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Thursday 17 Aug 2017 | 05:22 | SYDNEY
Thursday 17 Aug 2017 | 05:22 | SYDNEY

Five points on foreign investment (part 4)

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12 May 2009 13:10

Mark's first point is that Australia is inescapably dependent on foreign investment. His second is that foreign investment from emerging economies will grow. Third, he argued that state-owned entities investing in Australia should be treated differently.

4. The issue of investment reciprocity is a political and strategic problem, not an economic one. It is sometimes raised as a reason to reject Chinese investment into Australia, but there is not a strong economic argument to support this view. If being open to foreign investment is beneficial to Australia – which it is – then it makes no economic sense to forgo that benefit just because another country chooses not to be open. 

Politically, however, things are more complex. The idea of reciprocity appeals strongly to most peoples’ sense of procedural fairness and there is little doubt that its absence makes selling foreign investment (or open trade for that matter) much harder politically.

There is also a strategic element here. Canberra is locked in negotiations with Beijing over a Free Trade Agreement, and it is widely assumed that investment access to Australia’s resources sector is one of the few good cards that the Australian side has to play. Since achieving greater access for Australian investors to the Chinese market would allow for additional economic gains on top of those that come from allowing Chinese investment in Australia, there is a sequencing issue at play.

Photo by Flickr user jpmartineau, used under a Creative Commons license.

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