Howard bashes Abbott’s Great Gaffe of China

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From the AFR today:

In an off-the-record speech earlier this month, Mr Howard said Australia needed to be receptive to Chinese investment even when that created controversy. His comments are at odds with the position taken by Opposition Leader Tony Abbott, who said on a visit to China five weeks ago it would rarely be in Australia’s national interest to allow a foreign government to control an Australian business.

…“You’ve got to remember when a company invests, whether it’s state-owned, partly state-controlled or not, it still has to comply with the laws of Australia and it’s quite possible for the treasurer of the day to impose conditions on the investment,’’ he said

Mr Howard said the debate over the “so-called [choice] that Australia must make between China and the United States” was “rather juvenile’’.

…“When it comes to foreign investment, can I say this, I’m very much in favour of having Chinese investment, just as much as I was in favour of having Japanese investment. Japanese companies of the 1970s and ’80s weren’t state-owned but they were certainly state-told on many occasions.’’

Obviously I agree. But I often wonder why it is that leaders don’t argue their case rather than rely simply upon analogy (aside from pandering to the lowest common denominator). The reasons for keeping the foreign direct investment pipes open are deep and multi-disciplinary. Why not list them?

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  • post WWII market architecture was designed to promote trade over war. Closed borders means the only way to get needed resources is by invasion. Clearly it’s a better idea to sell stuff to each other
  • for the most part, trade improves productivity and standards of living (though I accept it can also lead to over-specialisation)
  • for a current account deficit country, selling assets is a fact of life. If you want to stop that then you must first debate why you have a CAD in the first place
About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.