MPs' 'loose talk' drives Australia's relationship with China to very low point, former defence chief warns
China is Australia’s partner, not an enemy, the former Australian defence chief Angus Houston has declared, as he accused some politicians of engaging in “loose talk” that had helped drive the relationship between Canberra and Beijing to “a very low point”.
As BHP revealed some Chinese customers had recently deferred coal purchases from the mining giant, Houston warned of the impact of ill-disciplined public comments and called for a “reset” of the relationship.
The ex-ADF boss said Australia needed China to aid its economic recovery from the Covid-19 recession and the process of trade diversification would take many years to achieve.
“China is our partner, China is not our enemy – let’s get that very straight,” Houston said during an event hosted by the Sydney-based Lowy Institute on Thursday.
Australian coal has reportedly become the latest target of Chinese authorities, prompting the Morrison government to seek assurances from Beijing. BHP confirmed late on Wednesday it was seeing some impacts first hand.
The chairman of the mining company, Ken MacKenzie, said BHP understood “there may be some new developments relating to how China plans and moderates imports versus their own domestic coal production”.
“Our commercial team has recently received deferment requests from some of our Chinese customers,” MacKenzie told reporters after BHP’s annual general meeting. “But we have longstanding relationships with our customers in China and we’re working with them to understand the situation more comprehensively.”
MacKenzie did not specify the volume of affected purchases but added it “would be concerning if the rumours are true regarding import restrictions for Australian coal into China”.
Reports by S&P Global Platts and Argus Media indicated China’s customs authorities had told several stateowned steelmakers and power plants to immediately stop importing Australian thermal and coking coal.
According to the International Monetary Fund’s World Economic Outlook, released this week, Australian coal prices have been “depressed by China’s apparent tightening of import restrictions and by Japan’s intention to phase out inefficient coal-fired power plants by 2030”.
MacKenzie argued coking coal imports from Australia to China had increased this year and he predicted China’s strong emergence from the Covid crisis would drive further demand for resources. Australia was well placed to support China’s economic recovery, the BHP boss said.
China has taken a range of actions against Australian exporters this year, including imposing prohibitive tariffs on barley, suspending imports from five red meat processing plants and launching two trade investigations into wine.
The Australian government, which copped flak from China for taking an early and forthright position in support of an independent international inquiry into Covid-19, insists it will not be deterred by economic pressure from standing up for its values.
Houston noted the reports about coal exports being restricted and highlighted Australia’s strong economic ties with China as he called for some sort of “circuit breaker” in the relationship.
He said the latest developments had occurred in the context of increasing tensions between the United States and China.
“Our number one alliance partner is at loggerheads with our number one trading partner,” Houston said. “I think there’s been some, shall I say, loose talk from here in Australia where we’ve seen some comments basically make the circumstances a little worse than they needed to be.”
Houston said some messages from parliamentarians were “ill-disciplined” although he did not name any particular members.
The Labor opposition has previously accused the cabinet of failing to show leadership on the China relationship, leaving a void for hawkish backbenchers to fill with sometimes inflammatory comments.
Houston argued the prime minister, Scott Morrison, the foreign minister, Marise Payne, and the trade minister, Simon Birmingham, had primary responsibility to make statements on the relationship.
“I think our relationship at the moment is at a very low point,” he said.
Houston said while there had been a “number of events” over the course of this year, Australia’s decision in 2018 to exclude Huawei from the 5G network was one of the major factors in the current tensions.
“We need to take a hard look at our relationship with China, I think we need a reset, we need a circuit breaker, because really if we’re going to come out of this recession that we have at the moment because of Covid-19, we need China.”
Australia’s economy was integrated with China’s to the extent that both sides needed to be able to work effectively together and to engage with mutual respect, Houston said. China and Australia needed to respect each other’s sovereignty.
“They’re not going to go away, they’re going to get stronger, they are going to be a force that we have to deal with, so we’d better work out the best way to deal with them.”
Houston said Australia also needed to hold firm to its values and interests and work with like-minded countries, including through the forums such as the Quad and Asean. He suggested a need to “construct a new strategic architecture in the region”.
He said he was “very encouraged” by the outcomes from the Quad meeting in Tokyo last week when Payne met with her counterparts from Japan, the US and India and they agreed to jointly “promote a stable, resilient and inclusive Indo-Pacific”.
The Lowy Institute event, focusing on the rise of China, also featured the former US defence secretary James Mattis, who predicted “more constructive engagement” between America and China in the new year - although he would not say who he would back in the presidential election next month.
Mattis said he could not understand “why China is doing much of what it’s doing”, including militarising disputed features in the South China Sea and retreating from the “one country, two systems” commitments to Hong Kong.
He criticised China for taking “economic retaliation” against Australia and for engaging in so-called wolf warrior diplomacy with numerous countries. “There is something driving this, a vulnerability somewhere that I don’t understand,” Mattis said.