A nice piece from Paul Kelly on the weekend:
China’s targeting of Australia’s highly successful $1.1bn wine export market, the latest threat in its campaign of trade retaliation, is a small cog in the larger global revolution where the US and China are decoupling in trade and technology — the lurch into a potentially demoralising long-run confrontation.
Prime Minister Scott Morrison offered his established refrain when asked about economic coercion from China on wine exports: “We will never trade away our sovereignty in Australia on any issue. We will be consistent. We will be clear. We will be respectful and we will get on with the business.”
Morrison was sending two messages that transcend the wine issue — Australia will not be bullied by China but it stands ready to repair the damage on the China trade front. This is a different message and position from that of US President Donald Trump, now in campaign mode, with the US embracing an ideological war with China in the cause of free societies and moving along the path of technological decoupling.
Herein lie Australia’s post-COVID-19 conundrums. First, our economic integration into East Asia and China will become more important and guarantees our superior recovery (compared with OECD nations), yet our political relations with China are deteriorating. The virus will reinforce East Asia and China as the focus of our trade and the US and Britain as the focus for our investment.
Second, our “dual play” with America becomes pivotal. In this world where China’s tactics are to exploit the COVID-19 chaos to expand its power, the Morrison government is deepening its security and defence ties with the US but is also asserting its independence within the alliance as America plunges towards an economic and technological schism with China that poses serious risks for Australia.
…America is moving into dangerous waters, typified by what might be called the Pompeo Doctrine as enunciated at the Richard Nixon Library last month. US Secretary of State Mike Pompeo declared a global struggle that should involve all nations since “securing our freedoms from the Chinese Communist Party is the mission of our time”.
The Trump administration calculates that by intensifying economic pressure on China its model of Communist Party capitalism will shatter from within. This may become the critical calculation of the coming decade. There have been multiple predictions that China’s huge debts, rampant corruption and state-run capital direction cannot endure. The risk, however, is that America has misjudged and China’s so-called fatal internal contradictions might not be realised for many years.
This is the context for the brand of Australian distinctiveness that Morrison is now carving out…Morrison’s message: there is a distinct separation between Australia and America. This is pitched to both America and China — to America it meant we don’t share all your views on China, and to China it meant don’t think we subscribe to everything the US does.
…Referring to the China trade relationship, Morrison said: “It’s a mutually beneficial economic relationship. And it does go broader into a strategic partnership. It is a two-way mutually beneficial relationship for Australia and China. And we want to see that preserved. The United States has a different lens on this problem.”
…China’s share of Australian exports is only increasing. Good luck to the defence boffins demanding that Australia cut its economic dependence on China. If you look solely at the trade numbers you conclude China will become more important to Australia post virus.
According to Scott and Paul, this is what a “galloping strategic partnership” looks like:
- Chinese students down 20% over the year with local unis under intensifying pressure for corruption and the CCP in full roar to crush the trade along with tourism;
- Chinese capital blocked at its border and acquisitions here off the table anyway;
- Aussie LNG volumes sailing in circles in the Coral Sea;
- explicit Chinese bans for Australian coal;
- new Chinese tariffs on barley, beef and wine with more coming down the pipe.
Did I miss something? Sure, iron ore revenues are up spectacularly, band-aiding over the rest of it. But this is purely the result of COVID vicissitudes for both supply and demand. These will pass soon enough as China slows and it seeds competition worldwide.
I would like to say that Paul’s elegant formulation of Australia’s emerging position is accurate. It would be great if we were able to sustain the “rules-based order” such that we could continue our great straddle between Great and Powerful friends. There will be some pretense that it has life if the Biden Administration arrives. But it will only be a moment of slowed deterioration not a change of direction.
Indeed, in my view, the writing is on the wall for Australia’s Chinese trade. As usual, Paul Kelly’s Rum Corp mates are playing little role in the decline, happy to sell their kid’s freedom for another belt of whisky. But for Beijing, it is abundantly clear that Australia has already crossed the line from friend to enemy under sufferance.
And it is right to see us that way. Paul Kelly’s parlour preening of the “Morrison Doctrine” is only the latest example of an intellect long lost to the Canberra bubble. The world in which a “Morrison Doctrine” had enduring force is passing before our very eyes and Beijing knows it even if Paul doesn’t. Power relations across the US/China theatre have shed globalisation’s friendly garb and now exist largely in terms of raw imperial power.
On the one hand is the US liberal empire, its force of liberal democracy and markets made real by the freedom of navigation patrols of the most powerful navy in history.
On the other hand is the rising Chinese illiberal empire, its force made real by autocratic containment of all human freedoms bar trade with Chinese characteristics.
This is the outline of today’s developing Cold War contest. The “Morrison Doctrine” has no place within it. I would go so far as to say that it is no more than an over-egged marketing slogan born of an advertising dullard.
The question confronting Australia now is not how do we manage the US versus China. It is how do we prepare for a hostile China and the collapse of trade with it, including iron ore.
COVID-19 is going to accelerate China’s slump into the middle-income trap, exacerbated by the US (and increasingly European) Cold War upon it. The direct corollary is that prosperity-based CCP political legitimacy will crumble. It’s not hard to guess where Bejing will turn next to sure up its power at home. We can already see it in Hong Kong and the armies of “wolf wankers” strutting their stuff globally. Beijing will become increasingly hostile to the world to arouse nationalism at home. Its next target will be Taiwan.
Invasion isn’t imminent. The One China deadline is 2049. But the timetable will be dictated by CCP fears of insurrection at home and little else, so will probably come sooner than expected.
When things turn more heated, does Paul’s little Canberra bubble really believe that Australian iron ore will be allowed to be recycled as bullets and missiles aimed at the destruction of the Western Pacific US liberal empire? Resistance will come from the Australian community, like it did during the build-up to WWII, as “Pig Iron Bob” learned. As well as from every democratic ally Australia has worldwide, not least our security guarantor, the USA. It would be incredibly easy for Washington to park an aircraft carrier off the Pilbara coast in a friendly blockade. Frankly, why wouldn’t it? What a great way to accelerate a historical CCP decline. Would Australia back the Chinese sinking it? Pfft.
Of course, in reality the US won’t need to do it. The threat of it is more than enough to bring Canberra to heal.
Australians know all of this in their bones even if our leaders do not:
So, what should we do? This:
- tax the living daylights out of iron ore today (plus add an export tariff) and save the proceeds in a sovereign wealth fund:
- block all Chinese takeovers and pursue selective non-commodity divestitures to protect ethnic Chinese from CCP evils;
- get unis off the Chinese tit;
- deploy all policies for a lower AUD to preserve and grow all non-China exports;
- massively incentivise the rebuilding of our industrial base using industry, energy and tax policy to reduce Chinese imports.
Plus show Paul Kelly the door.
