Abbott declares himself a sovereign risk

There’s some vague rhetoric and halcyon days analysis of Tony Abbott’s great China gaff today. As usual, the tribal nature of the Australian media is trumping more hard-nosed analysis, with both The Australian and the AFR going very light indeed on Abbott’s extraordinary declaration that Chinese SOE investment is not welcome in Australia.

The AFR, via Angus Griggs, has a comment that Abbott is returning to Howard era values on Asia. The comment is reasonable enough in its assessment of Abbott’s “values” based approach to foreign policy reflecting the views of John Howard. But that’s where the similarities end as far as I can see. Take a look at the this paragraph from Griggs:

“China should prosper even more if its people enjoyed freedom under the law and the right to choose a government,” was one of the key lines.

To some this might sound like the Bush-era neo-cons in America, which is perhaps not surprising given Abbott did meet Karl Rove in Washington last week.

But Abbott went no further than US Democrats on issues such as political reform and human rights in China.

Equally, most agree that once in office, he would not waste much time on the idea of bringing reform to China, mainly because it’s unlikely to happen any time soon.

Is this supposed to be an argument? US Democrats are some of the most vitriolic critics of China in the world. But don’t worry because “most” (who?) reckon she’ll be right. No worries then.

There are two more important points to make here. Howard may have been enamored of 50s Australian culture but one thing he did not do, ever that I can recall, is go to China and declare that they can stick their money elsewhere. Indeed, under Howard, Australia’s China dialogue become distinctly muted and behind closed doors. And the economic relationship was welcomed with a straight-faced pragmatism (notwithstanding he met the Dailai Lama in 2007).

In terms of how the strategic triangle with the US and China worked, as Paul Kelly once put it, when Howard came to a fork in the road, he took it. That is not what was on display in Beijing from Tony Abbott.

The second point builds on the first and is that the strategic environment has now very much shifted. Barack Obama has declared he is pivoting his strategic imperatives to Asia. He announced this in Darwin a he deployed a garrison of marines there. That is, he’s done with the Middle East and is looking squarely at China as a strategic rival.

This is the context in which Australia’s relationship with China is now evolving and Tony Abbott just declared that he’s pivoting to Asia too. And not in a good way. That is not taking the fork in the road, its the beginning of choosing sides and China might well see it that way given the context.

We could, of course, ask if this is not a bad idea. After all, I’ve been critical of the ultimately unsustainable fork that Howard took. And perhaps this is what we should do. But if so, can we maybe discuss it for what it is instead of making mealy-mouthed excuses?

Then again, the Abbott Declaration may simply be the statement of a political pragmatist of a different kind; one that is happy to jeopardise the national interest in a dog-whistling campaign to a segment of his xenophobic base.

Or, it might be the leading edge of foreign policy outsourced to Cardinal Pell; values driven and naive. I don’t know but the media is supposed to be there to find out.

In this vein, Rowan Callick at The Australian goes less easy and at least has the sense to ask:

Back in Beijing, Abbott on Tuesday expanded on what he meant in his speech: “Foreign investment is very important to Australia’s economic development — always has been and I suspect it always will be — but it does have to be in accordance with Australia’s national interest, and it does have to be in accordance with Australian standards.

“As a general principle we don’t support Australian government ownership of businesses. That’s why it would be rare for it to be in Australia’s national interest to have foreign government ownership of Australian businesses.”

He was indicating a general preference for Australian businesses to be owned by private entities and run on a commercial basis — and believed that to explain this publicly, in China, would be helpful and would diminish increasing concerns in China of sovereign risk.

Investments would still be assessed on a case-by-case basis, and the key determinant would remain Australia’s national interest.

But his use of the adverb “rarely” in terms of permitting control by an SOE — leaving aside the often-disputed question of what comprises “control” — appears to signal that an Abbott government treasurer would usually turn down SOE bids.

So, what about the Singapore and Middle East SWFs, with dubious democratic credentials, that have very large holdings in Australia? Dunno and I guess they don’t either. What about all that Chinese money pouring into Highrise Harry’s apartments? Dunno.