Peter Yuan Cai’s analysis of the commentary and other information in China raises a number of critical questions. The problem of disorganisation in the steel industry was an issue that attracted the attention of the top economic policy making authorities in China, including Premier Wen. It is ironic that, despite that disorganisation, benchmark priced ore under long term contract from Australia was delivered to China throughout the boom at prices well below the spot price of ore, though in circumstances that earned no credit. It is not at all clear yet to what extent the commercial interests or the economic policy authorities have been involvedor the Hu affair or in thinking the implications of this through. If there has been a breach of China’s porous law, the security authorities will have the whip hand now. Quietly providing Mr Hu and his colleagues with the best support possible is the right immediate priority for the Australian government.
But there are other big interests at stake for China, Australia and the rest of the world. There is a complex set of political and economic issues that have to be resolved both within China, and in cooperation between China and her major economic partners, including Australia. The current circumstance is not immutable as some commentators assert though it will require the careful identification of mutual interest in change. It is important for China’s authorities to avoid damage to the reliability of markets and for Australia to avoid the perception of investment protectionism. Both countries need to establish a cooperative framework—bilaterally, regionally and globally—where these issues can be talked through and resolved – and Australia needs to be at the forefront of getting this right with China.
The recent world financial and economic crisis and the roles different economies have played in dealing with the challenges posed by the crisis suggest that the world is in a verge of a significant reshape of international economic order, or a new framework of economic governance.
Developing economies are increasingly having more economic weight or clout, while the relative weight of industrialised economies are on the decline. The relative shift of economic weight between the two camps and the current international institutions governing international economic affairs in which the past powers dominate the say requires reconciliation and realignment to reflect the changed and changing world reality.
In that broad context, it seems that the Australia China economic relations are a small part of it in a strange and interesting sense, i.e. equality (or inequality) and respect in dealing with each other.
The Stern Hu case has the feature of coincidence in that context, although many commentators and the public have made all sorts of speculations and comments, based on limited information and own systems of thinking. How much are correct and relevant remains to be seen for a long time.
The comments or demands by some politicians in Australia on the case reflect a deep rooted misunderstanding or contempt of another country and its system. That is where inequality and disrespect were shown and could be felt by others.
Of course, information through official channels was also strangely scarce. But it requires good analysis to see whether it was the beginning of a new process, or it was a response in a process.
But it is important for any new international economic order and governance to be fair to all, irrespective the past justice or injustice, equality or inequality, as well as sizes of the economy. It should be a new beginning to reflect universal justice and equality.
The international community needs to work in that direction.
It is ironic (pun hard to avoid) that chaos and disorganization in China’s steel industry has led among other things to the security clamp-down in the industry of which Stern Hu’s arrest has been a consequence. Contrast this with the discipline the Japanese steel industry showed during the 1960s and 1970s in negotiating iron ore and coking coal prices with Australian mines. The Japanese were so disciplined that they could pick off one state, or one supplier, against another in forcing down prices in annual negotiations. Their tactics prompted the Australian government to request Ken Myer to produce the Myer Report, which in turn recommended machinery designed better to coordinate Australia’s strategies among miners and bureaucrats, both state and federal – the Standing Committee on Japan (SCJ), Consultative Committee on Relations with Japan (CCRJ), a Commonwealth-States Committee, and the Japan Secretariat. As a result, I believe Australian suppliers worked better together in pricing negotiations with the Japanese.
We’ve all moved on from those years, but in some respects a thoughtful look at the machinery and whether it could usefully be adapted to trading with China might make sense.