INDONESIA AUSTRALIA COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT. (IA – CEPA)
PREAMBLE Following years of negotiation, since 2012, the IA-CEPA was signed on 4 March by Trade Ministers Enggartiasta Lukita and Simon Birmingham. This Agreement now has to be ratified by the Parliaments of both nations. No sooner signed than Presidential candidate, Prabowo Subianto, stated that if elected on 19 April the document would be modified to protect Indonesia’s sovereignty and interests. There are prayers that Joko Widodo be re-elected as President.
BACKGROUND Currents swirl round this Agreement. Since the Dutch departure from Indonesia some eighty years ago Australia has had difficulty making friendly contact across the Timor Sea. For such close neighbours they are culturally and economically far apart. Raw data does illustrate the difference. Both are among the largest global economies, Australia 13th and Indonesia 16th, but the mismatch in population of 25 million to 250 million highlights the vast difference in living standards, virtually industrial to subsistence, but with a rising Indonesian ‘middle’ class. With current growth rates over 5%, Indonesia is slated to be the 7th largest economy by 2030. Australia wishes to exploit this growing market. In 1991, America and Europe anticipated vast new markets in the Russian Federation – alas history continues. Despite close proximity, Australia ranks 11th as an export destination to Indonesia and 8th as a source of export income to Indonesia. However, it is in Australia’s economic interest to more deeply penetrate this market. A recent estimate suggests there are some 300 Australian companies operating in Indonesia (12,000 in New Zealand) with a mere $11 billion invested in this 5,200 km archipelago. Bilateral trade historically has been low due to similar export profiles, incompatible culture and Indonesian government policy settings. In 2017-18 bilateral trade between Australia and Indonesia aggregated $10 billion, about 2.3% of exports. Australia’s principal exports are wheat, cattle, beef, cotton, seafood, sugar, aluminium and crude and refined petroleum; imports from Indonesia include crude and refined petroleum, aluminium structures, timber and footwear.
THE DEAL Australia’s objective is primarily to increase exports into Indonesia couched in soothing language that will hopefully achieve a goal of “economic cooperation which will assist in the implementation of the agreement, support trade and provide a pathway for future liberalisation”. This translates to: * a reduction of impediments to trade goods, * a reduction of impediments to the exchange of services and investments.
Beside agricultural products will be the establishment of university campuses with majority Australian equity: this is seen as a growth industry since there have been an influx of Indonesian students into Australia. In return, guest workers would be permitted into the workforce ensuring Australian dollars would be remitted to Indonesia. Ostensibly, this initiative is to forge economic relations to the next level but it is to build stronger ties between two peoples who are poles apart – a stealthy case of improving national security. Trade Minister Birmingham has spoken seductively of opportunities for agricultural exports but Indonesia depends heavily upon and is actively seeking to become self-sufficient in food production. Agriculture accounts for 50% employment and contributes 14% to GDP. Principal exports are palm oil, rubber, cocoa, coffee, rice, cassava, maize, fruit and seafood. For Australia, the agriculture, food and fibre sectors only account for 13% employment and 3% to GDP. (NFF) Indonesia’s reliance on food production and quest for self-sufficiency could present a prickly front door to Australia’s food exporters. The Indonesian breeding protocol is a problem for Australian cattle exporters. Each five cattle destined for a feed lot must be accompanied by a breeding cow: this is a significant financial impost on exporters.
FLOWERING OF BILATERAL TRADE? Despite close proximity markets will not immediately open. Much work is required to foster a closer commercial relationship. To achieve trading, two diametrically opposed objectives must be harmonised: *Australia wishes to export agricultural produce, education and services into a rising market. This is starting from a low base, 2017-18 exports were only wheat $1.1 billion and cattle, sugar, beef, cotton, milk $1.6 billion. There was another $4.6 billion, aggregating 2.3% of total exports. *Indonesia wishes to increase self sufficiency and protect its important agricultural sector.
Other issues facing Australian exporters are that: * the Indonesian cattle trade has been opened up to India, Brazil, and Mexico. * wheat supplies can now be imported from United States, Canada, India and the Black Sea. * Indonesia favours local fruit growers by imposing seasonal restrictions, also local markets are being opened up to Northern Hemisphere producers.
A GEOPOLITICAL ISSUE Indonesia’s insistence that the trade deal includes guest workers for Australia raises an issue. Germany, the Gulf States and other countries bring in workers for construction, agricultural and domestic industries thus relieving their own citizens. Australia relies on back packers, Pacific Islanders, Asians, and now probably, Indonesian labour to work where Australian youth is not wanted or where there are perceived travel and or accommodation problems. For Australia with a fiction of 5% unemployment (which hides underemployment) and a 10% youth unemployment and foreigners doing unpopular work, social issues in Australia will not improve. Another problem, Australia is among the highest in the OECD in terms of labour rates: not good for exports and a probable source of friction with itinerant labour. In a chance conversation, an exporter from America has stated that Australia is a difficult import market due to a plethora of bi-lateral trade agreements. A dark purpose might be revealed in a restrictive import policy that reduces Australia’s negative terms of trade.
REFERENCE Australian Trade Relationships with Indonesia. Australian Parliament, 2018. Export Markets – Indonesia. DFAT, 2018. Indonesian Trade Agreement. New Daily, 2018.
JOHN HUGH HILL Current Affairs Flash Points: towardsthefinalhour.com Email: email@example.com
The Conundrum of Christmas. Christianity could be considered a monumental oxymoron. The global message ‘Peace on Earth, Goodwill to all Mankind’ sits uneasily alongside the battle cry of a Christian nation ‘In God we Trust’ and with that of Islam’s ‘Allah Akbar – Allah is Great’. Peace and war come together in Oliver Cromwell’s dictum “He that prays and preaches best fights best”. Logically, this should equally apply to Christian and Muslim soldiers. Using the theme ‘Peace on Earth’, this festival kangaroo-hops round the globe looking at non-Christian cultures and their accommodation of Christmas. Christian numbers in the Arab and East Asian nations tend to be vanishingly small as a percent of population.
Christmas in the Islamic World.
Indonesia. Christmas Day or Hari Natal is celebrated in Indonesia in keeping with the Principles of Pancasila. This ensures an accommodating policy on faiths other than Sunni Islam. The National Islamic Council has approved Christian church services and fosters inter-faith harmony. Over the Christmas period, shopping malls radiate festive cheer and decorations to the repeated strains of ‘Silent Night’ – ‘Malaam Kudus’. December 25th is a gazetted religious holiday. To enforce government policy, tens of thousands of security guards move around churches and shopping malls.
Saudi Arabia. Not even the birthday of the Prophet Mohammed is recognised. To acknowledge the birth of Jesus is a crime. This Sunni kingdom is dominated by the strict Wahhabi doctrine. Clandestine Christmas celebrations are a punishable offence.
Iran. A Shiite republic with a history of Zoroastrianism and Armenian Christian faith. The Christmas period is holiday a season with the ‘Virgin Birth’ celebrated on the 24th and Epiphany on the 8th January. The malls are ablaze of merchandise, Christmas trees, music and colour. In Iran Jesus is recognised as one of God’s messengers. Ayatollah Kohamenei, spiritual leader, has stated “it is time for caring Muslims, Christians and Jews to obey the prophets and honour Jesus’ birthday”.
Pakistan. This is a Sunni dominated republic. The 25th is a public holiday. It is also Jinnah’s birthday, the founding father of this nation. On Christmas Eve there are services to promote peace between Muslims and Christians. The Big Day or Wadda Din is one of feasting and merry making- it includes exchange of gifts with Muslim friends. Despite an apparent relaxed mingling, Christians must be ever vigilant not to transgress blasphemy laws; mob violence is responsible for assaults and death of Christians.
Bangladesh. Another Sunni republic that permits freedom of religion however sectarian violence is common. The Big Day or Barra Din is celebrated with midnight services – observance is more a shopping spree enlivened by decorations and frivolity involving all faiths.
Christmas with the Mongoloids.
China. Freedom of religion is suppressed however tightly controlled faiths are permitted. There is no holiday on the 25th but the Chinese have welcomed the festival of Christmas with gusto and an explosion of consumerism. It is a shopping frenzy among coloured lights and uncountable Santa Claus’. Christmas Eve is for romantic dining or raucous parties with friends not family.
Japan. Among the Shinto and Taoist faiths Christianity is almost non-existent. The Christmas period is one of rampant consumerism buried beneath a crescendo of lights, colour, glitz and bling. There is no public holiday on the 25th.
Democratic Republic of Congo. A country wracked by civil war, corruption and under the thrall of missionaries. The religious significance of Christmas is important and the churches explode with music and song. Christmas is for the children who receive new or recycled clothes from street kiosks. For some adults special Western foods are imported to spice up the monotonous cassava based diet.
Quo Vadis, Christmas Day or Big Day.
According to the Ontario Consultants on Religious Tolerance, there are 2.0 billion Christians and decreasing, and 1.6 billion Muslims and increasing, on this planet. It is recognised that the fertility rate of the Christian West is below replacement level while for the Islamic East, the converse is true. Over the next century Africa with its high fertility rate might save Christianity for the West
Across the Islamic world the celebration of Christmas will become more difficult. Concurrently, the hedonistic festivities of the Big Day will become evermore garish and consumerist. It must not be forgotten that Christ’s birthday has been assigned to the Winter Solstice, a date shared by many extinct faiths. It was a date of major significance for societies in the Northern hemisphere. If you cannot beat them, join them!
Charles Darwin’s axiom, ‘It is the survival of the most adaptable not the fittest’ is relevant to Christian and Muslim ethos. In times of adversity, the Christian mantra is ‘God help us’ while the Muslim intones ‘It is the will of Allah’. The former represents a plea for assistance while the latter encourages a devout Muslim to assist Allah to ‘make it happen’. This is a core difference between these two cultures.
In the century ahead Christianity is forecast to decline in the West causing festivities to veer more towards a ‘Big Day’, rather than a ‘Christmas Day’. The spirit of ‘good will to all men’ should survive but ‘peace on Earth’ will remain a pipe dream. A Quo Vadis issue for the Christian West has emerged from left field. With the rise of women pari passu men in the Christian West the fertility rate has declined below replacement level. This is a profound issue with, currently, no rational solution and yet one must be formulated!!
May we all enjoy some spiritual contemplation and time with Family and Friends.
History In recent times Australian Government Ministers and media have commented upon problems and benefits with Australia’s Free Trade Agreements (FTA). There appears to have been little clarification on the pros and cons of these far reaching agreements. This essay seeks to throw light on some of the issues and how they may affect Australia.
In the age of modern empire (16th to 19th centuries) world trade was constrained by the Mercantilist theory by which governments regulated the empire’s economy such that state power was augmented at the expense of rival maritime powers. The policy reduced imports from rival nations and maximised exports which, in part, fuelled the Industrial Revolution. The effect was to remove subject peoples and colonists from foreign products; this policy was a trigger for the American War of Independence.
Prior to the Second World War, European and American industry imported raw materials from colonies and exported manufactured goods to tied markets round the globe – it was a closed trading loop.
Due to the two ‘World Wars’ in the first fifty years of the 20th century, global trade was severely disrupted. The European empires and Mercantilist trade vanished and trading patterns were ad hoc. The mid-century post-war reconstruction boom generated unprecedented factory growth across the Western world that generated high labour costs and this has sown the seeds of serious labour pains in the industrialised West in the closing years of the 20th century and the opening years of the 21st century.
From mid-20th century, Western world companies commenced a slide towards low-cost labour in Asia and South America causing closure of many Western world factories. This resulted in an inexorable under-employment or job losses that is now bedevilling the working class of the Industrialised world. The flood of cheap imports to the West from industrialising Third World countries has skewed world trade, created trading surpluses, particularly in China. This situation has contributed to low global inflation, deflation, low interest rates and under employment This global situation has contributed to the rise of European Right Wing parties: the popularity of Mr Trump, the Brexit vote and the phenomena of Bernie Saunders (Democrat,USA) and Jeremy Corben (Labour, UK).
Free Trade Agreements Economic theory suggests free trade agreements are the best way to proceed to raise global living standards, particularly in the Third World. However, not all in the Industrial West benefit. In effect, the practice is producing interconnected global trading blocks with reduced tariffs and quotas. With increasing complexity of trading blocks, the process might spawn the rise of mercantilist groups by another name. Negotiations by nations are complex as each participant endeavours to maximise trade benefits. Currently the advantages of free trade over mercantilism are:
nations benefit from a greater source of goods at lowest prices
mercantilism restricts imports resulting in high prices
the free trade system makes the nation, not necessarily the individual, more prosperous
mercantilism forces nations to fight over resources – under free trade goods and services are peacefully traded. Since globalisation is not a homogenous process, rival free-trade blocks could have designs on the same resources.
World Economy The world economy has been moving towards an interconnected globalisation. In today’s world no national economy is completely immune to the health or sickness of other national economies:
Globalisation ensures a majority of people benefit through new investment, but high labour costs in outdated industries can create unemployment. The Brexit ‘leave’ vote was lead by those who were ‘left behind’. Mr Trump’s support is, in part, from the disaffected working class.
Globalisation can produce lopsided unstable capitalism. There is, within Western World, unease that infrastructure and industrial projects will proceed in Third World countries where labour costs and tax rates are low.
Since Britain’s Brexit vote in June to leave the EU, five industrialised European nations anti-establishment parties are clamouring to erect trade barriers (tariffs) and close borders to immigrants.
Increasing globalisation has established that the real incomes of 66% of households in advanced economies have fallen between 2005 and 2014. The few gains have gone to the ‘salaried gentry’. (McKinsey Global Investments)
There is growing belief that globalisation benefits elites but much less so for the broader population in advanced economies.
China’s integration into global trade, by joining the the WTO, has caused lasting damage to workers in the Industrialised Economies.
China’s global penetration of low cost goods has risen from 2% (1991) to 20% (2013).
Of the six million American job losses in recent years, 29% are directly related to the import of Chinese goods.
With globalisation and increasing free trade, there is clear evidence in the Advanced Economies that wage inequality is growing with growing risk for low and mid-skilled workers.
Advocates for free trade admit gains come from greater manufacturing and productivity efficiency not from additional jobs. However, imports are cheaper.
American Trade Agreements As a backdrop to Australian trade agreements, the American experience is reviewed. Since 1985, fifteen separate free-trade agreements with twenty countries involved the export of high-value products. Note that these were one-to-one trade agreements not an international consortium master-minded by an American panjandrum. Employees benefited as wage premiums of up to 18% were paid compared to those in non-export industries who were unable to compete with cheaper imports.
In 1998, the United States and China signed a trade pact whereby American export tariffs were reduced from 24% to 9% while import quotas were abolished. Subsequently there were huge job losses in the American industrial heartland, but millions of Americans benefited from cheaper products. Bernie Saunders, a Democrat Presidential aspirant, noted that trade deals are a disaster for American workers.
Trans Pacific Partnership (TPP) Twelve countries have been co-opted and others are being cajoled to join. Negotiations have continued over five years. It was hoped to sign a binding document in 2016 but Partners have delayed until 2017. The TPP was the initiative of President Obama to counter the growing economic might of China. The current membership represents approximately 40% of global GDP and is summarised in the table along with some critical economic indicators. The Philippines, South Korea, Thailand and Taiwan have expressed an interest in joining. China is specifically excluded as its financial controls and social issues are not considered acceptable. (geopolitical futures.com, 8 August, 2016)
TABLE 1 Trans Pacific Partnership. Members Economic Indicators.
GDP (tr) & Ranking
Budget as % of GDP
Average Wage $'000
The table provides an insight into market potential, economic health and probable wage transfer from industrialised to developing economies. (World Bank, International Monetary Fund, The Economist)
Clouds on the horizon are an antagonistic American Congress that is required to enact the TPP into law, while both Trump and Clinton are opposed to this trade deal. Malaysia, Canada and New Zealand have delayed ratification until 2017.
The Roosevelt Institute has poured cold water on the proposed Partnership (DrJ Stiglitz, Columbia University):
middle incomes will be suppressed
tariffs are already low (average 2.7%) so a strong American dollar will swamp benefits
the World Bank opinion is that the proposed Partnership will have zero effect on the American economy
the inequality jeopardising the American middle class is a defining challenge to social instability.
The Australia-China Trade Agreement Before commenting on the TPP, a smidgin of history. This agreement came into force in June 2014. It is a contentious document as revealed on ABC News, October 2015. (abc.net.au/news) Benefits are summarised as:
Australians will enjoy cheap Chinese Imports, a 5% tariff will apply.
Within 2-4 years, Chinese tariffs of between 3-10% will be eliminated on imports of coal and aluminium.
Within 9 years, Chinese tariffs of up to 30% will be eliminated on dairy and animal goods.
Australian aged-care homes and some hospitals can be established.
Improved access to legal and financial partnerships will be expedited.
The Foreign Investment review Board will scrutinise all investments by Chinese State owned companies.
There is excessive leeway for years and tariff adjustments.
No tariff reduction for sugar, rice, wool, cotton, wheat, maize, canola.
Customs duties will apply on beef and milk powder if quotas are exceeded.
For Chinese investment projects exceeding $150 million temporary workers will be permitted.
Under ISDS legislation, the Australian government can be sued if Chinese interests are damaged by subsequent legislation.
Acquisition/investment limits have been raised from $252 million to $1,094 million – excluded are investments in media, telecoms and defence.
Trans Pacific Partnership (TPP) The Prime Minister spoke briefly, in glowing terms, on the benefits accruing to Australia from its membership of the TPP. (ABC rn, 7 November 2016) There is growing unease in Australia and among other participants on the conditions of and fall-out from the TPP once it is possibly ratified in early 2017. This concern is a realisation that the trade initiative may be politically designed to corral Pacific rim nations to further the corporate interests (hidden agendas) of United States industry. (The Drum, June 2015) The twelve nations involved, but not all irrevocably committed, account for 40% of global GDP. (geopolitical futures.com) For Australia, this Partnership does appear to be a lifeline for its economic growth and stability since 70% of its trade passes through the east Asian region. The long-term growth projections based on the TPP for participating countries have been assembled by the World Bank. (June 2016), Table below:
TABLE 2 Modelling Projection under Trans Pacific Partnership to 2030
GDP Growth %
Modelling Projection of Trans Pacific Partnership to 2030.
World Bank, 10 June 2016
Australia and Mexico appear to have similar disappointing growth projections.
Reports favouring the TPP from the Australian perspective have been issued by the Department of Foreign Affairs and Trade (16 July 2016 ) and the Parliamentary Joint Standing Committee on Treaties (2016). Summarised, their conclusions are:
there is a great potential to drive job-creating growth across the Australian economy
there is new market access for Australian exporters and investors
there will be transparency of regulations of the twelve participating nations, hidden agendas excepted
there will be certainty for business, cost reductions and consolidation of supply chains
Australian competitiveness will be enhanced which will promote Australia as an investment destination.
Government agencies, being politically controlled, have painted a soft rosy glow on the advantages of the TPP. Disadvantages of the TPP have been expressed in unequivocal terms. Dr M Rimmer, ANU College of Law, states “Australian consumers have been deluded. The intellectual property chapter of the TPP is a monster. The proposals in regard to copyright law, trademark law, patent law and data protection would hit Australian consumers hard.”
Getup (getup.org.au), the Australian political commentator, noted in 2016:
the TPP represent a ‘closed door’ deal driven by big business, pharmaceuticals and tobacco
foreign companies will be able to sue the Australian government for loss of earnings under the Investor-State Disputes Settlements (ISDS) scheme
significantly, the proposal deals extensively with investment not trade.
The Drum (29 June 2015) noted: ‘preferential trade deals, not free trade, add to the complexity of international trade. In this, the Productivity Commission and the Australian Chamber of Commerce agree. It is the opinion of the World Bank that the TPP will have zero effect on the American economy.’
The last round of the TPP talks were concluded in New Zealand during August 2016 with 98% of the deal agreed to. Sticking points are monopolies demanded by the pharmaceutical companies requiring twelve years exclusivity on their products, while other members require only a five year period. This issue has significant ramifications for Australian health costs. The next TPP meeting is scheduled for November in the Philippines.
Apples upsetting the Cart Recently, four potential Partners and/or angry citizens have had second thoughts or condemned the TPP document:
New Zealand. The New Zealand Herald (July 2016) reported wide-spread opposition to pharmaceutical and sovereignty issues, It was reported over 170,000 citizens were involved in the rallies.
Canada. The Council of Canadians (November 2016) has held a number of protest rallies that has delayed a Government decision on the TPP until January 2017.
Malaysia. Officials have announced that the Government has delayed a formal decision until sometime in 2017.
Australia. In May 2014, unions, church groups and community organisations endorsed a letter prepared by the Australian Fair Trade Network to Trade Minister Robb warning of draconian and unfair clauses dealing with public health costs, ISDS provisions, workers rights, environmental protection, copyright provisions and Australian media content. Currently, cyber space across Australia is clogged with damming reports on a poor outcome for Australia if the Trans Pacific Partnership is ratified. The latest word from the Government, risking repetition, was on the 7th November (ABC rn) when the Prime Minister extolled the virtues of the TPP but none of its iniquities.
What to think. What to do. There are very clear messages of concern coming from across the globe; the Australian government is publicly studiously ignoring them. There are two factors to the TPP. Firstly, it is a political construct to counter the growing might of China and secondly, it is perceived by the Australian government as a life-line for the nation’s future prosperity.
The attached tables can generate some uncomfortable deductions. From Table 1 the average wage ratio to GDP is instructive. Results are United States 316, Japan 145, Canada 35 and Australia 25. Australia’s productivity has been a concern; this data supports that contention. Table 2 provides an uncomfortable World Bank projection to 2030 of Australia’s growth compared to other members of the TPP. Australia’s GDP growth % and exports % are among the lowest among the industrialised cohort. Australia’s salvation has to to lie with high-tech exports on the back of its existing exports.
For Australia, there will be further job losses as GDP increases with the development of high-tech industries in the years to come. Is the TPP, with associated noxious clauses but associated with 40% of world trade, the real issue or is there an advantage in developing comfortable individual trading agreements with many nations?
The rapprochement (October 2016) between the Philippines President Duterte and Chinese President Xi Jinping, if consummated, will have immense ramifications. The apparent lack of resolve by the United States and Australia to curtail China’s creeping hegemony in the South China Sea may not be unrelated to Duterte’s decision.
In mid-October, the Australian Government (quietly) confirmed that the Australian navy will not conduct ‘freedom of navigation’ patrols within twelve miles of disputed territory. This policy was decided despite the findings of the International Tribunal (July 2016) that China is in violation of international law and, significantly, that 60% of Australian trade transits this waterway. Foreign Minister Bishop has declared that naval patrols in territory illegally claimed by China would ‘escalate tension’. (Wall Street Journal, 17 October 2016)
The reported attempt to de-escalate tension is at odds with a quote by Foreign Minister Bishop to the effect that ‘Australia will continue to exercise its international rights to Freedom of Navigation and Overflight. (Sky News Australia, 13 July 2016)
Chinese officials and Chinese media have not been oblique in their warning that Australia must ‘carefully talk and cautiously behave’. Does this constitute a threat to trade with China? The Chinese Global Times has warned ‘If Australia enters the South China Sea——-it will become a target for China to warn and strike. (Wall Street Journal, 17 October 2016)
Sitting on the Fence or not
The Australian dilemma has, in part, been created by the Obama Administration which is reported to have authorised only three naval patrols defined in appeasing jargon as one of ‘innocent passage’.
Since assuming office in early 2016, President Duterte must have been a bemused observer to the absence of strong pushback by the United States armed forces as Chinese hegemony cemented itself into the South China Sea.
With China an unchallenged rising power apparently facing down a ‘global power’, President Duterte appears to have jumped off the fence to ‘change horses in mid-stream’. China’s difficult financial state and its inferior military power compared to America has apparently not deterred the President.
Pivot to Asia
Recent historical events prior to the Philippines closer ties with China, are germane to this situation. In 2015, the United States provided the Philippines Government with $80 million to upgrade military hardware. Early in 2016, the Philippine Supreme Court, under a ten year agreement, granted America leave to upgrade and construct military bases.. (Military Times, March 2016) It was agreed the work would proceed at a slow rate in order not to antagonise the Chinese. (New York Times, January 2015)
President Duterte agreed to the construction of five army and airforce bases, one sited close to Manila and not far distant from the contested Spratley Islands. In a recent development (September 2016) President Duterte now requires American forces to withdraw from the Islamic southern Philippines and ?cancel construction of a proposed airforce base.
Through a Glass Darkly
There are serious implications should a China-Philippine union be consummated. The American Administration fears a domino effect and that other Asian nations might follow suit perceiving a safer future with the Chinese dragon rather than with the American pivot. The concept of US military bases in the Philippines could become untenable. There would be an impact on the ANZUS Alliance. Depending on any domino effect, there could be a problem for Trans Pacific Partnership negotiations.
Thinking ahead, the US Chief of Navy Operations, Admiral Greenert, in Canberra, indicated America is considering a naval base in Australia. No doubt ADF plans to construct a $125 million logistics facility in Darwin will reinforce US navy aspirations. Would Darwin port become a sophisticated Chinese listening post? (ABC News.February 2015)
In summary, geopolitical trends in the South China Sea have been unidirectional for more than a decade. Only a major intervention can now change the course of future history.
The Chinese objective in the South China Sea is rational if one steps back in time to consider historical precedents.
Ignoring the theatrical assassination of Arch Duke Franz Ferdinand, an important cause of World War I was the German invasion of north-eastern France to control the coal and steel industry in this region. (International Encyclopaedia of the First World War, Pierre Chanceret)
Among causes for World War II was the German invasion of the coal and iron ore resources of Silesia and Sudetenland and the push towards the Caspian oil fields. Japan commenced war in the Pacific a little before these events in Europe by the invasion of Manchuria to control iron ore reserves in that region. Later Japan moved into south-east Asia to control tin, oil, coal and rubber resources.
China’s actions in the South China Sea are consistent with the above as this Power wishes to control potential oil and fish stocks. This policy reflects those of other aspiring Powers in the first half of the 20th Century. A principal finding of the 2012 Rio Resources Conference was “there is a coming desperate competition for resources.”
History books inform us, that during the 1930s, Europe ‘sleep walked’ its way to war. During this decade Nazi military build-up was clear but the Democratic West hoped, nay prayed, that the threat would disappear. So today, a comparable situation exists with China. Fast reverse to 1991 when Mount Pinatubu in the Philippines erupted. Among the devastation were the United States Clarke Air Force base and the Subic Bay Naval base. America withdrew its military might to Alaska and Hawaii thereby creating a military vacuum adjacent to the South China Sea. Within a few months, the Chinese Government proclaimed “The Law of Territorial Waters and their Contiguous Areas” which effectively ensured any fish and oil resources within the 9 Dash Line could be controlled by China. For 25 years, the Pacific Rim countries appeared to have ‘sleep walked’ their way to the present confrontation today.
Russia and China possess similar geopolitical threats. Russian policy is to maintain a buffer between itself and NATO by maintaining influence over Ukraine, Belarus and the Baltic States. In a similar way, the Chinese construction of forward defences along the 9 Dash Line distant from its littoral is understandable. China’s reaction to the chorus of ‘Rule of Law’ is no surprise.
Despite China’s unfavourable reaction to the ruling of the International Court of Arbitration, it has a serious problem. The Chinese navy is no match for the United States navy as it is not yet an effective fighting force,. (Beijing’s Blue Print for the South China Sea, George Friedman, June 2016)
Again, peering through an historical rear window, documents show that once aspirations for Empire take root in a ruling elite, the growth become virtually unstoppable. The life cycle of an Empire is rise, domination and implosion or destruction by a virile aggressor. Empires require vassal states to provide cheap raw materials and food. By mid century, 35 years hence, Australia’s future international status, which incorporates the Chinese controlled port of Darwin, may be different from that of today.
Another driver to Chinese assertiveness is the 200 year memory of European intervention, including the introduction of opium, into Chinese affairs. Muscle flexing truly commenced in 1997 with the return of Hong Kong and Macau to China by former colonial powers.
A flash point for this regional issue could occur in the East China Sea over the disputed Diaoyu/Senkakus islands. As at June 30, 2016, in the previous three months, Japanese military aircraft ‘scrambled’ more than 100 times due to suspected Chinese incursions into disputed air space, also in mid June a Chinese frigate entered the contiguous sea zone. (Japan Today, 30 June, 2016) The significance of these events is Article V of the United States – Japan Security Treaty which requires the signatories to support one another in the case of a third party attack.
As a concluding comment, Beijing must now walk a tightrope by maintaining the expectation of the Chinese people and enforcing an exclusion zone over the South China Sea.