China is now the top export and import partner for 12 of the other 20 members of the Asia-Pacific Economic Cooperation (APEC) group and a top one-way partner for five others. The US score on this measuring stick is two and one.
This is a very fundamental way of seeing how China’s application to join the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) could find more resonance in the region than the somewhat negative response from Commerce Minister Dan Tehan seems to suggest.
APEC is not a perfect proxy for what the CPTPP members might add. But it is a natural reason for recruiting to expand the old Trans-Pacific Partnership (TPP) towards 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 reputation that is overshadowed in creating the AUKUS partnership to deal with its security awareness.
While New Zealand, the CPTPP’s custodian, says China’s application for membership last Thursday had nothing to do with AUKUS, this seems more than coincidental as China has shown interest for some time.
Contrary to recent signs of increasingly authoritarian economic governance in China, many trade experts believe that Beijing has studied the CPTPP carefully to see how existing variations on issues such as state ownership could be used to its advantage for incumbent members.
Deborah Elms of the Asian Trade Center says:
The bureaucracy in China has already spent a long time carefully reviewing the deal, preparing gap analyzes, and brainstorming how to respond to likely inquiries and concerns […] Many will argue that it is better to restrict China by a set of consistent rules than to try to compete with China, which operates outside of the same set of rules.
Henry Gao and Weihuan Zhou argue, “A careful review of the main rules of the CPTPP shows that the gap between it and China’s existing international obligations may be much smaller than many people think.”
All of this is far from allowing China to join very quickly, especially given the mixed views about its participation in the World Trade Organization. And, as Ian Hill noted, there is a mismatch between China’s security situation and its economic cooperation in the region.
But if China persists, the United States continues to oppose the old TPP it once advocated, and countries like New Zealand, Singapore and Malaysia stand ready to discuss the problem, Australia will face some tough choices.
Perhaps the trade group needs some more conventional new entrants like South Korea or Thailand to cloud the waters and slow this looming split over a new economic engagement with China.
It has been two years since then International Development Secretary Alex Hawke warned companies that the government expected them to do national service for the then one-year Pacific Step-up.
Citing the now popular Covid-19 political slang about economic resilience, he said:
We have resources to reduce the risk and we want Australian and New Zealand companies to really take action to take advantage of the conducive infrastructure and funding that it offers [governments] put …. on the table. We are of the opinion that the economy of this region also has an obligation.
To date, six projects under the Australian Pacific Infrastructure Finance Facility (AIFFP) have been approved for $ 2 billion, with approximately $ 60 million.
It is advisable to approach this new project with caution as Australia is apparently on the run to building a development finance institution, most recently by providing equity capital to Export Finance Australia (EFA).
For now, the national service obligation appears to fall on an apparently reluctant Telstra to buy Digicel Pacific, and is imposed by Papua New Guinea’s competition watchdog, preventing Westpac from leaving the region.
Last month, after quietly visiting PNG to speak about buying Digicel at the request of the Morrison government, Telstra CEO Andy Penn made it clear that he was making his contribution to the Pacific step-up separate from his otherwise modernizing Telecommunications business will keep.
“[Digicel] is not included in our financial ambitions or guidelines. If we acquired it, we would operate it effectively and run it relatively independently of the other parts under our business, ”he told The Australian financial report.
This seems to suggest that if this Australia Inc. company gets pissed off, the government debt to Telstra will be visible to all.
These laws are among the holdover from the unsuccessful 20 years of unsuccessful use of military power in the Middle East by the United States and Australia.
Meanwhile, Westpac’s offer to wave off its exit lounge by selling its Fiji and PNG banking business has been rejected by PNG’s Independent Consumer and Competition Commission (ICCC). The sale of 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 the ANZ’s sale of its retail bank in PNG in 2019, which was a high profile part of the exodus of a number of long-standing Australian companies from the Pacific.
The Commission seems to believe that it effectively forced Westpac to stay in PNG and helped make the financial system more competitive, stating: “Although Westpac has decided to divest its PNG business, it does not appear to be happening immediately to be able to ”. […] Therefore, the ICCC believes that Westpac PNG will be a significant source of competition for at least several years. “
This seems highly unrealistic. But when Australia has been forced to step back into the future over the past two years by providing PNG through EFA with $ 558 million in emergency aid, the Commission’s obvious call for competitive aid gives some food for thought on how best Australia can provide economic assistance to these countries.
Meanwhile, Westpac’s decision to leave the Pacific is particularly ironic, in part because of concerns about its inability to administer anti-terrorism money laundering laws. These laws are among the holdover from the unsuccessful 20 years of unsuccessful use of military power in the Middle East by the United States and Australia. Now they are undermining Australia’s efforts to win hearts and minds in the Pacific, but this time with its supposed economic power.
Angles and dangling
The Morrison administration is reluctant to take much advice from universities these days, but some recent evidence from the Senate manufacturing investigation highlights the least discussed aspect of the AUKUS submarine deal.
The submission by the Group of Eight Universities warns that the country’s $ 1.5 billion modern manufacturing strategy could be hampered by the lack of engineers.
With reference to research funding bottlenecks, migration cuts and barriers for foreign students, it says: “Australia cannot afford to become an economic and research island, and its research-intensive universities or industries cannot separate from the world either. This is especially true for advanced manufacturing, which requires a range of interdisciplinary inputs. “
While the G8 has since become politically smart enough to say they can deploy the talent to build nuclear submarines, the earlier warning underscores the question of where the human capital is coming from for a new complex construction project valued at over US $ 100 billion – Dollar comes when it’s not available now for a $ 1.5 billion multi-sector update program.
To find out how to make these complex boats when the China threat has been declared worse than ever, you need to do more “nooks and crannies” – as submariners say – than take a sudden deep dive.
Once the government brings at least one borrowed American or British boat into Australian waters, it is likely to become increasingly attractive to see offshore buying as the easiest way to meet an “everlasting partnership”.
A government that seems happy to report the likelihood of an impending war with China could also look to the library of reports from the Productivity Commission and the Australian Court of Auditors on Defense Procurement.
In fact, part of the reason the French boats got at least a 15 percent premium in Australia was because of the rejection of a nuclear option. This made it necessary for Australia to get a bespoke diesel submarine that would cover longer distances than commercially available models.
Fortunately, Australia’s public and private educational institutions are in a state of massive upheaval in how to acquire the necessary professional skills for age 21.
But a government eager to point out the likelihood of an impending war with China might also look to the library of reports from the Productivity Commission and the Australian Court of Auditors on Defense Procurement.
For example, the Commission has argued: “There is no clear policy framework that defines where and when” [domestic defence equipment production] it’s worth it. No information is published about local cost rewards for certain projects either. This makes it difficult to trust that these benefits will outweigh the significant additional costs for taxpayers. “
Clearly, given the deteriorating safety outlook, there is a need for a significant ramp up in the defense maintenance and parts manufacturing industries, but it will likely take some thorough thinking to get the boats here.