GREG WOOD. The Australian Dream: Many Belts Many Roads.

Nov 21, 2017

The ALP has indicated that, if elected, it will consider positively China’s so called One Belt One Road initiative. The ambition of BRI is vast. It would reshape global trade, transport and logistics in a China-centric way to meet that country’s requirements, contribute to it becoming the world’s pre-eminent economy and, ultimately, its dominant power. It fits with President Xi’s articulation of the Chinese Dream, the national rejuvenation of China as the Middle Kingdom, the communist party front and centre of that objective. Is Labor on the right path? If the Chinese have a dream do we need an Australian Dream?

Shadow treasurer Chris Bowen said:

“President Xi’s Belt and Road initiative will have profound ramifications for years to come. We will come to office if we win the next election with an open mind as to how Australia and China can best collaborate on the Belt and Road initiative, with a clear eyed approach to our respective national interests. We will examine proposals on a case by case basis including considering how the Northern Australia Infrastructure Facility and the Belt and Road initiative can best complement each other.”

Penny Wong, speaking in similar terms, also outlined six main principles to shape Australia’s future interaction with China.

New Zealand and China signed a “Memorandum of Arrangement” on the Belt and Road initiative earlier this year, NZ the first developed country to do so.  Their MoA refers to the “silk road spirit” with “peace and co-operation, openness and inclusiveness, mutual learning and mutual benefit” being endowed with new impetus.

“The participants will promote the exchange and integration of goods, technologies, capital and personnel, push forward coordinated economic, social, environmental and cultural development and common progress, and promote dialogue and fusion among civilisations.”

“Integration” and “fusion” imply rather more than a meeting of minds; more a coalescing of economies and societies. (I can’t recall NZ previously claiming to be a “civilisation” but all good wishes and strength to its arm).  As yet the MoA contains no specific proposals but says the two will conduct a close dialogue and cooperate so as to contribute to achieving BRI’s objectives.

To a considerable degree the BRI’s objectives are more explicable on a grand scale than at a specific level. The BRI link between specific national projects and cooperative understandings announced so far often isn’t obvious. A high level forum held in Beijing in May claimed 76 “deliverables” a mishmash of co-operation agreements on “policy, infrastructure, trade, finance, and people to people connectivity.” Little hard information is available about actual infrastructure projects.  Investments by whom exactly? what’s their trade and economic rationale? the source and terms of finance? construction and future ownership and control? profitability? the costs and obligations they will generate? falling on whom, over what period? governments? state owned enterprises? banks? multilateral institutions? private sector?  One clear exception to this is China’s provision of $50b to build the port of Gwadar in Pakistan and related works, China employing 10,000 troops to guard the railway that’s under construction.

Should Australia follow New Zealand’s example? The great advantage would be to have an ongoing dialogue with Chinese policy makers about China’s economic aspirations and the rationale behind them. The main downside is China pressuring Australia to comply with its aspirations rather than supporting us in securing ours. Hope that Australian firms could win major overseas contracts for construction work is pie-in-the-sky, as part of China’s rationale for BRI is to export or employ its own excess capacity.

Desirably Australia’s involvement would compel us to think through our own national interests and, indeed be prepared to reject China’s demands when needs be.  As my article  points out, Chinese economic policy is becoming more, not less, Beijing and communist party controlled, less not more market oriented. No Chinese enterprise, not even those stock exchange listed, are beyond Beijing’s and the Party’s beck and call.  Australia has to proceed on the presumption that any Chinese investment is ultimately subject to Beijing’s reach.

But if Chinese or other foreign investment can facilitate the development of our capacity as a significant and reliable supplier then it should indeed be welcome. It should be in partnership with Australian enterprises, involve substantial Australian ownership so we hold a substantial part of the supply chain, promote the use of the latest technology, and, in the case a large-scale agriculture, retain leasehold not freehold for “ownership” of land.  Like China’s own approach in fact. To me more worrying than the BRI as such are the provisions on investment now in the Australia China FTA which greatly complicate our policy latitude, reflecting a failure to fully recognise the difference between state capitalism and free enterprise capitalism. Australia would also have to compel overseas firms, welcomed on this basis, to comply with the agreed terms.

The pursuit of peace and cooperation with China won’t be plain sailing for any country, be they in or out of the BRI envelope. Singapore, an early supporter of BRI, sought to have Prime Minister Lien Hsien Loong attend the high level forum held in Beijing in May. A small snub but for reasons unclear, it was rebuffed by China, silk road spirit notwithstanding.

More generally the mores of international trade relations are fraying.  Major powers are becoming ever more inclined to use trade pressure for political ends. Threat of US trade pressure on China is being linked to the DPRK problem. South Korea has been buffeted on one side by President Trump, (critical of the balance of the ROK US FTA) and on the other by China, the latter applying disruptive economic “sanctions” for ROK’s deployment of the US THAAD anti-missile defence system, its understandable response to North Korea’s belligerent threats.  China rescinded those sanctions late October, again not for any clear reason, though Korea made statements indicating it had no current intent to add to this anti-missile array.  But the whole incident smacked of a try-on by China, an attempt to use trade leverage to weaken the US ROK security nexus. That’s a process likely to grow.

If the Chinese Dream has China as the focus and arbiter of the world, what’s the Australian Dream?  Closer links with China is definitely a component. But when it comes to our international economic relations the vision of our independent, democratic, polyglot, multicultural society should be of Australia as a global society engaging in global trade. We want investment and development that enables us to sell to any market, anywhere, be that China, Indonesia, Japan, South Korea, USA, Europe or wherever. We want no strings attached. Commercially we want to be able to take advantage of opportunities as they emerge, as they will. Anything that constrains this flexibility is a negative. What suits us best is not one belt one road, but many belts, many roads.

Greg Wood headed the North Asia Branch in the Department of Trade, the North Asia Division in DFAT, and was Deputy Secretary  P M and C


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