11.11.2016 Author: James ONeill

Is There a Radically Different Future For Australia

45234234234In 2013 President Xi Jinping announced that China would be embarking upon what has become the world’s largest infrastructure building program. Known in China as the One Belt, One Road, but more popularly referred to as the New Silk Roads, the plan is to create two major trade corridors, maritime and rail.

The maritime route will travel south through the South China Sea to Indonesia, then head west to the east coast of Africa, then north and west through the Suez Canal to the Mediterranean with terminals in Athens and Venice. Additional routes will link with Sri Lanka and India.

That the maritime route transverses both the South China Sea and the Malacca Straits gives it strategic as well as trade significance. Each year the Australian Navy participates in a naval blockade exercise in the Malacca Straits with the US Navy (Operation Talisman Sabre). It is through this narrow waterway that more than 70% of China’s seaborne trade is carried and more than 90% of its sea borne petroleum imports.

It is not a coincidence that in addition to the naval exercises, Australia also participates in provocative statements and military posturing in the South China Sea. The South China Sea is not only a major trade route; it is fundamental to China’s capacity to defend itself.

It is the land-based version of the New Silk Roads however that has the most potential significance for Australia. The rail lines being built or upgraded take alternative routes to Europe. The northern route encompasses the Trans-Siberian route from Russia’s Far East to Moscow. A second route runs from China through Kazakhstan, then linking with other countries in Central Asia and the Middle East and thence to Europe.

A third route runs south through Burma, Thailand and Malaysia. The projects are more than simply building railway lines. They include developing the infrastructure of the countries along these routes. A total of 65 countries will eventually be linked and those countries have 4.4 billion people.

There are parallel developments that also have major geopolitical significance. These include the Regional Comprehensive Economic Partnership (RCEP) that is an ASEAN based proposal for a regional free trade area. It was initiated at the East Asia Summit in Phnom Penh, Cambodia in November 2012.

The membership is intended to be the ten ASEAN member states and those countries that have existing Free Trade agreements with ASEAN, including Australia and New Zealand. In 2014 those countries had a combined Gross Domestic Product (GDP) of $22.6 trillion and represented 3.47 billion people. Its driving force and source of the largest part of the investments necessary is China. It differs therefore from the possibly doomed Trans Pacific Partnership (TPP). That agreement, negotiated in secret, pointedly excluded China, the world’s largest economy in terms of parity purchasing power.

The TPP was also not a trade agreement despite propaganda to the contrary. It was a thinly veiled attempt to maintain American corporate hegemony through the profoundly undemocratic dispute resolution procedures. It is also an essential component of attempting to maintain American military control of East and North Asia. US Presidential nominee Hillary Clinton’s new found opposition to the TPP is unlikely to survive her election to the presidency.

In August 2016 there was a RCEP Ministerial meeting in Vientiane, Laos, immediately followed by a further round of negotiations in Ho Chi Minh City, Vietnam. Almost none of this has been reported in the Australian media, despite Australia’s close association with the grouping. The corporate media support the TPP and therefore give little or no coverage to its alternatives, much less discuss why those alternatives have arisen.

Australia has chosen to ally itself with the provocative and potentially dangerous US policy in the region, and specifically in the South China Sea. At the very least this policy is counter-productive, and especially in the context of the One Belt One road geopolitical initiatives.

According to the 2015 figures released by the Department of Foreign Affairs and Trade (DFAT) Australia’s four largest exports to China were iron ore, coal, gold and copper. The total value of these commodities was in excess of $50 billion out of total exports of nearly $76 billion. Those four largest commodities represented 30.2% of Australia’s total foreign trade income. It represents a high degree of reliance on one market and hence vulnerability.

Of the other Australian exports to China, their common denominator was that they were mostly dug out of the ground. With those figures in mind the following table is instructive. It shows the major resources of those countries that form a significant part of the One Belt One Road projects. They have other characteristics that will be returned to.

COUNTRY PRINCIPAL RESOURCES
Afghanistan Coal, copper, gold, iron ore, natural gas, rare earths
Burma Natural gas
Iran Coal, copper, iron ore, natural gas, oil, zinc
Kazakhstan Bauxite, copper, gold, iron ore, lead, silver, uranium
Kyrgyzstan Coal, gold, iron ore, natural gas
Mongolia Coal, copper, gold, iron ore, nickel, silver, zinc
Russia Bauxite, coal, copper, iron ore, natural gas, nickel, rare earths, silver, zinc
Tajikistan Coal, copper, gold, iron ore, lead, natural gas, oil, zinc
Turkmenistan Natural gas
Uzbekistan Coal, copper, gold, lead, natural gas, silver, uranium

This table does not take into account China’s relationship with non-contiguous trading partners, including Brazil and South Africa, both major mineral exporters and along with Russia and India, members of the BRICS grouping. There are also other African countries that have been the object of massive Chinese investment in recent years. They also produce commodities in competition with Australia that are in demand by Chinese industry.

The strong and expanding Shanghai Cooperation Organisation (SCO) reinforces the infrastructure links of the One Belt One Road development. Its six current members include the nations in the above table excluding Afghanistan, Iran and Mongolia (all observer members) and Burma. Pakistan and India are both observer members expected to join in 2017, as will Iran. There are a further six dialogue partners of whom the most strategically and economically important member is Turkey.

BRICS and the SCO have a growing relationship with the Eurasian Economic Union, which comprises five member states of which three, Russia, Kazakhstan and Kyrgyzstan, are also linked via the SCO and the One Belt One Road development. Russia’s membership is common to all of the major economic blocs. Western economic sanctions against Russia and belligerent military activity by NATO on Russia’s borders have been a major driver of closer Sino-Russian relations.

China also has been the object of western military pressure, quite apart from the South China Sea issues referred to above. There are currently 400 US military bases encircling China. There is no military justification for this. It is clearly part of an attempt by the US and its allies to “contain” China, a policy that will either fail, as recent developments suggest, or end in war. Either way, the risks to the security of Asian nations are jeopardized. That subplot is again a major reason why so many nations are signing up for the peaceful alternative offered by the One Belt One Road initiatives.

It is also a factor in 57 nations, including Australia in a rare show of defiance to the Americans, in joining the Asian Infrastructure Investment Bank (AIIB). Again, that bank is a Chinese initiative and a key part of the economic reordering of the world’s financial structures dominated for most of the post world War 2 period by the IMF and World Bank. The Chinese Yuan recently becoming part of the IMF’s Special Drawing Rights is a further weakening of western financial dominance.

Even more importantly, China is now conducting its trade with more than 60 countries in each country’s respective currencies, thereby bypassing the US dollar as the sole medium of international trade. The demise of the dollar’s role in world trade will spell the end of US hegemony that has prevailed for the past 70 years. The US will not relinquish that role lightly as Libya and Iraq among others have found to their considerable cost. More turmoil and disruption can be safely predicted irrespective of the outcome of the US Presidential election.

The TPP and its European equivalent (the TTIP) are part of the rearguard actions being mounted to prevent the dollar’s collapse from its preeminent position. The relentless proxy wars, regime changes and general destabilization through ‘colour revolutions’ are manifestations of the same desire to maintain what the US Department of Defence called “full spectrum dominance” in its 2002 paper, Vision 2020.

That such an arguably insane objective will fail is inevitable. Not the least of the reasons is that countries, especially in Eurasia, have a viable alternative of peaceful development in what President Xi refers to as a “win win” situation for all parties.

The issue for Australia is a stark one. Its geography, its trading relationships, its wealth and its economic future all lie squarely with Asia. The conundrum lies in the central message of the 2016 Defence White Paper: the US is and will remain the essential guarantor of Australia’s security, and the military alliance is an unshakeable component of that. It is the paying of insurance premiums on that perception of the alliance that explains Australia’s continued willingness to involve itself in America’s illegal wars. Vietnam, Afghanistan, Iraq and Syria are only some of the more blatant examples.

Now however, for the first time in its trading history, Australia’s major trading partner is not also its ally. That its current political policies persist in portraying that major trading partner as a threat, either actual or potential, is evidence of its policy schizophrenia.

The perils of such a policy lie in the figures quoted above as to the resources available to China from neighbours and trading bloc partners that can be used to substitute Australian products upon which the past 40 years of Australian prosperity has been based. From a Chinese perspective, if one has a choice between sourcing raw materials from neighbours linked by high-speed rail, or from a belligerent and unreliable alternative that Australia is in danger of becoming, the choice in the vernacular is a no-brainer.

China may opt to switch its raw material trade anyway. But a prudent government conscious of Australia’s long term national interest should surely be exploring policy alternatives outside the straitjacket imposed by the US alliance.

James O’Neill, an Australian-based Barrister at Law, exclusively for the online magazine “New Eastern Outlook”.


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