NEW ZEALAND: ASSISTANT SECRETARY HILL'S MEETINGS

C O N F I D E N T I A L SECTION 01 OF 05 WELLINGTON 000686

SIPDIS

SIPDIS

FOR EAP, EAP/ANP
NSC FOR D. WILDER
STATE PASS USTR
DOD/OSD FOR JESSICA POWERS

E.O. 12958: DECL: 09/17/2027
TAGS: PREL PGOV ETRD PARM KNNP NZ XV AF KN FJ TT
BP, CH, IR, CVIS
SUBJECT: NEW ZEALAND: ASSISTANT SECRETARY HILL'S MEETINGS
WITH NEW ZEALAND OFFICIALS IN AUCKLAND, SEPTEMBER 10, 2007

Classified By: Consul General John Desrocher for reasons 1.4 (b) and (d
).


1. (U) Assistant Secretary Hill has cleared this message,
which was drafted by ConGen Auckland and approved by Embassy
Wellington.

--------------
Summary
--------------


2. (C) Assistant Secretary Hill's New Zealand interlocutors
emphasized the need to ensure that, as New Zealand approaches
national elections, the recent improvement in relations is
not undermined by political posturing. With that in mind,
New Zealand officials expressed caution about high-profile
visits, but said a visit by the Secretary early in the year
would be welcome. GNZ officials understood the difficulty of
opening bilateral FTA discussions and expressed great
interest in a regional trade arrangement should the Doha
round collapse. All of Hill's interlocutors emphasized the
GNZ's determination to "stick with Afghanistan." On Fiji,
GNZ representatives expressed hope that the Fiji
establishment will eventually turn on Bainimarama. End
summary.


3. (SBU) During the U.S.-New Zealand Partnership Forum in
Auckland, EAP Assistant Secretary Hill met separately with
New Zealand Trade and Defence Minister Phil Goff, Ministry of
Foreign Affairs and Trade CEO Simon Murdoch, and opposition
leader John Key. Full participant lists are at the end of
this message.

--------------
Bilateral Relations
--------------


4. (C) Hill's interlocutors expressed considerable
satisfaction with the improvement in U.S.-New Zealand
relations over the preceding year. Murdoch noted that both
countries were moving into election mode, describing Kiwis as
facing a "watershed, generational" election. He stressed
that the two sides need to handle the next year carefully in
order to avoid suffering any setbacks. Murdoch proposed to
avoid the most high-profile bilateral issues during this
period ("the 20% of the iceberg that's above the waterline")
while working away on the other 80%, "so that we're well
poised when new governments take over in 2009."


5. (C) Murdoch expressed a general reluctance to see any
high-level visits during 2008, especially later in the year,
fearing New Zealand's elections would so politicize such
visits that they risked doing more harm than good. It was
noted that Secretary Chertoff was planning to make a trip to
New Zealand, and it was agreed that a visit by USTR Schwab
would be useful. Hill encouraged his counterparts to
consider a visit by Secretary Rice, who already had two more
Asia visits planned in the year ahead. Murdoch said that
such a visit, especially early in the year, would be welcome.


6. (C) Key noted that his opposition National Party had
gained the support of roughly half of New Zealand's voters in
recent polls, compared to Labour's 35%. New Zealanders were
tired of Labour, Key said, and projected GDP growth next year
of barely 1% would make them even more "grumpy." If the
polls held true, Key said the U.S. would find a National
government to be a friendly as well as "pragmatic, realistic"
partner. For example, Key said, National would never change
NZ's anti-nuclear policy but it also would not press other
nations to eschew nuclear power. Key endorsed the wisdom of
keeping the bilateral relationship out of New Zealand's
upcoming elections.


7. (C) Shadow Foreign Minister McCully noted that National
is finishing a white paper on foreign and defense policies.

WELLINGTON 00000686 002 OF 005


On the defense side, the paper would focus on niche
capabilities. McCully said that National is also
"considering further investment" on the defense side -
National is sensitive to Australian complaints of New Zealand
freeloading and "we know that Washington thinks this (more
defense spending) is important."

--------------
Trade
--------------


8. (C) Murdoch expressed appreciation for Hill's public
remarks to the Forum supporting, in general terms, a U.S.-NZ
FTA. The NZG is increasingly alarmed at the situation in the
Doha round; Murdoch noted that "failure of Doha would hurt
New Zealand a lot." So much so, Murdoch continued, that the
GNZ is very interested in discussing next steps if Doha does
indeed fail. NSC Senior Director Dennis Wilder said that the
USG is very interested in multilateral options, noting that
the concept of a Free Trade Agreement of the Pacific (FTAP)
was gaining acceptance, even with China.


9. (C) Murdoch expressed frustration with NZ's own FTA
negotiations with Beijing. China was "very risk averse" on
tariff elimination, Murdoch said, initially putting products
covering 80% of New Zealand's trade with China on a
"sensitive" list. On services, he continued, China has "low
ambitions" with discussions on education services
(particularly important to New Zealand) going badly. The
outcome could still be positive, Murdoch concluded, but the
pace is slow.


10. (C) Opposition leader Key noted that his National Party
hoped to "get in (power) and stay in" after next year's
elections. He expressed hope that a bilateral FTA would be
possible during the lifetime of a National government,
possibly in its second or third three-year term, a timeframe
Hill called "realistic." The Australia-U.S. FTA made a New
Zealand deal all the more important, Key stressed. New
Zealand already loses 35,000 people to Australia every year,
and the Australia FTA will only encourage more companies to
shift operations across the Tasman.


11. (U) When asked by a reporter in his subsequent press
conference whether a U.S.-NZ free trade agreement was
"inevitable," Hill responded that he considered such an FTA
"logical," something which could happen "eventually." It
made sense given the way our relationship is developing, but
would require hard work and negotiations by both sides.

--------------
Afghanistan
--------------


12. (C) Murdoch emphasized that New Zealand remains firm in
its support of coalition operations in Afghanistan. There is
"no question of the criticality of sticking with
Afghanistan," he said. While authorization of New Zealand's
PRT deployment must be renewed from time to time, McKinnon
said "withdrawal is not on the table." New Zealand's
Afghanistan deployment stirred little controversy in New
Zealand, he added, describing the degree of public support as
"reasonable," no doubt because New Zealand troops have not
suffered significant casualties. Opposition leader Key made
the same point in a later meeting. Both Murdoch and Key
noted that the only recent attention New Zealand's deployment
had received was a result of the awarding of a Victoria Cross
to SAS Corporal Willy Apiata for heroism under fire in 2004,
the first VC awarded to a New Zealander since World War Two.

--------------
North Korea
--------------


13. (C) Discussion of recent progress in Hill's talks with

WELLINGTON 00000686 003 OF 005


the DPRK dominated the Goff and Key meetings. Hill explained
how recent meetings in Geneva resulted in a DPRK commitment,
by the end of 2007, to provide a complete and correct
declaration of all its nuclear programs and to disable its
existing nuclear facilities. In parallel with the completion
of these steps, the DPRK would continue to receive energy
assistance and the U.S. will consider terminating application
of the Trading with the Enemy Act and removing the
designation of the DPRK as a state sponsor of terrorism.
Hill also related that he stressed to the DPRK the importance
of progress on the Japanese abductions issue. Hill noted
that the very day he was meeting with the New Zealanders, a
joint U.S.-Russian-Chinese technical team was traveling to
Yongbyon to determine how to disable the reactor.

--------------
Fiji
--------------


14. (C) Goff complained that Commodore Bainimarama had been
spooked by former PM Qarase's return to Suva and had "gone
off the deep end" with his recent declaration of a state of
emergency; Murdoch suggested that Bainimarama might have
declared the state of emergency to secure his position before
visiting the MFO in the Sinai. Goff described Bainimarama as
"just a tool of the Muslim Indian population" and concerned
with self-preservation above all.


15. (C) Noting how sensitive the issue was in Washington,
Hill asked how great an impact termination of Fiji's
participation in multilateral deployments like the Sinai MFO
would have on the Fijian economy and support for the interim
regime. Goff said the impact would be considerable, as would
an end to UK recruitment of Fijians into the British
military. Murdoch later said that the NZG appreciated the
steps the USG has taken for far regarding Fiji and, when Hill
asked if the USG should "step it up," Murdoch replied, "not
necessarily." Regarding the UK, Murdoch said that New
Zealand understood that British armed forces could not stop
recruiting Fijians altogether. Nonetheless, the GNZ was
pushing the UK to "do less" recruiting and, just as
important, tell the Fijian government that they are doing
less, which New Zealand calculates would have a significant
impact on attitudes within the Fijian military.


16. (C) Murdoch emphasized that criticism of the interim
government is growing and that only "30-40 members of the
military back" the Commodore. The ultimate goal is to have
the "Fiji establishment" turn on Bainimarama. The opprobium
of other Pacific Island leaders was key to this, Murdoch
said, noting that Australian and New Zealand opposition to
Bainimarama was often perceived by other regional leaders as
overbearing and too direct.


17. (C) Murdoch described the upcoming Pacific Islands Forum
(PIF) as "a defensive operation for us." The NZG worries
that Pacific leaders, out of a mistaken sense of solidarity
with Bainimarama, will "clam up" on the situation in Fiji.
The Samoans and Tongans are firm, but Murdoch expressed
concerns that the Tongans, as hosts, would waver rather than
be embarrassed by divisions at the PIF. The Solomons Murdoch
described as "a wildcard" regarding Fiji. Hill said that he
had no plans to meet with Bainimarama at the PIF, but that
DAS Davies might meet Bainimarama during the U.N. General
Assembly.

--------------
Timor Leste
--------------


18. (C) Goff expressed satisfaction that FRETILIN was out of
power, but noted that the new ruling alliance was
inexperienced and "lacked clout." Goff described PM Guzmao
as having integrity, but also unfocussed and surrounded by an
unhelpful "old crowd." Timor-Leste faced a "big rebuilding

WELLINGTON 00000686 004 OF 005


job," Goff warned. NZ would continue to work with Australia
to improve police-army coordination in Timor-Leste. A sound
security review, with capacity building, "is the path to the
exit for Australia and New Zealand," Goff said. Murdoch
emphasized that "it's time to stop thinking about Timor-Leste
as a cause and start thinking about it as a strategic issue."

--------------
Solomons
--------------


19. (C) New Zealand "will hang in" in the Solomons, Goff
confirmed, and will hope for a leadership change. RAMSI has
great popular support but cannot go on if its authorities and
immunities are removed. Goff added that, while many "bad
guys" are in jail, they are simply replaced by others. More
positively, he said that civil society is starting to develop
and popular pressure is beginning to have an impact on the
government.

--------------
China
--------------


20. (C) Hill expressed hope that fruitful cooperation on
North Korea would help build "a sense of community" in
northeast Asia, particularly between Beijing, Tokyo, and
Seoul. At the same time, he voiced frustration that Beijing
does not understand how concerned the U.S. is by China's
weapons trade with Iran. Were Chinese arms shipped to Iran
to end up in the hands of Iraqi insurgents and used to kill
U.S. troops, consequences for the U.S.-China relationship
would be severe, Hill noted.

--------------
Iran
--------------


21. (C) In response to a question from Goff, Wilder said
that under Ahmedinejad Iran is playing games with the EU and
IAEA rather than engaging seriously. In response, the U.S.
was looking for "new pressure points" in hopes of changing
Iran's internal dynamics. Ahmedinejad is overplaying his
hand, Hill argued, leaving average Iranians feeling anxious
and isolated. He expressed hope that improved cooperation
with China resulting from work together on the DPRK nuclear
program would have a beneficial spinoff on Iran. He noted
that Beijing "is not defending Ahmedinejad as it once did."
Nonetheless, he continued, the USG is frustrated that Beijing
is so vigorously protecting its Iran trade, which accounts
for only one per cent of China's total trade.

--------------
Partnership Forum and Work/Travel Agreement
--------------


22. (C) These meetings took place during the second
"U.S.-New Zealand Partnership Forum," a gathering of
prominent figures from the public and private sector who meet
to seek ways to improve the bilateral relationship. The
highlights were speeches by PM Clark and opposition leader
Key, as well as A/S Hill. All noted the significant
improvement in the tone of the relationship over the past few
years. His Partnership Forum speech was Key's first major
foreign policy address as opposition leader. The text was
balanced and supportive of our bilateral relationship, but he
came across as uncharacteristically tentative. National's
shadow trade minister, Tim Groser, said to Auckland CG at a
post-Forum event that Key was "nervous as hell" about his
first foray into an area - foreign policy - considered one of
PM Clark's great strengths. Above all, Key did not want to
put a foot wrong, and in the end he did not.


23. (SBU) Participants called the Forum a considerable
success, particularly since participation of many significant

WELLINGTON 00000686 005 OF 005


players remained so uncertain right up to a few weeks before
the event that the organizers considered pulling the plug.
Despite the success, there was general agreement that it was
time for the Forum to move beyond the talking stage and, at
its next meeting in 18 months time, consider producing
concrete proposals for policymakers. Many participants also
agreed with former Deputy Secretary Armitage's suggestion
that Forum delegations, a rather grey-haired crowd
(particularly on the U.S. side),needed to draw in younger
participants and also put the bilateral security relationship
on the agenda.


24. (SBU) Hill and Murdoch signed an agreement during the
Forum that will permit young New Zealanders to travel and
work in the U.S. for up to 12 months during their college
years, an extension beyond the current four-month limit.
Such an "overseas experience," or "OE," is an iconic right of
passage for young Kiwis, many of whom currently spend it in
the UK or Canada where work rules are friendlier. Judging by
the flood of inquiries to our press and consular operations
in the hours after the announcement of the signing, the new
agreement will prove popular.

--------------
Participants
--------------


25. (SBU) Assistant Secretary Hill was joined in all his
meetings by Ambassador McCormick, NSC Senior Director Wilder,
DCM Keegan, EAP/ANP Director McGann, Auckland CG Desrocher
(notetaker) and EAP Special Assistant Klein.


26. (SBU) New Zealand participation was as follows:

Murdoch Meeting
--------------
MFAT CEO Simon Murdoch
MOD Secretary John McKinnon
Ambassador Roy Ferguson
MFAT John McArthur
MFAT Carl Worker
MFAT Elizabeth Halliday
Goff Special Assistant Taha McPherson
MFAT James Waite

Goff Meeting
--------------
Same as above plus Trade and Defence Minister Goff.

Key Meeting
--------------
National Party leader John Key
Shadow Foreign Minister MP Martin McCully
Key Chief of Staff Wayne Eagleson
MCCORMICK