Navarro as Trump trade chief shows complexity of Canberra China ties

Australian leaders seek Goldilocks solution for ties with Beijing: not so cold as to risk investment, not so warm as to turn off voters, America

Donald Trump’s appointment of Peter Navarro as his chief trade adviser signals the growing risk that the incoming US administration is charting a course toward greater confrontation with Beijing — and that’s adding further complexity to Australia’s ties with China.

Australian political leaders find themselves trying to strike a balance between soothing anxiety at home over China’s spreading influence and recalibrating the relations with a long-term strategic ally and what has become the nation’s most important economic partner.

In the run-up to his November election victory, Trump promised to impose a 45% tariff on imports from China. While he has backed away from some of his more controversial campaign pledges, the appointment of University of California, Irvine, economist Navarro —said to be the chief proponent of those policies — suggests Trump is more serious about following through on the trade threat.

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That would drive a wedge between US and Australian interests.

“Australia’s growth since 2008 has come from China,” Bob Carr, former Australian foreign minister and director of the Australian-China Relations Institute in the University of Technology, Sydney, wrote in the Guardian. “No OECD economy is more dependent on China. China takes one-third of Australian exports. Trump’s plan – effectively, to slice a few percentage points off China’s economic growth – would likely tip Australia into recession.”

Read: Death by China author to head Trump trade policy

The Lowy Institute’s annual survey of Australian public opinion showed that positive sentiment toward the US has declined, with almost half of respondents saying Canberra should distance itself from a Trump-led America. When asked which bilateral relationship was most important to Australia, the response was split evenly between the US and China.

To be sure, the geopolitical balance has been shifting for some time. In a major speech in 2011, the then Secretary to the Treasury Martin Parkinson pointed to “a situation where our major economic partner is not one of our major strategic partners” and highlighted the need to be “aware of the challenges the relationship presents for Australia.”

Those challenges boiled up again in August this year, when the Australian Broadcasting Corp reported that China-linked bodies were by far the largest donors to both main political parties. Between 2013 and 2015, they donated A$5.5 million (US$3.9 million). Implicitly, these financial gifts spoke of influence and raised concerns about transparency and the provenance of the funds.

For example, Hudson Chen Hak Fan, an honorary adviser to the Australia China Economics Trade and Culture Association gave A$100,000 to the Liberal Party. Wang Zi Chun donated A$850,000 to the Labor Party, giving an address in Hebei province that had been used by a state-owned bank, a government department and a center for retired Communist Party officials.

The financial influence is also entering areas of Australian education, with some schools in New South Wales being paid at least A$10,000 a year by the Chinese government on condition they provide culture and language courses in schools, some of which have been made compulsory, the Sydney Morning Herald reported in May.

“The Communist Party has been systematically attempting to infiltrate Australian institutions and manipulate them”

Mainstream Australian newspapers including the Age, Australian Financial Review and Sydney Morning Herald carry eight-page inserts from the official China Daily.

“The Communist Party has been systematically attempting to infiltrate Australian institutions and manipulate them; business, media, academia,” said Paul Monk, former head China analyst at the Defence Intelligence Organisation and chair of the inter-agency working groups on Korea and China.  “There’s a serious effort to encourage the teaching of Chinese history, Communist Party propaganda. That needs to stop.”

Australia needs to safeguard the relationship with the Chinese government by putting in place protective, strategic boundaries to help manage governmental influence and dominance,

“One area where this has become apparent is in the area of foreign investment, and the Foreign Investment Review Board has rejected several propositions which is relatively unusual,” said Monk, who is now a key member of managing consulting firm van Gelder & Monk.

Australia in August blocked the sale of Ausgrid, the country’s biggest energy grid, to two Chinese companies over security concerns. Earlier this year, it blocked the sale of Kidman & Co — the world’s biggest cattle farm — to a Chinese investor.

While Trump’s impact on the Australia-China relationship is yet to be seen, there is the potential for its to disrupt long-standing alliance frameworks within NATO, Monk said. Some of the issues now surfacing have arisen due to diplomatic decisions made by the Obama administration, he said.

“Iran, Russia and China think ‘this guys a soft touch. If we push him, he’ll go backwards.’ And by and large, he has.

“Now Trump comes in saying ‘I’ve got a whole different way of doing things’ — but what exactly is it? It’s quite conceivable that the next decade could be a wild ride.”

“If it was a British company or an American company buying these things no one would say as much”

Australians should be careful not to villainize China for following other economically ambitious countries such as the UK and US, Erin Chew, Convener of the Asian Australian Alliance, said.

“There’s a view that Chinese are buying up everything; ‘they’re buying up all our properties and they’re buying our farming resources,'” she said. “Farming and agriculture is a big part of Australian history and a lot of Australians still feel that ownership over it, however, if it was a British company or an American company buying these things no one would say as much.”

Direct Chinese investment in Australia last year reached A$2.8 billion, according to the Australian Bureau of Statistics; US investors bought A$9.7 billion in assets.

Another source of tension has come from an influx of wealthier Chinese migrating to Australia but not adhering to Australian business rules and regulations, Chew said. This issue typically arises when owners run their businesses in a way they are most familiar with; adhering to Chinese practice – which is starkly different from that in Australia.

“In China [they think] if I have a lot of money and give money to politicians, to various organizations, I’ll get support and I’ll be treated as important,” Chew said. In China it’s not seen as unethical to pay a legal bill or to pay travel expenses, she said.

The Australian government is in “an interesting position” in terms of how to make decisions they need to make to sustain the country’s economy,  while avoiding potential backlash about selling off assets.

“At the end of the day, they still want to win a lot of votes and they want to remain in government,” Chew said. “They have to be very careful, and also, they have to appease the US.”

Elizabeth Beattie