What’s at stake in the tariff negotiations between the US and China


Yixiao Zhou, Curtin University and Rod Tyers, University of Western Australia

The United States and China have put on hold plans to place tariffs on exports, in an effort to avoid a trade war. Our analysis shows just how important these negotiations are, with the impact of trade wars adversely affecting both economies and others like Australia.

The threat of a trade war started when US President Donald Trump announced 25% tariffs on Chinese imported electronics, aerospace products, and machinery. China retaliated hours later and announced 25% tariffs on US exports to China.




Read more:
The China-U.S. conflict is about much more than trade


Now both sides are agreeing to take “measures to substantially reduce the United States trade deficit in goods with China” and to work on expanding trade and protecting intellectual property.

We modelled a number of scenarios showing all increases in US or Chinese protection would cause international trade, and the global economy more generally, to shrink. We also find interest rates would rise everywhere and the Australian dollar would depreciate.

China and US trade would then fall by between a quarter and a third, depending on whether the tariffs are hiked unilaterally or bilaterally. Australia’s lucrative exports to China would also fall as US demand for China’s goods fall and China requires smaller quantities of Australian goods to produce them.

Because Australia is a small, open economy that is strongly influenced by developments abroad, the impacts of rising protectionism can be as large here as they are in the US and China.

https://datawrapper.dwcdn.net/4RLNb/1/

We found if US imposed tariffs but there was no retaliation abroad, the rise in tariff revenue would provide relief for the US economy and that this would raise the after-tax incomes of Americans even though US GDP would fall. However, we found after-tax incomes would fall everywhere else.

If China retaliated to the tariffs, all countries and regions would suffer losses, with Australia’s net loss among the largest, in per capita terms. The effects on China would be the largest, relative to their current disposable income. Because China would suffer the largest proportional loss of welfare, their government would have the strongest incentive to negotiate.

We expect any initial effects of tariffs on both sides to be slight, in small part this is because it will cause trade to be diverted to and through other countries. Because trade is likely to leak around the new protectionist barriers, the US and China could choose to impose the protection on imports from all countries.

https://datawrapper.dwcdn.net/i3oUF/2/

If this were the case global losses would be very much larger, and they would be borne primarily by third countries, including Europe and Australia.

One possible silver lining of this scenario for central banks would be inflation in the advanced economies like Australia, causing interest rates to rise. This would take pressure off the central banks, which have been struggling to prevent costly deflation.

While the US President continues to bring up a trade deficit with China as a concern, most economists agree that trade imbalances depend most on differences in saving rates.




Read more:
Why China can’t meet Trump’s $200 billion trade demand


The US is threatened by the continuing rapid expansion of the Chinese economy and because US firms have to relinquish intellectual property in order to enter the large and growing Chinese market. The US also fears China’s move toward more sophisticated manufacturing and services under the “Made in China 2025” plan.

The ConversationWhether or not China and the US are successful in negotiating out of a trade war and restoring the integrated global economy, there will still be strategic tensions between the nations. These will create political pressure for stronger trade interventions in the future and will place countries like Australia at risk of substantial economic losses.

Yixiao Zhou, Lecturer in Economics, Curtin University and Rod Tyers, Winthrop Professor of Economics, University of Western Australia

This article was originally published on The Conversation. Read the original article.

Advertisements

Why China’s ‘debt-book diplomacy’ in the Pacific shouldn’t ring alarm bells just yet


Michael O’Keefe, La Trobe University

Talk of Chinese “debt trap” diplomacy is nothing new, but a recent report by Harvard University researchers has resurrected long-held fears that China’s debt diplomacy poses a threat to Australian interests in the Pacific.

The crux of the report is that Pacific island states like Vanuatu and Tonga, as well as other nations in Southeast Asia, are at risk of undue influence from China due to unsustainable loans they’ve received for infrastructure projects.

The Australian Financial Review quoted the report as saying that while Papua New Guinea in particular has “historically been in Australia’s orbit”, it’s been “rapidly taking on Chinese loans it can’t afford to pay and offers a strategic location in addition to significant LNG and resource deposits” for China.

The story follows a well-trodden path from speculation to suspicion to alarm. Last month, another media report emerged saying China had approached Vanuatu about building a permanent military presence in the South Pacific – an assertion Vanuatu quickly shot down.




Read more:
Response to rumours of a Chinese military base in Vanuatu speaks volumes about Australian foreign policy


The latest report by the Harvard researchers comes with interesting context. A classified version of it was allegedly produced for the US Pacific Command last year, but the version leaked to the Australian Financial Review was written by graduate students, purportedly for the US State Department.

Interestingly, the students were supervised by Professor Graham Allison, who wrote the book Destined for War: Can America and China Escape Thucydides’s Trap?. The “Thucydides’s Trap” in the title relates to whether the US as a hegemonic power can accommodate China’s rise without resorting to war.

But this so-called trap does not necessarily point to historical inevitability. Therefore, a thorough analysis of the dynamics in the region is needed to fully understand China’s motivations, and what can be done to avoid conflict.

China has long been accused of using “chequebook diplomacy” to gain favour with nations around the world. The implication of the new “debt-book diplomacy” in the Harvard report is that China is using unsustainable loans to gain influence with Pacific island states that aren’t able to repay them.

Suffice it to say, this form of leveraging takes influence to a different level.

Historical fears

There is a long history of alarmism in Australia over the activities of strategic competitors in the Pacific. During the second world war, Japan was widely believed to have been poised to invade Australia from bases in the Pacific islands. This threat was later discredited, but the legacy of this fear of invasion from foreign powers lingers to this day.

During the height of the Cold War, Soviet fishing agreements with Pacific countries were also perceived to be a threat to Australian interests. These agreements were widely seen as strategic threats that could lead to military bases and/or spying arrangements, but nothing significant ever came from them.




Read more:
Aid to PNG and the Pacific should focus on fixing cities


The constant in Australia’s geostrategic view of the Pacific is that the region is viewed simultaneously as both a buffer and a potential location of threats.

In the second world war and the Cold War, perceived encroachments by strategic competitors led to a “strategy of denial”. This involved creating a buffer through forward defence initiatives, such as the Pacific Patrol Boat Program, in which Australia donated 22 vessels to Pacific island countries at the same time the Soviets were negotiating their “fishing agreements”.

It might not be a coincidence this program has been reinvented with a new Pacific Maritime Security Program that will see 21 vessels delivered to Pacific island nations from 2018-2021.

Reassessing Australia’s role

Australia has also been the largest aid donor to the Pacific region, a position that has withstood recent increases in Chinese aid. Furthermore, this development assistance to the region was prioritised in the latest federal budget.

This is significant considering the relative sizes of the two economies and the relative ease with which China can allocate resources (without transparency and without regard to a domestic constituency scrutinising its actions). Presumably, China could very easily overtake Australia as the largest donor if it wanted to, and the fact that it has chosen not to is telling.

It’s true China is becoming more active in the region. Australia appears to be responding through development assistance, defence cooperation and emergency disaster response with its Pacific neighbours, even if there is speculation the US doesn’t believe it’s doing enough.

But if there is a genuine Thucydides’s Trap in the Pacific, what’s needed is a coherent analysis of China’s interests in the region, rather than a quick and almost reflexive interpretation of their intentions as aggressive. (One angle worth exploring its China’s ongoing conflict with Taiwan over diplomatic recognition for the self-ruling island, as six of Taiwan’s 19 supporters are in the Pacific.)

Of equal importance for Australia would be to understand the motivations of Pacific island nations. What’s missing is any examination of why Pacific states might be welcoming China with open arms, or even whether they are simply begrudgingly welcoming them.




Read more:
Pacific pariah: how Australia’s love of coal has left it out in the diplomatic cold


This opens a Pandora’s box. Could Australia’s (benign) neglect and perceptions of neo-colonialism actually be part of the problem? One that exists independently of China’s intentions?

This is certainly the case with [Australia’s sanctions against Fiji]from 2006-2014, which led to Fiji’s suspension from the Pacific Islands Forum and the creation of alternative forms of Pacific regional arrangements, such as the Pacific Islands Development Forum, which are supported by China.

The ConversationAustralia sees threats coming through the Pacific, and not from the Pacific, and this should be the foundation of its Pacific diplomacy. If Australia continues to reflexively see threats in China’s diplomatic moves in the Pacific, it may close off just the sort of creative diplomacy needed to escape a Thucydides’s Trap.

Michael O’Keefe, Senior Lecturer of International Relations, La Trobe University

This article was originally published on The Conversation. Read the original article.

Vital Signs: how inflation in China and the US could affect Australia


Richard Holden, UNSW

Vital Signs is a regular economic wrap from UNSW economics professor and Harvard PhD Richard Holden (@profholden). Vital Signs aims to contextualise weekly economic events and cut through the noise of the data affecting global economies.

This week: How the economies of China and the United States will affect what happens in our own.


Business conditions in Australia have been strong enough to see a surge in company tax revenue that led Treasurer Scott Morrison to outline cuts to personal income taxes over the next seven years in Tuesday’s federal budget.

Those same robust business conditions were reflected in the National Australia Bank Business Conditions Index which was up sharply in April to 21 points (up 6 points from the previous month). This puts it at the highest level in twenty years.

NAB chief economist Alan Oster said of the figures:

The record high in the April survey simply reinforces what has been evident since the middle of last year, that business activity in Australia is robust…I see the business survey as indicative as why the government appears to be rolling in corporate tax revenue.

In the United States, the Job Openings and Labor Turnover Survey in March showed a surge of job openings – up 472,000 to 6.55 million. That was the highest reading on record. It also showed more workers voluntarily leaving jobs. This is generally regarded as strong sign of worker confidence and is indicative of looming wage inflation.

The US Producer Price Index rose just 0.1% in April according to the Bureau of Labor Statistics, much lower than estimates of 0.3%, the level of growth in March. This put the index up 2.6% over the last 12 months, down from 3.0%.

This eased concerns about rising inflation that have been a major focus of discussions about interest rates at the Federal Open Market Committee at recent meetings. That could make the Fed less likely to raise rates quickly, though the tightening path still seems likely.

All eyes will be on the May 10, inflation statistics release to see if there is less heat than the Fed has seemed to fear, especially with unemployment now running at 3.9%.

Adding to this, China’s Producer Price Index dropped by 0.2% from February, putting the annual rate at 3.1%, the weakest level since October 2016.

Economists were looking for an annual increase of 3.2%, down from 3.7% in February. Because China is such a significant global exporter, the lower Producer Price Index should ease any inflationary pressures in other countries. In other words, China is exporting less inflation.

China’s Consumer Price Index actually fell 1.1% last month, putting the annual rate at positive 2.1%. Last month’s figures in part reflect the timing of Chinese New Year, so one shouldn’t read too much into them. On the other hand, any softening of the Chinese economy is a big deal for Australian exporters and our economy generally.

The coming months overseas will be very revealing. We will get a better handle on whether there are genuine inflationary pressures in the US – or whether perhaps there is a new normal. That will affect short-term interest rates, but also says something about where those rates are likely to move back to in the cycle.

We will also get a better fix on the Chinese economy, at least in terms of growth numbers. What still remains opaque is the health of China’s financial sector. That remains a significant concern.

Both the US and China will factor heavily into two key things in Australia. The first is, of course, the RBA’s interest rate decisions later this year. The second is the key number in the federal budget – the 3.0% real GDP growth assumption that underpins the forecast return to surplus and the rationale for the personal income tax plan.

The ConversationAt least for the next few months, what happens overseas will be more important for the Australian economy than domestic factors per se.

Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW

This article was originally published on The Conversation. Read the original article.

Response to rumours of a Chinese military base in Vanuatu speak volumes about Australian foreign policy



File 20180411 584 1yw9nyo.jpg?ixlib=rb 1.1
Reports that China plans to build a military base in Vanuatu seem to have little substance at this stage.
EPA/Jerome Favre

Michael O’Keefe, La Trobe University

Rumour has it that Vanuatu has agreed to a Chinese request to establish a military base. The substance of this rumour is highly speculative at the least and disingenuous at most. Regardless of the truth, the fact that it raises alarm about the threat of Chinese military expansionism speaks volumes about Australian foreign policy, particularly toward the Pacific.

On Monday, Fairfax Media reported that “China had approached Vanuatu” about setting up a “permanent military presence” – in other words, a base.

The article went on to speculate about the dramatic strategic importance of the “globally significant move that could see the rising superpower sail warships on Australia’s doorstep”. Furthermore, this Chinese base “would … upend the long standing strategic balance in the region” and would likely be followed by bases elsewhere.




Read more:
When it comes to China’s influence on Australia, beware of sweeping statements and conflated ideas


Multiple international media outlets have syndicated the story. Much of the coverage alluded to military threats and a shift in the strategic balance. The language is reminiscent of Cold War bipolarity: “their” gain is “our” loss.

On face value, this sounds like a serious geostrategic issue for Australia. But on close examination, the threat is more apparent than real. An indication of which is that nowhere are Chinese or Vanuatuan interests in provoking this form of strategic competition explained.

From the beginning, every assertion was countered by one of the primary players. Multiple representatives of the Vanuatu government have been at pains to deny the story. For instance, Vanuatu Foreign Minister Ralph Regenvanu was quoted as saying:

No-one in the Vanuatu Government has ever talked about a Chinese military base in Vanuatu of any sort.

As the story spiralled out of control, he then told SBS News it was “fake news” concocted by a Fairfax Media journalist.

Multiple Chinese government sources have denied the story and also described it as “fake news”. China also has assured the Australian government that the story has no validity.

In the original article, it was noted that talks between China and Vanuatu were only “preliminary discussions” and that “no formal proposals had been put to Vanuatu’s government.” So given these caveats, and the comprehensive denials, this raises some serious questions about why this rumour was newsworthy in the first place.

So where did it come from? Presumably Fairfax Media would only have acted if the information was from a highly placed Australian government source that could be verified. Presumably this unnamed source has leaked sensitive intelligence, but it is curious that no Australian Federal Police investigation has been announced.

This has been the past practice from the Turnbull government in relation to national security leaks, and there is no sign the government is at all concerned about this leak.

In contrast, it has used this rumour for megaphone diplomacy against both Vanuatu and China. For example, after accepting the Chinese government’s denial, the prime minister said:

We would view with great concern the establishment of any foreign military bases in those Pacific island countries and neighbours of ours.

And it was the latter rather than the former statement that was covered by many media outlets.

This is very telling. Canberra is clearly sending signals to Beijing and Port Vila that it maintains significant strategic interests in the region (and is a message not lost on other Pacific capitals).

This concern is not new as Australia practised strategic denial in the South Pacific against the Soviet Union during the Cold War. More recently, speculation about Fiji’s relations with China and Russia was raised. But megaphone diplomacy with Fiji has proven unsuccessful in the past.

This approach simply rehashes colonial tropes about Pacific Island Nations being economically unsustainable, corrupt, and easily influenced by great powers. This is reinforced by China’s alleged influence borne from budget support, and capital and aid flows into the Pacific.

What these colonial stereotypes fail to acknowledge is that the foreign policies of Pacific Island countries have matured. Vanuatu is a committed member of the Non-Aligned Movement (NAM), eschewing formal military alliances and entanglements with great powers. The lesson of Fiji’s strong stance against Australian sanctions is that it too has created an independent foreign policy. Neither country will be easily influenced by foreign powers, including Australia.




Read more:
Why do we keep turning a blind eye to Chinese political interference?


Returning to the “truth”. It is true that China’s influence in the region has grown dramatically in recent years, especially during the sanctions years from 2006 to 2014, when Canberra attempted to isolate Fiji.

It is also true that military diplomacy is a key element of China’s foreign policy approach (to the Pacific as in Africa). A final truth is that Vanuatu has a high level of debt dependence on China and is a major beneficiary of Chinese aid. However, this does not mean that Vanuatu is being influenced into accepting a Chinese military base.

At some stage, Vanuatu might very well sign an agreement that allows transit and refuelling of Chinese vessels, as is commonplace in international relations. As Minister for Foreign Affairs Julie Bishop told Radio National: “these sorts of visits are normal for many neighbours around the world.”

The ConversationIf so, then all we have learned from this episode is that old colonial habits die hard, and the chances of dispassionately dealing with the geo-strategic rise of China are narrowing.

Michael O’Keefe, Senior Lecturer of International Relations, La Trobe University

This article was originally published on The Conversation. Read the original article.

When it comes to China’s influence on Australia, beware of sweeping statements and conflated ideas


File 20180409 114098 roqdfu.jpg?ixlib=rb 1.1
Australia’s approach to the debate over Chinese influence should be to carefully disaggregate the various problems under discussion in this debate and risk-manage them individually.
Shutterstock

Andrew Chubb, Princeton University

In December, the Turnbull Government tabled sweeping new national security legislation in response to what the PM called “disturbing reports of Chinese influence” in Australian politics.

An ongoing parliamentary review of the proposed laws has attracted hundreds of public submissions, with intelligence agencies and civil society organisations predictably lining up on opposite sides of the argument.

More surprising, perhaps, is the controversy the laws have sparked within Australia’s community of China experts.




Read more:
Dastyari saga shows the need for donations reform, and for politicians to take more care


Rival petitions

On March 19, a group of 30 China scholars submitted a petition calling for the espionage and foreign interference legislation to be withdrawn, pending more extensive consultation and rigorous, measured public debate.

The open letter argued the bill directly threatened academic freedom, and that the “alarmist tone” of recent public discourse over China was impinging Australia’s ability to calmly and rationally deal with the issues.

In particular, it warned that “a racialised narrative of a vast official Chinese conspiracy” was taking shape:

We should be vigilant that public discourse in Australia does not create undue pressure on one particular section of our society to demonstrate its loyalty to Australia at the expense of its freedom to criticise Australian policies and actions.

A week on, a different group of China and Asia experts submitted another letter — ostensibly in response to the first — defending public policy debates over the issue in light of “well-documented reports about the Chinese Communist Party’s interference” in Australia. It read:

We firmly believe the current debate is not characterised by racism and that it is crucial for Australia to continue this debate. Indeed, Chinese Australians are among the main initiators and drivers of this debate.

The rival letters attracted international media coverage, with a reports touting a split among Australian China scholars over the issue.

But how much did the two letters really differ?

Furious agreement

In fact, the two letters share a great deal in common. Both call for informed debate over the issues; both denounce racism; both affirm scrutiny of the CCP’s activities in Australia and the application of legal penalties where evidence of wrongdoing is clear.

Most signatories would agree that discussion of the set of issues raised is necessary, and that it is not motivated by racism. They would also agree that new laws may be necessary but must be carefully drafted, and there have been problematic elements in the public debate as it has unfolded so far.

Both lists of signatories contain trenchant critics of Beijing, as well as relatively China-friendly voices.

Yet, I’m aware of only one person who signed both.

Why have Australia’s China scholars cleaved into two camps on a matter of great public interest that requires their collective expertise — camps that seem to cut across personal networks and ideological preferences?

To some extent, as ANU National Security College head Rory Medcalf has observed, this reflects healthy scholarly disagreements among colleagues.

But the rival letters are also indicative of a less-than-healthy polarisation in the discourse at a time when identifying consensus views might be more valuable. After all, the letters were substantively in agreement on many of the key issues.

It may help, then, to clarify what we do disagree about.

As a signatory to the first letter, but not the second, I can identify four main points of contention. Yet, as shown below, even within these four areas there appears to be more agreement than the rival letters might suggest.

Four points of contention

The scope of CCP activities in Australia

While the first letter cautions against conflating distinct China-related issues in Australia into “a vast official Chinese conspiracy”, the second offers a list of ten bullet-point examples of the “CCP activities” Australia should be vigilant against.

The list ranges from espionage and intimidation of dissidents, to university student groups and pro-China political rallies.

The view that vigilance is warranted over the party’s activities in Australia should be uncontroversial. It is an unreformed and increasingly dictatorial Leninist regime with a ministerial-level department tasked with instrumentalising non-party actors to advance the party’s interests and counter its perceived enemies.

The scope of this “United Front Work” system is vast and expanding, and it is rooted in a thoroughly cynical vision of the world. It is an institution and a vision that Australians — especially political elites — ought to be properly educated about.

But it should also be equally uncontroversial to affirm that a person or group’s inclusion as a target within the scope of united front work does not constitute grounds for suspecting them of disloyalty or subversiveness if they espouse a CCP-friendly view on an issue.

Causes of racist and alarmist sentiments

The first letter criticises the Australian media for fanning “suspicion and stigmatisation of Chinese-Australians”.

The second letter acknowledges the public discourse has prompted “alarmist and racist sentiments”, but argues this is an inevitable side effect of having a debate in the first place.

Perhaps we could at least agree that the prevalence of racism and alarmism on the fringes of a debate depends significantly on the language used by those in the mainstream debate.

If so, this would narrow the disagreement down to whether or not the costs of using inaccurate and inflammatory language such as “Chinese”, “invasion”, “infiltration”, and “penetration” are acceptable.

The meaning of sovereignty

The first letter argues there’s no evidence that the PRC’s activities are aimed at challenging Australia’s sovereignty. The second letter, by contrast, advocates action to counter “threats to sovereignty”.

Each appears to have a different notion of sovereignty in mind.

If the word means, narrowly, paramount legal authority within territorial limits, then a PRC challenge to Australia’s sovereignty implies that it seeks to lay claim to parts of the Australian landmass, or reduce its polity to a tributary “vassal”. But as the first letter pointed out, there is to date no credible evidence of this.

On the other hand, there have been clear instances of PRC violations of Australian sovereignty in recent years. In 2015, for example, Chinese undercover police pursued a fugitive on Australian territory. Importantly, in that case, Beijing admitted its wrongdoing.

Interference with the political freedoms of residents of Australia, such as intimidation of dissidents’ families in China, also arguably violate Australia’s sovereignty in a broad sense.

Neither letter defines sovereignty, but both invoke the word’s emotive power. Those of us speaking of a CCP threat to Australian sovereignty (or absence thereof) might be able to agree on more if we specify in what sense this is (not) the case.

Threats to democratic politics in Australia

Whereas the second letter emphasises the threats that CCP activities pose to democracy and free speech, the earlier letter suggests the sweeping proposed national security laws and alarmist public discourse were creating an even more immediate threat to democratic political rights.

It is hardly in doubt that the CCP’s activities undermine the political values of democracy, liberalism and openness. It is openly hostile to them.

But there are well-documented cases of self-censorship resulting from the alarmist tone in Australia’s public discourse on the issue, with reports of some Chinese-Australian politicians growing afraid of associating with CCP-linked community figures.




Read more:
Australians working in China should expect fallout over questions of political interference


The second letter affirms that all residents of Australia “should be able to express their point of view free of fear or censorship, whether from forces foreign or domestic”.

This suggests, once again, that there is significant overlap among China scholars even within this ostensible area of disagreement. Specifically, both seem to recognise that threats to democratic rights exist inside Australia as well as outside.

A risk-management approach

Where to from here? In an upcoming report, I argue that if Australia wants to maintain a broad engagement with a powerful, increasingly dictatorial Leninist party-state ruling a billion-plus people while maintaining a liberal democracy, it will require careful understanding and management of the risks involved.

It will not be possible to simply disallow all CCP “operations of influence” without impinging on the very democratic rights the CCP threatens.

Conflating distinct issues (for example, espionage, lobbying, Chinese-language media, student activism) under single sweeping labels (such as “influence” or “operations”) that imply they’re all part of one Beijing-orchestrated campaign of subversion is also not helpful in developing methodical, systematic responses.

Policymakers in Beijing may dream of coordinating a vast conspiracy involving ethnic Chinese all over the world advancing the CCP’s interests, but that does not make it a reality.

Australia’s approach, I argue, should be to carefully disaggregate the various problems under discussion in this debate and risk-manage them individually, rather than grasping for some kind of resolution that will free Australia of “CCP influence”.


The ConversationThis article has been amended. The line that originally read: Yet, I’m not aware of a single person who signed both has been changed to Yet, I’m aware of only one person who signed both.

Andrew Chubb, Postdoctoral Fellow, Princeton-Harvard China and the World Program, Princeton University

This article was originally published on The Conversation. Read the original article.

Move over Canada and EU, Australia is best placed to benefit in the US-China trade tug-of-war


Giovanni Di Lieto, Monash University

Australian firms are in a sweet spot between the bickering United States and China, where they can sell more and buy more cheaply because of weaker competition in both markets. Essentially, the mutual tariffs are a double blessing for Australia.

The latest escalation of the ongoing tariff war promises to impact on international trade exchanges to the tune of A$130 billion per year across a broad range of economic sectors, including metals, drugs, motor vehicles, electronic components, industrial machinery and foods.

Australia is one of the best placed countries in the world to reap the gains of the likely trade diversions. For example, Australian beef producers will be much more competitive in exporting to China as their American competitors have to grapple with the 25% tariff on their beef. On the other side, as China raises tariffs on soybeans, Australia could buy this product more cheaply from US farmers keen to find new distribution channels.

And the same goes for all other products appearing in the US and Chinese hit lists on both the export and import sides of markets.




Read more:
Six signs China wants to avoid a trade war


Australia’s main competitors for this double market grab are just a handful of highly developed economies with sizeable commercial ties with both the US and China. These include Canada, the EU, Japan and South Korea.

But in comparison with these trading competitors, Australia has a natural advantage due to the ease of access to maritime routes right across the Asia Pacific region.

While Europe is also in between the American and Asian continents, its overland trading routes are far less developed than the maritime ones and are also clogged by hostile countries such as Russia, Turkey, Iran, Pakistan and India.

Canada is also at a disadvantage to Australia because of its more embedded economy and supply chains with the US. The challenging renegotiation of the North America Free Trade Agreement with the US and Mexico could also stunt Canada’s range of trading action.

Similarly across the Pacific, Japan and South Korea share Canada’s tricky position as they are too close to their powerful neighbour, in this case China. Not to mention that South Korea is also under intense geopolitical pressure from President Trump to renegotiate its advantageous bilateral free trade agreement with the US.

Australia is sitting pretty

Australia doesn’t pose a direct strategic threat to either China or the US, as its economy and military power is not too big. And it’s not so small that it can be easily trumped. Also, its location is not too close, yet not too far from any of the major contenders for primacy in the Asia Pacific region.

Australia has skin in the game but not to an indispensable degree. More important still, Australia has solid and mutually beneficial bilateral free trade agreements with both China and the US, which gives more predictability to the country’s trade and investment flows.

In fact, as the Australian Trade minister, Steve Ciobo remarked, Australia is relatively safe from any retaliatory action from the Trump administration thanks to a negative trade balance with the US.

On top of that, in terms of foreign direct investment Australia has ample room and need to diversify its over-reliance on US money. Official data show the US tops the list of foreign investment in Australia with 27% of total value by country, which is a level 10 times bigger than Chinese investments. On the other hand, Australian capital mostly flows out to the US (28% of total value) and not very much to China (only 4%).




Read more:
Why Trump’s tariffs will have little impact on Australia and a trade war is unlikely


It’s handy for Australia that the US Trade Representative has flagged new restrictions on Chinese investment in the US to
contain “China’s stated intention of seizing economic leadership in advanced technology as set forth in its industrial plans, such as Made in China 2025”. This means more investment spillovers are likely to flow between China and Australia with more favourable terms than ever.

Deeper investment ties with China will make an increasing negative trade balance with Australia more acceptable to China over the long term. Also this dynamic places Australia’s economy in pole position to take advantage of the improving quality of Chinese financial markets. This is evident in the ongoing rebalance of the Chinese economy, as it moves towards more reliance on growing consumer demand and away from inefficient, debt-fuelled investment.

Overall we are in the presence of a paradox. What in ordinary times used to be Australia’s vulnerabilities may instead prove its strategic strength in the context of a trade tug-of-war between the US and China.

As long as the trade war does not escalate to a full-blown military conflict, on the face of it Australia can still afford to sit on the commercial fence. With this pragmatic economic approach, cynics may well define Australia as a vulture country.

The ConversationBut to be realistic, the US-China trade war gives Australia the unprecedented chance to expand its economic footprint in the geopolitical agendas of both global superpowers. At such uncertain times, even more than pure economic profit, this strategic improvement will be the sweetest fruit for the lucky country.

Giovanni Di Lieto, Lecturer of international trade law, Monash Business School, Monash University

This article was originally published on The Conversation. Read the original article.

Why do we keep turning a blind eye to Chinese political interference?



File 20180403 189804 run4vj.jpg?ixlib=rb 1.1
Chinese President Xi Jinping is sworn in for a second term at the National People’s Congress at the Great Hall.
AAP/Wu Hong

Clive Hamilton, Charles Sturt University

Academics in Australia might reflect on the fact that scholarly books critical of the Chinese Communist Party are now shunned by publishers. Scholars who work on China know that continued access to the country requires them to play by Beijing’s rules, which for most means self-censorship – the dirty secret of China studies in Australia.

Despite refusing to publish my book, Silent Invasion, I am privileged in my access to free speech in a way that most Chinese-Australians are not.

In February, Alex Joske, my researcher for the book and of Chinese heritage himself, wrote in the New York Times that as Beijing’s interference in Australian society intensifies:

… the voices of the Chinese-Australians alarmed by Beijing’s encroachment are being drowned out by an aggressive Chinese government campaign to silence critics here.

Once quite vocal, pro-democracy activists, supporters of Tibetan autonomy, and Falun Gong practitioners are barely heard nowadays. In my book, I describe how this marginalisation has been carried out.

Marginalising critics

Examples are legion. The New York Times recently reported that Taiwanese workers at restaurants in Sydney have been sacked because, when asked whether they believe Taiwan belongs to China, they say “no”.

It only takes a few examples like this to send a signal to all Taiwanese in Australia to keep their views to themselves if they go against Beijing. This kind of violation of democratic principles — not to mention employment law — has for years been ignored by the mainstream.

Soon after Allen & Unwin pulled publication of my book, a retired businessman phoned. For years he has been taking in Chinese students as lodgers. Recently, he was walking through the CBD with one of those students when they came upon a Falun Gong practitioner collecting signatures on a petition. When he said “let’s go over”, she begged him not to. She kept walking while he signed the petition.

Two weeks later, the student’s parents back in China had the Ministry of State Security knocking on their door. They were warned to keep an eye on their daughter, who was creating trouble in Australia.

Think about that. Chinese authorities in Australia are monitoring Falun Gong practitioners on the streets of Sydney and Melbourne, photographing anyone who interacts with them. They can identify any ethnically Chinese person and put them on a watchlist.

In the course of researching my book, I spoke with pastors at Chinese churches in Australia who believe their congregations and community groups have Communist Party agents spying on behalf on the consulate. Some Chinese-Australians cannot even go to their places of worship without Beijing’s vast security apparatus watching and reporting on them.

Few religious groups of modern times have experienced more coercion and violence than practitioners of the peaceful spiritual practice Falun Gong. Working through the consulates, the sinister 610 Office has harassed, threatened and bullied Falun Gong practitioners in Australia and frightened off sympathetic politicians.

Last year, Feng Chongyi, an associate professor at the University of Technology Sydney, was forcibly detained in China for a week while doing research on human rights lawyers. China does not like what he is uncovering and wanted to send an unambiguous message that he should change what he works on in Australia.

It’s important to understand that the effect of Beijing’s suppression of critical voices in the Chinese-Australian community is not confined to pro-democracy and Tibetan autonomy activists. The dominant narrative in the community is now one that supports the Communist Party view of the world.

Leading Sinologist John Fitzgerald has shown how the once-diverse Chinese-language media became overwhelmingly pro-Beijing. Chinese-language media in Australia is subject to Beijing’s censorship regime. Chinese-Australians who speak about human rights violations or complain about Beijing’s interference in Australian politics are vilified.

A young Chinese-Australian who wants to enter politics knows that any criticism he or she may make of, for example, party influence operations in Australia will result in bad press and pressure from “community leaders”. If they were to persist, family members in China may receive intimidating visits from state security. It’s much easier to stay out politics.

This is a denial of their democratic rights. It means that Chinese-Australians critical of the Communist Party have no representation in parliament. Who will speak up for them if their family is threatened, or if their business in Australia is sent broke by a boycott organised by the consulate?

Enabling the silencing

Instead of giving these critics of the Communist Party a voice, some of our political leaders have collaborated in their silencing. They shun them, even condemning them when they protest outside the Sydney consulate, while mixing with and responding to “community leaders” who typically head United Front organisations guided by the party through its network of agencies that operate in Australia.

In February, Shadow Treasurer Chris Bowen expressed outrage in parliament because Cambodian Prime Minister Hun Sen had threatened violence against any Cambodian-Australians who staged a protest during his visit to Australia. Bowen declared he would defend the right of Cambodian-Australians to protest and would not allow peaceful protesters to be harassed and bullied.

https://www.facebook.com/plugins/video.php?href=https%3A%2F%2Fwww.facebook.com%2Fchrisbowenmp%2Fvideos%2F1412172932225379%2F&show_text=0&width=560

Good for him. But where is Bowen when Chinese-Australians are threatened and intimidated by China’s state security apparatus in Australia? Where is he when supporters of Tibetan autonomy are drowned out and intimidated on the streets of Sydney?

Bowen is a prominent member of the New South Wales Right faction of the Labor Party and accordingly has been the recipient of largesse from wealthy Chinese businessmen close to Beijing. He has been flown to China at the expense of the Communist Party and an organisation run by Huang Xiangmo, the businessman ASIO warned the major political parties to avoid taking money from.

Bowen has been a patron of the Australian Council for the Promotion of Peaceful Reunification of China, the peak United Front body closely associated with Huang Xiangmo.

As my book appeared in the bookshops, the big beasts of the NSW Right came out to monster me because I have said they are too close to Communist Party front groups and agents of influence. Bob Carr, Paul Keating and Graham Richardson attempted to trash my reputation and make me out as a Sinophobe and closet racist.

They are embarrassed when anyone draws attention to the evidence of the deep penetration of the Chinese state into their part of the Labor Party. They should know that the more they try to shut down critics, the more we will ask what they have to hide.

Xenophobia-phobia

Like others, I have puzzled over the astonishing level of naivety in this country about what China is doing here.

It doesn’t seem enough to speak, as some have, of being blinded by the money or referring to the natural openness of Australians. For some, it’s almost a wilful unwillingness to see, despite the powerful evidence of China’s aggressive intentions.

When writing Silent Invasion, I anticipated that its arguments would be dismissed as rooted in xenophobia and that I am just stirring a cauldron of anti-Chinese racism. I have a pretty good record of anti-racism over the decades, but for some that counts for little.

More to the point, in the book I tried hard to reflect the experiences of those Chinese-Australians who are critical of the Chinese Communist Party and feel threatened by it in their new home.

I discussed with some of them the risk of racist groups misusing the book to reinforce their prejudices. The typical response was: “Well, what’s the alternative? Should you just say nothing?”

The judgement of these Chinese-Australians is that they may have to take some collateral damage to win the larger battle. They are much more worried about the vast apparatus of Communist Party coercion than some wave of anti-Chinese sentiment.

Blame shifting

From the moment I began researching and writing Silent Invasion, I resolved to ensure that none of the criticisms I made of the Chinese Communist Party could be construed as anti-Chinese or anti-China.

I knew that nothing I did would deter the party from its usual conflation of the party and the nation. And true to form its spokespersons in Canberra and Beijing have stuck to the party line, attacking the book as “racist bigotry” and “anti-Chinese”.

If you just read Race Discrimination Commissioner Tim Soutphommasane, Chinese Embassy statements, and Beijing’s trolls on social media, you’d think the danger we face in Australia is not Chinese Communist Party interference operations but the risk of inflaming anti-Chinese racism by calling out the party.

The problem lies not in Xi Jinping’s aggressive assertion of a newly risen China, but the stain on our own history. Our first goal must not be to resist growing foreign interference, but to keep the lid on fringe sentiments here.




Read more:
Academic Chongyi Feng: profits, freedom and China’s ‘soft power’ in Australia


But what of China experts in Australia? Surely they can see what is happening. Most of the serious ones can and have been trying to draw attention to it for some years.

Others, like the University of Sydney’s David Brophy, prefer to put their ideological purity on display. In a ranting “review” of Silent Invasion, he argued that when discussing the Chinese Communist Party’s interference operations in Australia, people like me and the string of China experts who take a similar view have got it all back to front.

For Brophy, when the issue of foreign interference arises, we must not “shift the blame onto China” but “confront our own failings”.

Concern about Communist Party interference in Australia, opines Brophy, actually “reflects a deep malaise in Australian society”. Really? Then Taiwan, Singapore, Canada, the US, New Zealand and several European countries, where the same debate is taking place, must be suffering from the same malaise.

In truth, when someone who is being bullied or violated is accused of just imagining it, we call it victim-blaming.

When Brophy dismisses the mountain of evidence of Communist Party interference in Australia as “imagined subversion”, he shares the assessment of his vice-chancellor, Michael Spence, who has labelled the mounting warnings by the government, based largely on ASIO reports, as “Sinophobic blatherings”.

As I suggest in Silent Invasion, Spence’s University of Sydney is among the most compromised of this country’s academic institutions.

It’s not Silent Invasion, but the reaction to it, that has highlighted something troubling in the intellectual life of the nation. The fault is not an incipient xenophobia ever-ready to burst forth in anti-Chinese racism, as if our universities inherited the culture of the gold fields.

The ConversationNo, the fault lies in the sacrifice of intellectual rigour to the guilt felt by politically correct academics for what happened on the goldfields. For the Chinese Communist Party, this fault is a rich seam to mine in its quest to exert its influence here.

Clive Hamilton, Professor of Public Ethics, Centre For Applied Philosophy & Public Ethics (CAPPE), Charles Sturt University

This article was originally published on The Conversation. Read the original article.

With China’s space station about to crash land, who’s responsible if you get hit by space junk?



File 20180328 109175 fyiu6k.jpg?ixlib=rb 1.1
An artist’s impression of Tiangong-1 in orbit.
Aerospace Corporation

Melissa de Zwart, University of Adelaide

The defunct Chinese space station Tiangong-1 is falling back to Earth and about to crash land some time over the next few days. Most experts expect much of it to burn up as it enters the atmosphere, but it is likely that some pieces of the 8.5-tonne station will survive re-entry.

While the odds of the debris falling on a person are small, you may ask: who is liable in the event of damage caused by a space object to a person or property?

Under international law, a State is liable for damage caused by its “space objects” to another State or its space objects. Liability arises under the provisions of the Outer Space Treaty, which deals both with State responsibility for activities in outer space and the attribution of liability where damage has been caused by a space object.




Read more:
China’s falling space station highlights the problem of space junk crashing to Earth


The Outer Space Treaty is an international agreement, which came into force in October 1967, has more than 100 member countries, including Australia and perhaps more importantly China.

Rules and liability

The Treaty provides the basic rules of use of outer space by nation States. It requires them to carry on activities in the exploration and use of outer space, in accordance with international law and in the interest of promoting international co-operation and understanding.

States who are parties to that Treaty “shall bear international responsibility for national activities in outer space” regardless of whether those activities are undertaken by or on behalf of the government or by non-government entities.

This is important as it imposes liability on States who are party to the Treaty, rather than the corporations or entities who are launching or operating the space object.

In other words, national governments are responsible to the international community for activities undertaken with respect to space activities by their nationals, whether the launch occurs from that State or not. They are also responsible for launches from their territory by foreign entities.

That means Australia is still responsible for the Australian-built satellites launched last year even though they were launched from Cape Canaveral, in the US.

States will be liable for damage to another State who is party to the Outer Space Treaty caused by the space object or its parts, on Earth and in air and outer space. This includes damage to people, property and corporations.

Thankfully Europe’s space freighter ATV Jules Verne burned up over an uninhabited area of the Pacific Ocean at the end of its mission.

Damages and compensation

No guidance is given under the Treaty regarding how liability for the damage is to be calculated. But a further treaty, called the Liability Convention, provides some further guidance.

The Liability Convention provides in Article II that a “launching state” will be:

(…) absolutely liable to pay compensation for damage caused by its space object on the surface of the Earth or to aircraft in flight.

This high standard of absolute liability reflects what were perceived by the drafters of the treaty as particularly vulnerable parties. People and property on Earth and aircraft in flight cannot avoid or reduce their potential harm from space from catastrophic launch failure or space debris.

But where damage is caused other than on the surface of the Earth or aircraft in flight the principle of fault is applied. The Convention does not elaborate on how fault is to be determined.

On Earth we are used to applying principles of negligence to accidents involving people or property. Negligence considers issues such as the potential of harm occurring, the foreseeability of that harm and whether sufficient measures were taken to reduce or avoid that harm.

It is not clear if these sorts of calculations exist with respect to space.

What is clear is that the Convention is intended to be “victim-oriented”. Claims for damage may relate to any harm caused by the space object including direct and indirect harm.

Article XII says compensation is to be determined on the basis that it should restore the person:

(…) to the condition which would have existed if the damage had not occurred.

But it wasn’t our fault

What about where objects collide in space causing harm to a third party? In this case liability may be shared by the launching States of the colliding space objects, again in accordance with their respective fault, where the damage is in space, absolutely if the damage is on Earth or an aircraft in flight.

Some exceptions exist where the State making the claim with respect to harm is actually responsible for that harm, through its own gross negligence or an intention to cause harm.

There has only been one claim made under the Liability Convention. The Government of Canada made a CA$6 million claim for compensation to the Soviet Union after its Cosmos 954, a nuclear powered satellite, crashed in Northern Canada on January 24, 1978.

While the final, diplomatically negotiated settlement of CA$3 million, did not specifically mention the Liability Convention, it is generally considered that the settlement was negotiated in the context of the Convention. Those costs related to clean up of the contaminated site in such a remote area.




Read more:
Step up Australia, we need a traffic cop in space


In 1979 debris from NASA’s Skylab fell to Earth in Western Australia. NASA advertised for claims with respect to damage caused by the debris, but no State-based claims were formally made under the Liability Convention.

There were some claims regarding illegal dumping: the local Shire of Esperance issued NASA with a A$400 littering fine. It was eventually paid in 2003 by a US radio presenter and his listeners who raised the funds.

Tiangong-1 was China’s first attempt at a space station. It was launched aboard a Long March 2F/G rocket from the Jiuquan Satellite Launch Center on September 30, 2011, so it is China’s responsibility.

In the unlikely event that a piece of the Tiangong-1 falls on an Australian, the Australian government would need to pursue a claim with respect to any injury the person suffered against the Chinese government. Such a claim could take many years through diplomatic channels.

Unfortunately, an individual cannot make a claim on his or her own behalf.

The ConversationI therefore suggest that before you get hit by a piece of space junk, you check your health insurance!

Melissa de Zwart, Professor, Adelaide Law School, University of Adelaide

This article was originally published on The Conversation. Read the original article.

China’s falling space station highlights the problem of space junk crashing to Earth



File 20180322 54875 7h0mw5.png?ixlib=rb 1.1
China’s Tiangong-1 space station is due to hit Earth, and Australia is in the crash landing zone.
Cindy Zhi/The Conversation, CC BY-ND

Brad E Tucker, Australian National University

Any day now, the Chinese space station Tiangong-1 is expected to fall back to Earth – but it’s uncertain where it will crash land. We know that Australia is in the potential zone, and we have been hit before by a falling space station.

But Tiangong-1 is just one of many pieces of space junk left orbiting our Earth.

The United Nations Office for Outer Space Affairs (UNOOSA) says more than 8,000 objects have been launched in to space, with 4,788 currently still in orbit around the Earth.




Read more:
60 years in orbit for ‘grapefruit satellite’ – the oldest human object in space


With every launch, even more space junk is produced ranging from the rocket boosters, to flakes of paint and the satellites themselves. In 2009 an old communication satellite crashed into a new one, creating thousands of pieces of smaller debris.

By some estimates, the amount of space junk is in the hundreds-of-thousands to millions of pieces and this interactive illustration shows some of them.

An illustration of some of the space junk left orbiting Earth.
ESA/ID&Sense/ONiRiXEL, CC BY-SA

From a heavenly place

Tiangong-1, or “Heavenly Palace”, was China’s first space station – a small version of the International Space Station – and was launched in September 2011. Weighing a bit more than 8 tonnes, about 10 metres long and 3 metres in diameter, it was the first of three planned space stations.

An illustration comparing the Tiangong-1 with a US school bus.
Aerospace Corporation

After delays in Tiangong-2, the Tiangong-2 and Tiangong-3 were merged and Tiangong-3 was launched in 2016. Tiangong-1 has subsequently not been in use and was always designed to come down back to Earth.

But where will it crash land?

A drop in the ocean

Halfway between New Zealand and South America in the Pacific Ocean is one of the most un-inhabited places on the Earth. This is the ideal location to have large pieces come back down, as the risk to lifeforms is minimal.

While most of these objects will break up into smaller bits, choosing a remote location then further minimises the risk of these bits.

In this part of an ocean there are literally hundreds of parts of automated space vehicles, rocket boosters, and even the Russian Space Station Mir, which splashed down east of Fiji in March 2001.

When you look at maps of satellite and space junk re-entry, the majority go straight over Australia and New Zealand. That is because re-entry starts roughly between 80km and 100km above the ground, takes around 15 to 20 minutes, and creates debris footprints hundreds-to-thousands of kilometers wide.

Therefore in order to hit the target of the southern Pacific Ocean, it must start over Australia and New Zealand.

But there’s one important feature that makes Tiangong-1 different in all of this: it is out of control, according to China’s space agency.

Crashed in Australia

If you were around in 1979 and happened to be in Western Australia, you might have a unique souvenir – part of the NASA space station Skylab, which re-entered near the southern town of Esperance.

An overhead view of the Skylab space station.
NASA

While most missions now plan on re-entry, this was not always the case and Skylab did not have a good plan for coming back to the Earth. It was designed for a nine-year lifetime, but no clear manoeuvrability was built to re-enter at a specific point.

As news came out that it was going to re-enter, and it was not clear where, there was a varied response. Some people staged Skylab parties, others operated safety measures (such as air raid siren preparedness in Brussels).

After it hit WA, the local Shire of Esperance issued NASA with a cheeky A$400 littering fine for scattering debris across its region. It was eventually paid in 2003 – not by NASA, but by a US radio presenter and his listeners who raised the funds.

NASA fined for littering when Skylab fell near Esperance, WA.
Flickr/Amanda Slater, CC BY-SA

So in 2016 when China notified UNOOSA that Tiangong-1 was uncontrolled in its point of re-entry, this made scientists pay attention. Of course this made the public and media take notice, causing a bit of a panic in some coverage.

Don’t panic!

Every day, hundreds of tons of debris, both human and natural (i.e. meteors), hit the Earth. Even those that survive re-entry and land pose a minute risk. Keep in mind, most of the Earth is unpopulated – from the oceans to vast deserts and land, nearly all people are safe.

The total surface are of the Earth is over 500 million square-kilometres. Even if a piece of space junk leaves a 1,000 square-kilometre debris field, that is only 0.0002% of the Earth’s surface.

A graphic showing how Tiangong-1 could break up as it crashes back to Earth, but where will it crash?
Aerospace Corporation

In fact, the Aerospace Corporation has calculated the odds of getting hit by Tiangong-1 parts at 1 million times LESS than winning the lotto.

Map showing the area between 42.8 degrees North and 42.8 degrees South latitude (in green), over which Tiangong-1 could reenter. You are many more times likely to win the lotto then getting hit by a piece of space debris from it.
ESA, CC BY-SA

Now that you know you don’t have to worry, if you do end up being in a path that can see re-entry, you will see a show not unlike in the 2013 movie Gravity.

SPOILER ALERT: Don’t watch if you don’t know the ending of Gravity.

What are we doing about it

Of course the question has to be asked – what are we doing to both solve the junk already in space and prevent more? Well, lots actually.

A large source of space junk is all the rocket boosters and engines that are still up there and can be seen re-entering. If you remember the excitement in February around the Space X Falcon 9 Heavy launch, one of the huge reasons for excitement was that those rockets come back down safely, making them re-usable and not another piece of space junk.




Read more:
Australia’s back in the satellite business with a new launch


Making satellites smaller not only means they are cheaper and quicker to build, but at the end of their life they can break up even more in the atmosphere, eliminating the possibility of large pieces surviving and landing.

And for all those small bits out there, Electro-Optic Systems (EOS) and Mount Stromlo Observatory are part of the Space Environment Research Centre (SERC) which is planning to build a laser system capable of safely de-orbiting small bits of space junk

The ConversationSo don’t worry about Tiangong-1 or other space junk hitting you, we’re on it.

Brad E Tucker, Astrophysicist, Australian National University

This article was originally published on The Conversation. Read the original article.