Source: The National Business Review

by Nathan Smith

COMMENT

United States president Barack Obama is pushing what could be the biggest agreement of his administration.

The Trans Pacific Partnership (TPP), while not a significant enlargement of America’s trading relationships, would bring together many Pacific nations under a free-trade zone in much the same way as the North American Free Trade Agreement (Nafta).

Only four nations are considered members and original signatories: New Zealand, Brunei, Chile and Singapore. However, economically large countries such as Australia, the United States, Mexico, Peru and others are negotiating for entry.

While the agreement has attracted a healthy level of controversy, the geopolitical realities of the 21st century will keep such an agreement in the spotlight.

The Pacific has become a diplomatic battleground as checkbooks are being produced by the likes of China, Russia and the US.

Washington turns east

The US announced earlier this year its primary focus will pivot towards the East and on to the Pacific. With access to both the Atlantic and Pacific oceans, whoever dominates North America will always have an interest in the Pacific region.

This is why the world’s largest economy never really left the Pacific, even while Washington’s focus obsessively fixated for much of the past decade with the other east, the Middle East.

US Secretary of State Hillary Clinton reinforced her leader’s new vision for the future by scheduling an unprecedented visit to the Pacific Islands Forum in the Cook Islands, which recently succeeded New Zealand as forum chairman, before attending the larger Asia-Pacific Economic Co-operation (Apec) held in Vladivostok, Russia.

Although the US is the second largest donor to the many Pacific islands behind Australia, it has promised to increase this.

Mrs Clinton’s attendance at these summits and Mr Obama’s invigoration of the TPP are exemplary of America’s heightened dove-like presence in the Pacific.

There is some logic to Washington’s change in tack.

The South China Sea is the world’s busiest energy highway and crude oil almost literally flows from the Middle East into the fast-growing economies of Asia.

Close to 50% of all ocean tonnage passes through the South China Sea and it is in Washington’s interest to assure those markets continue to receive their cargoes.

Chinese influence in the Pacific inevitable

These days, mentioning China as a comparison to Washington’s movements in the Pacific is almost cliché. Yet according to the Australian think-tank the Lowy Institute, in 2009, China gave close to $US183 million to South Pacific nations in “soft loans”.

This sum includes increased aid to Fiji, the once dreamy holiday nation that Australia and New Zealand politically maligned after the 2006 coup.

Chinese influence in the Pacific is just as inevitable as that of America. Beijing’s protection of sea routes and trading partners is just as crucial for its economy.

The majority of China’s trading partners are in Asia and South America. Expanding from the claustrophobic Yellow Sea is imperative if Beijing wishes to continue the country's meteoric rise into the 2020s.

China is doing business with tiny also-ran Pacific nations to shore up support as a race for influence in the Pacific increases its pace.

There is little Australia and New Zealand can do about this growing influence and Canberra and Wellington will simply have to get used to the idea that the Chinese are here to stay.

Prime Minister John Key, speaking at the Pacific Islands Forum in July, emphasized the ability of the Pacific nations to speak as one on the world stage. He said this “gives the Pacific family a much stronger voice in global affairs”.

Mr Key’s words speak not only to the rising geographic importance of the Pacific region. They also highlight how this relevance is being chased by more than one major world power keen to secure access and influence over the world’s largest ocean.

Russia a surprising player

Mr Key has driven a strong warming in relations between Washington and Wellington during his tenure. And while it is tempting to view this as countering a rising China, there are other players in the Pacific.

Russia is resorting to checkbook diplomacy too and its recent Pacific targets have been south of the equator. Although Moscow joined the vote-buying game relatively late, it is earnestly trying to close the gap.

It is flush with cash mainly through high energy market prices and is turning up the heat on small Pacific island nations. While each country lacks any real political weight, the Pacific Islands Forum carries 16 votes in the United Nations, a highly attractive prize if influence can be exerted on the world stage.

The historic dynamics between Taiwan and China is a good example of the diplomatic machinations that Russia is attempting in the Pacific. Both Asian nations tried to outdo each other in a bidding war to buy recognition from smaller Pacific countries.

The breakaway Georgian states of South Ossetia and Abkhazia were recognized by the tiny nations of Nauru and Tuvalu in 2009 and 2011, respectively. For their kind diplomatic overtures, the two nations received financial assistance packages worth of millions of dollars.

Buying the support of sovereign nations benefits the Kremlin even though the two countries are close to bottom of the world’s most populous countries. Such purchasing of political support is expected to escalate as strongman Russian President Vladimir Putin’s third term moves into gear.

Yet Moscow still has a long way to go if it wishes to counter Washington and Beijing’s already healthy lead in the Pacific. Russia was only invited to the recent Pacific Islands Forum in the Cook Islands as an “attending” country, rather than a “dialogue partner”. Treating it as a snub, Russia declined attendance altogether.

Caught up in an international race

Yet Russia’s interests in securing votes from small Pacific nations for its own border headaches undermines the ability of the PIF to speak with a unified voice as Mr Key emphasises is the forum’s strong point.

This is especially true when it comes to elucidating concerns to the world about marine reserves and the growing threat of climate change.

Ultimately, the members of the Pacific Islands Forum, including New Zealand, are caught up in an international race for their support by much larger countries.

Perhaps the tiny Pacific islands are shrewdly playing off one power against another to leverage maximum gains. So far it has been easy to sell diplomacy for funds. When the only real resource you have is your vote, it makes sense to sell it for whatever price you can get.

But there are bigger stakes for these small, vulnerable nations.

Wise heads must prevail over who these nations do deals with and when. Short-term gains for any of the three major players in the Pacific could undermine long-term, healthier partnerships. Checkbook diplomacy can be detrimental by destabilising governance and encouraging corruption and arbitrary policies.

New Zealand’s example of closer relations with the US might not be useful for every small Pacific country, but it always pays to think about where aid money is coming from. Wellington would be well served by encouraging its Pacific neighbours to move off the dangerous path of selling their support too cheaply.