Australia’s biggest export could be key against tensions boiling over with China

Date & time : Monday, 23 November 2020

Ian Verrender

A rising tide of fear has begun to course through the boardrooms of some of the nation’s biggest companies.

Some can see their entire livelihoods on the line. A great many others worry about a huge drop in earnings and profits and, by proxy, a premature end to their own careers.

Under normal circumstances, it’s difficult enough to get business leaders to express an opinion on anything outside their firm or industry and nigh on impossible to coax them into any kind of comment on politics. They leave that to their lobby groups, to avoid any personal flak.

But when it comes to China, and the rapidly deteriorating relationship between Canberra and Beijing, big business heads are hopping mad and suddenly not holding back when it comes to their innermost thoughts.

Rather than direct their anger towards Beijing, however, and the punitive sanctions being imposed on some of our biggest export money spinners, our business leaders instead are unleashing their fury at Canberra.

In recent weeks, one exporter went public, saying Australian politicians and journalists should “just shut up”.

Australian exports of meat, timber, cotton, coal, barley, wine and seafood have been targeted by Chinese authorities this year as tensions have escalated, usually under the concocted guise of either pest infestation, administrative changes or trade rule breaches.

A fortnight ago, as the annual general meeting season was in full swing, the chairmen of two of Australia’s biggest companies expressed alarm, urging the government to fix the situation urgently.

They’ve been part of a long line of business leaders beating a path to Canberra, urging restraint and calm, fearful that the increasing hostilities will impact sales, profits and, of course, the lucrative salaries Australian executives have built off the back of the trade.

But is there a fix? If there is, it certainly isn’t as simple as merely keeping schtum, taking the money and ignoring the sweeping changes to the geopolitical landscape.

Coalition governments and big business usually see eye to eye on most major issues, but not this one. That’s because there is a fundamental difference between business and government.

Directors and executives of major corporations have a legal obligation to work in the best interests of their companies. Our political leaders, on the other hand, have a duty to act in the best interests of the nation.

Money may be important. National security is paramount.

The shrill nature of Beijing’s recent criticisms of Australia and the brute commercial force it is exerting in retaliation for legitimate comment or objection should be warning enough that our economy needs to be far less reliant upon a single country, even if it is the rising global power, for future wellbeing.

There’s one commodity conspicuously absent from Beijing’s hit list of Australian exports.

Iron ore is the lifeblood of the Chinese economy. Every time the country encounters another financial hiccup, Beijing opens the stimulus floodgates, pouring cash through the banking system and ramping up infrastructure spending.

China’s great urban expansion depends almost solely upon iron ore. And for that, it depends upon us.

While a major iron ore producer itself, China’s supplies of the key steel-making ingredient are low grade and expensive. In fact, material shipped out of the Pilbara in Western Australia can be landed at Chinese ports at lower cost than local supplies.

In the year to June, we provided 62 per cent of China’s iron ore imports. Brazil came in as the second biggest supplier with around 21 per cent.

That puts Australia in rather a unique strategic position. Without our raw material, China’s economy would take a near terminal hit, a fact that wouldn’t have gone unnoticed in Washington.

China desperately needs our iron ore and cannot secure adequate supplies elsewhere. Our exports to the Middle Kingdom far exceed Brazil’s total output, while plans to expand mines in west Africa, to replace Australia, are years off.

While that potentially delivers us power, it also makes us vulnerable to rising global tensions, particularly if Beijing continues with its military expansion in the South China Sea and its long-stated ambition to bring Taiwan back under its wing.

Late last week, Washington signed a five-year health, technology and security arrangement with Taiwan. Ever since the 2016 election, Taiwan has backed away from the One China policy and has resisted Beijing’s overtures putting it on a diplomatic collision course.

That’s raised fears of a military confrontation that could force a stand-off between the US and its challenger for global economic and military dominance.

The US and China both would be reluctant to engage in a full-scale military confrontation. What is more likely trade being employed as a weapon. And Australian iron ore — our biggest export earner — would be on the front line.

If China invaded Taiwan, Washington would put enormous pressure on Canberra to stop the trade. Even in the far more likely scenario of a cold war, our iron ore trade is vulnerable.

Scott Morrison made a lightning visit to Tokyo last week, to strengthen business and defence ties, particularly maritime security. It didn’t go unnoticed in Beijing.

China and Japan similarly have been facing off in the South China Sea for years over a bunch of uninhabited rocky outcrops that Japan calls the Senkaku Islands and the Chinese, the Diaoyu Islands.

Tensions between the two powers date back centuries although emotions are still raw over Japan’s invasion of China in 1937.

The five-decade relationship Australia built with China began to unravel three years ago when the Turnbull government took umbrage at Beijing’s interference in Australian politics, an increasing number of cyber attacks on bureaucracy and business, and revelations of Chinese influence peddling within our universities.Ever since, the government has toughened its approach to China, from criticising its military expansion through the South China Sea to calling for an independent inquiry into the COVID-19 pandemic that crippled the global economy.

Each time, Beijing has raised the stakes. Each time it does, it has accelerated the mechanism that gradually will decouple the two countries on trade.

It’s unlikely, for instance, that we will ever see a return of the China boom in tourism. Our great education export industry, that undermined the integrity of our universities, may well have peaked too. That’s no bad thing, even if it does come at a cost.

One thing is certain; the once-symbiotic economic relationship appears to have been ended by the cultural clash between democracy and authoritarian rule.

For that reason, it is a little unrealistic for our business leaders to believe Australia will enjoy an uninterrupted trade in minerals and energy to a regional and global superpower that is becoming increasingly hostile and threatening.

Those decisions may well be taken out of our hands.

By; abc.net

Australia’s biggest export could be key against tensions boiling over with China

MailList

Follow US