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.