Flat White

China is focused on import quotas, Australia is focused on gender quotas.

15 April 2021

3:52 PM

15 April 2021

3:52 PM

Hubris. A noun meaning overbearing pride or presumption; arrogance. From the Ancient Greek describing a personality quality of extreme or foolish pride or dangerous overconfidence.

Welcome to Australia where our political leaders, evidently unable to walk and chew gum at the same time, focus on gender and culture wars. Up north in China, the grownups are laser-focused on economic prosperity and national security.

With iron ore prices at record levels, recently as high as AUD $225 per tonne, the Western Australia Treasury’s tax coffers are overflowing. Western Australia is the only state in Australia running budget surpluses principally off the back of mining royalties and associated taxes. And having extracted a political GST concession from the Commonwealth Government when economic times were different, Western Australian Premier Mack McGowan is now sticking up is metaphorical iron-red finger at the suggestion of adjustments to GST distributions.

McGowan warned:

[T]he rest of the country not to mess with the split of goods and services tax between the states and that any move by the Morrison government to backtrack on Western Australia’s revenue share would represent a “massive betrayal”.

Yes. Yes.  Western Australia is currently a net payer from the current Commonwealth Grants Commission horizontal fiscal equalization model.  For generations, before the economic rise of China, Western Australia was a net recipient of tax transfers from the eastern states.  But demonstrating that one of the keys to happiness is a bad memory, Western Australia is living large, living plenty and living loud.  Border closures be damned.

Meanwhile, over in Canberra, the Commonwealth Treasury’s coffers are not overflowing from iron ore related revenues, but are at least not completely decimated by the breathtaking fiscal profligacy of the (so-called) Liberal-National Government.  Oh, and the big issue is whether Senator Marise Payne is the Minister for Women or the Prime Minister for Women.

Except that someone’s revenue is someone else’s expense.  And China [is] determined to build iron ore hub in Africa as Australia goes Quad.  Uh-oh.

Unlike our goldfish governments and school curriculum writers, the Chinese are avid students of history.  They carefully studied the fall of the Soviet Union and they carefully study other significant historical inflection points.

For example, the 1940 US oil embargo on Japan that was a catalyst for the attack on Pearl Harbour.  And the 1917 US steel embargo, also on Japan, which when analysed in a 1921 book on sea power in the Pacific noted:

[S]o serious has the shortage become of late that the output of tonnage in Japan during 1920 was 25% short of the forecast of 800,000 tons which had been made in January of that year… This scarcity of steel reacted on the naval program, delaying the launch and completion of ships.

China is well aware of its strategic exposure to Australia and despite laying economic assault on various Australian exports, such as wine, beef and barley, has thus far been unable to do anything serious about its dependence on Australian iron ore which represents over 60% of China’s imports.  This is the same iron ore that goes to making not just homes, cars and windmills but also that goes also into making Chinese warships, planes and munitions.

China also has not forgotten that, despite recent production issues, Brazil is its second-largest supplier of iron ore.  It should therefore not surprise that China is on a diplomatic offensive in Brazil to supply the Chinese coronavirus vaccine.  And to great surprise, Brazil, previously hostile to Huawei, has changed its mind.  In February 2021, the Brazilian government announced the rules for its 5G auction.  Having been banned from participating a few months earlier, Huawei will now be allowed to participate.  Will China’s One Belt One Road provide an express highway for Brazilian iron ore to China?  Don’t be surprised.

So, while the Chinese government is looking to diversify its strategic exposures and vulnerabilities to Australian iron ore, the Australian government is deeply ensconced in gender and culture wars.  China is focused on import quotas.  Australia is focused on gender quotas.

As famous Chinese military strategist Sun Tzu wrote some 2,500 years ago:

[T]he opportunity to secure ourselves against defeat lies in our own hands, but the opportunity of defeating the enemy is provided by the enemy himself.

If nothing else, our governments are experts in providing others with the opportunities for our national demise.

Stephen Spartacus blogs at Sparty’s Cast, where a version of this piece also appears.

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