30 September 2020

SUBJECTS: Australia’s trading relationship with China; The Government’s failure to diversify Australia’s trading relationships.



SUBJECTS: Australia’s trading relationship with China; The Government’s failure to diversify Australia’s trading relationships.

GARETH PARKER, HOST: On the opinion page of The Australian newspaper, the Labor Party's trade spokeswoman, Shadow Trade Minister Madeleine King, has made a couple of, I think, very interesting and worthwhile points to explore further. She says the China trade arrangement didn't happen by accident, that it was a long time coming. It took a lot of work, but equally, if we put all of our eggs in the China basket, we perhaps set ourselves up for problems in the future, whether that is sooner or later. Madeleine King is on the line. Good morning.


PARKER: I’m okay.

KING: The debate is pretty brutal isn't it?

PARKER: Yes, I know you’re a US politics aficionado, you've been keeping an eye on it?

KING: I was, I’ve turned it off five minutes ago to calm down quite frankly, they’re yelling at each other. It says a lot about what people don't like about some of the modern politics.

PARKER: I think that may be right. Are we too reliant on China?

KING: Well the truth is, Gareth, is that China is a market that we can't replace. And we built it as a nation and our leaders built it, corporate leaders as well, because we knew the potential a country that has the greatest population on the face of the earth. So we want to be part of this market and Australia and China have worked together hand in hand for decades, but as I said in my piece, that didn't happen at the snap of someone's fingers. It took a lot of effort by subsequent prime ministers, starting obviously with Whitlam, but also Bob Hawke put in a lot of effort and so did of John Howard. Where we are today, China is our largest trading partner and that's going to be the case for some time to come and I don't want people to have any misgivings about that. That's not a bad thing, but like everything we do, whether it's in our own personal savings or our superannuation, we should always seek to have other groups or countries to deal with, to have backup plans so to speak. And that's the point about diversification is that you need to have other places to trade should something go wrong.

And it's not just to do with the nature of the relationship now, it's at a pretty low ebb our relationship with China. But the facts are that its demand for some of our bulk commodities are going to plateau. And this is not me saying this. BHP has modelled that, they think by the second half of this decade, the 2020s, that the demand for iron ore will plateau. So in the face of that kind of modelling and that evidence, we should be and should have for many years, seeking to strengthen economic ties and trading relationships with our near neighbours like Indonesia and India. So that's my point Gareth, and that's what I make in the article today.

PARKER: So is the point that you have to build those relationships now in the expectation that they bear fruit several years hence.

KING: Absolutely. And you know, there's been a lot of good people working on these relationships for many years and the Australia Indonesia Business Council and the Australia Indian Business Council, these are groups that have been working very hard and diaspora communities as well. But without government leadership and drive, a real push behind these efforts, it's hard for the country to gain momentum and really solidify these trading relationships. So you need a leader to be there, be in the negotiations for flagship-type enterprises. And I make the point that our government, the current government has been in power for seven years with different prime ministers, but they've got roadmaps and been given roadmaps for how to pave a relationship with India, for example, through the Peter Varghese report. Now two years later, they haven't implemented that. And the flagship of that, of our relationship with India, was promoting higher education. Yet our higher education sector is not being supported through this COVID crisis, and some universities are going to suffer terribly from the recent changes.

So my point is that you need to have a really long-term view. It's not one election cycle, it's not two, it's not three, it’s like five or six or more. It has to be a focused, long-term plan and quite frankly as bipartisan as possible, so that we can build industries like higher education to go and trade with like-minded nations like India, so we have another market but also another product which is the services in higher education. And not just relying on the bulk commodities like iron ore and gas, which you know is super important to our economy, but we need to be able to export more things.

PARKER: Madeleine, you make the point that we are overly reliant on four exports. That is resources, agriculture tourism and education. Is there anything else we can do that the rest of the world may want?

KING: There is. And this is one of those lightbulb moments we have and that came along with COVID is that sometimes we need to look inside a bit more into our country and support our own capacity. Now there's an opportunity for Australia to flick a bit of a switch on advanced manufacturing. And so right now, Australia is ranked 93rd in the for the complexity of our economy because we do only, by and large, export those bulk commodities in terms of agriculture and iron ore and gas. Very important, but …

PARKER: We always have.

KING: Yeah, we have.

PARKER: It’s been that way since Federation, really.

KING: Absolutely, we grew right on the sheep’s back, there’s no doubt about it. I’ve got CBH in my electorate and their grain exports are extraordinarily important, but we can do more, and we can add value more here is my point.

PARKER: That's been the holy grail of industrial policy for 50 years and yet we're still doing what we've always done, and we do do it very well. It’s made us one of the richest countries in the world, with one of the highest standards of living in the world. I remember when I was in high school and the economics teacher used to call them elaborately transformed manufacturers, they were the ETM that we didn't have enough of, and we still don't have enough of them. Yet, the economy is going in a big-picture sense okay.

KING: Yeah that's right but we can go better is what I want to put across. So you point to, what is the next industry? Support for higher education is a good start. That's an established industry. It's our third or fourth largest export pre-COVID depending on the year. But there’s a lot of talk about battery production and how far we go along that value chain, so we're not just digging up lithium, processing a bit here and sending it offshore. There’s been some work on it through research centres, but the government, just like Hawke did, just like Howard did, need to get behind the push to work with our partners in Japan and South Korea that have the know-how, and bring it here, and have them invest in developing the cathode and anode capacity that's a long way into that battery producing value chain.

So that's one industry. There’s a lot of talk about batteries. Not much action at the moment. My concern is that we should as a nation have a national effort to build those industries, and really mean it. You know, we can do these things but we need help to do them. We need to bring that capacity, the capital investment, the intellectual investment from other countries, countries we've dealt with for many years and will continue to, as we should. And start building smart jobs here in this country and that's entirely possible.

The other thing to do is build the capacities of small and medium enterprises to export. In this country we are one of the lowest numbers of small and medium enterprises that actually export. So there's room for the government to help build the capacity of some of those smaller, many family owned businesses that seek markets overseas, a wide variety of them, and push their products out so they are getting more people to sell more thing to I suppose, to put it pretty simply, Gareth.

PARKER: Madeleine King, thank you for your time this morning, I appreciate it.

KING: Yeah great, good luck to you mate.

PARKER: Good on ya. The opposition trade spokesperson and the member for Brand, Madeleine King from the Labor Party.