Waiting line

China is now the top export and import partner for 12 of the 20 other members of the Asia-Pacific Economic Cooperation (APEC) group and the top one-way partner for five others. The American score on this measuring stick is two and one.

This is a very basic way of seeing how China’s bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) may resonate more in the region than the somewhat dismissive response from Minister of Commerce Dan Tehan seems to suggest. suppose.

APEC is not a perfect indicator of how the CPTPP might add members. But it is a natural recruiting ground to evolve the former Trans-Pacific Partnership (TPP) into an Asia-Pacific free trade area. And it shows how China’s status as the largest economy in the region – and possibly soon the world – gives it a position that is overshadowed by the creation of the AUKUS partnership to face its assertion of security.

So while New Zealand, the CPTPP’s custodian, claims that China’s application for membership last Thursday was unrelated to AUKUS, it seems more than a coincidence given that China has been expressing interest ever since. some time.

Contrary to recent signs of increasingly authoritarian economic management in China, many trade experts believe that Beijing has carefully studied the CPTPP to see how the existing variations on issues such as state ownership for historical members could be used to its advantage.

Deborah Elms of the Asian Trade Center says:

The Chinese bureaucracy has already spent a lot of time carefully reviewing the deal and preparing gap analyzes and thinking about how to respond to likely demands and concerns. […] Many will suggest that keeping China constrained by a consistent set of rules is better than trying to compete with China operating outside the same rulebook.

Henry Gao and Weihuan Zhou say, “A close look at the substantive rules of the CPTPP shows that the gap between it and China’s existing international obligations could be much narrower than many people realize.

All of this is far from letting China join very quickly, especially amid mixed reviews about its membership in the World Trade Organization. And as Ian Hill noted, there is a disconnect between China’s security posture and its economic cooperation in the region.

Many analysts suggest that it is better to keep China constrained by a set of trade rules rather than trying to compete with China (Russellstreet / Flickr)

But if China persists, the United States continues to reject the old TPP it once defended, and countries like New Zealand, Singapore and Malaysia are ready to discuss the issue, Australia will face up to. to difficult choices.

Perhaps the trade group needs new, more conventional candidates such as South Korea or Thailand to muddy the waters and slow down this looming split over a new economic engagement with China.

Pacific Partners

It has now been two years since then-Minister of International Development Alex Hawke warned companies that the government would expect them to do a national service for the then-established Pacific Step-up. a year.

Leading Covid-19’s now familiar political language on economic resilience, he said:

We have funds to reduce risk and we want to see Australian and New Zealand businesses scale up to take advantage of the enabling infrastructure and funding that [governments] put on the table. We believe that companies also have an obligation to this region.

So far, six projects have been approved under Australia’s $ 2 billion Pacific Infrastructure Finance Facility (AIFFP), with around $ 60 million of its funds allocated, plus a loan guarantee of 96 million. million dollars to ANZ bank.

It is prudent to approach this new venture with caution given that Australia appears to be a runaway development finance institution, most recently giving Export Finance Australia (EFA) equity investment power.

For now, the national service obligation appears to fall on a Telstra apparently reluctant to buy Digicel Pacific, and is imposed by the Papua New Guinea competition regulator preventing Westpac from leaving the region..

Last month, after quietly going to PNG to discuss the purchase of Digicel at the behest of the Morrison government, Telstra chief executive Andy Penn made it clear he would keep his contribution to the Pacific Step-up. quite distinct from its otherwise modernized telecommunications business.

“[Digicel] is not included in our ambitions or our financial orientations. If we were to acquire it, we would operate it efficiently and run it as part of our business relatively independently from other parties, ”he told The Australian Financial Review.

This seems to suggest that if this Australia Inc business turns sour, the government’s debt to Telstra will be there for everyone.

These laws are among the remnants of the 20-year unsuccessful application of military power in the Middle East by the United States and Australia.

Meanwhile, Westpac’s offer to leave the exit lounge by selling its banking business in Fiji and PNG was rejected by PNG’s Independent Consumer and Competition Commission (ICCC). He said selling the PNG business to Kina Securities (which owns Kina Bank) would have reduced competition.

Westpac sold much of its Pacific business in 2015, followed by ANZ’s sale of its PNG retail bank in 2019, in what was a significant part of the Pacific release of a range of long-standing Australian companies.

The Commission seems to think that it has, indeed, forced Westpac to stay in PNG and has helped to make the financial system more competitive, stating: “Although Westpac has decided to divest its business in PNG, it appears that this is not happening. will not occur immediately. […] therefore, the ICCC considers that Westpac PNG will be a significant source of competition for at least several years.

It seems highly unrealistic. But when Australia was forced to look back to the future by providing $ 558 million in emergency budget support to PNG through EFA over the past two years, the Commission’s apparent call for the Competition aid provides food for thought on how Australia can best provide economic support. to these countries.

Meanwhile, Westpac’s decision to leave the Pacific in part because she feared she would not be able to handle anti-terrorism laws on money laundering is particularly ironic. These laws are among the remnants of the unsuccessful application of military power in the Middle East for 20 years by the United States and Australia. Now they are undermining Australia’s efforts to win hearts and minds in the Pacific, but this time using her putative economic might.

Angles and pendants

The Morrison government is reluctant to take the advice of universities these days, but some recent evidence from the Senate manufacturing investigation highlights the less discussed aspect of the AUKUS submarine deal.

The Group of Eight universities’ submission warns that the country’s $ 1.5 billion modern manufacturing strategy is at risk of being hampered by a lack of engineers.

China is now the top export and import partner for 12 of the 20 other members of the Asia-Pacific Economic Cooperation (APEC) group and the top one-way partner for five others. President Joe Biden delivers virtual remarks at the APEC Leaders’ Retreat July 16, 2021 at the White House (Adam Schultz / The White House / Flickr)

Referring to research funding gaps, reductions in migration and disincentives for international students, he says: “Australia cannot afford to become an economic and research island, and its universities or industries to be. research intensive cannot be separated from the world either. This is especially true for advanced manufacturing which requires a range of interdisciplinary inputs. “

While the G8 has since been politically astute enough to say it can provide the talent needed to build nuclear submarines, the earlier warning highlights the question of where human capital will come from for a new construction project. complex over $ 100 billion if not available. for a $ 1.5 billion multi-sector update program now.

Figuring out how to produce these complex boats when the Chinese threat has been declared worse than ever is going to involve more “angles and dangles” – as the submariners say – than a sudden deep dive.

Once the government has borrowed at least one US or UK vessel in Australian waters, it will likely become more and more attractive to view overseas buying as the easiest way to enter into a ‘partnership forever’ .

A government that seems happy to signal the likelihood of an impending war with China might also pay attention to the Productivity Commission and Australian National Audit Office’s library of defense procurement reports.

Indeed, part of the reason French ships in Australia with a premium of at least 15 percent was the rejection of a nuclear option. This forced Australia to acquire a bespoke diesel submarine that would run longer distances than standard models.

Fortunately, Australian public and private educational institutions are in the midst of a massive upheaval in how to produce the professional skills needed for the 21st century, from PhDs to apprentices, which should be timely for the Submarine Project.

But a government that seems happy to signal the likelihood of an impending war with China might also pay attention to the Productivity Commission and Australian National Audit Office’s library of defense procurement reports.

For example, the Commission argued: “There is no clear policy framework defining where and when [domestic defence equipment production] it’s worth it. There is also no published information on local additional costs associated with specific projects. It is therefore difficult to be confident that these benefits outweigh the considerable additional cost to taxpayers. “

With the security outlook deteriorating, there is clearly a need to dramatically increase the maintenance of the defense and parts manufacturing industry, but careful thought will likely be needed to get the ships here.