS AND FIGURES

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Defence

Our security environment has changed over the last two decades:

• In 2001, the Prime Minister, Helen Clark, said New Zealand is in an "incredibly benign strategic environment".
• In 2020, advice to the Government said, “New Zealand’s security environment is deteriorating.” ¹ 

Defence spending is approx. $5 billion and is expected to keep increasing:

• New Zealand “spends about 1.5% of its GDP on defence, compared to an OECD average now at 2.5% (3.7% for the US, 2.2% for Britain, 2.1% for Australia and 1.4% for Canada).” ²
• The military is losing personnel in record numbers, straining its ability to respond to national emergencies and overseas deployments.³

Alliances and agreements:

• Australia is our only formal defence ally. However, Australia entered into a new security alliance with the US and the UK in 2021, a bilateral security agreement with Japan in 2022, and is part of the Quadrilateral Security Dialogue with the US, Japan, and India.⁴ 
• The US broke off its alliance with us in 1986 after we refused to allow nuclear-powered ships in our waters. In the last 10 years, the US-NZ relationship has been thawing and we have entered into arrangements for strategic cooperation. ⁵
• New Zealand is part of the “Five Eyes” intelligence-sharing network with Australia, the US, the UK, and Canada.⁶

The Pacific:

• Our foreign policy has a special focus on the Pacific; in 2022, the Prime Minister said, “The Pacific is who we are as well as where we are.” ⁷
• New Zealand participates annually in the Pacific Islands Forum.
• Pacific peoples make up 8% of New Zealand’s population, projected to rise to 11% by 2043.
• China has been actively seeking a Pacific-wide agreement on security and trade and reached agreements with the Solomon Islands and with Samoa in 2022.⁸ Later in 2022, the US responded by entering a partnership agreement with Pacific nations (including the Solomons).⁹ 

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Trade

New Zealand’s major trading partners are China, Australian, the USA, Japan, Singapore, and South Korea.  

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New Zealand has many free trade agreements (FTAs) with other nations:¹⁰

• Our most recent FTAs are with the UK and with the EU.
• We entered an FTA with China in 2008.
• Our current FTA with Australia has been in force since 1983.
• The US is the largest market that we do not have an FTA with.

China is our largest market for exports and imports. For example, exports to China ($20b) are more than double exports to our next-largest partner, Australia ($8b). ¹¹

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ISSUES AND ARGUMENTS

An official Defence Assessment in 2021 argued that “China’s rise is the major driver” for New Zealand’s increasingly challenging strategic environment: “Ultimately, Beijing is seeking to reshape the international system … with China recognised as a global leader.”

About half of New Zealanders say there’s a real threat of other countries interfering in our affairs, and threatening our interests in the Pacific, in the next 12 months.¹²  Some say that, “The post-World War II global order is receding and no new order is yet emerging to replace it.”¹

However, others argue that China does not pose a threat to New Zealand and that we should be optimistic about our international relationships. They believe New Zealand’s typically values-based yet pragmatic approach to foreign policy allows us to navigate a changing world.

Some say we are too economically dependent on China and therefore vulnerable to pressure from Beijing. Others say it is normal for a nation to be concentrated on one key market, the relationship offers significant economic benefits, and exporters could redirect their products if necessary.¹³

Some argue New Zealand needs to increase its defence spending, especially as New Zealand could not defend itself from direct attack without allies. Others argue that what we spend on is more important than how much we spend, and some official advice says we should focus on military services that are inter-operable with the militaries of our ally and partners.

Some argue that trade competition between nations like China and the US means organisations like the World Trade Organisation are losing their relevance. Others say these organisations are still effective and benefit New Zealand by making rules more important than raw economic power.¹⁴

Some argue New Zealand does not have true foreign policy independence; while we are not just a “cork on the waves” and can make meaningful choices, we are limited by geopolitical context and obligations to historical friends and allies. They argue these obligations place us within “the West”, but others argue that we should re-think our allegiances and look more to the Asia-Pacific region.

Some argue that as a small and isolated nation, New Zealand is largely irrelevant and dispensable to the ‘great powers’ like China and the US. Others believe that New Zealand can ‘punch above its weight’ and set an example as a principled and innovative player on the international stage.