• Small states increasingly in position of having to make choices
• New Zealand wants to ensure there is respect for UNCLOS
• Host of approaches important to respond to IUU challenge
• NZ has very strong interest in free, open Indo-Pacific region
• Important to diversify markets, build diplomatic partnerships
• Way to get more prosperous is not to be afraid of the world
• Impressed by Sri Lanka’s talent, optimism about the future

Over the last few years, small states have been increasingly finding themselves in a position of having to make some choices and calibration in the backdrop of much sharper US-China relations, said Prof. David Capie, one of New Zealand’s pre-eminent foreign policy thinkers and analysts, in an interview with The Sunday Morning.

In this context, principles that are really important for a small state like New Zealand include respect for international law, sovereignty, freedom of navigation, freedom of overflight, and inclusivity, he asserted. 

Part of managing the sharper great power competition has also been building a range of partnerships and relationships with the Association of Southeast Asian Nations (ASEAN) framework, he added. 

In the course of the interview, Prof. Capie also spoke on managing maritime security and trade, Illegal, Unreported, and Unregulated (IUU) fishing, which is a concern for both New Zealand and Sri Lanka, ensuring a rules-based order in the Indian Ocean, how New Zealand faced and overcame periods of economic crisis, and the importance of engaging with the world.

How has New Zealand managed the return of great power rivalry, particularly in the Indo-Pacific?

The last few years, what we might call the Asia Pacific era, was one that was enormously favourable for New Zealand. It was one in which we were able to develop a deep economic relationship with China, which takes about 30% of our exports, but at the same time sustain a close security relationship with the US. It wasn’t a sense of having to choose one or the other.

I think that what we’ve seen over the last 5-6 years with much sharper US-China relations is that small states were increasingly finding themselves in a position of having to make some choices and calibration.

There is a bunch of principles that are really important for a small state like New Zealand – respect for international law, sovereignty, freedom of navigation, freedom of overflight, and principles of inclusivity.

Part of managing the sharper great power competition has also been building a range of partnerships and relationships with the ASEAN framework, the East Asia Summit, the ASEAN Regional Forum (ARF), economic frameworks, and building deeper partnerships with countries like Japan and India and also Sri Lanka.

Sri Lanka has been struggling to maintain balance between China, India, and the US. How has New Zealand’s relationship with these three countries evolved over the last two decades in terms of economic, trade, and strategic relations?

In 2008, New Zealand signed a Free Trade Agreement (FTA) with China and trade has quadrupled since then. China takes about 30% of our exports. At the same time we’ve had a close and very important partnership with the US and a very close security relationship. With India we’ve got a close people-to-people relationship that’s flourishing. 

For New Zealand, it’s also about a whole range of other relationships as well and a series of other partnerships. As I said, the importance of those inclusive relationships is framed around ASEAN and also our relationships in the Pacific, our family relationships in the South Pacific, which are really fundamentally important to us.

Both New Zealand and Sri Lanka are maritime nations in waters that are contested by global powers. What lessons can Sri Lanka learn from New Zealand in managing maritime security and trade amidst these rivalries?

New Zealand and Sri Lanka are both small maritime powers. New Zealand has one of the largest maritime Exclusive Economic Zones (EEZs) in the world. It’s the third or fourth largest. 

For New Zealand, an incredibly important part of how we manage our maritime state is the importance of international law and, in particular, the United Nations Convention on the Law of the Sea (UNCLOS). New Zealand wants to make sure that there is respect for UNCLOS, whether it’s in the South Pacific, the South China Sea, or elsewhere. 

New Zealand wants to work with a range of partners to make sure there is respect for international law and to contribute to maritime security.

IUU fishing is a concern for both New Zealand and Sri Lanka. What approach do you recommend and what does New Zealand do?

There are a number of approaches that are important in terms of responding to a challenge like IUU fishing. For New Zealand, that’s something that we’ve seen in the Pacific but also in our Southern Ocean – a huge area to try and manage.

I think there’s a recognition that a country like New Zealand can’t manage an area that big by itself, so a key part of responding to that is working with partners and sharing information, getting a better understanding of maritime domain awareness, of the picture of the region, and understanding what’s going on and who’s there. There’s the importance of contributing to that through some of our fisheries patrols that the New Zealand Defence Force does, particularly in the Pacific.

Then there’s a range of policy options to try and reduce the prevalence of IUU fishing. For example, trying to tackle the problem of fisheries subsidies, which make possible what would otherwise be uneconomic and unsustainable fishing.

Have these methods worked? Have they had an impact on tackling IUU fishing in your waters?

I think it’s an ongoing challenge.

IUU fishing is a very big issue for Sri Lanka. How bad is it for New Zealand?

It’s certainly been a significant concern in the Southern Ocean and I think there’s growing concern about the presence of a number of deep water fishing nations, which are possibly starting to put pressure on Pacific fish stocks in a way that could be unsustainable.

I think one of the key points about the response is actually getting a clear understanding of just what the challenges and the threats are. These are huge areas of ocean with a whole range of states with their own EEZs.

Getting an accurate picture of what’s going on out there is a really important and fundamental part of the response – understand the problem, partner with others to try and improve that understanding, and also respond to it. Then there’s tackling some of the underlying incentives, which makes what would otherwise be uneconomic fisheries appealing and possible.

China’s actions in the South China Sea have caused great concern for many countries in the region. Increasingly India, the US, and other countries have raised concerns about Chinese Government vessels and Navy being active in the Indian Ocean. How can countries in the region ensure the Indian Ocean follows a rules-based order with China’s entry?

New Zealand, as a small maritime open trading state, has a very strong interest in a free and open Indo-Pacific region and very strong interest in respect for international rules and norms. A key part of that, as I said before, is UNCLOS. That’s something that New Zealand takes very seriously and works with partners and others to contribute to in the South Pacific and in the South China Sea.

A key part of the rules-based order is key principles like freedom of navigation, for example, and New Zealand naval vessels and others contribute to that in the South China Sea and the South Pacific. 

It’s also about making statements and strong expressions of support for international law, which again New Zealand has done. 

I think those same principles are as applicable in the Indian Ocean as they are in the South Pacific or the South China Sea.

As Sri Lanka tries to recover from its economic crisis and restructure, given that New Zealand also faced periods of economic crisis in the 1980s, could you tell us how New Zealand reacted and responded to this and changed its society?

Without going too far into the history, New Zealand’s economy faced a number of shocks. One fundamental shock was in the early 1970s, when what was then a hugely important market for us that took a very large proportion of our exports, the UK, decided to join the European economic community. 

New Zealand suddenly found itself out in the cold and one of the lessons that came out of that was the importance of diversifying markets and the importance of building a whole range of diplomatic partnerships as well – not putting too many eggs in one basket.

A second crisis came in the middle of the 1980s, partly after a series of pressures built up in the economy. There were huge subsidies and New Zealand had basically become insulated from international markets, from the disciplining effects of international markets.

There was a period of really striking reform, which involved opening up New Zealand to international competition, floating the dollar, removing very significant subsidies – particularly in the agriculture sector – and privatising some State-Owned Enterprises.

At the time I think there was a sense of some pain, but actually in some ways it set in place the fundamentals for a New Zealand economy that was able to be international, that was able to be nimble, and I think if you look today, New Zealand is much, much more prosperous as a result of those changes.

To bring about those changes, was there unity among the Government and Opposition parties? How did the Government introduce such massive changes and see them through?

The key moment was really an election in 1984 that saw a change of government. The new Government that came into power found itself essentially with an insolvent country, a nearly bankrupt nation. In fact, the former Prime Minister was also quite reluctant to take any steps to actually address those challenges. 

I think the state of the economy had got to such a point, a real point of crisis, that the Government was able to implement some fairly dramatic political and economic reforms.

Was this with or without Opposition support?

Initially it certainly wasn’t with the support of the former Prime Minister, who was very reluctant, but many of his colleagues actually recognised that if we didn’t change, if we didn’t put in place some new measures – for example, if we didn’t devalue the dollar, if we didn’t open up the economy to the world – New Zealand, which was on the verge of bankruptcy, essentially would increasingly just get poorer and poorer. 

The way to get more prosperous was to actually not be afraid of the world and shut it out; it was actually to say ‘we can change and make our economy better able to compete and make us prosperous by engaging with the rest of the world’.

To close, what brings you to Sri Lanka and what have your impressions of the country been?

I am very fortunate to be here as part of a delegation that is led by the Asia New Zealand Foundation, which is a group in New Zealand. One of its key goals is for New Zealanders to have a better understanding, familiarity, literacy, and ability to work with and engage Asia. 

We are here to carry out the first of what’s called a track two dialogue – academics and analysts speaking with counterparts from Sri Lanka about a whole range of regional security, foreign policy, and domestic issues and also talking about the New Zealand-Sri Lanka bilateral relationship. It’s the first one of its kind and we’re absolutely thrilled to be here. We had a series of terrific meetings with Sri Lankan analysts, commentators, scholars, and people from civil society. 

I’ve been here once before. I was here in 2018 on holiday and I had the chance to see more of the country. I just fell in love with it. I thought it’s a very special part of the world and it’s a real pleasure to be back here.

In what we know is a challenging time for Sri Lanka, to talk to people and get a sense of and understand those challenges, it’s hard not to be just so impressed by the talent and the optimism that is here about the future.