It may be our most low key diplomatic triumph.
But as Parliament’s Foreign Affairs Select Committee heard yesterday New Zealand has already had a disproportionate influence in China’s new Asian Infrastructure Investment Bank.
New Zealand was the first developed western country to sign up to the bank.
And since then former Treasury Secretary, John Whitehead, has played a critical role in designing the bank and insisting that it meets accepted international standards for Governance and on issues like the environment and other social issues.
His work is said to have been one of the reasons that European countries like Britain, Germany and France were willing to join.
China intends that the bank will be used to finance big infrastructure projects in the region such as its “new’ Silk Road.
The United States has not joined the bank.
Former Federal; reserve Chairman Bernard Bernanke says that is because the US cold shouldered China’s attempts to get more voting rights at the International Monetary Fund and World Bank to match its growing economic clout.
Former US Treasury Secretary Lawrence Summers said recently that “that U.S. cold-shouldering of the AIIB may be remembered as the moment it “lost its role as the underwriter of the global economic system”.
The Bank’s initial capital will be $US100 billion of which New Zealand has supplied just NZ$125 million, paid over five years.
Pressed by Labour’s Phil Goff as to the United States reaction to New Zealand joining so early on with China, Mr Whitehead said that “at no time did the United States ever actually say to us we don’t want you to join.”
And Ministry of Foreign Affairs and Trade negotiator, Rupert Holborow said that though the United States was “cautious about the bank” they didn’t “either formally or informally” try to discourage New Zealand from joining.
Mr Holborow said that the Chinese were pleased to have New Zealand in at the start of the bank because we had a brand around efficacy, transparency and anti-corruption.
“And because John (Whitehead) was an ex head of Treasury who had experience in the World Bank around governance, he had mana and voice there,” he said.
“In those early days before the big guns like Britain and Germany arrived, there was a very strong New Zealand voice and I think it was quite influential.”
Mr Whitehead and the Chinese drew on other multi-lateral financial institutions for guidelines on how to draw up the Bank’s constitution.
But he said it some areas it had improved. For example appointments would not be based on “someone’s passport” but ability and he suggested the way disputes could be handled was better than at other institutions.
However New Zealand’s major contribution may have been on environmental and social matters, which were critical if a Chinese institution was to have credibility with the west.
New Zealand instigated the insertion of “sustainable economic development” in the objective so the Bank.
And in March this year, partly at New Zealand instigation the Chinese convened a meeting in Beijing to discuss environmental and social standards for the bank’s lending.
Partly as a consequence of that meeting Britain, France, Italy, Germany and Switzerland all joined the bank.
In its National Assessment of the Agreement for New Zealand to join the Bank, Treasury noted that New Zealand membership of AIIB would also represent a valuable platform to advance our strategic interests.
“The strategic benefits are probably as material as the economic benefits,” it said.
“Membership would contribute to the objective of integrating New Zealand into the Asia region and regional institutions.”
And it says that New Zealand’s decision to be the first advanced western country to join the bank is being regarded by China as another ‘relationship first’. “
Mr Whitehead said that other countries including China had commented positively on New Zealand’s role in the negotiations.
“And we hope that we have helped create a genuine multilateral 21st century institution that will serve the region and New Zealand’s best interests.”