by Chris Becker
One of the major takeaways from the coronavirus epidemic has been the inability of Australian politics to adopt a more Machiavellian method in dealing with Communist China. There are many layers to Australia’s relationship with the Middle Kingdom, but the most brutish is the amazing amount of iron ore that is pumped into China in return for an equally tremendous level of terms of trade. This, in turn, creates wealth for Australians, but at what real cost?
As Western nations realise they need to pivot away from a just-in-time supply chain that has China at one end and literally mouths, hospitals and other critical goods at the other, Australia needs to be aware of its perilous relationship with the virulently communist Chinese apparatus, that has no compunctions in seeing its own geopolitical goals met at the expense of all others.
This is the very bottom line of Machiavellian politics – advance your state at the detriment of others, and use whatever means are necessary for those ends. In Australia we’ve seen the nefarious use of decades of soft influence at every level of politics and media when any criticism of the handling of the coronavirus by the CCP flips into a hard-line anti-racialist attack that seems highly co-ordinated in ensuring that real debate is obfuscated. It doesn’t take much to cloud this even further when you strut out the Pauline Hanson’s or use terms like Wuhan flu in a chest beating way to deal with these very carefully prodding of hornet’s nests.
The recent increase in defence spending by the Morrison government (that first, has had almost zero criticism from mainstream media analysis, except the usual Chinese influencers like Sam Dastyari and secondly, dwarfs any expected increase in Jobkeeper or other deficit spending measures to keep or move Australia’s economy into a more sustainable direction) showed how the usual way of dealing with China – upfront and brash, echoing US interests and methods – has failed to garner the longer term under-handed response required. Instead we’ve seen import bans, increased tariffs, targeted reduced demand for certain products, plus travel warnings that could affect the tourist industry amongst other responses, except touching the third rail of dual reliance – iron ore.
Because China needs that iron ore to literally build its economy. Australia needs the proceeds to keep its terms of trade elevated or it will suffer a run on its currency, higher external inflation and much lower standards of living. It’s a relationship that risk managers would consider fragile in the extreme given the huge numbers involved, even though the existential benefits are the basic drivers of each economy. With Brazil unable to ramp up its supply due to the disastrous internal response to the coronavirus, almost on par with Trump’s malfeasance in dealing with the outbreak, the reliance on Aussie ore is higher than ever.
But recent news shows that the lack of long term planning, of letting a non-existent free market deal with the obvious and dangerous over-concentration of iron ore within the Australian economy could soon bite only one hand of that relationship. Mainly because the Australian hand doesn’t want acknowledge the risk or use it in an under-handed way in dealing the Chinese a blow.
From the Lowy Institute:
China considers diversifying to other iron ore sources, particularly in Africa. For China, the Australian trade dispute is coming on the heels of a trade war with the US, disruption in Brazilian iron ore production, and general global economic turmoil, which all combine to make investment into the exploration and production of African deposits increasingly worth the risks.
The African continent has similar levels of iron ore reserves as Australia, and the majority of these remain untapped. The signs are already there: In May, major Chinese steelmakers called on their government to increase both domestic iron ore production and investment into the exploration and development of iron ore deposits in Africa. In early June, China’s state-controlled newspaper Global Times threatened that China was willing to curb Australian iron ore imports if it felt backed into a corner and would “pay more and spend time to seek alternatives from Brazil or Africa”.
In many ways, this is one of those moments that China has strategically been preparing for since its African engagements began to skyrocket roughly two decades ago. Chinese investments in Africa’s natural resources serve a multitude of purposes – but more than anything, they support China’s long-term quest for self-reliance in key commodities necessary for economic growth, national security, and political stability.
State-owned and non state-owned Chinese firms have already invested heavily in African iron ore to help diversify and secure China’s supply of this key commodity. South Africa is currently China’s third largest source of the metal (albeit a distant third behind Australia and then Brazil) and Mauritania is among its top 15 suppliers. Algeria, Cameroon, Republic of Congo, Guinea, Liberia, Senegal, Sierra Leone, Gabon, Nigeria, and Madagascar all have reserves, many of which are under study or being developed by Chinese companies.
As pointed out, this is not just a “rhetorical leveraging” to put more pressure on Australia, its part of a long game that has been central to the CCP policy in lifting its state above others for decades.
Australian politicians better start thinking beyond the next election, or even the 24 hour news cycle, and ditch the remainder of the failed neo-liberal ideology that has kept it wed to letting the mining industry balance the future of Australia’s economy and welfare on a pin.
And maybe pick up a book written by a certain strategist from Florence, to try to work out how to deal with an aggressive China in the 21st century.