AUSTRALIA AND THE BRI: WHY SO RELUCTANT?

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26 June 2018

 The Sydney Morning Herald has recently published a series of articles (18-23 June 2018) on China’s Belt and Road Initiative (BRI). The articles come at a time when relations between China and Australia are getting distinctly cooler. The articles will do nothing to thaw the relationship. On the contrary, they are replete with the assumptions, allegations, falsehoods and queries that if anything, will reinforce Australia’s faulty perceptions as to what the BRI is, how it is transforming the development model that has prevailed since World War II, and how it is illustrative of China’s changing role, not just in Asia, but in Europe, Africa and South America.

The headlines of several of the articles provide a clue as to the editorial intent. The newspaper’s foreign editor Peter Hartcher’s lengthy piece is entitled “China’s Modern Trojan Horse,” (19 June 2018) a clear allusion to an ancient Greek subterfuge. He quotes Rebiya Kadeer, a Uyghur dissident (not disclosing that she lives in exile in Virginia, USA, as a source on China’s alleged human rights violations of the Uyghur, and also The Economist (UK) that “Xinxiang is apartheid with Chinese characteristics.” Hartcher concludes his piece with the observation that BRI is another way of spelling bought and sold with Chinese characteristics.

Lindsey Murdoch (21 June 2018) wrote an entirely negative piece on China’s investment in Cambodia. Chinese investment he says, accounted for about 30% of total foreign investment in Cambodia, a figure intended to raise alarm. The 25.9% of Australia’s foreign investment sourced from the United States does not rate a mention, let alone a comparable degree of alarmism.

Murdoch does not mention for example that Cambodia sought tenders for the building of its biggest hydro dam at Stung Treng. The Japanese were competing bidders for the contract and were unsuccessful because they were too expensive, both in contract price and at the interest rate they sought to charge.

It is a recurring theme in the Australian media that references to the BRI represents a potential ‘debt trap’, and that  an inability to repay loans will lead to a loss of sovereignty. That there is not a shred of evidence to support this contention in respect of Chinese investment does not prevent its endless repetition.

There is also the point that none of the countries that have signed up to the BRI (now more than 100) have done so as a consequence of pressure from China. They are in fact exercising their sovereignty in doing so and it betrays a lingering neo-colonialism for Australia to issue threats and “warnings” to sovereign nations, as was recently the case in Vanuatu and the Solomons, about what their leaders should and should not do when offered the opportunity of Chinese investment. That potential investment was portrayed is intruding upon Australia’s sphere of influence and upsetting what was perceived in Canberra as the strategic balance in the Pacific.

David Wroe (19 and 23 June) repeats this sovereignty canard, citing Julie Bishop that the “the funding mechanisms of the BRI are unclear.”If Wroe or Bishop had bothered to look, there is ample literature on the funding of the BRI, coming as it does from specific funds allocated for that purpose.

The Memoranda of Understanding signed by each of the participants in the BRI are readily available, as are the contracts dealing with the financing of specific projects. Australia did in fact sign a Memorandum of Understanding in September 2017, albeit limited to projects involving third countries. Whether or not that memorandum required transparency in the financial arrangements we do not know because the Australian government has refused to release a copy of the signed version. Transparency is not something that one automatically applies to the Australian government and this is just another example. Instead of repeating the tired cliché that China is less than transparent, the Australian media should look to their own government and its habit of keeping from the voting public details of arrangements they should know about.

Michael Bachelard quotes Bishop again on the Solomon Islands, where she says, perhaps with unconscious irony, that “the [Australian] Government felt compelled to intervene to keep China out.”

Bachelard does make some attempt at balance by quoting a spokesman for the Asian Development Bank is saying that the BRI “is unlikely to cause a systemic debt problem.”  He rather undoes that attempt at balance by making the claim that “America may still rule the waves, but China is seeking to rule Eurasia.”  Making two errors in the same sentence is no mean feat.

President Xi certainly does seek some fundamental changes in the geopolitics of Eurasia, but to claim that he seeks to “rule” Eurasia is manifestly absurd. Bachelard does touch upon what may well turn out to be the most important geopolitical change of the first decades of the 21stcentury: the displacement of the US dollar as having the dominant role in international trade.

Bachelard quotes former French President Giscard d’Estaing on the dollar’s role as an “exorbitant privilege”, but fails to follow-through on the implications of the financial changes currently underway. The dollar’s dominant role in the post-World War II geopolitical framework has permitted the exercise of US hegemony, militarily, economically and politically for the past 70 years.

That is now changing with a rapidly growing number of countries paying in their own currencies or with the Chinese Yuan, backed as the latter is with the gold trade convertible note through the Shanghai and Hong Kong exchanges. Without the historical demand for US Treasury bonds, the capacity of the US economy to defy economic logic will diminish rapidly. This trend is reinforced by the growing cooperation between a number of economic and geopolitical groupings such as the Eurasian Economic Union (EAEU), the SCO,  and BRICS which between them account for more than half of the world’s population and more than half of the world’s GDP. Very few if any of the members of those organisations have any interest in assisting the US dollar maintain its historical role.

With the profound changes occurring in the world’s trading system and its associated financial structures there is going to inevitably be a change in the geopolitical balance. It is a recognition of and resistance to these changes that are arguably the principal reasons why Australia is so reluctant to enter a serious dialogue about a possible role in the BRI.

David Wroe, in his article of 23rdof June comes closest to capturing the real issues. He quotes John Brumby, the former Premier of Victoria, President of the Australia China Business Council and a director of Huawei (itself a target of the Australian government) that:

 “a lot of the caution that we see in relation to China is not based around legitimate security concerns. It’s based around protectionism of the US and an inability to grasp that the world order is changing.”

It will be recalled that when Australia was contemplating joining the AIIB it was urged not to do so by the Obama administration. The exact same fears of “Chinese domination”, “lack of transparency” and “debt traps” were advanced then. None of those fears have been realised and the AIIB this is now regarded as a model of its kind  (Journal of Infrastructure, Policy an Development (2018) Volume 2, Issue 1).

Australia made one of its rare departures from American wishes when it joined the AIIB. It is time to acknowledge the truth noted by former Howard government minister Warwick Smith (head of the Australia China Council and a director of the ANZ bank) that “there is a reality about this (the BRI) that is inescapable. The wheels of commerce keep turning. Money will flow trade and trade will follow money.”

It is long past the time with Australia displayed a similar degree of realism, acknowledging the view recently expressed by Hungary’s Foreign Minister Peter Szjjarto that “we in this region have looked at China’s leading role in the new world order as an opportunity rather than a threat.”

If there is a “ threat” associated with the BRI it is to the role of the United States. Australia has been a loyal acolyte to that role and the grave risk that Australia faces is in not recognizing that the emerging world is a multipolar one, and that relations between countries as exemplified by the BRI represent a profound change. The United States was offered the opportunity by China to join the BRI and like Australia it refused.

It is difficult if not impossible to address issues of transparency, accountability and sovereignty if one is not a member or active participant in the process.  Australia prefers, it would seem, to cling to a version of the world order that is increasingly irrelevant and outdated.  It is delusional to believe that the present anti-China rhetoric found in the statements of government ministers and repeated in the recent series of articles in the SMH will not have consequences for Australia.

*Barrister at Law and geopolitical analyst.  He may be contacted at joneill@qldbar.asn.au

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