GREG WOOD. Pretext Protectionists and Other Viruses

May 18, 2020

A growing list of countries is encountering unilateral trade restrictions as China becomes ever more prone to applying them for both protectionist and political reasons.

Ironically, its threatened measures affecting barley and four beef establishments lock us into maintaining the Australian proposal for an international inquiry into the origins of COVID-19. Longer term however, developments suggest Canberra needs to review its seemingly defective processes for developing foreign and trade policy.

A year ago China suspended pork imports from two major Canadian companies and its imports of Canadian canola. Canada-China relations, never particularly close, had become strained in late 2018 when Canadian police arrested the chief financial officer and daughter of the founder of Huawei, Meng Wanzhou, on a US warrant. China also arrested three Canadians, one a former diplomat, gaoled them, and charged them with espionage.

A year later Meng is still in Vancouver, though living in apparent luxury in contrast to the three Canadians who remain in Chinese gaols. The bans on Canadian pork establishments have been lifted probably because another virus, African Swine Fever, has decimated China’s own pig population. Canadian canola exports remain suspended.

The Canadian Agriculture Minister’s response to the trade measures was that “we have to look into this; it might be only administrative; we might be able to deal with the situation easily”, word perfect with the response of Australian Trade Minister, Simon Birmingham, to China’s barley and beef threats. Sensibly, both are seeking wriggle room to allow the possibility of an agreement.

At least in its initial “logic” China’s anti-dumping action on barley was just protectionist. Similar issues cropped a year or so ago to that now threatening beef around the labelling and marketing of Australian infant formula. Again, China imposed limitations on the tonnage of imported coal that could be unloaded at five of its northern ports important to Australia. Again, the rationale seems to have been to make space in the market for domestic coal production, though in the background was Australia’s decision to exclude Huawei from competing for our 5G network. Such measures can serve more than one objective.

Other countries hit by unilateral Chinese commercial sanctions include Norway, (after the Nobel Prize was awarded to a Chinese dissident), and South Korea, (which boosted its anti-missile defences in response to North Korean belligerence). Malaysia, Vietnam and Indonesia are all contesting with China over resources or fishing rights in the South China Sea. We are not alone in encountering problems; Australia’s distinguishing characteristic is China’s share of our imports and exports.

China, these days, inclines to unilateral coercion, the free trade agreement notwithstanding. (As our current predicament underlines true FTAs are only plausible with countries with whom we share a common foreign policy and domestic economic outlook.) In its trade, and in its industry policy, China’s instinctive response remains protectionist, arguably mercantilist. China heavily subsidises its agriculture, as it does its state- owned enterprises. Ironically, its principal critic, the US, has in President Donald Trump another “pretext protectionist” fond of using China as his pretext.

Both China and President Trump have had flawed responses to COVID-19. Both are engaged in dissembling and propaganda as to the virus’s origin. If the explanation given by the Chinese Foreign Ministry spokesman is true, that the virus was introduced into China by an American military reservist, then 83,000 American deaths suggest it constitutes the greatest home goal of all time. The US argument that the virus started in the Wuhan Institute of Virology is also, rightly, treated with deep scepticism.

Around COVID-19 President Xi Jinping’s refrain is to assert the merits of the centralised Communist Party regime in its handling of the pandemic domestically, plus the munificence and example it provides other countries confronting the virus, (which of course wasn’t Chinese in origin). In a vaguely decent world the Australian inquiry proposal should have been unnecessary; in today’s it was certain of a hostile Chinese reaction.

The Australian press and business community are quick to criticise Australia’s miscalculations in its dealings with China; imprudently quick to get the wind up. They are less likely to comment on China’s inept dealings with Australia. How far further advanced would relations be today if China had followed Deng Xiaoping’s precept to hide their strength and bide their time. Trump is widely regarded here with dismay and distaste, a discrediting figure for the US. A China that projected as internationalist, multilateralist, with peaceful intentions would have won instinctive support and respect. Instead the opposite. Increasingly China presents as a centralist, authoritarian, assertive country and a menace, those attitudes exemplified here by their imprudent Ambassador.

So how should we respond? First, we should not drop the current COVID-19 initiative as doing so simply invites more bullying in future. Hopefully, the issue can cool off. In putting on trade restrictions China is hurting itself as well as us, not that that counts for much. So, my apologies to the beef and barley industries but I can offer nothing in the short term. (I can register my respect for the barley industry’s warning to growers of some months back to diversify markets and, possibly, grow something else).

Longer term, Australia does have to adapt; we’re in a nasty world. We need to view any issue that affects our international relations, particularly with China, through better filters than we now apply. My sense, from well outside, is that the circle providing foreign policy advice to the government is small, with narrow experience and expertise.

If an issue is likely to cause a tension between our foreign policy and our trade interests then it warrants cabinet consideration. It is not apparent how the combined Department of Foreign Affairs Trade now works, its public profile being its over-egged consular activity. DFAT needs (again?) to be involved in the development of government policy at the formative stage, not advised of decisions after they’ve been taken. The respective trade and foreign policy considerations need to be clearly before Cabinet, with both Ministers present, separately briefed by both trade and foreign policy experts. If being in the same stable causes blurring of such advice, then split the Department.

Kevin Rudd’s views notwithstanding, it’s better if a Prime Minister doesn’t carry the case on issues like Australia’s COVID proposal. Better that our invisible Foreign Minister or the Health Minister do so. You always want the nation’s most senior office holder in reserve, an “absent presence”, not directly involved, capable of decreeing or agreeing to a change in tack if change in tack is warranted. He can claim any credit later. Also, as others have noted, before running an international initiative we need to line up the ducks, get domestic and international support, get some food-tasters.

Finally, with China, we need to start applying what I would label the “Trump Test”. If we were to consider any proposal affecting China, as if it was the US not China we were dealing with, what would we be prepared to ask of them in any situation and what response and reaction could we expect? It’s great to speak truth to power, but in dealings with China we need now to apply a higher, clearer, national interest threshold than we’ve done to date. At least when they react next time we will be better prepared.

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