Paul Wallbank – Brilliant Communications

Tag: trade

  • Australia in the Asian Century – Chapter 8: Building sustainable security in the region

    Australia in the Asian Century – Chapter 8: Building sustainable security in the region

    This post is one of the series of articles on the Australia in the Asian Century report.

    The eighth chapter of Australia in the Asian Century looks at the security picture of the region, this is one of the bigger chapters and like some of the others it’s as notable for what it leaves out as for what it says.

    National objective 20. Australian policies will contribute to Asia’s development as a region of sustainable security in which habits of cooperation are the norm.

    That’s nice, worthy and has been undoubtedly true for most previous Australian governments. Except of course when Australian Prime Ministers join the prevailing colonial power in wars like Iraq, Afghanistan, Malaya, Korea, Vietnam or kicking around the German territories in World War I.

    Chapter Eight partly dives into territory already covered in Chapter Three, this time though the analysis does discuss the United States’ role in more detail and makes the observation that US military spending dwarfs that of any other Asian nation – interestingly this is one of the few times Russia gets a mention in the entire report.

    Encouragingly, the paper doesn’t confine the concept of ‘security’ just to military matters and takes a broader view of issues such as guaranteeing access to resources, food and water. There is some discussion of climate change and on regional responses to natural disasters such as tsunamis and earthquakes.

    One notable omission is that of refugees. Given that most of the asylum seekers arriving by boat are Asian – currently coming from Afghanistan and Sri Lanka – and almost all pass through other Asian countries, it would be expected this issue would get some exploration. Sadly it doesn’t and once again skirting over an important issue detracts from the paper’s substance.

    As befits Australia’s most important relationships in Asia, there is a lot of discussion of the three way relationship between China, the United States and Australia with a detailed breakout box in section 8.4.

    The discussion on Australia’s relations between China and the US makes an interesting statement;

    In managing the intersections of Australia’s ties with the United States and China, we will need a clear sense of our national interests, a strong voice in both relationships and effective diplomacy.

    Undoubtedly this statement is true, however successive Australian governments have conflated the interests of the United States with being the same as Australia’s. In recent times Australian leaders have followed the US lead even when it has been clear American policy conflicts with Australia’s Chinese relations.

    Moving away from a reflex support of the United States is going to be one of the biggest challenges for Australian governments in the Asian Century and one hopes the process is as gradual and incident free as the white paper hopes.

    National objective 21.The region will be more sustainable and human security will be strengthened with the development of resilient markets for basic needs such as energy, food and water.

    National objective 21 is an interesting statement in itself – “resilient markets for basic needs such as energy, food and water” smacks of the 1980s privatisation and corporatism that has left Australia with duopoly industries and an excessive financialisation of those markets for basic needs.

    It may well turn out to be the case that Asian countries choose not to follow that path, particularly those like the Philippines and Indonesia who have experienced the effects of crony capitalism in recent history.

    Chapter 8 of Australia in the Asian Century finishes with a detailed look at the regional efforts aimed at building trust and co-operation on trans-national issues.  Much is made of various international groups such as the G20 and the UN.

    An interesting case study is that of the Nuclear Non Proliferation Treaty with an examination of Japan’s and Australia’s work in that field. Sadly this is another area that’s let down by the actions of current and previous Australian governments in selling uranium to India.

    The nuclear weapons stand off between India, Pakistan and China is another ‘elephant in the room’ issue that doesn’t really get the coverage it should in such a report.

    Chapter 8 of Australia in the Asian Century is a very optimistic section of the report however it does hint at the path Australia could follow to being a credible, medium sized economy and influencer in the region. However one has to consider the actions of Australian leaders when asking if the nation is really interested in taking that path.

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  • Australia in the Asian Century – Building the agriculture industry

    Australia in the Asian Century – Building the agriculture industry

    Before going into Chapter 8, the Australia in the Asian Century report has a detailed look at the agriculture industry. Which kicks off with National Objective number 19;

    National objective 19. Australia’s agriculture and food production system will be globally competitive, with productive and sustainable agriculture and food businesses.

    While this objective seems to have already been achieved, the bulk of the chapter does a good job of identifying the opportunity and challenges for the industry.

    The examination of trade treaties, biosecurity and food security is a good overview of the industry however it does suffer from a rose coloured view of prospects and government programs.

    Issues such as protectionism, genetically modified foods and the running sore of live cattle exports don’t get a mention.

    Another aspect of this section is how the aspirations don’t match the actions of governments, for instance the industry capture of regulators – the case of defining free range eggs being a good example – is a real barrier to Australia selling quality produce internationally.

    While the section does discuss ‘value adding’, the tenor of the section seems to be focused on bulk exports and really doesn’t identify industries such organics and free range which are an opportunity for the agricultural industry.

    Overall though, this section at least does give a reasonably detailed snapshot of an industry and its a shame the paper doesn’t attempt to profile other sectors in the Australian economy.

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  • Australia in the Asian Century – Chapter Seven: Connecting to Asian Markets

    Australia in the Asian Century – Chapter Seven: Connecting to Asian Markets

    This post is one of the series of articles on the Australia in the Asian Century report.

    The seventh chapter of Australia in the Asian Century looks at how the country’s businesses and governments can engage with markets in Asia. In some ways this is the most effective chapter of the report.

    At the beginning of the chapter introduction points out that Asia offers bigger markets than Australia and says “Australian businesses need to build on their existing advantages by developing new capabilities and approaches as they become fully part of the region.”

    This is true, but the Chapter never really identifies what Australia business’ existing advantages really are and again this is a weakness in the report.

    National objective 17. Australia’s businesses will be recognised globally for their excellence and ability to operate successfully in Asian markets.

    How this comes about is difficult to say, and what governments can actually do to help businesses be recognised globally isn’t really identified.

    The CPA case study is notable for illustrating the number of Australian expats working in Asia. In many ways these people are the wasted talents that should have been cultivated by domestic businesses through the 1990s and 2000s.

    Saying that businesses need to be part of the global supply chain is a statement of the obvious and Chapter 7.3 does discuss the importance of efficient ports, fast customs procedures and reduced barriers to trade. This ties into National Objective 18a.

    National objective 18a.The Australian economy will be more open and integrated with Asia, through efforts to improve our domestic arrangements. The flow of goods, services, capital, ideas and people will be easier.

    • Australia’s trade links with Asia will be at least one-third of GDP by 2025, up from one-quarter in 2011.

    It’s difficult to argue with this objective, although one wonders what Canberra has been doing for the last twenty years on smoothing the flow of goods, services, capital and ideas. Hopefully this is one of the relatively easy areas where a Gillard, or Abbott, government can deliver.

    National objective 18b. The Australian economy will be more open and integrated with Asia, through comprehensive regional agreements, better aligned economic regulations, greater infrastructure connectivity and enhanced understanding of each country’s arrangements. The flow of goods, services, capital, ideas and people will be easier and Australian businesses and investors will have greater access to opportunities in Asia.

    This objective focuses around formal trade links and really only describes the current policy – continued from the Howard government – of signing bilateral trade agreements rather than waiting for the cumbersome and possibly never ending global negotiations to actually deliver something.

    Most of Chapter Seven is focused on describing the various trade initiatives the Australian government is engaged in through APEC, ASEAN and various other forums.

    All of these are good initiatives and these are the brightest spot in the entire report, this is where the Australian political system has delivered bipartisan support for a long term plan and it’s a shame we can’t see more actions similar to this in areas like education, taxes and sustainability.

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  • Australia in the Asian Century – Chapter Two: The future of Asia

    Australia in the Asian Century – Chapter Two: The future of Asia

    This post is one of the series of articles on the Australia in the Asian Century report. An initial overview of the report is at Australian Hubris in the Asian Century.

    “Asia’s economic resurgence is set to continue” is the bold statement at the beginning of Chapter Two of the Australia in the Asian Century report and with that the chapter immediately falls back to warm motherhood statements;

    Average living standards are set to improve dramatically and transform the way people live and work. Asia’s economies are projected to expand at a strong rate. The region’s expansion and development will change the contours of Asia and the globe—opening up exciting new opportunities, while also posing some challenges.

    All of this is true, however the report struggles to identify exactly what those challenges and opportunities are as Asia develops and where Australians fit into the region’s evolving economy.

    Demographics will matter, but they are not destiny

    The constant mantra through the report is “demographics will matter, but they are not destiny.” Yet, despite the headline, Chapter Two illustrates that so far it has been destiny.

    Graph 2.6 of the report shows how Japan’s, and now South Korea’s, productivity has tailed off as the population has aged. This is to be expected when economic expansion has been based on labour intensive manufacturing, as China’s is today.

    Frustratingly, the report acknowledges this with the following paragraph;

    But the fruits of adopting new technology and adapting it will become harder to harvest. A point will come, though it’s still some way off, where the growth of labour productivity in developing Asian economies will slow—opportunities for gains from importing foreign technology and for shifting workers from agriculture to industry will diminish.

    “Some point in the future” doesn’t wash when the rest of the chapter shows off various ‘firm’ numbers estimating ‘base’, ‘low’ and ‘high’ growth rates. If you can quantify those growth assumptions, then it should be fairly trivial to estimate the turning point where aging populations start to affect China.

    Luckily others have done this work, the Australian Macrobusiness site suggests that turning point could be as early as 2015. In which case, unlike Japan and South Korea, China will have got old before it got rich.

    If this true, then IMF’s projected growth rates will miss their targets – particularly the ‘low growth’ scenario which is almost identical to their ‘base scenario’.

    Rise of the middle class

    Much of the emphasis in this view of Asia’s development is on the rise of the middle class and the report features a case study of Hitesh, a middle class stockbroker in Ahmedabad.

    While there’s no doubt Hitesh and his family’s income and standard of living are rising, the idea that several hundred million Indian and Chinese will jump to European or North American income levels before 2025 is improbable.

    Most stockbrokers in New York, London or Sydney earn between 30 and 300 times Hitesh’s $5,000 a year and in 2010, average Chinese income was a tenth of the US.

    Even if the Indian and Chinese middle classes did manage a tenfold growth in income over the next decade, the assumption they would adopt the debt driven high consumption patterns of the US or Australia isn’t a given as we see in how the Japanese middle classes haven’t aped the spending behaviour of their profligate Western friends.

    The credit and banking points in this chapter illustrate the hubris mentioned in my original overview of Australia in the Asian Century.

    And with financial systems in advanced economies unwinding the high debt levels built up before the Global Financial Crisis, financial institutions in stronger economic positions, such as those in Australia and elsewhere in the Asian region, will have opportunities to expand into new markets.

    Given the dire records of Australian banks in expanding overseas along with the “stronger economic position” being due more to government guarantees during the GFC and the desperate political desire to prop up Australia’s property market at all costs, it’s difficult to see exactly what Australian institutions have to offer Asian savers except to further underwrite the never ending down under housing bubble.

    Chapter two of the Australia in the Asian Century report finishes with an overview of the current geopolitical situation which is notable more for what has been left out. This is again probably due to Canberra public service politics and the report suffers for it.

    One major region left out is Central Asia and Russia – outstanding given the report’s view  that a resource poor Asia (that Japanese assumption again) will need Australia to fuel its energy and resources needs – which ignores the construction of pipelines and railways to China and India.

    Also missed are the projects to upgrade China’s railway and road links to Europe and Central Asia. These in themselves may trigger major geopolitical changes over the next few years, as we’re seeing today in Tibet and Xinjiang after railways were built to Kashgar to Lhasa. Yet none of this is considered.

    Not the ‘Stans should feel aggrieved, like the rest of the report the emphasis is on China and India with scant mention of other Asian countries.

    For Australia, much of the hope in the report seems to be in providing raw materials for Asia’s industrialising and urbanising societies along with being a holiday destination and education provider. This is all lazy 1980s thinking which projects Australia’s Japanese experience of thirty years ago onto China and India today.

    The predictions of Asia’s future in the Australia in the Asian Century report are largely are a continuation of the status quo. If this report had been written in 1960, it may have picked the rise of Japan over the following twenty years but the main focus would have been on Burma as Asia’s richest independent country.

    Exacerbating the report’s weakness are the assumptions that development paths will follow the same course as Japan, Taiwan or South Korea in the late 20th Century.

    Development wasn’t a smooth path in all three of those countries and each had their own unique political and economic upheavals in that time, the failure to recognise that similar disruptions will happen in Asia’s emerging economies as they develop is probably the greatest weakness in the entire report.

    It’s very easy to draw straight lines on graphs based on ‘best case’ IMF projections but history is rarely linear. This is probably the greatest intellectual failing of the white paper.

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  • Australia in the Asian Century – Chapter One: The rise of Asia

    Australia in the Asian Century – Chapter One: The rise of Asia

    This post is one of the series of articles on the Australia in the Asian Century report. An initial overview of the report is at Australian Hubris in the Asian Century.

    “Just over two decades ago, the Australian Government commissioned a study of Australia and the Northeast Asian ascendancy” starts the opening of the Australia in the Asian Century report. That sentence describes how this paper is the latest of Australia’s earnest efforts to understand the region.

    The opening chapter of the report follows the sensible principle that to plan for the future we have to first understand the present so this section seeks to explain the development of various Asian economies and put those changes into an Australian perspective.

    Notable in the narrative is the North East Asian focus, while India gets a brief mention most of the story revolves around the development of China, Hong Kong, Japan and South Korea. Chart 1.2, “Asia’s economic dividend” gives the game away when all but one ‘Asian’ country listed is East Asian.

    Russia, along with most of South and Central Asia – not to mention other Asia countries like Iran, Turkey and the former Soviet Republics – rate no mention all.

    The narratives around the countries which are covered is also deficient – for instance the discussion on Japan’s, South Korea’s and Vietnam’s developments totally ignore post-war reconstruction efforts and their relations with the United States.

    China does get a more detailed examination rightly noting it was the country’s admission to the World Trade Organisation in 2001 that really set the economy’s export sector moving, however it skates over the massive dislocations and market reforms introduced in the 1980s which laid the foundations for China’s successful bid to join the WTO.

    More notably, the analysis overlooks – probably to avoid upsetting PRC diplomats and making life difficult in Canberra – the role of Taiwanese investment in China and Taiwan’s development itself.

    In a similar vein the scant discussion of India misses the role of Non-Resident Indians (NRIs) in the country’s economic development along with the concentration of power in the various industrial conglomerates like the Tata Group.

    Again, the same omission is made when discussing the South Korean Chaebols and Japanese Keiretsu. Given the investments made in Australia by all of these industrial conglomerates it’s curious they barely rate a mention in discussing Asia’s industrialisation process.

    The discussion on innovation in Chapter 1.3 is useful however it lacks substance in identifying exactly which sectors various Asian economies are specialising in and which industries are in decline as various countries move up the value chain.

    Singapore’s success in becoming East Asia’s hub for banking and corporate regional headquarters is a notable omission and again one has a suspicion this is because of ongoing Australian governments’ doomed ambitions to establish Sydney as a regional financial and business centre.

    Probably the most glaring omission in Chapter One though is the role of the United States. In tracking the rise of the Indian service sector or Chinese, Japanese and South Korean manufacturing the trade policies of the US cannot be ignored. And yet they largely are.

    That failure to acknowledge the US role means report overlooks the Clinton and Bush I Administrations’ forced opening East Asia’s largely closed economies which radically changed South Korea, Taiwan and Japan in the late 1980s and early 90s. Not to mention the critical role the US had during that period in allowing China and Vietnam to join the global trade networks.

    Chapter One of Australia in the Asian Century is an unsatisfactory introduction to the complexities of the Asian economies and one suspects is because of the compromises made to assuage the egos and groupthink of Canberra’s mandarins and politicians.

    Most importantly, it fails to put the last thirty years’ developments in Asia into an Australian context or perspective. In this respect, it’s a fitting start to a largely inadequate report.

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