The Weekend Australian - - THE NATION - ROWAN CALLICK

The spill-over of the Amer­i­can con­fronta­tion with China may of­fer op­por­tu­ni­ties as well as dan­gers for Aus­tralian busi­ness.

The China re­la­tion­ship, in the con­text of US Pres­i­dent Don­ald Trump’s trade war, pro­vided a ma­jor theme of this Out­look con­fer­ence, touched on by speak­ers in many ses­sions. The com­mon re­sponse was one of con­cern about be­ing trapped be­tween our big­gest trad­ing part­ner and our core se­cu­rity ally.

But this was hedged by a less ex­plicit pon­der­ing, with a sup­pressed sense al­most of ex­cite­ment, that the coun­tries’ com­pe­ti­tion may present op­por­tu­ni­ties for Aus­tralia.

These range from po­lit­i­cal op­por­tu­ni­ties to ben­e­fit from re­stored links as China seeks to reach around Don­ald Trump to embrace oth­ers, and from en­hanced eco­nomic op­por­tu­ni­ties with both China and Amer­ica as they turn from each other. Aus­tralia has free trade agree­ments with both.

Pro­fes­sor Bob Gre­gory of the Aus­tralian Na­tional Univer­sity warned that the terms of trade, whose strength had done so much to drive Aus­tralian pros­per­ity, might now trend back down if China’s own trade with the US was crip­pled.

An­other re­sponse, in­clud­ing from Prime Min­is­ter Scott Mor­ri­son, was that in the face of this threat Aus­tralia should fo­cus on is­sues it di­rectly con­trolled, such as tax­a­tion pol­icy and re­duced en­ergy costs, to en­sure it re­mained com­pet­i­tive and at­trac­tive to in­vestors.

Mel­bourne In­sti­tute’s Ross Gar­naut said it wasn’t pos­si­ble to sep­a­rate clearly Aus­tralia’s eco­nomic and se­cu­rity in­ter­ests, which are bound in a com­plex way in the re­la­tion­ship with China. He said there was no rea­son why the re­cent leg­is­la­tion about for­eign in­ter­fer­ence should be a con­tin­u­ing source of ten­sion in re­la­tions with Aus­tralia.

Op­po­si­tion for­eign af­fairs spokes­woman Penny Wong stressed that La­bor had sup­ported such leg­is­la­tion, and backed the govern­ment’s move to quar­an­tine the in­com­ing 5G net­work from Chi­nese gi­ant Huawei and sim­i­lar over­seas com­pa­nies.

Pro­fes­sor Gar­naut said it was ques­tion­able whether the prospect of ma­jor in­ter­ven­tions by Wash­ing­ton in sup­ply chains to re­duce China’s value-added pro­duc­tion, formed a nec­es­sary or ef­fec­tive way to achieve se­cu­rity ob­jec­tives.

“I can’t see that the fail­ure of China’s devel­op­ment could be help­ful”, he said. “It would be hugely dam­ag­ing for Aus­tralia and for global devel­op­ment.”

The core ques­tion was not whether to en­gage with China but how, in­clud­ing manag­ing risks.

Ms Wong said China’s role was im­por­tant for Aus­tralia’s pros­per­ity, and that it was in­evitable there would be both di­ver­gence and con­ver­gence in the in­ter­ests, given Aus­tralia’s com­mit­ment to democ­racy and the rule of law.

She said that while the Ab­bott and Turnbull gov­ern­ments made the re­la­tion­ship “harder than nec­es­sary,” it may be­come harder rather than eas­ier in the fu­ture.

“The bumps in the road won’t nec­es­sar­ily re­solve them­selves, we need to man­age them ac­tively … on the ba­sis of re­spect, not fear, ” she said. In re­cent weeks, she said, a sense had emerged of Bei­jing seek­ing to im­prove re­la­tions with Aus­tralia.

She said Aus­tralia’s gov­ern­ments and busi­nesses should en­gage more over China: “Too of­ten, they are talk­ing past each other.” It was vi­tal to en­sure “we as­sert our in­ter­ests and safe­guard our sovereignty” in the China re­la­tion­ship “with­out be­ing de­fen­sive or in­flam­ma­tory”.

The Lowy In­sti­tute’s Richard McGre­gor said past govern­ment re­la­tions with China “don’t of­fer us a great guide for the fu­ture. It’s a vastly dif­fer­ent China” un­der the trans­for­ma­tive new era of Pres­i­dent Xi Jin­ping.

Aus­tralia was also big­ger and richer, with the re­la­tion­ship bet­ter char­ac­terised as in­ter­de­pen­dent rather than as our be­ing re­liant on China, he said.

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