Australia moving to “China containment” policy?

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From Crikey:

Abbott has never outlined any China policy, and [former Chinese ambassador Stephen] FitzGerald says the government simply does not have one. But someone clearly does. Foreign affairs insiders say the policy shift in favour of Japan (read: the US) is the handiwork of Andrew Shearer, Abbott’s chief foreign affairs adviser, a former diplomat who once held the No. 2 position in Washington. He worked briefly for John Howard and sat out the Labor years at the Lowy Institute, returning to the Libs once it became clear Abbott would triumph last September.

Shearer is widely known to be an active subscriber to the pro-US/pro-Japan view of the world where China is seen as a rising threat that needs to be contained. Others simply describe him as a “neocon”, a shorthand reference to the now largely discredited pre-emptive war clique that permeated the George W. Bush administration; their legacy is the wars in Iraq and Afghanistan.

Many are concerned about Shearer’s influence, hardly a new view about those who have been in his position. They describe his views as outdated and warn they are not in Australia’s interests.

FitzGerald claims he has a smoking gun, saying the draft communique from Australia’s summit with the US and Japan in October, which supported Japan’s East China Sea case, was changed at the last minute; the original DFAT draft was replaced by a new, pumped-up version, drafted by Shearer.

With Abbott having demonstrated he has, at best, a diplomatic tin ear, it’s the unelected Shearer, with his close connections in Washington, who now appears to be setting Australia’s foreign policy agenda. And in the process, foreign affairs insiders say, making radical, possibly dangerous changes.

I hope this is scuttlebutt because it sure isn’t national interest policy.

David Llewellyn-Smith

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.

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Comments

  1. interested partyMEMBER

    and in a nationalistic rebuttal, China blacklist Australia as a destination for the hot money leaving China’s shores……….leaving a sizable hole in the supports to our FIRE sector……….hmmmm……….nah, that won’t happen….will it?

  2. Might be idle gossip but don’t underestimate the extent to which there are lot of bright young things hanging around the LNP who adore John Howard (but lack his pragmatism) and the uber idealism of the US neo-conservative “vision splendid”.

    They are not really conservative as they lack the caution and gradualism inherent in Burke conservatism. They like conflict, nice clear lines and a strong belief that force can make the world a better place.

    Every now and then old school conservatives will fire a shot at them – eg – old school conservatives were opposed to the Iraq fiasco for most of the reasons the invasion later demonstrated in spades.

    The Neo-cons interpret the actions of everyone else through their own narrow frame of reference and rather bleak assessment of human nature.

    They would prefer to think of themselves as hard headed, realists on a mission from God. To outsiders they smell like Zealots.

    They are less conservative and more like an inversion of their extreme ‘left wing’ opponents. The only difference is that there are not many hard core lefties left. This of course does not stop the neo-conservative from claiming the world conquest by socialism draws near and the US particularly close to the day of reckoning.

    The lack of hard core lefties is probably because many of those hard core idealistic lefties who wanted to “change the world” and “make it better” decided that it would be easier to do so from the other side.

    To some extent the search for new enemies has been a process of creation – eg radicalisation of Islam as a result of Western/Soviet middle east policy post WW2.

    Neo-conservatives are quite a different group to the US Libertarians even if they both tend to hang out in the Republican party. They have some policies in common but very different philosophical outlooks. Libertarians have much less enthusiasm for US Imperial Glory.

    To a Neo-Con the rise of China is a bat flying out of the belfry as it mixes the smell of their old commie enemy with a potential threat to muscle up against. If they play this well they will have a enemy for their mental cartoon landscapes for decades.

    One hopes that China is smart enough to avoid being drawn into their game and keep its focus on internal development and trade with the rest of the world. Looks like the Iranians may have started to realise that engaging with the Neo-Cons is just bad for business. Better to smile and wish every one well – even Israel – that would really annoy them.

    As that has been successful policy for 40 years there is a good chance they will stick to it.

    But if the Chinese military men are cut from the same cloth as those in the west they may commit the mistake of making rocks covered in bird shit points of national pride.

    • migtronixMEMBER

      The neo-cons really are Troskyites – they want “permanent revolution” too they just call it “end of history”.

      Philosophically they are midgets.

      As for shifting focus to the land of the rising cancer epidemic? Yea that’ll work out a beauty.

  3. I like Explorers level headed comments

    The “Don’t buy now” advice has been wrong for most people for years now. Most people now living who have bought more than 12 months ago are in front in impact on net worth.
    Maybe they will have so much gain before it happens that they will still be better off from having bought in the last few years.

    Hindsight is great and also frustrating, driving around areas like Thornbury and Brusnwick and wondering why didn’t I buy an old house here on a good parcel of land ten years ago

    Over the weekend I went to the northern suburbs of Melbourne, Mernda/Yan Yean, areas now filled with home builders signs and house and land package advertisements, I couldn’t help but wonder how long it will take for these areas to become populated, for the estates to fill up, maybe 7-8 years, and when they would widen existing roads from 1-2 lanes (10 years) and for there to be shops, schools, an extended train line (10-15 years)

    This is the issue I have with a less regulated land market, greater availability of land doesn’t always mean a better deal for potential buyers. Ultimately, people vote with their feet and struggling land sales in these estates shows that maybe living in these areas is a bridge too far

    Finally, it is hard to say if there is a right or wrong way ahead, there is a high level of demand for homes within 15kms east of Melbourne CBD due to the lifestyle, proximity to good schools andpublic transport with the addition of some cashed up new migrants that I find it hard to see prices falling without an economic disaster, falls in the AUD will lead to an even greater influx of money for housing from our asian neighbours

    My thoughts anyways, I could be wrong

    • Good locations will remain good locations.

      All that matters is that buyers are given choice.

      The key choice they deserve and have been denied is the choice to buy low cost agricultural land on the outskirts and build a house. Instead that choice has been loaded up with costs and expense by ‘well meaning’ planners.

      If they don’t want to live there at low cost they are then free to pay more and compete for more expensive locations closer in.

      • Sure, I am all for it

        But I thought this was available now? Or did I miss something

        I can’t remember how many times I spoke to friends in the 90s who would say it would be a good idea to buy land (rural at the time) in areas like Officer and Cranbourne North, these have since been bought up by developers, those that got in early did well

        But there were no guarentees it would pay off

        Anyways, one can still buy a cheap semi rural house on a large parcel of land if they are willing to put up with the non existing infrastructure and a long drive to your nearest Priceline

        Could the fact that people aren’t leaving middle suburbia in a concentrated mass exodus mean that they are willing to pay higher prices to be able to take their kids to a doctor, catch a train and see a movie without driving 20kms?

      • “Could the fact that people aren’t leaving middle suburbia in a concentrated mass exodus mean that they are willing to pay higher prices to be able to take their kids to a doctor, catch a train and see a movie without driving 20kms?”

        No – because the price of living on the outskirts is not much cheaper.

        A basic land house package on the edge of suburbia should cost between $150-$200K – that would make a 20% deposit $30-40K.

        A new 3 bed home starts at less than $150K and the block of land should cost no more than $20-30K. (with an appropriate model for financing development costs over a 30 year time span).

        At those prices there might well be a mass exodus of people deciding that a longer drive is worthy paying $200K-$300K less.

    • arescarti42MEMBER

      “The “Don’t buy now” advice has been wrong for most people for years now. Most people now living who have bought more than 12 months ago are in front in impact on net worth.”

      I’m fairly sure this is false, prices in real terms are still well below what they were 3 years ago in most capital cities. Plus almost all the people that bought in that time are paying a hefty premium in interest over renting.

      More to the point though, it’s silly to bring up what’s happened in the last 12 months when the life of the loan for most new entrants is 30+ years.

      “This is the issue I have with a less regulated land market, greater availability of land doesn’t always mean a better deal for potential buyers. Ultimately, people vote with their feet and struggling land sales in these estates shows that maybe living in these areas is a bridge too far”

      I think what struggling sales shows is that $200k for a 400m^2 block of land in a far flung subdivision with no infrastructure is a very poor proposition for most people. If the land market was deregulated, that block could easily be double the size and half the price.

      • I guess it depends over what timeframe you look at things and in what locations, markets within markets, Melbourne grew around 7%ish percent last year, Mt Waverley 22%, if you can identify why it grew it may show you where to buy next

        I’d be pretty sure that between 1980 & 1990, 1990 & 2000, 2000 & 2010, prices rose above inflation, the median in a suburb I looked at went from $280k to $630k between 2000 & 2010, I’m guessing inflation wasn’t running at 8% during that time? Pretty common growth throughout Melbourne in that decade

        Leave that renting cheaper than buying nonsense at the door, well der, if buying was cheaper then everyone would buy instead of rent, what you are doing by buying is taking short term pain for long term gain, would hate to think how much more i’d be paying in rent now for my home had I not bought (thats even at the money I borrowed at that time if I hadn’t paid a dime off the principal)

        Maybe go speak to someone that bought a house in the 80s or 90s and ask them if they are sad they didn’t just rent the whole time? They would look at you like you were mad

      • flyingfoxMEMBER

        @OMG You are equating property to investment. Great if it is an IP. Doesn’t matter if it is not. I don’t care if Mount Waverly grew 22% because I don’t want to live there.

        Also you have to put what happened in the last few decades into context and not just assume they will continue.

        We had massive financial deregulation, credit boom and wage inflation along with a ToT inflation. Almost every part of our economy was distorted due to the mining investment boom. We have developed a culture of property investment.

        Melbourne only really took of after 2005-2006. The 5 years prior it might have even gone backwards. I will try and find evidence of this because I visited Melb for the first time in 2006 and compared to Sydney, it was cheap. A major push for this was Perth based mining workers (need to find articles) that were using Melb property to negatively gear their ridiculous incomes.

        I am not saying your points are incorrect but you are speaking from the point of a an investor, a speculator actually. Even from that point, I remember posting on a RPData release middle of last year where I showed on average, an investor buying in the last 5 years and selling in that quarter would lose money.

      • You need to decide whether you’re talking about a timeframe of the last 12 months or the last 30 years.

        Because you start off at the former, then make a whole bunch of arguments that are only relevant to the latter.

        Over the last 12 months, almost anyone who has bought will be worse of than someone who has been renting. Indeed, that would remain true for the vast majority even stretched out to a 5 years timeframe.

      • arescarti42MEMBER

        Some excellent responses here.

        I might add a further comment on the decision to buy or rent.

        Sure, in retrospect, the decision to buy over renting was an obvious winner in the 80s or 90s, as housing was cheap both in absolute terms, and relative to renting, and the period was followed by a massive boom in real house prices.

        In making that decision today, you need to consider all the available information, not just project past experiences in to the future.

        When I consider current ridiculous property prices, the risk of a correction, the precarious situation of the Australian economy, probable slow future house price inflation, and rents that are (comparatively) at bargain basement levels relative to mortgage repayments, renting is a pretty obvious choice.

      • You misread, I am saying that nearly everyone who has bought in all of recorded history, except maybe the last 12 mnths are ahead in net worth terms.

        I am not saying real prices have risen or fallen I am talking about net worth (in nominal terms) of people.

        I am *not* including the people who bought in the last 12 months as ahead in net worth terms because they are probably still behind because of stamp duty, loan fees, higher mortgage interest component than rent, etc. but in Sydney they probably are well ahead.

        The dynamic for home buyers is the huge leverage makes any significant increase in price over a short time frame a big increase in net worth. for investors it is compounded by the tax sheltering of other income through interest deductions and depreciation (for rental properties).

      • Just a minor edit if I may.

        “The dynamic for home buyers is the huge leverage makes any significant increase or decrease in price over a short time frame a big change in net worth.”

  4. “Australia’s close relationship with the United States is the cornerstone of our foreign and security policies, and a significant factor in our broader engagement with our region.

    The global primacy of the United States has underwritten our regional security and prosperity, and helped ensure that global “goods”, such as freedom of the seas, has been maintained.
    Suggestions that the United States quietly surrender its primacy in Asia, which has been proposed here in Australia chiefly by ANU academic and former Labor adviser Hugh White, should concern all nations which have prospered under the current system of international rules and norms.

    Australia stands alongside other countries in the region in our commitment to continued US engagement and leadership in Asia.

    In this context it is important to note that in order to form government the Australian Labor Party entered a formal written alliance with the Australian Greens.
    The Greens oppose the fundamentals of Australian foreign policy that have been implemented by all governments for decades.

    Specifically the Greens seek the end of the ANZUS alliance; to close all existing foreign bases on our territory; the end of bilateral free trade agreements including the Australia-United States Free Trade Agreement; our withdrawal from the WTO, the IMF and the World Bank and that is just for starters.
    If these published policies were taken up by the Gillard Government, in any way, they would represent the biggest single threat to Australian international security arrangements as it would mean the abandonment of all major security links with the United States.
    Recalling that before our alliance with the United States we depended on the British security umbrella, this would turn on its head 110 years of Australian defence and security policy.

    Despite their rhetoric and continual claims to the high moral ground the Greens policies are a genuine risk to the peace a security and economic welfare of Australia given that they are dictating Labor Government policy in many other areas.

    But enough of the Greens!

    In regard to Australia’s relationship with the emerging power in the Asia Pacific, namely China, the Coalition will return to a policy based on shared interests and mutual respect.

    China is a critical player in world affairs and there are few greater global challenges than the re-emergence of China as a superpower.

    Given our regional and economic proximity, how Australia manages shifts in global economic power will have profound implications for Australia’s domestic and foreign policymaking.

    I note that for the first time in living memory our major trading partner is not one of our major strategic allies. However I reject the notion that Australia must choose between its economic and strategic interests.
    China’s increasing economic, political and strategic prominence presents opportunities and challenges for our two countries.

    The Coalition believes that it is essential that Australia-China relations remain a strong and consistent partnership based on shared interests and mutual respect.

    We will continue to voice our concern over issues where we disagree or where we believe go against the values held by our Party, and the majority of Australians.

    In the end however, it will be patient diplomacy not public hectoring that will achieve real results.
    I sincerely hope that we can assist the Chinese leadership to understand the enormous benefits to their country of a more open and transparent form of government that matches their more open and competitive approach to markets.”

    http://www.liberal.org.au/latest-news/2011/07/28/priorities-foreign-policy-coalition-government-0

    Crikey is slipping. I certainly don’t bother with it anymore.

    • migtronixMEMBER

      Oh no you’re right much better that you regurgitate NLP copy here so that we’re all sullied wading through such tripe!!

      But enough about the Greens? Hey Liberal retards last time I checked NZ hadn’t been invaded by anyone once they refuse US nuke ships access to their waters…

      • The excerpt above appears to give fair illumination as to the Government’s broad ideological direction re China and the US.

        Crikey will surprised!!

    • Agree re Crikey but that speech is dated 28 July 2011 and from opposition.

      Isn’t the issue whether in government and particularly in recent months the spirit of that speech is evident.

      You may be correct and people are getting too excited by a word here and there and in fact there has been no change in the ‘vibe’.

      Hopefully you are right but never hurts to draw attention to issues before they develop a head of steam.

      After all perhaps not all ministers are reading the coalition speech archives as closely as we do.

      • In my view there appears no evidence direction has changed in any substantive way from that indicated in the speech. There has been growing interest in matters surrounding the China seas – a more definitive assessment should not surprise.

    • migtronixMEMBER

      The except above appears to give fair illumination as to the Government’s broad ideological direction re China and the US

      No it doesn’t! Its just copy…so is crickey…

    • migtronixMEMBER

      Sorry 3d but what effing direction? Just look at this line with the critical thinking skills I know you possess:

      ” note that for the first time in living memory our major trading partner is not one of our major strategic allies. However I reject the notion that Australia must choose between its economic and strategic interests.
      China’s increasing economic, political and strategic prominence presents opportunities and challenges for our two countries.”

      1st for a nation with a history spanning a whole 100 years this statement is stupid. 2nd It was well past living memory, for its 100 year history Australia has had precisely 2, read em 2, “major allies” – UK/US – which lets face are really just the singe Angloenterprise. But China, the US, the UK have had over hundreds of years of political survival several “major allies” with competing interests to boot (US/France).

      Long story short who do think is wearing short-pants at the negotiation table? Don’t you think its about time Australia started to define It’s own foreign policy interests?

      • As in US will remain key and we will continue to foster harmonious relationship with China.

        Security has always ruled.

    • migtronixMEMBER

      we will continue to foster harmonious relationship with China…Security has always ruled.

      Security from whom? Argentina, for instance, doesn’t spend its whole time talking about how Spain is its greatest strategic partner. Its a stupid discussion, its admitting we’re effectively hiding behind someone elses skirts isn’t it? Shouldn’t we provide for our own security?

      • interested partyMEMBER

        Mig,

        We have provided for our security. We sold a bunch of RE to the Chinese………..they won’t attack their own assets… and the yanks need us as monsanto’s testing paddocks. C’mon, it’s all good.

    • migtronixMEMBER

      Maybe your lib mates can give us a State of the Friendship address tomorrow night – make it an annual worship exercise.

  5. China may be Australia’s sugar daddy, but is a rising threat that needs to be contained. This is not a Neocon view, this is the American view and in fact Obama’s pivot to Asia underlines this policy.

    China is an economically unstable, military dictatorship with huge social problems and corruption issues. It’s a politically unpredictable country who’s military is growing more powerful by the year. Economic instability would lead to political instability in China, which might lead to war. We may even now be seeing the symptoms of economic instability in China’s geopolitical actions.

    So, containment and alignment with Japan & USA may not be such a bad policy for Australia. If China’s economy implodes, the impact on the greater region and the world could be very scary. Better to prepare for the worst and hope for the best.

    • migtronixMEMBER

      America is an economically unstable, military dictatorship with huge social problems and corruption issues. It’s a politically unpredictable country who’s military is growing more powerful by the year. Economic instability would lead to political instability in America, which might lead to war. We may even now be seeing the symptoms of economic instability in Americas’s geopolitical action.

      I only did that because its embarrassing how close it is.

      BTW, China is a politically unpredictable country? In what year, 1949? Try Labor’s spat last year then talk about political stability…

      • Yes, yes, but one’s a goodie, the other a baddie. Can you guess which ? Answer incorrectly, and you risk locking Australia’s foreign policy into a protracted economic death spiral.

      • MiG,

        Interesting juxtaposition although it is based on a false moral equivalency. Not even close to true. Americans voted out the neocons and voted in Obama mostly in opposition to being lied to on Iraq among other things. Would that be possible in China? How about in a China at war?

        America is actually quite economically stable (and self sufficient) compared to most countries in the world. The USD is the most widely held currency in the world.

        Last time I checked Australians and Americans have freedom to vote and to express their opinions in public and on forums such as these without fear. While imperfect, both countries are democracies and long time allies. The US may be many things, but military dictatorship is not one of them. China on the other hand is dominated economically and politically by its military.

        I believe the world rightly fears China’s potential aggression much more than the current US role in the world. Just look at how China treated Australian Stern Hu…There’s an important lesson in that case for Australians to consider when weighing up the China relationship.

        China lacks transparency and a stable political system It is a nation of men/power and not laws. 1.3 billion people is not an easy thing to manage, especially if economic conditions worsen. Therefore, it is unpredictable. We don’t know what future direction politics will go in China, but we do know about the great leap forward, the cultural revolution, and tian an men square. All of these events took place after 1949. Why do you think the Chinese themselves want to get their money (and families) out of there and over to Australia, Canada, etc…?

        Containment of China, while not openly admitted, is a rational policy supported by both parties in the US and Australia. Otherwise, why would we have the pivot to Asia and Darwin?

    • @Micheal: I understand your points of course but the flip side is Americas has dragged us into several wars and yet those unstable Chinese haven’t so much as invited us to a dumpling cook-off.

      At a certain point I suspect all you said boils down to in the US they look like us…

  6. Everyone fears the military actions of the countries around them that are growing their armaments. Some countries fear the US (although that is probably a receding threat unless someone pokes the bear given the losses and costs of the wars in Iraq and Afghanistan).

    We have such an anglo view of the world that we don’t even stop to think that maybe there are muslim countires that fear an Israel/US axis, or Asian countries taht are as scared of Japanese rearmament as they are of Chinese flexing of muscles and claiming of territory.