WELLINGTON -- The clash between the U.S. and China over trade and technology is pushing Asia-Pacific countries to choose sides, exemplified this week by New Zealand's move to block China's Huawei Technologies from contributing to its 5G mobile network.
It was not a decision Wellington could take lightly.
New Zealand in 2008 became the first developed country to sign a free trade agreement with China. Later FTA partners, especially Australia -- a close rival in dairy and other key export sectors -- have won better access to the Chinese market in some areas. So last year, Wellington opened talks with Beijing on upgrading their pact.
Paul G. Buchanan, director of geopolitical risk consultancy 36th Parallel Assessments in Auckland, said the Huawei decision could slow or sidetrack the trade talks and later lead to a breach with either China or the U.S.
"I fear the time of reckoning is coming sooner rather than later because the U.S. is accelerating its conflict with China," he said. "One or the other will put the squeeze on us and we need a contingency plan."
The two governments' last round of talks was held in September. A sixth round was to be held soon. Prime Minister Jacinda Ardern had been set to visit China in December, but last week Beijing called off the trip over what Ardern's office described as scheduling issues.
Huawei had announced the successful completion of a 5G network trial on Nov. 21 with telecom operator Spark New Zealand. But on Wednesday, Spark said it would not be able to proceed further with Huawei, due to a Government Communications Security Bureau ruling that the Chinese company's participation in the network posed a significant security risk.
The move came as the U.S. has lobbied allies, such as Canada and Germany, to keep Huawei equipment out of their planned 5G networks.
"The U.S. and Australia have already acted," Buchanan said. "The word is Canada and the U.K. are leaning toward acting. If they went ahead and rejected Huawei and we approved it, the diplomatic fallout would be very consequential."
New Zealand Trade Minister David Parker on Wednesday downplayed fears of economic repercussions from the Huawei decision, telling reporters that Wellington and Beijing have a mature relationship. A Chinese Foreign Ministry spokesman, however, urged New Zealand to "provide a fair competition environment for Chinese companies operating in New Zealand and [do] more to benefit bilateral mutual trust and cooperation."
On Thursday, both sides sought to lay a path to a compromise. Andrew Little, the minister overseeing the Communications Security Bureau, said Spark could potentially modify its 5G development plans in a way that might address the government's security concerns.
Huawei New Zealand said it was seeking an urgent meeting with the government. "Huawei would welcome the opportunity to actively address any concerns and work together to find a way forward," said Deputy Managing Director Andrew Bowater.
The government has been under pressure in recent months over alleged meddling by China in domestic affairs. On Tuesday, Winston Peters, who serves as deputy prime minister and foreign minister, weighed in on a controversy over reports of intimidation and harassment directed against local professor Anne-Marie Brady, who has published research into Beijing's manipulation of ethnic Chinese organizations and media.
"You would be terribly naive to think that New Zealand citizens are not being spied on by foreign powers," Peters told a radio interviewer. "The issue in this case is from whence it's happening."
He also said that he was concerned about the alleged activities of Yang Jian, a legislator for the opposition National Party who has admitted to being a language instructor at a Chinese spy school and a past member of the Chinese Communist Party.
"The reality here is that we're being asked to believe that someone who was part of the Chinese secret service no longer has any loyalty to that service," Peters said.
On Monday, 29 academics signed an open letter to Ardern calling for her to clearly oppose intimidation of scholars, following Brady's report to the police of tampering with her car. She had previously reported burglaries at her home and university office.
Strains between Wellington and Beijing have also shown up on the security front. In July, New Zealand's updated Strategic Defence Policy Statement noted that China was challenging the existing world order and expanding its military presence in disputed waters, triggering a rebuke from the Chinese Foreign Ministry.
