How to de-escalate China tensions

Kelly’s cowards returned on the weekend to demand Scott Morrison prostrate himself before Xi Jinping. Paul Kelly led them off:

This week Morrison sent a series of messages but his most important theme — tricky but critical — is for Australia’s status as an independent player to be better recognised, as a nation allied to the US, interdependent with China but pursuing its “own unique interests”.

…The task for Morrison is to navigate a path with China between antagonism and appeasement. And it will be much harder than that sounds. His three main problems will be getting China to listen and rethink; containing the anti-China sentiment building in this country; and ignoring the fatalists at home who believe China is locked into a stance of strategic hostility from which there is no respite.

Morrison said this week patience was important in dealing with China. That’s right. But his remarks also reveal he knows patience is not enough. Morrison has plenty of activism and pragmatism in his toolkit and they need to be deployed in that diplomatic space where Australia must operate in order to change the atmospherics with Beijing.

Stan Grant chimed in with the same piece with added groveling, at the ABC:

Listen closely: The sound we heard this week was the penny dropping.

Prime Minister Scott Morrison and Australia’s top diplomat, Frances Adamson, have both set out a vision for Australia that accepts the old order is changing.

In a speech to a British think tank, Morrison sent a message to China that Australia will not be America’s “deputy sheriff” and Canberra will not be making decisions based on a choice between Washington and Beijing.

Meanwhile, Adamson candidly argued that Australia “is not about imposing our views on others”, adding that “an era within which we felt comfortable has passed”.

…As China defied history, building a powerful economy while doubling down on authoritarianism, our greed turned into fear.

Why were we surprised that China began acting like the big power that it is? Big powers seek to bend the world to their will and control what is theirs.

The Saturday Paper’s Paul Bongiorno threw himself on his face:

Former prime minister Kevin Rudd, now president of the Asia Society Policy Institute think tank in New York, says China is pursuing a “highly systematic strategy” to close the gap with the US economically, militarily and technologically. But under Biden’s re-engagement policies of global leadership, Rudd says, any talk of Washington’s decline is premature. Still, he believes Xi Jinping plans to consolidate his position as paramount leader in China and to be around for at least another decade.

And that will be a challenge requiring a better performance from the Morrison government than we have seen so far. The prime minister’s pandemic-defying trip to Japan last week – to cement a reciprocal access agreement for our military – antagonised Beijing, despite naive assurances from Morrison that it would not.

…On his return from Tokyo, Morrison had a virtual appearance at the Business Council’s annual general meeting. He told business leaders who are worried about their continuing prospects in China that he’s always willing “to pick up the phone”. But he said he’s “not prepared to agree to a meeting” with China that would “trade away” any of Australia’s interests.

“Being Australia is something we should never apologise for,” Morrison said. No doubt, but signalling a meeting can happen only on your terms is hardly conducive to good relations with our biggest trading partner.

John Howard and Bob Hawke, to name two examples since Whitlam first went to Beijing in the 1970s, managed to trade Australia’s commodities, goods and services with China, while not sacrificing “our values”. China expects Australia to respect its achievement as a major world player and, while Morrison made a start this week at the G20, the prime minister has a long way to go to mute the howling wolves.

Was China the same in the Howard and Hawke eras? Were either handed 14 conditions to end Australian democracy in return for a chat?

All of this “analysis” is shockingly feeble-minded and maddeningly narcissistic. There was no change in Australian foreign policy last week. Morrison simply restated existing policy: Australia prefers not to choose between powers. That has been the official standpoint for decades which is why China grew trade with us at all.

More to the point, there is always a gap between declaratory and actual foreign policy. The rhetorical version is served up to signal virtue, as well as to provide a smokescreen for enemies and vested interests alike. The real version is much more hard-nosed and anchored to core interests, in this case, that Australia will not bend to Chinese demands that effectively end both sovereignty and democracy.

So how can we de-escalate tensions with China? To my mind, there is no need to do so at all. The relationship is right where it should be. CCP China is not our friend. It may pay us for dirt but it is our political enemy. The more China pushes us away, the greater it serves Australia’s long-term interests as we fork away from the dystopian future of the CCP dominating Australia. So, do nothing I say!

But, if we want to de-escalate then there is a multilateral path and an unliteral one. The Government is underway on the first, at the ABC:

As tension grows over Beijing’s massive tariffs on Australian wine, the Federal Government is continuing with plans to take China to the World Trade Organization (WTO) over barley exports.

In May, China began threatening to slap the tariffs on the barley industry, as a result of “an ongoing anti-dumping and countervailing duties investigation”.

Trade Minister Simon Birmingham has detailed appeals the Government has made through China’s domestic processes to overturn the decision and limit the impact on the $1.5 billion barley trade with China.

This is going to come to nothing. Bejing has already illustrated its contempt for trade rules. There is greater hope of pushing Beijing back if the recent rhetoric of supporting nations throws up some kind of combined reprisals.

But the unilateral path can achieve results without either, nor compromising our interests. It is very simple. Apply export tariffs to iron ore directly proportional to the size of China’s import blockades and make them ratchet up or down according to Chinese moves. If China is in the process of blocking $20bn in Aussie exports then that amounts to a 20% export tariff on iron ore. If Bejing moves to $50bn in import blockades then the iron ore tariff rises to the same dollar amount. If Beijing drops the blockades then the iron ore tariff falls by the same amount. If Beijing ends the dispute so does the iron ore tariff.

This approach offers several strengths. First, right now, China is desperate for our dirt so we’d be maximising our leverage while we still have it.

Second, it puts all onus back upon Bejing to resolve a crisis of its own making. Import tariffs are already hurting its steel sector and other importers. Skyrocketing iron ore prices will redouble that. Those interests have power in Bejing in the same way that our trade losers do in Canberra.

Third, it takes the pressure to compromise off Australia, shuts up Kelly’s cowards, and mobilises national sentiment for the struggle. The revenue could also be recycled as compensation payments to mollify local interests damaged by Beijing’s blockades.

Fourth, it is a directly proportional response and Australia can sustain the high moral ground of seeking open trade given all China has to do to end it is stop violating the rules.

Fifth, it creates a more symmetrical power exchange from which both sides can then more easily find a face-saving compromise without selling out core interests.

Sixth, it is a language of strength that Bejing will understand and respect, not the language of defeat that Kelly’s cowards would have us adopt, which will only serve to encourage Beijing to crush us entirely.

David Llewellyn-Smith
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Comments

  1. adelaide_economistMEMBER

    The beauty of the fact that Australia’s key assets have already been sold off to international owners is that at least a significant part of the pain being inflicted by Beijing will be experienced by overseas owners, including those from China. What a world we live in.

  2. But the unilateral path can achieve results without either, nor compromising our interests. It is very simple. Apply export tariffs to iron ore directly proportional to the size of China’s import blockades and make them ratchet up or down according to Chinese moves

    Love this… and presumably the funds could be placed into a pot that can be accessed by companies that can prove they’ve been hurt by the tariffs.

    This would go a long way towards insulating Australia from Chinese bullying…

    Smart

    • Smart?
      Unlikely.
      Nope, opposite.
      Export tariff hurts both sides and it is useful only as a gambit. Once our IO price closes in on other suppliers, the leverage is gone and a precedent is done (alternative suppliers). It does not have to be even close, it is a relatively painless lesson given to Aus IO. In the end, the leverage over Aus only increases because .gov.au receipts will dry out (IO is not a top shelf wine to jusy find another buyer) and we will have no choice. Master will let that lap dog malnourish.

      The only way to deescalate is to stop being a lap Yorkshire terrier for the master and to bark for him.
      Since this will not happen… D, L and S for president of Ausyralia!

    • what would really make it work is if AUS could convince Brazil to do likewise- i know it’s collusion, but OPEC do it so why not IOPEC?

      • It’s like putting a fire out with more fuel.
        It can work in a few very narrowly defined circumstances where the blow from the explosion will exhaust the flame (think of the peddled narrative around Hiroshima etc) otherwise it will just make the fire bigger and hotter.
        If only we did not assume the lapdog role and if we let those with horns clinch them…… but then must add heroin junkie addiction to RE and reverting to 3rd world economy models (raw materials, food and low/mid-level production)

  3. Stan’s words:

    “Why were we surprised that China began acting like the big power that it is? Big powers seek to bend the world to their will and control what is theirs.”

    “Theirs”

    Yes, and they tend to throw the powerless to the dogs in the process of flexing that power over what is “theirs”. Accordingly, does Stan suggest that we should perhaps seek a treaty 250 years hence? Stan, in such case, for the sake of consistency, how about you act far less surprised overall? Apparently it’s all about power and “might is right”. And if we apply your thinking to 1770, Terra nullius can be passed off by the Eora people as a whim of the British Empire? Done and dusted Stan, done and dusted.

    • adelaide_economistMEMBER

      Yep, I suspect Stan’s ‘agitation’ occurs like so many of his kin in a world that based on an upbringing that is very unlike that which we live in now but rather is formed by that which they grew up in the 1970s and 1980s. Watching the reaction of Han immigrants to being accosted for money or cigarettes n cafes here in Australia tells me all I need to know about how Chinese ownership of Australia will play out out for indigenous Australians, and suffice to say, they won’t be turning a blind eye to their behaviour nor spending their time on uplifting statements about the permanence or sustainability of their culture. Sad how people’s mild slights and angers in their formative years is enough to turn them into self-destruct mode.

      • As opposed to the “pretty pretty pretty please can be High Commissioner to London” crowd?

        • ErmingtonPlumbingMEMBER

          London is much less likely to Nuke us and send a replacement 25 million here to secure their new asset.

      • You keep inferring that China owns vast swathes of Australia and it’s enterprises.
        The experts and facts do not agree;
        “David Irvine, the former Asio spy agency chief who now heads the foreign investment review board (Firb), clashed with the outspoken Liberal National party MP George Christensen, who is chairing a trade inquiry and using it to campaign for Australia to reduce its economic dependence on China.
        Irvine used his appearance before a parliamentary committee hearing on Thursday to defend the benefits of foreign investment, but when he noted that some underlying concerns were based on “nationalistic” sentiments he was accused by Christensen of being “dismissive” of community concerns.
        Despite China being Australia’s largest trade partner, the picture is different when looking specifically at foreign investment.
        Treasury officials told the hearing the top source of foreign direct investment into Australia was the United States (20.1%), followed by the United Kingdom (12.5%), Japan (11.4%), the Netherlands (5.4%) and Canada (4.6%). They said China was ranked sixth with 4.5% of the share of foreign direct investment.
        Christensen asked Irvine to describe what the Australian community at large thought about foreign investment, and in particular purchases made by state-owned enterprises.
        The head of Firb replied that “the starting point is probably that there is an underlying concern within the community in respect of foreign investment, that foreigners are buying up the farm, they’re taking over, it’s a nationalistic sense that our industry should be Australian – there are all those concerns and sentiments existing within the community at some point or other”.
        CIrvine said he had been “watching criticism of various Firb decisions over a very long time” and called for facts to be at the centre of discussion.
        “Five years ago when I first entered the Firb the percentage of Australian agricultural land in foreign hands was about 13%, and I think it’s currently about 13.2% or 13.3%,” Irvine told the joint standing committee on trade and investment growth.”

        • “Five years ago when I first entered the Firb the percentage of Australian agricultural land in foreign hands was about 13%, and I think it’s currently about 13.2% or 13.3%,” Irvine told the joint standing committee on trade and investment growth.”

          Be interesting to know what that percentage was 20 and 30 years ago.

  4. Moral failure of the leadership in (a democratic) social setting brings calamity because the state’s lifeblood; its citizen-produced resource-base, is threatened when there is a loss of confidence in the state, which brings in its wake social division, strife, flight, and a reduced motivation to comply with tax obligations. In the resulting weakened fiscal economy, services that citizens have come to depend on fail, including public goods and administrative control of corruption. By contrast, in the case of a more authoritarian regime, the moral collapse of the leadership is not as serious an economic problem, neither for the leadership, whose chief resources are not significantly citizen-provided, nor for citizens, who have little motivation to comply anyway, and who benefitted little from public goods or other government services.

    https://www.frontiersin.org/articles/10.3389/fpos.2020.568704/full

    • We are seeing this play out atm now in Australia with the weakening of society and mutual trust, through Balkanisation. That said, the Chinese bullying is doing its very best to congregate different groups in society.

  5. How many Chinese speak English? Walking around Melbourne I find not many…And they sure as f#ck don’t bother with Latin script.
    In Melbourne…

    • ErmingtonPlumbingMEMBER

      That’s a very racist, unwoke and irrelevant observation to make Mig.
      Just believe Jane when she tells you, you are engaging in an unacceptable prejudiced attack from a position of white male privilege.

      You need to apologize!

  6. We need to be talking about what is going to be done in Australia not what needs to be done in China………we are being left behind by the rest of the world as we bid up house prices to each other. Huge changes are underway and we are whistling past the graveyard. The internet is going to fracture.

    https://asia.nikkei.com/Spotlight/Century-of-Data/China-rises-as-world-s-data-superpower-as-internet-fractures

    China will increasingly go up the food chain

    https://www.rt.com/news/508093-china-new–nuclear-reactor/

    Where is our industrial policy ? We have no leaders, only people who play leader on television.

  7. Poochie the Rockin DogMEMBER

    We should be putting massive tariffs on anything from China that we can produce locally, and have a government reindustrialisation plan where we gradually produce more goods & apply more tariffs. China is powerful & we are not, because we lack self sufficiency

    • Thats a small list. We can’t even produce t-shirt locally with our own cotton. we are not in a good position.

      • ErmingtonPlumbingMEMBER

        Making our own tee shirts and steel would be easy.
        Some of the more sophisticated stuff a little harder. But we’ve done it all before. It only requires the will and, heaven forbid, a preparedness to pay a little more.
        I’ve just recently paid about 10% more for a flat pack laundry cupboard by choosing the Australian made over the identical looking Chinese offering at Bunnings.
        Got a New ‘Esky” as well but not of the brand called Esky though. They are made in China.
        I settled for one I consider slightly inferior but made in Thailand.

        • It is easy but that’s my point; we can’t even make the easy stuff any more.
          We don’t have the will or the preparedness and we even lost the experience and knowledge.
          I work in the industry that’s trying to build things in Australia but it requires a lot of international help including China.
          I don’t know what the answer is but perhaps if China want to sell IT communications equipment to Australia, build a manufacturing and assembly plant here and employ local people, train them up so that we can rebuild our knowledge. Just an idea.

          • Lols, sounds a bit familiar. I don’t think the chinese are looking to return the favour though. They understood what they were buying by providing cheap goods to the west.

          • A huge part of inner Melbourne was devoted to the rag trade and was shut down almost overnight. It could do so again, it is merely the a question of the size of the tariffs.

        • We don’t have machinery to make the cotton into clothes, nor the ability to make them without parts from China.

          That being said, most of our cotton clothes are imported from India now anyway.

        • Making our own steel and t-shirts would have been easy 40 years ago.
          These days merely doing the safe work method statement would end up taking 12 months and being cost prohibitive.

          • ErmingtonPlumbingMEMBER

            Well that just goes to show how little of a level playing field there is within these “Free trade” agreements.

          • That should be completely obvious by the complete movement of production to a single place. Add the environmental impact compliance, higher energy costs, land prices. It’s not just a bit more but massively more to produce stuff here.

          • ErmingtonPlumbingMEMBER

            Well, Thanks to slavery America cornered cotton production in the mid 19th century.
            What’s your point?
            That we should just continue to sell our souls and sell out our democracy for access to the cheapest price possible?

          • I’m a man without a plan,
            but given tightening workplace safety and environmental laws contributed significantly to the removal of previous industry, it seems unlikely to magically reappear without some relaxing of these same laws, or some serious tariffs on imported alternatives. I just don’t see a government doing either of those anytime soon.
            It’s a bit like asking do I think house prices should be pushed even higher? No, but the government is clearly determined to do it and betting against them wouldn’t be the smartest idea.

  8. For me this all comes down to one simple question:
    Will China implode at some time in the near future (less than 10 years)
    If China is on a pathway to self destruction then our response should be to tariff Iron Ore
    However, If China is on a pathway to becoming the worlds next true super power then maybe we need to think this through a little more clearly.
    Unfortunately for the last 10 years MB’s stance on China ascendance can be summarized as wrong, Wrong and WRONG. With this in mind I’ll get my Chinese strategic advise elsewhere.

  9. China is the party that has been escalating the tension with Australia. Given Australia’s dependency on China for both import and export, responding in kind is self destructive, and falls into the trap of the ‘Wolf Wankers’ who wants to make Australia suffer as an example to other countries.

    The ‘adult’ approach to a child throwing a tantrum is not to get into a shouting war with the child. For Australia, the ideal situation is for the USA to apply further trade sanction to China as response to their trade sanction on Australia.

  10. Bullying = hold our ground. Morrison is doing well on this front. Proportional tariffs on iron ore does make sense, but then we are playing into their game. My 2 cents is just hold our ground for now. Xi couldn’t be doing a better job of destroying trust with trading partners.

    Can we make steel cleanly here in Aus so we’re selling the value added product not the raw material?

      • ErmingtonPlumbingMEMBER

        Feeling entitled to buy everything for the absolute cheapest price possible is no moral basis for a Civilization.
        So fken what if things cost more.
        It’s a small price to pay for independence and freedom from tyranny.

        • So start up a steel smelter…

          But when people can buy equivalent goods for less than it costs you to produce goods you go broke. This is why the industry isn’t here now.

      • Given the main cost component of making steel is likely energy – I don’t see any reason why we should be shy about making the steel here.

        • Oh the lols…
          Our grid can’t currently support the aluminium smelter at Newcastle full time, it gets asked to shut down production on high Electricity demand days as we simply don’t have the excess power generation capacity to deal with peak demand anymore.
          Yay privatisation…

          • What currently exists with our grid setup is no reflection of what’s possible.

            Compromised policy for donor bags of cash appears to be the main game so far.

            A lot of our talent being wasted though. That’s the sad thing for me.

    • Agree, keep the heavy artillery of iron ore tariff for later. Xi is under pressure whether it’s admitted or visible there are still those in the CCP who believe his actions are bad for China (Thank dog he is doing it as nobody in power seemed to notice the CCP plan before) so we make sure the world knows how hard we are trying to contact Beijing via every channel. Then we take them to their WTO one product at a time slowly increasing pressure (and call them out & use any mechanisms, if possible, In any of these secret trade deals our government has signed). This will show the world we are playing by rules & further degrade China’s reputation internationally thus causing even more firms to move supply lines out of China … at least partially.

      The worst thing that can happen is that everything we do only helps China to adjust internally as they need to, ie. more internal consumption & share of GDP going to ordinary Chinese workers. This would be bad from democratic countries perspective, as it would allow the CCP to survive instead of imploding. If Xi cannot get those with power in the CCP & SOE etc to change what better way than to engineer a confrontation with another country that produces a war like attitude within China which allows him to stay in power (he can claim anyone who disagrees white him is a traitor) whole forcing their adjustment China needs. For this reason we must use the WTO etc relatively quickly, thin the tariffs so that enough pressure is applied quickly enough to see the CCP boot Xi out.

      • “The worst thing that can happen is that everything we do only helps China to adjust internally as they need to, ie. more internal consumption & share of GDP going to ordinary Chinese workers.”

        Every country should be free to become as self-sufficient as they want to be. We need to do the same in many areas.

        With the trade side..it’s also interesting to imagine Xi doing the same as he has done with us to one of our neighbours…if it was our close neighbour experiencing this…what would we want to see them doing? Exercising all their rights under any international / trade rules is pretty obvious. Anything less would look like they are giving up / caving in etc.

        • Agree.
          I was just suggesting our actions may help Xi stay in power, as it could force others powerful internal groups to accept adjustment, which has failed in past due to vested interests, however if we don’t come to an agreement then we have no choice but to stay strong and retaliate in kind even if it does help Xi

          • We do hold the whip hand when it comes to Iron Ore, unfortuneatly it is a 2 edged whip
            Some of the commentators here are advocating the stopping of iron ore to China and selling to countries like India and Japan. Here are a few facts. In 2019 China imported 69.1% of all iron ore exported in the world. India does not import iron ore. Japan imports 7.5%. There is no market of note for Australian iron ore because no other country has the steel mills and manufacturing capabilities that China has. The US imports 0.6% and the UK imports 0.5%.
            http://www.worldstopexports.com/iron-ore-imports-by-country/
            15 countries that imported the highest dollar value worth of iron ore during 2019.
            China: US$99.8 billion (69.1% of imported iron ore)
            Japan: $10.9 billion (7.5%)
            South Korea: $6.9 billion (4.8%)
            Germany: $3.9 billion (2.7%)
            Netherlands: $2.9 billion (2%)
            Taiwan: $2.3 billion (1.6%)
            France: $1.5 billion (1%)
            Malaysia: $1.3 billion (0.9%)
            Turkey: $1.1 billion (0.8%)
            United States: $842.1 million (0.6%)
            Bahrain: $805 million (0.6%)
            Canada: $772.3 million (0.5%)
            Oman: $758.5 million (0.5%)
            United Kingdom: $757.9 million (0.5%)
            Belgium: $715.2 million (0.5%)
            This year, China opened 4 new ports in Rizhao, Yantai and Lanshan in Shandong province and Sanduao in Fujian province to add to the 7 ports in China that can handle Valemax ships capable of carrying 400,000 tonnes. Australian miners use Capesize ships ranging from 250,000 to 300,000 tonnes. As of March 2020, there were 66 Valemax carriers in operation and two under construction. The use of the large ore vessels not only allows the shipment of larger amounts of iron ore, therefore lowering logistics costs, but enables Vale to speed up the delivery of iron ore to steel mill customers in China and also increases its ability to blend different grades of iron ore in China instead of in Brazil to meet customer demand. It is easier for China to find alternative supplies for iron ore, including in Africa, than for Australia to find steel mills in other countries.

          • @bolstrood
            What good can possibly come from mixing facts and feelings?
            Everyone that can read an export report knows where our Iron Ore goes to and where our income comes from
            China has us over a barrel and we have China over a barrel
            Will they flinch first or will we?
            Clearly there are sources for Iron Ore other then Australia but as you point out Australia ships so much ore that no other country could possibly take our share of the IO Market any time soon.
            We’re stuck with China and China is stuck with us.
            This fact fully explains why we can’t seem to get along, with each party wanting to leverage this relationship to achieve some other objective.
            And then we have DLS who believes that sending an official GFY message to China is the prudent way to deescalate present tensions? go figure!