Do you know what you are doing on China, PM?
We need this trade war with China like we need a hole in the head. Morrison risks making an almighty mess.
It has been a difficult year, beginning with parts of the nation caught in a crippling drought. Bushfires raged, then the pandemic hit, and devastating lockdowns. Now, as things have been looking up and people are scrambling to get back on their feet, we face escalating tensions with our largest trading partner and a risk of a catastrophic drop in income. We need this trade war with China like we need a hole in the head.
Do you even know what you are doing? That is the question industry leaders would love to ask Scott Morrison and his team. Our political leaders appear inept and the Prime Minister’s angry response this week to an offensive image gave an impression of weakness.
To my eyes, the warning signs are clear; in any dispute, loud outrage and haughty offence usually serve as the forerunner to humiliating capitulation. There are two key tasks required of the team in Canberra; one is to protect the nation’s security and sovereignty, the other is to preserve the ability of our private sector to trade freely. Unfortunately, it appears the distinction between the two cannot be made, so we fail on both counts.
More than a third of our export dollars earned are from sales to China. If we take account of only product exports and exclude ancillary services, the potential losses are significant.
The University of Western Australia and the Australian National University conducted simulations of the effect of shutting down Australia-China trade in products by 95 per cent. The research showed the effect on our gross domestic product was 6 per cent and the loss to our real disposable income was 14 per cent. At the same time, China would lose only 0.5 per cent of its GDP and 2.4 per cent in real disposable income. Who has the most to lose in this fight? Clearly, not them.
To date we have seen our beef, coal, barley, copper, seafood, sugar and timber producers endure sudden and disastrous punishment. There are suggestions that Chinese students could be hampered in continuing their university studies here, and our wine sector has been smashed.
Industrial relations practice, distilled down to its essence, is the art of doing people over. With decades of practical experience, I understand how to initiate, manage and conclude a dispute. While my experience is in workplace settings, the principles of dispute management endure. Serious operators carry a big stick but walk quietly and speak softly. Their opponents have no idea what is coming; they just wake up one day to find they have lost. As a rule of thumb, 70 per cent of dispute management work is complete before the first action is taken or word is spoken. A good outcome is born of a plan with a clear objective.
In 10 words or less, Morrison needs to define his objective for Australia with regards to China. Is it to cut economic ties completely? Or is it to just reduce our economic reliance and, if so, by exactly how much in dollar terms and by when?
With the objective set and written down, Morrison must draw all possible pathways towards it. Pathways can be mapped out, with pros and cons listed. Morrison must define the skin that will be lost. Who is going to suffer, by how much, and what can be done to mitigate the effect? Once a pathway is chosen, a communications plan must be created and stress-tested by sceptics in the team.
If a reset with our economic relationship with China is needed, generally speaking, the people of Australia are agreeable. This is an almighty task, though, and the cost will be substantial. Morrison must prove he can do more than just make an almighty mess of things.
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US tariff history and the public record show that Donald Trump started this stoush with China. Perhaps by osmosis we were drawn in. Yet Trump is on the way out and so here we are, watching nervously and wondering which industry will be the next to fall. Australia is in a “very serious situation” — the understatement of the year from Josh Frydenberg this week.