As trade and political tensions with the People's Republic of China escalate, one thing is clear: Australia needs to pivot.
It is true that trade and investment have long supported Australia’s economic growth and that we have historically relied on a major trading partner for our exports.
Originally it was the United Kingdom, then the United States of America, then Japan and most recently China. Some may argue that the dominance of a single country as an export market provides stability in trade relations but recent events have thrown this theory into doubt.
Rising trade tensions and the COVID-19 pandemic have created or emphasised weaknesses in many countries’ approach to trade. In Australia, the combination of these disruptions has led many to question whether we are too reliant on China as our major export market, and whether this has unnecessarily exposed Australia to security and economic risks. Many now concede that the race for the highest export dollar (or yuan) has caused both industry and the nation to be exposed to the highest risk, and that, as a nation, we are all the more vulnerable when we put too many of our economic eggs into the one basket. That vulnerability is exacerbated when the basket is woven by a totalitarian communist state that uses trade as a political weapon.
This inquiry began in February 2020, before the full impact of the COVID-19 pandemic on Australia’s trade, and economy more generally, was known. COVID-19 was not the impetus for this inquiry, but the Committee found that the pandemic threw into stark relief some concerning trends in Australia’s trade and investment profile.
With this global context in mind, the Committee has considered opportunities for Australia to diversify its export markets. India, Vietnam and Indonesia in particular present valuable opportunities for Australian businesses. As such, ensuring access to these markets should continue to be a priority for the Australian Government.
The Committee has also made recommendations aimed at protecting Australia’s national interest and national security, particularly in sensitive and critical sectors. Notably, there are recommendations that go to serious concerns regarding state-owned enterprises and state-linked enterprises funding our universities and owning or leasing our strategic infrastructure, including the port of Darwin. Given the ongoing tensions with China, it is an unacceptable national security risk to have Chinese state-owned and state-linked enterprises involved in our universities (including Confucius Institutes) and our strategic infrastructure.
The Committee has also put forward recommendations regarding the need for foreign investment to be in the national interest. Much foreign investment into Australia merely displaces Australian capital rather than growing the economy by creating new jobs and business opportunities for Australians. This is not investment that is in the national interest and is not considered by the bulk of the Australian population to be in the national interest. The Committee is of the view that there needs to be a clear definition of 'national interest' for the purposes of the national interest test for foreign investment and that our foreign investment regime needs to be more in line with community concerns.
As well as looking to new opportunities abroad, Australia should also develop its domestic sources of investment and production. Greater support for future focused, innovative industries and Australia’s manufacturing capabilities will assist in diversifying the range of goods and services Australia exports, while also ensuring Australia has the supply capabilities necessary in times of crisis. Domestic sources of investment, such as a national development bank and also incentivising domestic investment of Australian superannuation savings, will further insulate Australia from the impact of international trade tensions and disruptions, and provide an alternative to international investment that may pose a potential risk to national security.
The Committee’s recommendations aim to position Australia so it emerges from the COVID-19 pandemic in a more secure, stable, and profitable position than before. These recommendations were informed by a range of stakeholders who provided evidence on the opportunities and challenges related to diversification. On behalf of the Committee, I would like to thank the individuals, businesses, peak bodies and government agencies that assisted the inquiry. I would also like to thank my Committee colleagues for their contribution to this inquiry and acknowledge their commitment particularly in the uncertain and evolving context of the COVID-19 crisis.
The onus is now on the Australian Government to urgently consider each of these recommendations and implement necessary changes to secure our nation’s future. In doing so, the government should be mindful of the consequences for both national security and the national interest if we fail to pivot.
Mr George Christensen MP
Chair