Everyone with a stake in the game is starting to show their hand

By John Fitzgerald

Friday May 15, 2020

Adobe

Looking beyond the COVID-19 pandemic, it’s difficult to put the disruption, the suffering and the ongoing geopolitical gamesmanship behind us. But over the past fortnight a number of organisations have been doing just that.

Australia’s think tanks, political parties, government commissions, business councils, industry lobbies and university research centres have been busy drafting competing policy prescriptions for a post-pandemic Australia.

It’s not difficult to see why. The pandemic offers a once-in-a-lifetime opportunity to reset Commonwealth policy in relation to taxation, markets, infrastructure, investment, energy, security and much else beside. Everyone with a stake in the game is starting to show their hand.

In other times, some of the adjustments mooted in the policy papers in circulation could damage investor confidence or possibly carry sovereign risks. Not now. The greatest danger in planning for post-pandemic Australia is not sovereign risk to businesses but business risks to sovereignty. Whether they like it or not, businesses and security interests are in this together.

Among other things, the pandemic has exposed a degree of dependence on China that was sometimes anticipated but never fully appreciated until tourist flights were grounded, student enrolments fell away, and tariff and non-tariff measures were imposed on beef and barley.

At the same time, the pandemic has cruelly exposed the Trump administration as incapable of preserving Americans from harm, let alone capable of reaching out and assisting others.

As Australia starts drawing lessons from these international experiences, China and America loom large in the policy prescriptions being drafted around the country.

This is part of the problem.

An obsessive focus on economic relations with China and security relations with the US introduces a new and serious risk of putting Australia’s relations with one or the other at the heart of serious planning for the post-pandemic era. We’ve been talking so long about China and the US that we approach issues relating to Australia’s economy and security as if it were about them, not us.

The choice facing Australia, Peter Hartcher pointed out in Red Flag, is not one between China and the US. It’s a choice for Australia and it goes well beyond relations with either.

A focus on China is apparent in two recent reports about post-pandemic Australia. The timing of James Laurenceson and Michael Zhou’s Australia-China Relations Institute (ACRI) report on COVID-19 and the bilateral relationship was unfortunate, coming less than a fortnight after China’s ambassador Cheng Jingye’s explosive comments to The Australian Financial Review late in April.

China’s ambassador to Canberra basically said that if bilateral relations did not improve, in China’s favour, China’s students and tourists could stop coming to Australia and its consumers could lose their taste for Australian beef and wine. Whatever his intention, the ambassador’s comments drew immediate attention to Australia’s dangerous level of trade dependence on China.

Despite this, Laurenceson and Zhou say there is little we can do about trade dependence so we should just get over it. Australia’s trade dependence, they argue, is nothing out of the ordinary as the country ranks 46th in the world for relative dependence on a single export market. Any attempt to reduce dependence is a “zombie idea”.

In fact, all but one of the 45 countries ahead of us are not peers (some are in fact dependencies) and the sole exception, Canada, is acutely aware of its trade dependence on the US and has a long-standing ambition to diversify its way out.

In Canada, diversification is not regarded as a zombie idea. It is not borne out of anti-American prejudice either. It’s a matter of common sense. What if Americans were to elect a vengeful “America-First” narcissistic to office?

Canadians already know the answer to that one.

The same goes for Australia and China. Whether Cheng’s remarks were intended as a friendly warning or as a dire threat is immaterial. Either way, they clarify as never before the risks arising from excessive dependence on China. Australia is a trading country. Our biggest trading partner could dump much of our business overnight.

Just think about that.

There is only one possible lesson to be drawn. Australia’s trade dependence on China presents a serious threat to our welfare and sovereignty and something needs to be done about it.

Precisely what is the question driving John Coyne and Peter Jennings’ report After COVID-19 for the Australian Strategic Policy Institute (ASPI). On the assumption that Australia is dangerously over-dependent on China, the report proposes a series of remedial steps that go beyond trade dependence to other forms of dependence, “including walking back PRC ownership of critical infrastructure such as the electricity grid, IT assets, farmland, ports and medical facilities and cutting university research links that help to enhance People’s Liberation Army (PLA) capabilities”.

Looking forward, they suggest extending the administrative architecture of national security beyond traditional areas of defence, intelligence and foreign policy to cover other policy domains such as health and biosecurity, climate policy, human security, critical infrastructure, university and industry R&D, and oil supplies.

This is where things start to get interesting. In pushing the boundaries of security thinking beyond defence, intelligence and foreign policy — in fact beyond the US alliance — the ASPI report expands the scope of the problem from simple trade dependency on China to dependency on the US for strategic oil reserves, on Germany and Switzerland for medical and hospital supplies, and on a largely foreign-controlled fossil fuels industry for meeting Australia’s energy needs. The report starts out being about China but ends up arguing that we need to do whatever it takes to secure Australia’s future.

This includes addressing climate change.

The business press and top tier bureaucracy pounced on the ASPI report to condemn the administrative overreach a comprehensive national strategy would obviously entail — and to defend the fossils industry. For Dennis Richardson, it appears preferable to live with excessive China dependence than to contemplate alternatives such as a domestic industrial revival built on investment in renewable energy.

The former head of Defence and Foreign Affairs told journalist Paul Kelly on May 9 that “when it comes to putting a whole range of things under the national security banner, my response is ‘no way’.” He went on: “if you have climate change in the mix, you are throwing a domestic political hand grenade into it. That merely highlights the point — you cannot put everything into a single pot and create a consistent product.”

In fact you can. But it is not likely to happen while Australians are distracted by their China dilemma. The fossil-fuel industry is hiding behind this country’s national China/US obsession to entrench its power and influence in planning for a post-pandemic Australia and arguably placing national sovereignty at risk.

On March 25 the federal government announced the creation of a high-powered commission to manage the economic and social impacts of the pandemic. The National COVID-19 Coordination Commission (NCCC) was set up under the Department of Prime Minister and Cabinet “to help minimise and mitigate the impact of the COVID-19 on jobs and businesses, and to facilitate the fastest possible recovery of lives and livelihoods once the virus has passed”.

Some idea of the recommendations likely to emerge from the commission can be gleaned from its composition. It is headed by Neville Power, former CEO of Andrew Forrest’s Fortescue Metals, and according to one report seven of its 15 commissioners and working group members have strong links to the fossil fuel industry, particularly the gas industry.

Expect fracking, expect resistance to reservation of existing gas fields for east coast consumers, and expect resistance to any reasonable effort to increase taxes and royalties on minerals and energy to help meet fiscal deficits arising from the pandemic. Also expect arguments about maintaining Australia’s continuing dependence on China. In fact, expect the fossil fuel and China business communities to come at this together.

The debate we need to have  is not about relations with China and the US but about our future energy and strategic-industry policies. The pandemic shows that possibly our greatest security challenges involve human security, not traditional security, and this goes well beyond anything the US security alliance can offer.

It also shows that we need to find a path to recovery that builds strategic resilience while reducing dependence on China or any other country. Navigating an economic recovery in these circumstances means tacking in entirely new directions.

The key to reducing a dangerous China dependency lies in reducing dependence on fossil fuels and positioning Australia to become the energy superpower of the 21st century, as Ross Garnaut put it, producing low-cost renewable energy that is capable of supporting globally competitive industry and commerce.

A strategy of this kind would get people, businesses and governments back to work and build resilience at the same time.

What is stopping us? China? I don’t think so.

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