Sunday 18 Nov 2018 | 10:39 | SYDNEY
Sunday 18 Nov 2018 | 10:39 | SYDNEY

Economic diplomacy brief: Trade under pressure, betting on China, Japan and the AIIB, and more

Crown Casino in Melbourne (Photo: Flickr/Paolo Rosa)

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COMMENTS

29 June 2017 15:07

Mixed polling on globalisation

Recent opinion polling on global economic engagement shows why it has become increasingly treacherous territory for politicians – especially, it seems, in the developed world.

And while freer trade appears to have more support in a range of polls in Australia and the world than political debate might suggest, the same can't be said for foreign investment, where Australia may be becoming more insular.

Last week's Lowy Institute Poll shows that top line support for globalisation is strong in Australia, with 78% of people saying the process is good – a large increase on a decade ago, when only 64% felt this way.

That figure could be seen as broadly in line with the most comprehensive global poll in this field three years ago by the Pew Research Centre, which found 74% of people in 44 countries (not including Australia) thought foreign companies building factories in their country was good.

But it is significantly more pro-globalisation than the Ipsos poll of 22 countries (including Australia) last November, which found an average of 42% people across the world saw globalisation as an opportunity – but only 33% in Australia.

The Lowy Institute finding seems to be underpinned by high support for free trade, with 67% saying it was good for their own standard of living and for the country's economy, with around 20% saying free trade was bad.

This result underlines consistent (or higher, in some cases) general support for freer trade in Australia over recent years, though it is stronger than the two most recent parallel polls – in January, Essential showed 47% support, while the Asian Research Network (ARN) had 49% support. Both of these polls also showed around 20% opposition.

The average of these three Australian polls (54%) is remarkably similar to the most recent Pew poll on trade in the US, which found 52% support (though that is a substantial rebound from 45% during last year's election campaign). The interesting difference is the US is more polarised, with opposition to free trade about twice the level in Australia (where there is typically a much higher undecided vote).

Also unlike Australia, where support for trade has been relatively consistent, the Chicago Council on Global Affairs has published polling analysis that suggests a rough 10 percentage point decline in support for trade deals between 2012 and last year.

Nevertheless, the Lowy Institute, Essential and Pew polls reveal an interesting and nuanced community approach to these issues, with people appearing to think freer trade is good for the country, even if it won't be as good for them individually.

One interesting takeout from this polling is that there can be high level of generic support for globalisation, but this support then seems to fall away as the issue becomes more specific.

While the Lowy Institute Poll finds 78% topline globalisation support and the three poll's free trade support average is 54%, polling on specific agreements is lower. For example, Roy Morgan Research Centre found 40% support for Australia's China agreement in 2015 and 45% support for the US agreement in 2004. US generic support for trade was 58% in 2015, but only 49% for the Trans-Pacific Partnership, according to Pew.

Then there appears to significant further decline in globalisation support in Australia when the question turns to foreign investment. The Lowy Institute Poll finds that around 40% of people over time have seen foreign investment as a critical threat, and that the issue ranks about seventh in the hierarchy of threats. But framing the question more specifically, an Essential poll last year found much lower support levels for foreign investment in mining (27%), ports (23%), agriculture (21%), infrastructure (19%) and real estate (14%). This was reinforced by the ARN poll, which found 18% support for foreign infrastructure investment.

The other consistent takeout from this polling is the way support for globalisation or trade is waning in the developed countries that created the global system, but is still strong in much of the developing world. This is strikingly underlined in the ARN research, which shows Australians to be less supportive of free trade agreements (FTAs) and foreign investment in infrastructure than people in China, Japan, India, South Korea and Indonesia. While opposition to FTAs is at somewhat similar levels across the region, Australians are much more opposed to infrastructure investment.

This is consistent with the Pew findings on the TPP in 2015, which had average 65% support in developing members and only 51% support in developed members. The Ipsos poll reinforces this trend, with a global average of 42% seeing globalisation as an opportunity, while an average of 26% see it as a threat. The opportunist camp is led by Peru, South Africa, Great Britain, Sweden and Hungary, while the threat camp is led by Italy, France, Argentina, Turkey and then Australia.

The same poll found a global average of 36% wanting to open up to the world and 31% wanting to protect themselves. The open up camp was led by Peru, Mexico, Spain and Poland. The protection camp was led by the US, Canada, Israel and Australia.

Contrary to the idea that economic nationalism is overtaking the world, these findings seem to reveal a more nuanced situation, where policymakers need to be subtler with their advocacy of globalisation and nimbler with offsetting structural adjustment policies.

Crown's losing bet

Whether Chinese President Xi Jinping's anti-corruption crackdown has a broader economic rationale or is simply all about him staying in power, it is one of the more intriguing issues in modern China.

James Packer seemed to bet on the latter when he decided to have his Crown Casino staff operate aggressively within the grey area of the rules dealing with the promotion of offshore gambling – until they were arrested last October. Packer and his executives appeared to think they could exploit the rules with the protection gained from Packer's high-level support for closer engagement with China and his downplaying of the idea that China was a communist state.

The company has now managed to adroitly rescue its staff from the consequences of its misjudgement with the relatively light sentences handed down this week. But the costs to its once highly Chinese-oriented Australian casinos and its interest in Japan's casino licence remain to be seen.

Crown's ordeal has highlighted how the practice of doing business with authoritarian nations across Asia is changing. Backroom deals are increasingly not cutting it, thanks to more rigorous legal processes, changing economic conditions, and the views of the wider population.

Paying the piper

Recent media reports on influence-peddling by China in Australia drew attention to the way it monitors offshore students, but now one of the country's university leaders has bluntly warned about the economic risks of dependence on Chinese foreign student fees.

University of Queensland Vice-Chancellor Peter Høj, who also heads the Group of Eight, says the balance is now 'tilted to the extreme' in terms of dependence on revenue from foreign students, especially from China.

Australia's universities have been up there with the Australian Federal Police in terms of deep institutional engagement with Asia, but are much more financially beholden to revenue sourced from China just when the bilateral diplomatic relationship is becoming more challenging. Høj suggested the universities are desperately trying to diversify their way out of this dilemma by recruiting students in India and Indonesia.

It was notable that in a speech to the National Press Club this week, Høj was clearly much more concerned about the financial exposure than the issue of managing influence-peddling or security risks from Confucius Institutes or joint Australia-China research projects.

Building new bridges

Japanese Prime Minister Shinzo Abe recently provided an interesting signal that scepticism about China's Asia Infrastructure Investment Bank may be shifting by suggesting Japan was now considering joining.

While questions remain about how the broader Belt and Road Initiative is going to operate, the AIIB under the guidance of its smooth-talking President Jin Liqun is sticking to global development norms and taking junior roles in Asian Development Bank projects.

Perth USAsia Centre Research Fellow Jeffrey Winter argues in this new paper that the bank has already changed to conform with global best practice rather than simply act as a Chinese strategic vehicle.

'The AIIB which has emerged is a far cry from a strategic Chinese attempt to redraw the regional economic architecture … Given recent headwinds facing the region, this is a welcome development,' he says.

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