Ordie
07-15-2009, 08:07 AM
The Australian (http://www.theaustralian.news.com.au/)
BEIJING is flexing its muscles and the Prime Minister will be forced into concessions.
'The world is watching'
The Australian's Scott Murdoch on Kevin Rudd's warning to China to tread carefully in Rio spy case....
THE signs are that Australia is about to be taught another lesson in realpolitik; that it has little political leverage over China once Beijing's cumbersome power structure decides on an assertion of its authority.
The detention of Rio Tinto executive and Australian citizen Stern Hu is not merely sending a message to foreign corporations. It also sends an internal message. It signals a shift in China towards a more conservative, state-focused and security-conscious expression of power. The idea of China as a market economy, a recognition conceded by the Howard government, ran far ahead of reality.
China's detention of Hu and the disdain with which Australia is being treated is a reality check for our governments, businesses and public opinion. In recent years surveys have shown Australian public attitude more favourable to China than the US, a misjudgment presumably driven by George W. Bush's sabre-rattling and a boost for a regime prepared to shoot its own people.
Australia is in unprecedented territory. For the first time in our history our main trading partner is not a strategic ally and not a rule of law democratic state. This is a fundamental change in our national existence. It is a long-run transformation and will demand a more sophisticated Australian diplomacy.
The first thing Australia needs to forget is that populist, brainless, megaphone diplomacy can solve our problem. The idea that China's leadership will buckle and submit with a well-publicised phone call from Kevin Rudd is a touching flight from reality. As our former ambassador to China Ross Garnaut said, politicising the issue by making it "a high-profile public event" will make China more resistant.
It is equally futile to think Australia should retreat from China because it is an authoritarian state. That was not John Howard's policy. It is not the attitude of a sensible Australian government. Our involvement with China will only intensify. What is required is an unsentimental pursuit of the national interest, dismissal of any illusion about a special friendship yet a prudent drive to deepen relations and practical co-operation. That means working through tensions such as the Hu detention.
China's economy blends the market with command and control. It has no transparent legal system and no independent judicial enforcement. It allows petty officialdom and intimidating state security to override normal commercial rules. China gets away with behaviour that would never be tolerated from other nations because of its economic potential and future assumed great power status.
This bullying mentality is on display again. Is it any surprise with the US economy debt crippled and with global growth more dependent than ever on China? Yet, at the same time, China seems paranoid that its behaviour and investment are not accepted on a bona fide basis.
Nobody knows the full story behind the move against Hu and three other Rio officers. But two messages are known: China is agitated over its recent commercial setbacks and unnerved over the Rudd government's inept foreign policy messages.
Professor of economics at the Australian National University's Crawford School Peter Drysdale says: "I don't think this relates to any tit-for-tat issue arising directly from Australia's commercial ties with China. There is no evidence of that. But the risk is that Australians overreact and we get locked into a downward spiral. The situation needs a careful and modulated response from the Rudd government."
Rudd's misjudgments with China need to be kept in context; there is nothing to suggest the Rudd government is responsible for Hu's detention. Rudd's mistake has been to personalise the China relationship. It carries his imprint, his personality, his lofty aspirations and his deep suspicions of China's military intent. Because the policy is dictated almost totally by Rudd's personality, its policy foundations are uncertain and contradictory and expectations were raised far too high.
This is the reason China is confused. It has every right to be confused. If Rudd were smart, he would give Foreign Minister Stephen Smith, cautious and unemotional, more scope with Beijing. In Drysdale's words, "we need to get our act together on and with China, and quickly".
This is more imperative if, as seems, there is an internal shift within China towards a harder line.
One critical backdrop here is the humiliating failure by state-owned company Chinalco to take 18 per cent of Rio and two board seats. The Rudd government didn't like this deal and made that known privately to China. In the end, the market scuttled the play. But this was China's biggest foreign investment initiative since itsstate-owned oil corporation tried to acquire US energy company Unocal, only to succumb to a hostile US congress.
It would be unusual if Chinalco's failure did not cause soul-searching within China's leadership. How could this not be the case? Paul Keating argues that Australia's response was too negative and static. He told this column: "What is China's best interest out of Australia in iron ore? It is having the certainty of a big-volume, low-cost supplier. This is what Australia offers. For China, this model is far superior to seeking a vertical integration by owning a substantial chunk of the supply chain in Australia. It is, to some extent, a strategic oversight by Australia not to have reinforced and persuaded China to this view."
Keating's point is that Australia must become a more collaborative strategic player with China. Beijing's leaders are consumed by frustration, aware of their rising economic power yet being outmanoeuvred on the big global plays. This humiliation was reinforced in the iron ore negotiations in which, ironically, Rio took the lead. Once Japan settled for a 33per cent price cut with South Korea and Taiwan following, China's hopes of a securing a far bigger price cut were in retreat. The big miners, Rio and BHP, were triumphant and Beijing was on the losing side. Again.
Relying on an official website, Smith said the detention of Hu arose from the iron ore negotiations and claims that he "stole state secrets", including bribery. The decision seems to reflect political and economic judgments at a high level within China's leadership.
Hence the comment from Smith that "we may well be in for a long haul here". Smith's aim is to limit the damage and press China in private. Yet public concern about China's action is fully justified and appropriate. The more China displays contempt for the Rudd government, the more opinion will turn against Beijing. There is a simple proposition here: "This is not the action of a friend."
Smith's public remarks mean that China has been told. But does it care? Australia's strongest argument is that China is undermining its own commercial interests on a universal basis. This is our best leverage.
The bottom line, however, is that Rudd at some point will probably need to make concessions to China for Hu's cause.
Source: The Australian Editorial
BEIJING is flexing its muscles and the Prime Minister will be forced into concessions.
'The world is watching'
The Australian's Scott Murdoch on Kevin Rudd's warning to China to tread carefully in Rio spy case....
THE signs are that Australia is about to be taught another lesson in realpolitik; that it has little political leverage over China once Beijing's cumbersome power structure decides on an assertion of its authority.
The detention of Rio Tinto executive and Australian citizen Stern Hu is not merely sending a message to foreign corporations. It also sends an internal message. It signals a shift in China towards a more conservative, state-focused and security-conscious expression of power. The idea of China as a market economy, a recognition conceded by the Howard government, ran far ahead of reality.
China's detention of Hu and the disdain with which Australia is being treated is a reality check for our governments, businesses and public opinion. In recent years surveys have shown Australian public attitude more favourable to China than the US, a misjudgment presumably driven by George W. Bush's sabre-rattling and a boost for a regime prepared to shoot its own people.
Australia is in unprecedented territory. For the first time in our history our main trading partner is not a strategic ally and not a rule of law democratic state. This is a fundamental change in our national existence. It is a long-run transformation and will demand a more sophisticated Australian diplomacy.
The first thing Australia needs to forget is that populist, brainless, megaphone diplomacy can solve our problem. The idea that China's leadership will buckle and submit with a well-publicised phone call from Kevin Rudd is a touching flight from reality. As our former ambassador to China Ross Garnaut said, politicising the issue by making it "a high-profile public event" will make China more resistant.
It is equally futile to think Australia should retreat from China because it is an authoritarian state. That was not John Howard's policy. It is not the attitude of a sensible Australian government. Our involvement with China will only intensify. What is required is an unsentimental pursuit of the national interest, dismissal of any illusion about a special friendship yet a prudent drive to deepen relations and practical co-operation. That means working through tensions such as the Hu detention.
China's economy blends the market with command and control. It has no transparent legal system and no independent judicial enforcement. It allows petty officialdom and intimidating state security to override normal commercial rules. China gets away with behaviour that would never be tolerated from other nations because of its economic potential and future assumed great power status.
This bullying mentality is on display again. Is it any surprise with the US economy debt crippled and with global growth more dependent than ever on China? Yet, at the same time, China seems paranoid that its behaviour and investment are not accepted on a bona fide basis.
Nobody knows the full story behind the move against Hu and three other Rio officers. But two messages are known: China is agitated over its recent commercial setbacks and unnerved over the Rudd government's inept foreign policy messages.
Professor of economics at the Australian National University's Crawford School Peter Drysdale says: "I don't think this relates to any tit-for-tat issue arising directly from Australia's commercial ties with China. There is no evidence of that. But the risk is that Australians overreact and we get locked into a downward spiral. The situation needs a careful and modulated response from the Rudd government."
Rudd's misjudgments with China need to be kept in context; there is nothing to suggest the Rudd government is responsible for Hu's detention. Rudd's mistake has been to personalise the China relationship. It carries his imprint, his personality, his lofty aspirations and his deep suspicions of China's military intent. Because the policy is dictated almost totally by Rudd's personality, its policy foundations are uncertain and contradictory and expectations were raised far too high.
This is the reason China is confused. It has every right to be confused. If Rudd were smart, he would give Foreign Minister Stephen Smith, cautious and unemotional, more scope with Beijing. In Drysdale's words, "we need to get our act together on and with China, and quickly".
This is more imperative if, as seems, there is an internal shift within China towards a harder line.
One critical backdrop here is the humiliating failure by state-owned company Chinalco to take 18 per cent of Rio and two board seats. The Rudd government didn't like this deal and made that known privately to China. In the end, the market scuttled the play. But this was China's biggest foreign investment initiative since itsstate-owned oil corporation tried to acquire US energy company Unocal, only to succumb to a hostile US congress.
It would be unusual if Chinalco's failure did not cause soul-searching within China's leadership. How could this not be the case? Paul Keating argues that Australia's response was too negative and static. He told this column: "What is China's best interest out of Australia in iron ore? It is having the certainty of a big-volume, low-cost supplier. This is what Australia offers. For China, this model is far superior to seeking a vertical integration by owning a substantial chunk of the supply chain in Australia. It is, to some extent, a strategic oversight by Australia not to have reinforced and persuaded China to this view."
Keating's point is that Australia must become a more collaborative strategic player with China. Beijing's leaders are consumed by frustration, aware of their rising economic power yet being outmanoeuvred on the big global plays. This humiliation was reinforced in the iron ore negotiations in which, ironically, Rio took the lead. Once Japan settled for a 33per cent price cut with South Korea and Taiwan following, China's hopes of a securing a far bigger price cut were in retreat. The big miners, Rio and BHP, were triumphant and Beijing was on the losing side. Again.
Relying on an official website, Smith said the detention of Hu arose from the iron ore negotiations and claims that he "stole state secrets", including bribery. The decision seems to reflect political and economic judgments at a high level within China's leadership.
Hence the comment from Smith that "we may well be in for a long haul here". Smith's aim is to limit the damage and press China in private. Yet public concern about China's action is fully justified and appropriate. The more China displays contempt for the Rudd government, the more opinion will turn against Beijing. There is a simple proposition here: "This is not the action of a friend."
Smith's public remarks mean that China has been told. But does it care? Australia's strongest argument is that China is undermining its own commercial interests on a universal basis. This is our best leverage.
The bottom line, however, is that Rudd at some point will probably need to make concessions to China for Hu's cause.
Source: The Australian Editorial