Environment: Key's harder foreign relations task

Free trade is the easy bit for John Key, new ambassador. There has been a strong political majority at home for free trade for two decades. The hard bit in international relations is the environment.

All foreign policy starts at home. Diplomacy in essence is promotion of the national interest, getting your way with other countries to enhance wellbeing at home.

Big countries can do that with force or arm-twisting. Small countries have to win friends and influence people. That requires policy and practice at home to be consistent with positioning and presentation abroad.

In trade New Zealand measures up on both counts.

In world trade forums and in high-quality bilateral agreements, New Zealand has pushed free trade because it has lifted overall domestic economic welfare.

And free trade is practised at home. Tariffs are low to non-existent, non-trade barriers are few (apart from biosecurity protection), subsidies are very few and low and investment hurdles are low. This is a very open economy.

So when Key goes to international forums, free-trader Tim Groser in tow, he can preach free trade hand-on-heart, as could Helen Clark before him.

And free trade sermons have more than usual relevance right now. The credit crunch has dunned taxpayers for huge bailouts of wildly irresponsible and staggeringly well-paid financial capitalists. Taxpayers naturally want tough controls as the price of the bailouts.

There is a risk that when governments impose those controls they may develop a penchant for regulating other sectors. Moreover, as domestic economies shiver and shudder through the recession and as unemployment lists rise, demands for trade protection are also likely to get louder and governments might listen and act.

Switch the focus to climate change and the environment. Can Key preach hand-on-heart on these matters?

Two years ago climate change was the excitement of the moment. But recession has sidelined it. Bothering about the environment is a luxury for the well-off. When the well-off feel poor or even just less well-off, the environment goes back of mind. When the poor can’t eat, who among them cares about polar bears and kakapos?

Key gets this. Campaigning this year, he made a lot of the wage gap with Australia. He interpreted the stampede to Australia as a quest for a higher material standard of living.

Accordingly, he made speeding up economic growth his top priority. He has restated that since taking office.

Where does the environment fit? Helen Clark wanted us to be a “world leader” on climate change and she was feted abroad for her rhetoric. At home, with not many exceptions, business excoriated her for that rhetoric on grounds of cost.

Key has made it clear he stands with business on climate change. Or does he?

His pro-business stance is evident in his vote against Clark’s bill on the emissions trading scheme (ETS) even after it was substantially amended in ways that responded in some measure to business concerns.

It was Key’s call to say that in government he would amend the ETS to cut the cost to business. He talked of a “balance” between environmental and economic interests — thus marking them as competing — and, by prioritising economic growth and making trade top priority in international relations, he indicated where the balance should lie.

Key also wrote into his agreement with ACT last week a “delay” in implementing the ETS and a special select committee review which will explore substituting a carbon tax, ACT’s and the Business Roundtable’s preference.

But, for all that, National also remains committed to an all-sectors, all-gases ETS and to passing an amending bill by September. There is therefore a huge parliamentary majority against ACT’s carbon charge.

Stir in a flirtation by Key, talking in September to National’s Blue Greens ginger group, with “marriage” of the economy and the environment, not just a “balance” of their competing claims.

And note that his tourism policy, for which he has taken personal ministerial responsibility, promises this: “Make the changes necessary in New Zealand to ensure our environmental performance matches our rhetoric in international marketing.”

That depicts the environment as integral to economic growth — a badge to persuade foreign consumers to pay premiums for New Zealand goods and tourism and a badge of honour to lift New Zealand’s chance of getting special forestry, land-use change and methane needs addressed in negotiations over what follows Kyoto when they rise back up the agenda after the recession.

It amounts to brand: clean-green, 100 per cent pure and all that. An ETS “review” risks the brand. It risks foreign media attacks.

So there are two Keys: pro-business and pro-brand. Which is he?

Key’s problem, like Clark’s before him, is that, unlike on free trade, there is no political majority on the environment and climate change. He will have to choose between “balance” and “marriage”. That’s the hard bit of foreign relations.