Tuesday, November 2, 2010

Canada right to rebuff BHP

As a liberal and believer in functional markets, this blog reckons that from time-to-time it is necessary for policy to shape appropriate competition.

Australia has always prided itself on "punching above its diplomatic weight". The narrative of Australian foreign affairs is littered with this interpretation of the twentieth century. Some have interpreted this as a sign of immaturity; that is we are more concerned with being heard than we are with protecting our interests.

The truth is the statement has always been overblown. Can we really sustain the argument that we are more powerful than other middle powers? There are notable successes (or at least points of prominence), the role Australia plays in the US alliance probably elevates its strategic influence above a comparably sized European country for instance. Although they may well argue that the collective will of the EU is more than a match. But are we more influential than Canada? Or even one of several South American states?

Australia has had influence not power. We have always readily accepted the status of a client state, first with Britain as a colony and then cultural outpost. Later with the US as a small piece in its strategic power matrix across the Pacific. We have readily and sensibly accepted these limitations and worked to influence our overlords through persuasion and judicious support. Nudging them this way or that in accord with our interests, but often making significant sacrifices to sustain our voice.

But now we find ourselves in an unfamiliar situation. We have a rising Great Power on our doorstep over which we have zero influence, but some considerable power. The Chinese state's need for resources goes well beyond economic objectives. Prosperity is a central plank of the CCP's legitimacy as a government. Resources are therefore of strategic importance to the CCP. Without them, they lose power.

As John Garnaut makes clear in his deceptively simple piece today, Australia has failed to think carefully about how it handles its resources companies in this situation.
Recently Australia has been doing a better job of grappling with China's complexity, including with Treasury setting up a new China unit and Rudd handing $30 million mainly to the Australian National University to study how China sees itself in the world. It has also shown more discipline in avoiding diplomatic accidents.

Yet as four cabinet ministers and a former prime minister - Rudd, Wayne Swan, Craig Emerson, Chris Evans and Paul Keating - converge on Beijing to visit Chinese leaders this week, it is still not clear that Australia has worked out what it wants from China or how it is going to get it.

This blogger will add that simplistic notions of national interest and profiting from Chinese demand have only destabilised the political relationship. Ultimately this tension is unsustainable.

Real power must be used more judiciously even than influence.

Problem is, although Australia's resource advantages offers power over China, the Australian government has no power over its giant resource firms and their penchant for economic rents.

The question facing Canada today is whether they want to join this club.

Would you?


Anonymous said...

"Join the Club"??? We are all in it, like it or not. We all have to deal with China's ascendancy.

And we are all much smaller than China - BHP included. How then do we avoid getting overrun? By ensuring we have what China wants, such as potash.

This isn't simple "rent-seeking". This is longer term survival, for BHP, Aus & Canada.

David Llewellyn-Smith said...

That's a more than fair world view. And the Canadians may well take it.

However, this blogger is arguing for a better world, not for the ruthless management of the current one, which, ultimately, it thinks is better policy...