Aotearoa/New Zealand foreign policy looks set for more of the same in 2025, despite the potential for significant chaos due to the incoming Trump administration in the United States and increased China-U.S. confrontation.
The main threats and opportunities facing New Zealand will likely be unchanged. There’s the imperative of moving closer to Australia while querying the scope of the country’s relationship with AUKUS (including the question of whether New Zealand should join AUKUS Pillar II). New Zealand must also navigate increased polarization in its Asia-Pacific neighborhood amid threats to its role as a bridge between the Western powers and China. The relationship with its Pacific Island neighbors will need attention as New Zealand’s ability to be a major player among Pacific Island states comes under scrutiny. And finally, New Zealand will look to protect and expand its trade and investment relationship with other states, such as India.
These issues have become more difficult to navigate, however. The recent foreign policy consensus concerning New Zealand’s relationship with Australia and commitment to the liberal international order has been challenged by AUKUS and the anticipated trade and security policies of the incoming Trump administration.
As a small state it is often assumed that New Zealand must simply adjust to the international environment and the machinations of larger powers in its neighborhood. Due to adept international diplomacy and normative innovation, this has not been the case with New Zealand. The country has established an independent foreign policy, which has provided it with a degree of space to pursue its material and normative interests while positioning itself as an international leader on human rights, climate change, and non-proliferation.
It is evident that the past decade has witnessed a marked erosion of the post-World War II rules-based order and the efficacy of international institutions to impact state action. States are more willing to use force without fear of international sanction. At the same time, the types of force used by states have multiplied. Many states and organizations report an increasing number of cyberattacks against critical infrastructure. There is an increased use of “gray-zone” tactics (exemplified by the recent seizure of a Cook Island-flagged vessel for transporting Russian petroleum) and non-state actors by governments as they pursue political, security and economic objectives. For example, China has used its fishing fleets to both illegally fish as well as extend its strategic presence in the South China Sea. In the Indo-Pacific, these changes have been decried as part of an increased polarization of the region, which encourages foreign policy makers to view international development through the lens of the China-U.S. competition.
These developments have been accompanied by threats to the liberal trading and investment regime. While there has been significant deindustrialization of New Zealand under this regime since the 1980s, there is little doubt that the country has enormously benefited from the liberal trading regime and its free trade agreements, particularly the free trade agreement with China. Yet this international economic regime has been battered by COVID-19, supply chain disruptions, inequality engendered by economic change in domestic economies, and an increased willingness of states to intervene in trade and investment flows based on national security or political considerations.
Perhaps more importantly, the global trade and investment framework is viewed less and less as benign and value-neutral by larger states (it has always been challenged on these grounds in the Global South). Rather, there is increased fear of trade and investment asymmetries and a renewed focus on domestic economic losses from trade and investment. The liberal approach to trade and investment is increasingly seen as (ironically) biased in favor of China by the United States and Europe.
The coming year, like 2024, presents a series of challenges to New Zealand policymakers to avoid being drawn into what is expected to be a more strident China-U.S. competition under the Trump administration while continuing its commitment to support a liberal-rules based international system. Over the past several decades, New Zealand has been able to establish close economic ties with China while maintaining its security cooperation and economic engagement with Australia and the United States. There is a question whether this balance can, or should, be maintained.
It is not clear whether tilting more toward the U.S.-Australian position regarding Chinese activities in the South China Sea and in the Pacific Islands will tend to increase polarization in the region. On one hand, there is a possibility that increased polarization will lead to increased militarization and conflict. On the other hand, such “balancing” against Chinese activities could be a way to ameliorate the potential for conflict.
Given that the current government has continued to rely on Australian security assistance – and has already indicated its preference for the Australian perspective regarding the South China Sea and the Pacific Islands – it is unlikely that New Zealand needs to do more. At the same time, New Zealand needs to independently make clear that Chinese activities in the Pacific Island states need to be limited to economic development activities and not be aimed at larger geostrategic objectives.
Second, given the renewed interest and competition in the Pacific Islands, New Zealand must increase its effort to engage with the region. It is important that New Zealand continue to emphasize its role as a major source of economic opportunity, aid, and security for its Pacific Island neighbors, which the current government has been doing. Foreign Minister Winston Peters, who enjoys more credibility than his predecessor in the region, has visited numerous Pacific Island states in the past year, promising renewed political and economic support while emphasizing a Pacific perspective on solving the region’s challenges.
Peters has criticized what he calls the rise of “checkbook diplomacy” that can leave small island states encumbered by debt and political stipulations that can be damaging to their domestic populations and international sovereignty. At the same time, he has noted that New Zealand and Western states have neglected the region, and that this “vacuum” has provided an opportunity for other states to gain influence. This engagement needs to continue but additional funds for economic development need to be made available.
Third, New Zealand must determine its position regarding AUKUS Pillar II. It is evident that the current government seems inclined to embrace Pillar II of AUKUS, while the Labor Party has announced its opposition. Meanwhile, Pacific Islands leaders have been reluctant to criticize New Zealand’s interest in AUKUS explicitly, instead emphasizing their commitment to the Blue Pacific ideals of an expanded security premised on climate mitigation and a nuclear-free Pacific. These conflicting visions need to be reconciled but are likely to be finessed in the coming year.
Given the New Zealand public’s antipathy toward the incoming Trump administration and its “America First” policies, as well as Labor opposition, it is unlikely that any decision will be made absent some international incident.
Fourth, there needs to be a continued push to strengthen trade and investment relationships with other states such as India, Canada, and the members of the Association of Southeast Asian Nations (ASEAN). The opportunities generated by these arrangements could increase the diversity and robustness of New Zealand’s trade and investment relationships while lowering some of the vulnerabilities it currently has due to reliance on Australia and China. It also needs to look at the Overseas Investment Act 2005 to facilitate additional investment while continuing to protect the core national interests. Whether this involves simplifying procedural hurdles or entails a more (or less) permissive regime than currently in place remains an issue.
Fifth, New Zealand must continue its international engagement and support of international institutions and rules. Many current problems – such as climate change, loss of biodiversity, human migration, the threat of global pandemics, and terrorism – must be solved through international cooperation. Current international institutions are seemingly less able to address these problems. While much of the blame for dysfunction can be placed on the domestic situations and international postures of states, the institutions themselves have the ability to impact political, economic, and strategic calculus.
For example, Peters recently noted that the permanent members of the U.N. Security Council have abused the power of the veto in an effort to avoid international sanction and inquiry. As such New Zealand must continue to wholeheartedly support international institutions and procedures.
Among these obligations is the ever more pressing climate change crisis, which has become an existential issue for many Pacific Island states. Given the previous Labor government’s commitment to addressing the issue, as well as the high salience this issue has in the region, it is unlikely that the National government could reverse on climate commitments without significantly damaging New Zealand’s national and international interests.
Finally, New Zealand must continue its effort to oppose attempts by states to unilaterally change the international status quo by the use of force. It needs to continue to oppose the annexation of Ukraine by Russia and China’s threats against Taiwan and the Philippines. New Zealand Prime Minister Christopher Luxon has noted a clear linkage between Russian expansionism, tacitly backed by China and India, and Wellington’s security concerns in the Indo-Pacific.
If it believes that Ukraine’s territorial integrity is vital, New Zealand needs to increase its military aid. At the same time, New Zealand must continue to support the two-state solution to the Arab-Israeli conflict while holding Hamas and Israel to account (the former for its use of force against Israeli citizens and the latter for its continuing offensive in Gaza). New Zealand also must oppose the widening use of force throughout the Middle East in bilateral, regional, and global forums.
It is too early to determine whether recent developments across the region and globe will lead to significant international realignment and conflict. More often change is created in a muddle, without the clarity of dramatic events. New Zealand must continue to deepen its engagement with its neighbors and support liberalism, human rights, and decency across the region and the globe.
Small states such as New Zealand can play a major role within the international community. Their commitment to values and rules serve as both a mechanism for international cooperation as well a common basis of mutual understanding and cooperation by the many. This can give pause to those states – and redefine national interest calculations by policymakers – who do not see cooperation and persuasion as an essential part of international interaction.
