Trading blows: China’s punitive strategy against Australia is failing

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First Beijing imposed a political ban, a ban on top-level contacts with Australia, accompanied by salvos of bluster from Chinese Communist Party mouthpieces. The usual abuse. That was more than a year ago.

When that failed to frighten Australia into submission, last year it imposed a go-slow on imports of Australian thermal coal, with $1 billion worth piling up on China’s docks.

When that didn’t work, China’s ambassador announced in April that his government would impose strategic trade sanctions. He listed four industries: beef, wine, tourism and universities. Altogether, it was a threat to some $25 billion in Australian export revenue. The abuse machine cranked up again.

When that prospect failed to inspire sufficient fear, China’s government ministries added another layer of penalties. In recent months, they’ve started punitive measures against barley, cotton, thermal coal and coking coal exports. That’s another potential impost on Australian export earnings worth about $16 billion.

And when that failed to produce the required result, CCP media outlets recently announced seven more categories would be added: timber, sugar, copper ore and copper concentrates, wool, lobster, barley and wine. These bans were to be effective Friday last week. This news was widely reported in Australia. The potential loss to Australia is estimated at $5 billion or so.

Note three important subtleties. First, observant readers will have noticed that two of the industries on the latest list were cited earlier – wine and barley. So there’s some double-counting and repetition in the lists.

Second, ambiguity is very important to Beijing’s processes. The Party and its various apparats issue the threats, generate the abuse and gleefully call down pain on Australia. Last week, for instance, the Global Times editorialised that “Australia will pay tremendously for its misjudgment”. But no government official will say directly that Australia is being punished. Officials pretend that it’s about the sudden appearance of impurities in Australian lobster, or beetles in Australian timber, or mislabelling of Australian beef, which all occur at the same time by sheer coincidence.

And the ambassador’s April statement maintained the ambiguity by pretending the trade sanctions would be a spontaneous boycott by China’s 1.4 billion people. The Party propaganda hate speech is another coincidence.

Why the pretence? Two reasons. Such capricious trade bans violate the rules of the World Trade Organisation. Beijing doesn’t want to give Australia any recourse. But, more importantly, it’s a deliberate psychological campaign. “It’s part of their strategy,” explains Peter Varghese, former secretary of the Department of Foreign Affairs and Trade, now chancellor of Queensland University.

“They leave it to you to guess. They let you go through the process of thinking, ‘What could we have possibly done to upset the Chinese?’ They leave us to use our imaginations to think of what we might have done.” This is the same principle – the self-criticism – that the Party used to pressure victims during the Cultural Revolution.

“Then they wait while you take it to the next step. You identify it yourself. Once you’ve come to your list of possibilities of what they might be upset about, you try to fix it. There’s an element of tactics to it. The whole pattern of Chinese exercise of influence and control is to bring pre-emptive concessions to China so that they don’t have to invade or do anything so unsubtle.”

The third subtlety is that, as Australia’s Trade Minister Simon Birmingham said on Monday, it appeared that the latest expected bans didn’t necessarily take effect from last Friday. Beijing officials denied any such orders. This deliberate uncertainty is all part of the psychological gaming.

Beijing is trying to generate political pressure on the Morrison government. Wave after wave of measures, targeting industry after industry, abuse heaped upon abuse, month after month. The aim is that Australian companies and industries will turn on the Morrison government and demand that Canberra “do something” until the pressure is intolerable and Morrison buckles.

Memo to Xi Jinping. It’s not working. If the federal government were about to crack, it would not have proceeded with Australia’s first prosecution of a case of foreign interference last week. Nor would the Morrison government be pressing ahead this week to pass its foreign relations bill through federal Parliament. The bill allows Canberra to overrule any state or local government arrangement with foreign governments. It’s aimed squarely at quashing the Victorian government’s deal to join China’s Belt and Road scheme.

Scott Morrison and his cabinet have no intention of buckling under Chinese coercion. Neither does Anthony Albanese’s Labor Party. Both sides of Parliament are deeply aware that the Chinese Communist Party is testing Australia’s sovereign resolve. Once broken, it will be too late to recover. Capitulation now would lead to subjugation.

Australia’s political parties are reassured by the fact that public opinion is solidly supportive. This year’s Lowy poll found that Australians’ trust in China had more than halved over the past two years, from 52 per cent to 23.

Shouldn’t Morrison just pick up the phone, call Xi and fix the relationship? That’s tricky. Remember, Xi still has a ban on any communication with Morrison and all his ministers. Australian and Chinese officials still talk through their embassies, and Morrison uses some Australian business leaders as a discreet back channel to Beijing. But there is a fundamental clash of sovereign will under way.

“There’s a naive view that this can be solved by a phone call and a cuppa tea,” the prime minister has told colleagues. “That’s just not true. We are dealing with a very different China to the one John Howard dealt with.”

And Australia can take solace from a fascinating September study by the Australia China Research Institute. It examines six cases of Chinese economic coercion against Australia in the last three years. It finds the actual costs generally end up being minor and the trade measures fleeting.

And besides, Australia’s overall exports to China are still rising. In the first six months of the year and in spite of the pandemic, Australian exports to China were actually 4 per cent or $2.6 billion higher than at the same time a year earlier, according to the Australian Bureau of Statistics.

That won’t console the companies that are about to lose business. The federal and state governments need to consider better supporting companies suffering from Xi’s megalomania through no fault of their own.

But the overall picture of China’s economic coercion of Australia so far resembles the traditional Chinese lion dance. It’s highly theatrical, with clashing gongs and drums and sudden threatening lunges. It’s enough to frighten the kiddies. But while the thrashing beast might step on some spectators’ toes, it devours no one. Xi’s intimidation of Australia is much the same. All dance, not much lion.

By Peter Hartcher
SMH

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