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Economic diplomacy brief: Intelligence Review, econocrats back RCEP, in thrall to China and more

Business has been called on to be a key player in an intriguing, new and more contestable approach to intelligence gathering and analysis.

Photo: Getty Images
Photo: Getty Images

Spooky business

The 1980s Hope inquiry first put economics on the agenda of Australian intelligence analysis but the latest Intelligence Review has taken this connection much further.

Follow the money and three trends emerge from this Review, important developments that have been lost in all the debate about the political and bureaucratic rivalry involved in restructuring the security community.

The first is that the private sector is going to be drawn much more deeply into the espionage world. This is mainly because it has better technical and personnel skills in some areas like cyber security. But business is also being called on to be a key player in an intriguing, new and more contestable approach to intelligence gathering and analysis.

'Collaboration and co-operation between Australia’s intelligence agencies and the private sector will become increasingly necessary and relevant,' says the Review, which would have external views put to the government alongside the official intelligence assessment.

The second trend to note is that conventional security types are going to be crawling even more closely over foreign investment proposals and critical infrastructure development than they have been in the past year. The new Office of National Intelligence is to have 'a greater capacity to provide assessments on foreign investment issues as well as inform the Critical Infrastructure Centre at the strategic level'.

And thirdly, the review reveals intelligence spending across 10 agencies now sits at about $2 billion a year and employs 7000 people which means it should be managed like a major enterprise. The recent double digit annual budget growth rates for many of these agencies contrast with the 30% decline in development aid spending since the 2013 peak to below $4 billion.

While the review identifies common aid issues like economic development, demography, climate change and resource security as important security challenges, the sub text is that the intelligence community will play a greater role in dealing with them.

Another notable theme for economic policy making is how relatively new financial agencies such as AUSTRAC (which tracks money laundering) now figure so centrally in the intelligence community amid a consistent message that economic globalisation has opened up serious new threats to national security.

Regional trade goes PC

The resistance by some federal economic regulators to the Trans-Pacific Partnership (TPP) trade deal due to concerns about intellectual property, investor dispute arbitration, and lack of independent evaluation was a persistent undercurrent in the long running negotiation leading up to the agreement announcement in October 2015.

Now the TPP sceptics at the Productivity Commission have broken cover in the Donald Trump era to throw their support behind the alternative Regional Comprehensive Economic Partnership (RCEP), despite its faltering progress. (Trade officials are discussing RCEP in India this week aiming for a conclusion next year.)

In this self-commissioned report on how Australia should respond to US protectionist moves, the Commission argues that the 16 RCEP members would be the best coalition Australia can hope for in terms of holding the line against protectionism.

It’s an interesting position given both the Commission’s free trade heritage and the widespread scepticism that the RCEP group will be able to deliver the liberal framework for ecommerce and services that the US-led TPP had promised.

In the new report, the Commission, usually a staunch backer of World Trade Organisation-based multilateral trade, has also acknowledged the reality of more regional deals by conceding that they are 'an option for reducing barriers to trade and investment in partner countries in situations where broader agreements are unlikely to be reached'.

The Commission questions whether the Asia Pacific Economic Cooperation (APEC) group can made a serious stand against protectionism and whether the TPP can move forward without the US, leaving the core Asian members (including China) in the RCEP as the best option.

While the government’s top independent economic policy adviser doesn’t retreat from its traditional support for unilateral trade liberalisation, it says regional or sectoral deals - which are open to new members - need to be taken seriously amid the gloomy global mood on open trade.

Good foundations

The investment underpinning the Asian century looks sounder than is sometimes suggested, according to the first major assessment of world infrastructure needs from the Sydney-based Global Infrastructure Hub.

The Group of 20-linked agency says the world needs to invest US$94 trillion in infrastructure over the next two decades which is about US$15 trillion more than one year’s current global GDP.

But two striking forecasts emerge from the agency’s outlook for a country like Australia that is so heavily exposed to continued growth and security in Asia.

The first is that while Asia accounts for more than half of the required infrastructure spending, the outlook suggests it has the lowest forecast shortfall of any region at only 10%. This relatively balanced demand and supply outlook in Asia is underlined by the contrast between China and the US.

China is expected to spend US$28 trillion by 2040 out of a needed US$30 trillion, while the US is expected to spend only US$8.5 trillion on its ageing infrastructure out of a needed US$12 trillion.

While there are different timeframes and measurement techniques, the Global Hub outlook for Asia appears to be more optimistic about the region meeting its infrastructure investment needs than we reported the Asian Development Bank to be in February.

Sinophiles Down Under

The latest polling from the Pew Research Centre has underlined how Australians' confidence in the rise of the Chinese economy far exceeds that of many others.

A world-beating 58% of Australians see China as the world’s leading economy, a result that is well ahead of other notable China enthusiasts such as Canadians (42%) and the French (47%).

People in only 12 out of 38 surveyed countries see China as the leading economic power -  which is twice as many as in the past. But 24 countries still back the US with a global median of 42% compared with 32% for China. Australians ranked below the median with 29% picking the US.

What is really notable is how the Australian belief in China’s economic stature compares with the support for the US in otherwise close Asian partners, such as South Korea (66% for the US), Japan (62%) and Vietnam (51%).

The Pew poll parallels the Asian comparative findings on China from the Perth USAsia Centre Asian Research Network polling here and the Lowy Institute polling on the China economic relationship.

The Pew polling finds Australians have high overall favourable impressions of China at 64%, compared with the global average of 47%. But, as the Lowy poll has found, Australians still have a nuanced approach to China with 46% having no confidence in President Xi Jinping’s foreign policies and 81% saying China doesn’t respect personal freedoms.

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