US-China ‘new Cold War’ not in the interests of the global economy, says former CIA director and Magellan Financial Group adviser Michael Morell

US and China are headed for a ‘new Cold War based on economic competition and the pursuit of influence’.

Mike Morrell at Melbourne Convention Centre. Picture: David Geraghty

Former CIA director and Magellan Financial Group adviser Michael Morell said Australia must stand firm with the US and its allies to present a united front against China as a “new Cold War” takes hold between the two world superpowers.

Speaking ahead of his address on Friday evening to the first event of Magellan’s annual investor roadshow in Melbourne, Mr Morell also said the coronavirus pandemic would further intensify a global economic slowdown that had taken hold in the months before the virus outbreak in January.

“I think the world economy was already slowing down before coronavirus. This puts an additional weight on top of that,’’ he told The Australian.

“There is no doubt that it has led to a significant slowdown in the Chinese economy. We have yet to see how that plays out with China’s trading partners. One of the things that strikes me is not only has the Chinese government not been 100 per cent truthful about the numbers of cases, but they don’t know the totality of the problem they are dealing with.”

Significant foreign policy challenge

Mr Morrell has previously claimed that the US-China relationship was the most significant foreign policy challenge ever faced by Washington, including the Cold War with the Soviet Union.

He continues to stand by that position and believes both countries - whether they like it or not - are headed for a “new Cold War based on economic competition and the pursuit of influence with other countries around the world”.

“That is not in the interests of the global economy,’’ he said.

“It is by far the most important issue in the world and it is not one where the US and its allies have worked out the best way forward yet. It is like in the old Cold War where we are waiting for that cable from Moscow that defined the solution. There isn’t one yet.”

Magellan chairman and chief investment officer Hamish Douglass this week accused the nation’s parliamentarians of whipping up “xenophobic” sentiment about China and playing “national security out as a political issue”, undermining Australia’s most important economic relationship.

Magellan Financial Group’s Hamish Douglass. Picture: Hollie Adams

But Mr Morell said it was important for Australia to present a united front with the United States and its allies in the face of China’s global ambitions.

‘We need to bring together a coalition of nations that will say to the Chinese that “you are by virtue of your economic strength are welcome to play a larger role in the world, but you have to play by a certain set of rules”.

“You can’t solve territorial disputes militarily or steal intellectual property’,’’ he said, noting America also had to ensure its “economy, politics and society” were as strong as they could be to compete with China.

Important partner

“But it is going to take more than just the US. Which is why our relationship with our allies is so important. Australia is an incredibly important partner to the US. It has to be an important part of our strategy going forward.”

He said that historically the Chinese had shown they were willing to change a strategic position if faced with enough countries standing against it.

But he said the tit-for-tat tariff wars of the past year between America and China had been more damaging to the former than the latter.

It is important to try to force the Chinese to live by the global economic rules, says former CIA director and Magellan Financial Group adviser Michael Morell. Picture: AFP

“It is important to try to force the Chinese to live by the global economic rules, such as the rules laid out in the WTO (World Trade Organisation). But I think we have learned that the tariff route is not the route to go,’’ he said.

Mr Morell said there was every chance US President Donald Trump could be elected for a second term later this year, particularly given his stewardship of the US economy and the power of incumbency.

Chinese President Xi Jinping (right) and US President Donald Trump. Picture: AFP

“Those people who say Trump can’t win a second term are absolutely wrong. I think this is going to be a very close election. The democrat nominee will get more votes but the battle for the electoral college will be extremely close. President Trump has as equal if not a better chance that the democratic candidate at this point in time,’’ he said.

He said former New York Mayor and billionaire Michael Bloomberg would present the greatest threat to Mr Trump.

“He was a successful businessman and a mayor of New York City. He would debate very well. He would be tough for Trump to deal with. He would bring along moderate republicans to the Democratic side,’’ he said.

“But my question about Michael Bloomberg is not his competitiveness against Trump, it is his ability to win the Democratic Primary ... How does a billionaire, capitalist former mayor fare in that race?”

Mr Morell has been advising Magellan for almost three years after being introduced to Mr Douglass by the Lowy family.

He worked with both the Bush and Obama administrations. On September 11 he flew with President George W. Bush on Air Force One and by President Barack Obama’s side when Bin Laden was killed.

“I don’t look at the world the way they (Magellan) do. I am giving them an objective analysis of geopolitics. They put that into the mix of the decisions they are making,’’ he said.

“I am very careful about who I do work for. I tend to do it for people I really like, who I admire and who have integrity. Hamish is a terrific leader, and the people around him at Magellan are terrific.”