Today's Wikileaks are again confirmations rather than revelations. The SMH reports today that:
The cable confirms an account by the Treasury's former top China economist, Stephen Joske, who last year said Mr Argus and other BHP executives targeted the then prime minister Kevin Rudd, Mr Swan, the Resources Minister, Martin Ferguson, and their advisers over Chinalco's bid.
''Emails from BHP were circulating at the highest levels, copied in to ministers' offices, about all the 'China Inc' stuff,'' Mr Joske said last year after leaving Treasury in July.
The cable said Rio's rejection of what would have been China's biggest foreign investment "spared" the government having to make a tough decision on whether to approve the proposal.
But embassy officials in Canberra noted it left Mr Rudd having to deal with "an unhappy China''. "We noticed a very glum Chinese ambassador Zhang Junsai waiting outside Rudd's office with the Chinalco CEO Xiong Weiping.''
None of this is new. BHP's lobbying in these terms can be backdated to its attempt to buy Rio. In mid 2008, The Diplomat revealed that:
Some suspect that the Rudd Government’s anxiety about Chinese investment reflects the lobbying interests of BHP more than any clear-eyed analysis of Australia’s national interest. The BHP board does not want Chinalco to raise its stake in Rio at a time when BHP is trying to buy the company, and nor would it be comfortable with a major Chinese investor on it own share registry.
Indeed, people close to BHP have been arguing that “the Ruskies or Chinese” will grow to dominate the world’s mining industry if BHP Billiton and Australia do not do so first. A similarly crude and improbable argument has been heard emanating from inside Australian ministerial offices, if not so poetically expressed.
“Don Argus has argued very persuasively to both the Howard and Rudd governments that the merger will deliver a national champion too big to be taken over,” says Max Suich, a former Sydney Morning Herald editor who previously reported on the early Australia-Japan resources trade from Tokyo. “The line is that it will preserve influence and profits for Australia,” he says. “The silence from Canberra on the merger suggests tacit approval and that Argus has won the argument."
It's just another example of the muddy thinking that has afflicted Canberra policy-making for the past few years.
Strategic commodity markets are not like other markets in which supply and demand rules supreme. They therefore cannot be viewed through simplistic prisms of government versus free markets. As this blogger wrote a few months ago when predicting that Canada would reject the BHP Potash bid:
In regular markets if prices rise then demand falls, as well as vice versa. But in strategic commodity markets, where governments depend upon security of supply for legitimacy, the opposite happens. When prices rise, demand rises further because governments get spooked about security of supply. Stockpiling and strategic investment in production ensue.
For a sustainable market you therefore need some balance between stable supply competition and demand.
Throughout 2008 and since, this blogger argued that instead of listening to BHP's self-serving rhetoric, and throwing Australian foreign policy and the policy-making process to vested-interests, the government should have installed a two-pillar policy for the big miners that prohibited takeover of either. Such would have prevented the waste around the BHP/Rio bid, would have placated the Chinese, would have prevented the rent-seeking activity confirmed by Wikileaks, would have prevented the Chinalco bid debacle and throughout retained a balance between supply and demand in pricing. And it still would have allowed huge Chinese investment to flow into mid-tier and developing mining.
Ironically, the rest of the world has seen the wisdom of this policy even if our captured politicians can't. By banning large-scale takeovers by our big miners a two pillar policy is now the defacto position.