Jacinda Ardern won a strong majority in New Zealand’s election on Saturday and can now choose to run the country without making concessions to a coalition partner.

After receiving acclaim for her handling of a series of crises in her first term, she faces a different test: leading the country out of a COVID-19 recession that is deeper than Australia’s.

New Zealand is Australia’s most integrated economic partner, thanks to the free trade agreement they signed in 1983, and also its closest security partner, connected by a web of alliances and shared interests.

When Ardern joined a meeting of Australia’s national cabinet in May, it prompted some to reflect on how New Zealand could have joined the Australian Federation at one point. But several months later, New Zealand and some Australian states have resisted joining a full trans-Tasman travel bubble, free of quarantine restrictions.

Both national governments should be working to overcome this resistance. A travel bubble would allow them to take advantage of an easy source of economic growth while other restrictions on international travel remain in place. 

They should then seek new areas of cooperation that would benefit their respective recovery efforts. This could also assist with Australia’s foreign policy agenda.

New Zealand has a deeper and more consistent history of engagement with South Pacific countries, which Australia could draw on to implement its important Pacific “step-up” policy.

New Zealand has also managed to make decisions on China – in areas such as telecommunications, foreign influence and investment – without the bluntness that has at times characterised Canberra’s approach.

China’s trade silence

Chinese buyers of Australian coal and cotton have reportedly been encouraged to source those products elsewhere.

Reports on the trade limits first surfaced from within the industries themselves, and it seems that Beijing has not informed Canberra of any official directives it may have given to importers.

This situation is significantly different from the direct trade disputes that occurred between Australia and China earlier this year, when China placed bans on selected beef exporters for failing to meet export requirements and pursued anti-dumping investigations into Australian barley and wine.

It presents Canberra with a new and more complicated dilemma, as federal ministers are currently not able to directly talk with their Chinese counterparts.

Even in normal times, it would be hard for Canberra to deal with reports that the Chinese government had informally discouraged imports of Australian products. 

While some fear that China is targeting Australian products for political reasons, other explanations are possible. For example, China’s recent promise to become carbon neutral by 2060 means its need for Australian coal will eventually decline. Beijing is also trying to become a more self-sufficient food producer.

The difficulty of interpreting the current developments makes it even more important for Australia to revive communication with China, whether via ministerial contact or informal back channels.

Despite an increasingly obvious campaign of broad economic coercion on China’s part, the Australian government has sought to treat each trade setback as an individual case.

This is a sensible approach, because it may allow Australian exporters to resolve some of these issues by seeking support from Chinese customers who value their products. It will also allow certain cases to be arbitrated by the World Trade Organization disputes process, which China still supports.

Pacific dealings

A new free trade agreement between Australia and Pacific island countries will come into force in two months, after the Cook Islands became the eighth signatory to formally approve it last week.

The Pacific Agreement on Closer Economic Relations Plus was negotiated three years ago, but some smaller countries have required time to prepare for its ratification.

The agreement aligns with Australia’s policy of greater engagement in the Pacific to combat rising Chinese diplomatic and economic activity there. It also reflects Australia’s new focus on promoting development through measures like the Pacific guest-worker program rather than through traditional aid projects alone.

However, its aims have been undermined, to an extent, by comments from the government that focused on the potential benefits to Australian exporters. Such messaging is not surprising, but will only make small nations more concerned that the deal is tilted in favour of the region’s largest country. The government needs to explain to voters that Australia has a national interest in Pacific countries becoming more economically sustainable.