Publication: The Financial Review
Author: Andrew Robb
Australia was the first Western country to break through the metaphorical Great Wall of China in terms of free trade, creating a trading environment no Western G20 economy has ever enjoyed. Yes, in breaking through we have got a little bloodied, but our efforts were not in vain, and they must not be in vain.
For many of the persistent naysayers the only way forward with China is conflict. Yet, there is an alternate way forward.
Australia and China signed a high-quality China-Australia Free Trade Agreement (CHAFTA) in 2015 built around two economies perfectly complementing each other; what we are good at China needs, and what China is good at we need.
This trade relationship is not the case for other G20 countries that have increasingly become strategic competitors to China as it re-emerges as a superpower.
Since the creation of CHAFTA, Australia’s commercial relationship with China has greatly strengthened, however, our political relationship has soured, to put it mildly.
Unfortunately, this political deterioration is starting to impact Australia economically. As is always the case when geopolitics and economics clash, the former takes priority.
It is time to fix the political relationship. Our commercial relationship is unique, so must be our political relationship. No small feat I understand – especially given China won’t take our phone call – but there is always a way forward.
For our path as a nation, we need to recognise the historical context, see China through a 2020 lens, identify the many positives and focus on the never-ending task of fostering respect and trust.
For 18 of the past 20 centuries China was at the political and economic center of gravity globally. This turned to national humiliation at the hands of foreign powers in the 19th and 20th century. Given this context, it is understandable that the country is hugely, and justifiably proud of their recent achievements, particularly lifting hundreds of millions out of poverty.
Many people make the mistake of viewing China through a 20 or 30-year-old lens. Yet the last 20 years alone have seen an unimaginable change in so many dimensions.
China has emerged as a superpower. They are a modern economy that has changed the existing world order. They are a major player in global trade. They are not going anywhere.
Countries and businesses worldwide are now vulnerable to this one market simply due to the sheer size of their economy.
I hear a lot about the need for market diversification from policy makers and commentators, overlooking harsh economic realities.
For the last 15 years, two-thirds of the world's growth derived from the growth in China itself. More recently China is the only significant economy that registered positive growth numbers during the pandemic.
Of course, good business people try to diversify supply lines, but at this point in time, companies, and nations, looking for growth in international markets simply cannot afford to overlook the Chinese market.
As with all relationships, the door swings both ways. For China, with power comes responsibility. China, given its dramatic rise as a re-emerging superpower, has sent a ripple of fear throughout the world. If they were deeply humiliated in the 19th and 20th centuries, how will they react in the 21st century?
The onus is on China to relieve some of that fear through clarifying intentions, and communicating with their neighbours and trading partners on a range of global issues such as the South China Sea. A global leader has added communication responsibilities, and needs to work in the open.
Our relationship with China is unique, but the challenge Australia faces is not. Every country is currently reevaluating their relationship with China and trying to understand their intentions.
Despite this fear that has driven an anti-China drumbeat in our country, the business relationship between Australia and China has been overwhelmingly positive.
Up until this year since 2015, trade between our two countries has increased 15-20 percent year on year. Even in the middle of a pandemic trade increased over last year.
Much credit for this rapid business expansion should go to the 1.3 million Chinese Australians who have provided an interpretation bridge between the two cultures.
It is an enduring and strong commercial relationship. The governing powers in both countries should take note. Let’s get back to old fashioned diplomacy, show interest, back our strengths, show respect, the coinage of diplomacy as Ambassador John McCarthy once noted.
We both need work harder at understanding and respecting the different mores and foundations that underpin our two societies.
This includes the complex concept of “Face” in Chinese culture, a concept all about respect and sincerity, a concept providing the foundation of Chinese social relationships; and not surprisingly it is the foundation of genuine long-term business success.
When dealing with China we must remember “face” for our Chinese friends but also “face” for ourselves – these two aspects are often inseparable.
This should top of mind, and applied to all our efforts.
What efforts? How about inviting China (and the United States for that matter) to be a part of the Trans Pacific Partnership. Work with them in an official capacity to improve global institutions such as the World Trade Organisation. Be a partner with China in dealing with the West.
Constructive, positive efforts to work together are endless. Let's focus our minds to positive solutions, invite cooperation, and stick to it.
There is always a way forward, we are not at an impasse. Where there is goodwill and intent, there is always a way forward.