Luxon shores up Indo-Pacific trade as volatile Trump impact continues

Trade in the time of Trump. Prime Minister Christopher Luxon is hoping to strengthen New Zealand's trading relationships in the Indo-Pacific as he embarks on a week-long trip to the region, diversifying the country's economic opportunities in an environment of global instability.

Luxon's trip comes as US President Donald Trump makes his first visit to the region since returning to the White House, and the continuing fallout of his 'Liberation Day' tariffs.

It also comes on the eve of a scheduled meeting between the US and Chinese presidents, the first since Trump became president for a second time.

An international relations expert says the "softly, softly" approach to the new Trump administration has not paid off for New Zealand and other countries, and the government will need to take on board that it cannot rely on the United States in the same way it has in the past.

Luxon leaves for Malaysia on Sunday morning to attend the East Asia Summit (EAS), where he will co-host a leaders' summit with Association of Southeast Asian Nations (ASEAN) countries and celebrate 50 years of dialogue between NZ and ASEAN.

As the ABC has suggested, "ASEAN represents the countries that have been among the hardest hit by the Trump tariffs: the relative minnows who it has been easier to punish for their economic links with China than going full tilt at China itself."

Luxon will then continue to South Korea to attend the Asia-Pacific Economic Cooperation (APEC) leaders' meeting. All of New Zealand's top five trading partners are APEC members: China, Australia, the United States, Japan and South Korea.

Together, ASEAN and APEC represent around 60 percent of the global economy and more than 70 percent of New Zealand's international trade. The security and economic summits take place amidst a backdrop of geopolitical tensions that are creating uncertainty when it comes to traditional trading and defence partnerships.

University of Otago politics professor Robert Patman told RNZ Trump's protectionism was causing "a fair amount of problems" for countries, including New Zealand.

The United States imposed a 15 percent tariff on New Zealand exports in August, which remained in place.

Patman indicated some countries may be looking to make alternative free trade arrangements, albeit in a way that did not provoke the United States.

As well, Patman noted the "strategic linkage" between Russia's war with Ukraine and New Zealand's security interests in the Indo-Pacific region, saying China was Russia's "biggest backer".

"Any outcome there - if there is a ceasefire, or [Russian president Vladimir] Putin succeeds in keeping land that he's annexed from a neighbour - will have big ramifications for Chinese foreign policy in the Indo-Pacific."

Patman pointed to the "daddy diplomacy" most liberal democracies had played in regards to the new Trump administration, "where you fawn all over Mr Trump and tell him what a great guy he is".

"The danger in doing that", he said, is "that you neglect robustly defending your own national interests".

Patman said the government deliberately tried to go "softly softly" with the new Trump administration, but New Zealand was still served with tariffs despite not criticising US policy decisions publicly.

"We weren't exactly rewarded for keeping our head down."

One of the issues raised by Trump's "protectionism" was how New Zealand can continue to divert and accelerate its efforts to diversify in the Indo-Pacific, Patman said.

Patman also argued the Trump administration "doesn't even pay lip service to an international rules-based order". He was puzzled that New Zealand continued to deepen security links with the US at the time when it was "moving away from democracy towards the autocratic system".

He also indicated China was not the only threat to the rules-based order in the Indo-Pacific.

"Russia was even bigger threat with its flagrant breach of international law, its lack of respect for the sovereignty of Ukraine and its attempt to steal land from a neighbour."

Recently, it was reported Trump pushed Ukrainian President Volodymyr Zelensky to give up swathes of territory to Russia.

Patman said that would be "disastrous" for New Zealand, "because it undermines the rule of law".

"It says that big countries, great powers, are entitled to take land from smaller countries."

Patman said the visit to both the EAS and APEC was part and parcel of New Zealand trying to develop its trade interests in a very important part of the world, but also projecting a "diplomatic identity which is distinctive". Whilst they were routine visits, Patman said they were very important in the current context.

He figured Luxon would not be making a big deal about Trump's unpredictability, focusing instead on securing meetings with EAS and APEC leaders whose goals were more compatible with New Zealand's national interests.

Speaking to RNZ before departing, Luxon said the trip was about recognising the Indo-Pacific region was "at the heart of our future," referencing the government's foreign policy reset to focus on Southeast Asia, Northeast Asia, China, India and the Pacific "because that's actually where our real security, but also prosperity" comes from.

The coalition government had been deliberate in this strategy, with Luxon already having visited and met with ASEAN countries during his time in office.

This trip continued that focus, with Luxon pointing to two key objectives while in Malaysia. Firstly, finalising the NZ-ASEAN Comprehensive Strategic Partnership, putting New Zealand at the "top table" when it comes to the depth of relationship with those ASEAN countries such as Indonesia, Thailand, Singapore, and Malaysia.

He will also look to secure a "common halal standard" with the Malaysian Prime Minister Anwar bin Ibrahim - who he called his "good friend" - in order to sell more red meat into the country.

The ASEAN meeting would also be broader in terms of talking about both economics and security issues, Luxon said, while APEC was economic-focused. Russia, China, and the US were likely to have representation at APEC, with the Chinese and US presidents expected to meet formally.

The expected meeting between US President Donald Trump and Chinese President Xi Jinping in South Korea is highly anticipated, with Reuters reporting it as an attempt to avert any further escalation of a trade war between the two nations.

While in South Korea, Luxon said he would be advocating "very, very strongly" for the rules-based system.

"We don't think tariffs is the way forward. We are free traders," Luxon said. "We continue to make that case, obviously, in our bilateral relationship with the Americans."

He said NZ exporters had been able to mostly pass on any tariffs to the US consumer through pricing, but the bigger issue was the "second and third order consequences" of the tariff policy, and what that meant for "trading relationships around the world".

That was why he attempted earlier this year to create trade dialogues between the EU and ASEAN, and the EU and the CPTPP, he said.

"We want to be able to have platforms and dialogues around trade and economics to make sure the rules based system is upheld amongst what would be 40 percent of global trade.

"The consequences of the tariff policy and the disruption it causes in the trading environment is that, inevitably, you could get behaviour between two unrelated countries that are dealing with dumping of product or goods that then leads to tit for tat tariffs, and before you know it, the system breaks down."

Luxon said there'd been a "shift and breakdown" from "rules to power" and "security over economics", and his "interventions" at APEC over the last two years had been about upholding the system that had "served the world incredibly well over the last 70 to 80 years".

Trump 'straight up' - Luxon

Asked about Trump's actions and whether they contributed to upturning the rules based system, Luxon said that would be part of the conversation.

But he acknowledged Trump had been "straight up" and was doing exactly what he campaigned on: "You may not like it, but the reality is you need to navigate that."

In the week of Jim Bolger's funeral, Luxon's trip is a continuation of that Prime Minister's determination to pivot New Zealand's focus toward the Asia-Pacific.

Three decades on from the first of Jim Bolger's three trips to Japan, and his insistence that our future relied on trade diversification and that our relationship building should reflect that, Luxon has packed the same message in his travel luggage.

He said the Indo-Pacific was the "single biggest economic growth engine in the world economy, and we sit bang smack in the middle of it".

New Zealand could do "exceptionally well in that world" and that's why there's so much focus on that region.

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