Morrison whinges as Aussie iron ore returns in Chinese warships

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Pig Iron Scott’s storm troopers are upset that China is spying on Australia on the high seas, via the UK Express (there are now two spy ships):

The Australian military is keeping tabs on the PLA naval surveillance ship, Tianwangxing, as it travels towards Queensland waters off the country’s north-east coast. The vessel is widely believed to be planning to observe military drills involving military personnel from Australia and the United States, which got under way this week.

Australian Senator Eric Abetz, chairman of the Senate’s Foreign Affairs, Defence and Trade Committee, contrasted Beijing’s behaviour with its attitude to ships passing within waters off in south-east Asia.

He told Express.co.uk: “Australia is carefully monitoring the situation and the timing of the intelligence ship visiting our waters.

“One may well suspect it is a deliberate act ahead of the Talisman Sabre war games.”

While the ship was in Australia’s Exclusive Economic Zone, it was allowed to travel through in accordance with international maritime law, Mr Abetz acknowledged.

However, he added: “It is hypocritical for China to practice freedom of navigation so close to our shores while at the same time voicing loud protestations against other nations that conduct the same freedom of navigation exercises through the South China Sea.

“If Australia or another country were to transit through China’s Exclusive Economic Zone, there would be the predictable belligerent claims from the CCP dictatorship about ‘interference in China’s internal affairs’.”

If we’re going to measure the national interest based upon hypocrisies then how does Australia whinging about its iron ore coming back repurposed as warships stack up? Pretty well, I would have thought.

Which again raises the question, why do we do it? Why do we keep pumping the lifeblood of the growing Chinese tyranny? With perhaps only the exception of oil, iron ore is the key building block of Xi’s dictatorial power, both at home and abroad.

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Iron ore is the lynchpin for about half of China’s economy, via industry and construction. Any shortage will SMASH IT.

Given economic advancement is the CCP’s only claim to legitimacy, Australian iron ore is directly supporting its domestic political strength, as well as power projection capability of ships, planes and rifles.

Australia supplies 60% of China’s iron ore needs. There is no way to replace it for five years at least. Probably ten. In that decade, the Chinese economy would be rocked to its core.

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Even better, it might goad the CCP into doing something really stupid, like invading Taiwan prematurely, which would rally the free world behind further trade blockades, containing the CCP threat for good.

By comparison, iron ore is nowhere near as important to Australia. Sure, it makes up a large slice of export revenues. But if we refused to sell it to China, the price would go up 1000% and the Australian dollar crater. We’d come out about even. In fact, much better off, as we achieved instant trade diversification.

Such measures may sound extreme but it’s not hard to rationalise them with some realist analysis. If:

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  • China is a tyranny, and
  • the CCP is intent on dominating Asia (if not the world)
  • then why wait until it is powerful enough to do so before fighting it?

The reasoning doesn’t even need to be so drastic. Take this line of thought. If:

  • CCP legitamcy is based upon economic advancement, and
  • its economy is headed into the middle-income trap
  • then it will turn to nationalism as the only other form of mass political movement to keep itself in power and it will invade Taiwan, followed by endless border and maritime wars with Korea, Japan, SE Asia Russia, India and the Stans.
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At the point of the Taiwan invasion, Australian iron ore will cease to go to China anyway.

So why wait until the CCP is much more powerful and harder to resist? Cut the iron ore now. Cut the CCP off at the knees.

And deliver our kids a dual bounty of sustained commodity endowment plus bulwarked freedom.

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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.