News

Abbott's Nixon in China moment



24 March 2014

Mr Abbot's visit to China in early April will be the biggest diplomatic challenge of his premiership so far. But it won't be because of the various minefields over China-Japan relations and Australia's role in all of this that have dominated the airwaves so far. Abbot's team, and the Chinese side, will be well prepared to avoid some of the misunderstandings that have happened since last year. Enforced harmony will almost certainly prevail in public.

The real challenge for Abbott is discussion of the Free Trade Agreement (FTA). And the reason this is such a big issue is that Abbott has done something quite unusual for a politician: he has set a clear timetable and clear measurable objectives. He has said he wants a deal done on the FTA this year. In politics anywhere, sticking your neck out over something so specific is the most dangerous thing you can do. You either achieve it, or start dusting off decent excuses for why you failed. The margin for error is fatally narrow. But this is precisely what Abbott has done.

And his problems don't end there. In China in April, Abbott must come away with some kind of statement from the Chinese side about how the FTA is going to pan out. But most people now know what the Chinese red lines are. They want better investment access, and more flexible labour arrangements. On both of these issues, Abbott will have to go out in front of public opinion in Australia, as it is currently pretty clear that there is little positive consensus on having China as a major land buyer here, or having investments that involve what might be perceived as significant numbers of Chinese coming here to work.

There are lots of reasons for this negativity. Opinion on China remains ambiguous. People know a lot about relations with China, and have thought about things enough to have an opinion. But there is antagonism to the image of China that sits alongside appreciation for its role in producing growth in Australia. Perhaps this is best characterised as `it's fine for them to buy our resources, but not so fine if they come and buy our land.' The issue around Chinese highly skilled workers coming to Australia in larger numbers is mixed up with the complex and emotive immigration debate nationally. Abbott agreeing to an FTA which involved labour liberalisation in one area, while deploying his fierce control language in all others, would look incoherent.

The immigration question is particularly tough in view of the recent ending in Canada of their investor migrant scheme, which has been popular amongst wealthy Chinese. Australia remains relatively open for investors from China to move here, and the figures since Abbott took power have actually increased. But again, public opinion on this issue is untested and might prove capricious, especially if the jobs market deteriorates with falling growth.

On these critical issues that are intimately linked to any FTA deal, Abbott is almost certainly going to have to take a position ahead of public opinion if he wants to do a deal. There will be domestic costs for this. It may be some small comfort that, unlike his predecessor Rudd, who promised us the stars from the sky on China relations but managed to underperform in almost every area, Abbott carries no such burden of expectation.

Nonetheless, despite all these headaches, he does not have the luxury of choice. The risks of not closing an FTA now outweigh the risks of going ahead with one. The two economies are linked together, fair weather or foul. If Chinese growth falls, so does Australia's. They cannot avoid each other. Access to the domestic Chinese market with all its potential for growth is the greatest prize for any Australian company. And an FTA is one of the few means of clearing the way to this. Can Australia really sit still while the EU, ASEAN countries and others sign up to FTAs with China, and watch them profit? That would be a hard thing to watch. It would be something to soften even the most recalcitrant protectionist for Australia. Abbot has to do a deal in April.