Huawei deal calls for reflection
It is probably time for New Zealand to become a little more worldly when doing business with China.
Since the 1960s, China policy has been based on the principle that, as a small country, if we are not first we will be last.
It’s been spectacularly successful and clearly in our interests.
Even Keith Holyoake’s National government made clear it was keen to recognise the People’s Republic, welcoming Canada’s moves to become the first Western country to do so. New Zealand then formally recognised the People’s Republic under Norman Kirk.
The “first not last” policy was accelerated under Jim Bolger, who wanted to “hitch our old waka to the Orient Express” through his Asia 200 Foundation.
In August 1997, New Zealand became the first Western country to agree to China joining the World Trade Organisation (WTO).
Over the next decade, New Zealand became the first developed economy to recognise China as a market economy, the first to start free trade negotiations and the first to conclude them with a deal.
In wonderfully Maoist language, the Chinese refer to these leaps forward as “the four firsts.”
Had we not been first, we would certainly be close to the back of the queue, as the US, EU, India, Brazil, Russia and the Gulf states barged in ahead of us.
New Zealand businesses have a spectacular record of failure when internationalising – even in Australia as the Air New Zealand, Telecom and Warehouse fiascos demonstrate.
A major reason has been the belief that, because they talk a bit like us, look like us and follow some of the same sports, doing business in Australia is like doing business in New Zealand. That ignores the power of government, unions, media and big business across the Tasman. While Qantas may no longer be 100% owned by the Australian government, for example, Australian governments are always 100% owned by Qantas.
As a result of immigration, international travel, China’s opening to the world and initiatives like the Asia 2000 Foundation, many New Zealanders regard themselves as fitting in to Beijing or Shanghai as comfortably as they might in Canberra or Sydney.
Paradoxically, that risks New Zealanders not recognising how even more naive it would be, than with Australia, to think business practices in China have anything in common with New Zealand.
China will be the biggest economy in the world as early as 2020, it is already New Zealand’s second largest trading partner and there is no doubt it will eventually overwhelm even Australia in its economic importance to us – but it is also a deeply oppressive dictatorship controlled by the military and party.
Even its more mainstream companies often have parallel party structures within them and there are close ties and cross-over ownerships involving party, army and commercial enterprises.
We have learned at some cost to adopt a healthy scepticism towards Qantas, Telstra or Wesfarmers. It makes no sense to be less sceptical towards Chinese business partners.
It has been reported this week that the government actively encouraged Chinese telecommunications giant Huawei to supply Crown Fibre Holdings with equipment for its $3.5 billion ultrafast broadband (UFB) initiative ($1.35 billion of the project's funding comes from the taxpayer, the balance from private partners Chorus, Enable, Ultrafast Fibre and Northpower).
Quite why John Key singled out this particular firm for involvement is unknown but it led to Finance Minister Bill English, superminister Steven Joyce and Trade Minister Tim Grocer all visiting China to encourage them to pitch.
Because of concerns about possible links to Chinese agencies, Huawei is banned from working in the US and from having any part in Australia’s $36 billion broadband initiative.
Key concerns are said to be the security of Echelon, which includes the signals gathering operations of the US National Security Agency, the UK’s Government Communications Headquarters, Canada’s Communications Security Establishment, Australia’s Defence Signals Directorate and New Zealand’s Government Communications Security Bureau of New Zealand, whose listening station is at Waihopai.
This intelligence arrangement was seen as valuable to New Zealand by prime ministers as different as Holyoake, Kirk, Muldoon, Lange, Bolger and Clark and even survived the anti-nuclear fuss.
Whether Huawei really threatens Echelon is beside the point. The US and Australia, our closest allies, clearly think it might.
That the government singled out one foreign company for special treatment during the broadband process is odd enough. That it did so for a company distrusted by our closest allies is extraordinary.
It couldn’t hurt to be more wary of our new partners to maintain relations with our old ones.