There’s a smug tone to Australian complaints about the rising tide of foreign protectionism, one underlined by Charles Richardson in Crikey earlier this week in his excellent spray at the Rudd Government for slashing Australia’s immigration intake.
As Richardson noted, there’s a strong correlation between economic and employment growth and immigration, but apparently not strong enough to convince politicians to maintain high levels of immigration when growth falters.
Now you have to be careful of the company you keep on this argument, because Australian business, one senses, is all for high immigration primarily because it helps keep wages down when competition from their fellow employers might otherwise dictate that they need to shell out more to keep their staff. But nevertheless, the link between growth and keeping Australia open to those who want to move here is undeniable.
So on immigration, we’re stuck with bipartisan protectionism — just like our disgraceful automotive industry protection racket, which continues to punish consumers with tariffs and waste billions of taxpayer dollars on an unviable industry uninterested in making cars people actually might buy.
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Similar protectionist impulses are making themselves felt in relation to Chinalco’s investment in Rio Tinto. The keen economic intellect of Barnaby Joyce has launched a campaign funded by businessman Ian Melrose — he of the East Timor oil ads and dubious causes such as West Papuan independence — against bids by Chinalco and Minmetals.
As with all protectionism, the case shows plenty of sloppy thinking.
The key to objections to both Chinalco and Minmetals is that they are in effect bids by the Chinese Government, via state-owned enterprises, and the Chinese Government will not act in the Australian national interest, does not let foreign investment in key sectors of the Chinese economy and has an appalling human rights record.
The argument that we shouldn’t let China invest in Australia because it doesn’t reciprocate is analogous to arguments that we shouldn’t lower tariff barriers unless trading partners do. In fact the primary benefit of reducing protectionism is generated by unilateral removal of tariffs and non-tariff barriers. Similarly, if the Chinese don’t want the benefit of Australian investment in the Chinese economy, that’s no reason why we shouldn’t avail ourselves of the benefits of Chinese investment in ours, especially at a time of global illiquidity.
The notion China will not act in Australia’s national interest must be seen in context. The Chinese Government is a collection of murderers, thugs and thieves with a worse human rights record than Robert Mugabe. But they will no less act in Australia’s national interest than the many multinational companies that invest in Australia — whose number, by the way, includes several with dreadful human rights records, such as Shell, BP, Coca-Cola and Nestlé. Why would foreign executives be any more inclined to act in our national interest than the Chinese Government?
The Chinalco and Minmetal bids should accordingly be considered on the same basis as any other investment under Foreign Investment Review Board — whether it is in the national interest. Shareholders can then make a decision about whether the investment proposals are worth accepting — which is a different story entirely.
This leads us to the more fundamental problem here: Australia’s foreign investment assessment process is entirely opaque and politicised. Peter Costello revealed just how politicised it was when he boasted of ignoring his own Department’s advice in relation to Shell’s bid for Woodside. What Costello — he of the “China will cause an economic tsunami” school of thought — omitted from his rant was that it isn’t just his own Department that advised him, but the Foreign Investment Review Board, consisting of his own hand-picked appointees – chairman John Phillips, former Liberal MP Chris Miles, Keating-era appointee Lynn Wood whom Costello reappointed and a Treasury official.
But the decision as to whether foreign investment is in the national interest is left in the hands of the Treasurer; there is no accountability or appeal of the decision; the national interest is deliberately left undefined, and proponents of investment can get no insight into the analysis and advice being provided to the Treasurer or the basis on which the Treasurer makes their decision.
The notion that Wayne Swan and Kevin Rudd will be any less n-kedly political than Costello was is obviously false, notwithstanding Costello’s smarmy, sub-racist quip that “our Chinese-speaking Prime Minister will undoubtedly favour the proposal”.
The FIRB process needs to be overhauled so it is less opaque, so foreign investors can have a clearer understanding of what constitutes Australia’s national interest, and there is a modicum of accountability for these decisions.