Lowy Institute

In his new Lowy Institute Paper, Peter Hartcher is correct when he writes that Australia is an adolescent country. However, I believe the roots of our adolescent behaviour lie deep in the lack of maturity of our national consciousness.

The juvenile language of our leaders, our false bravado, and our burning need to constantly prove ourselves on the sporting world stage all reflect the characteristics of an adolescent: insecure, uncertain of their place in the world, reluctant to come of age and enter adulthood. 

Speaking of ourselves as a 'middle power', boasting how we 'punch above our weight', saying we are the 'best in the southern hemisphere', is immature — this is Australia.

When watching the 1972 Olympic Games, I clearly recall Shane Gould receiving her three gold medals to a rendition of God Save the Queen; the anthem of Great Britain was also our national anthem at the time. Today very few would consider that appropriate and many would cringe, but back then few thought anything of it. Our nation eventually decided to change its anthem to reflect a maturing nation.

Today, several more things will need to change before we as a nation will fully mature.

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First, we need our own truly Australian flag. Our current national flag is clearly a remnant of our colonial past. To have the flag of another nation on our national flag is as inappropriate as having the national anthem of another nation as our own.

Second, we need to become a republic. To have our head of state not one of us but a monarch from another nation is similarly inappropriate for a truly independent nation.

Third, we need to fully come to terms with our treatment of the original inhabitants of this land, our indigenous people. A mature nation would take complete responsibility for its often shameful history and embrace indigenous culture as central to the country and its future.

Fourth, we need to fully embrace the participation of women in the stewardship of the nation, politically and commercially. To have a federal cabinet that consists of 18 men and one woman, and to have only three women as chief executive officers of the top 50 ASX-listed companies (two when Gail Kelly of Westpac steps down), is an indictment on our society and not befitting a mature nation.

Fifth, we need to accept that since 1788 we have been an immigrant nation, full of people from all over the world, arriving in all types of circumstances. A mature nation, with this sort of understanding, would not tie itself in ridiculous knots over asylum seekers. 

Sixth, we need to accept that we are well and truly part of Asia and not a satellite of Europe. The sooner we are able to do this (and it entails more than just trade links), the sooner we will enter international adulthood.

With the right leadership all this will be possible for Australia, but unless and until these issues are dealt with, we will remain adolescent.

Imagine this one day: a national president who was originally an Afghan refugee opens our national parliament. The president swears into office our prime minister, an indigenous woman. The cabinet and parliament of the day reflect the gender and racial make up of our society. Flying above Parliament House is the Australian flag, without the Union Jack.

One might think that when all this happens the nation will have come of age, but that is only partly right; Australia will have fully come of age when everyone thinks this is normal.

Photo courtesy of Flickr user Maarten Thewissen.


As Kerry Brown noted yesterday, Chinese President Xi Jinping's speech to the Australian parliament on Monday gave Australians plenty to talk about, and Australians (of a certain kind at least) have been busily dissecting it to see what it might mean for the bilateral relationship.

The coverage in China of President Xi's speech, however, has been far more muted, which suggests that while Sino-Australian ties are a hot topic in Australia, they are far less so in China. This is partly because China is more important to Australia, in multiple ways, than Australia is to China. But it also reflects the limited interest many Chinese people have in international relations and foreign policy. The focus for most Chinese people — and the Government — is far more on domestic issues; foreign policy is generally seen as a means to support the primary goal of domestic development.

Yesterday I enjoyed a delightful lunch with international relations and diplomacy scholars from a local university here in China. We had a frank and dynamic conversation about various topics related to Chinese foreign policy. However, when I asked what they thought of Xi's speech to Australia's parliament, my companions were rather nonplussed. One professor politely volunteered to break the silence by observing that it was a warm and practical speech, in which the essence was basically the same as that which former President Hu Jintao might have presented, but the style and manner was much more relaxed and engaging.

It did not take much pressing to get the assembled academics to admit that the speech had not really caught their attention. None of them had read it, nor any media coverage about it.

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A survey of Chinese media coverage suggests that this rather lukewarm response is widespread throughout China. The major state-run news agencies, including Xinhua and The People's Daily, all ran exactly the same story, entitled '习近平在澳大利亚联邦议会发表重要演' ('Xi Jinping issued an important speech at the Australian Parliament').

The articles begin with a brief discussion of the 'China dream' before going into some detail about how China's development is viewed with uncertainty by other countries, and Xi's three points on what China is doing to allay those concerns. The articles then talk about how, in the wake of the success of Xi's visit to Australia, future Sino-Australia relations should be built on long-term and broad-reaching mutually beneficial objectives. For this to be achieved, they note, mutual trust will need to be further developed. The articles emphasise that Xi was warmly received, and that Australian politicians recognise the mutually beneficial nature of the relationship. China Central Television news ran stories based on the same script. 

The South China Morning Post, known for being more independent of the government line, ran the headline '习近平: 中国了解'国虽大, 好战必亡' ('Xi Jinping: China understands that even a big [powerful] country will certainly be destroyed if it is warlike'). The content was more or less the same as the state agencies (China's desire for peaceful development; Beijing's willingness to cooperate with other countries to maintain peace). The English version of this article too focused on China's commitment to non-forceful means of achieving its goals. This version also mentioned some of the protesters and pro-Beijing supporters who gathered on the lawns of Parliament House at the time of the speech. 

What does it mean that President Xi's speech in Australia has failed to ignite the Chinese national imagination?

Where articles were published about Xi's speech in Chinese media, they used stock wording and were eclipsed by coverage of the G20. Both state-aligned and more independent media focused on Xi's three points describing what China is doing to allay other countries' 'natural' concerns about its growing influence, rather than on Sino-Australian relations (except that the development of mutual trust needs more work).

The Chinese coverage of Xi's speech strongly suggests that Sino-Australian relations are not of as much interest to the average Chinese person as China's role as a world economic power or its role on the international stage. It also points to a broader ambivalence to world affairs. For most Chinese people, the world only really matters inasmuch as it impacts on Chinese domestic affairs, particularly economic and social development. Australia  would do well to remember that when China acts outside its borders, its purpose is always domestic. 

Jessica Tang contributed research to this post.

Reuters/David Gray.

  • Bonnie Glaser writes that the two US-China military CBMs, inked recently in Beijing, signal Xi Jinping's intent to establish a more cooperative relationship with the US military. 
  • China's newly built bridge to North Korea remains unused because DPRK authorities refuse to connect it to the North Korean road network.
  • Latest Sinica podcast on the outcomes of Beijing's APEC summit, featuring Evan Feigenbaum and Damien Ma.
  • Here at the Interpreter, Sam has gathered together analysis on the new US-China climate deal.  
  • China's pollution protests could be slowed by stronger rule of law.
  • Can China’s silk road vision coexist with a Eurasian Union? 
  • China’s maritime silk road is all about Africa.
  • China Media Project on Xi Jinping's pet propaganda term 'positive energy', which is part of a  'full frontal attack on negativity. Not just in journalism, on the internet, in arts and culture, and in academia, mind you, but in China’s foreign and trade relations as well.'
  • Despite a loosening of family planning laws last year, only 6% of the 11 million couples newly eligible for a second child have applied for a second birth permit. 
  • The fattest of corrupt Chinese flies: RMB120 million (US$20 million) in cash, 37kg of gold bullion and ownership documents for 68 homes were found in the home of a low ranking official. Check out this slideshow if you're wondering what RMB120 million in cash looks like.



Kurdish Peshmerga advance towards Kobani, Syria. (REUTERS/Yannis Behrakis.)

ISIS is a transitory organisation whose aspiration to lead an Islamic reconquista is doomed to fail. It will eventually be degraded and splinter, some of its members joining the myriad other groups within the jihadist milieu while others fight over what is left of ISIS. One thing of enduring interest about the ISIS experience, however, is the way it has understood the Western (and local) media cycle and exploited it. 

Grotesque images of beheadings and of Western jihadis spewing forth their intolerant bile are without doubt sickening, but they serve a purpose. One of the enduring principles of war is the maintenance of momentum. Once lost, it is difficult to recover. ISIS has certainly lost its battlefield momentum and is unlikely to recover it. That's why it is trying to maintain momentum through the media.

Like all good PR practitioners, ISIS's PR jihadis understand that in order to give the impression of dominance even when you don't possess it, it is necessary to replace bad news with something that suits your purposes. Hence each video release has coincided with images that ISIS would prefer did not get much airplay.

Note that the latest video showing the beheading of Peter Kassig and Syrian military personnel was released a day or two after the fall of the town of Bayji to Iraqi government forces.

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The release of the video of the 17 year-old Australian Abdullah Elmir ranting to camera surrounded by his Lord of the Flies fan group followed a day after spectacular photos of US bombing raids against ISIS targets around Kobane hit our screens. Guess what dominated the media — images of thousands of pounds of high explosive blasting ISIS positions in Syria in the meat grinder of Kobane or a 17 year-old with a rifle blathering on about not much? The latter, of course.

This is part of a broader pattern. A day after the Turkish parliament authorised military action against ISIS (not good news for ISIS), video of the beheading of British aid worker Alan Henning was released. And if we hark back to the recapture of Mosul Dam by Kurdish forces backed by US air support in mid-August, the beheading of US journalist James Foley followed shortly after. 

None of these actions are designed to dissuade Western military intervention in Iraq or Syria, or even to goad the West into becoming decisively committed on the ground, because ISIS understands this is unlikely to occur. Rather, it has a much more short-term aim: to get ISIS's military and political setbacks out of the media cycle and replace them with bloody imagery that demonstrates ISIS is still a force. We should not, however, confuse media momentum with battlefield momentum. ISIS may have the former, but it has lost the latter.


This is two-part post. Part 1 here.

I've seen a few people claim to be free traders. And then say that, therefore, they are in favour of free trade agreements (FTAs).

I support free trade, but not necessarily FTAs. Indeed, the effects of FTAs could even be negative. How? Let's talk very quickly about the economics of FTAs. As part of earning your ticket as a trade economist, you have to master the concepts of trade creation and trade diversion as they apply to FTAs. A quick recap:

Trade creation

Suppose Australia imports cars from the US and China, and we apply a 50% tariff to these cars. Now suppose we sign an FTA with China, and China is really good at producing cars. Then the Chinese will supply lots of cars and the domestic price of cars will come down substantially, so we now import more cars. Trade is created. That's good.

Trade Diversion

Suppose now, instead, that the Chinese are not overly adept at producing cars. In that case the supply response will be muted and the price of cars will not come down very much. However, because there are no tariffs levied on Chinese cars, Chinese producers have an advantage over US producers. Chinese cars will likely displace US cars. Australian consumers don't benefit much because the price does not fall much. The upshot is that, as an economy, we have displaced cheaper (pre-tariff) US cars with more expensive Chinese cars. Trade is diverted. That's bad.

Congratulations, your trade economist certification is in the mail.

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So, FTAs can be bad. They don't necessarily increase welfare. That is, in part, why economists are asked to model their effects. In a former life, many years ago, I worked on the report that modeled the US-Australia Free Trade Agreement.

We can peel the onion back another layer and ask: what kind of agreements will the political process likely deliver? Will they be those where trade is created or where trade is diverted? Two economists, Elhanan Helpman and Gene Grossman, asked this exact question (my two cents: Helpman was seriously stiff not to get the Nobel the same year as Krugman, but don't take my word for it, Krugman himself heaps praise on the guy).

Their paper contains a lot of maths, but buried beneath are some crucial insights that can be neatly explained. Importantly, the existing tariff structure, before the FTA is signed, is the product of a political game, where vested interests are played off against the welfare of the wider community. Why is that important? Take the car example above. Remember that 50% tariff? That tariff is so high because the car lobby is powerful. This powerful car lobby will not be happy with an agreement that creates trade because that will lower the price of cars. They will be OK with an agreement that diverts trade, because the price, in that case, will not fall by much.

I think this is a profound insight. Powerful interests will fight against welfare-improving FTAs, while accepting ones that reduce welfare. So there is a bias in the political process that will deliver FTAs which are trade diverting. To be clear, Grossman and Helpman don't claim that this will always be the case – they just note a bias.

Photo by Flickr user toesoxluver.


We've all heard of Mythbusters, the TV program that tests whether common assumptions are based in reality or myth.

The conclusion of negotiations for the China-Australia FTA, President Xi Jinping's elevation of Australia-China relations from the strategic partnership (agreed during the Gillard prime ministership) to a comprehensive strategic partnership, and the agreement by Japan, Australia and the US on the sidelines of the G20 in Brisbane to jointly develop submarine technology definitively bust two long-held myths about Australian foreign policy and its Asian engagement project.

Yet these magically combined myths have been busted before, only to reappear as major underlying assumptions to much of the commentary on Australian strategic and foreign policy under Prime Minister Abbott.

The first myth is the partisan one that Liberal governments and prime ministers are less able to manage relations with East Asian states than Labor ones. Michael Wesley did a masterful job debunking this myth in relation to the Howard years in The Howard Paradox. From his earliest, understandably tentative, days as leader, Abbott, a confessed foreign policy non-expert, has faced a similar barrage of at times caustic commentary about alleged Asian faux pas and the assumed damage they were causing to Australia's relations with key East Asian states.

Yet, just over a year into its first term, the Abbott Government can claim to have gone faster and further than the Howard Government in deepening relations with the US, China, Japan, India, South Korea, the Philippines and Singapore, with the new Jokowi Administration offering opportunities to include Indonesia on this long list.

The Liberal Party's traditional focus on bilateral relationships over regional bodies has continued under the Abbott Government, and Abbott's critics argue that, with the geopolitical situation in East Asia becoming more uncertain, this focus is having damaging consequences. But in fact these uncertainties provide more opportunities for Australia to forge closer relations with major powers, and Abbott is well placed to take advantage of them. The Abbott paradox is in full swing.

The second strategic myth is that closer relations with the US, to which the Liberals are seen as being more prone than Labor, are detrimental to Australia's key relationships in Asia. Australia's Asian engagement policy would benefit from a more 'autonomous' and 'independent' relationship with the US and its ally Japan, it is argued.

The most sustained and inaccurate criticism of the Abbott Government's foreign policy is that closer relations with Japan and the US will undercut relations with China, with Beijing likely to impose costs on the bilateral economic relationship. The exact opposite now seems to have occurred, with the signing of the historic Japan-Australia FTA earlier this year clearly an important late-term stimulus to the decade-long China-Australia trade talks.

It seems Chinese and Australian policy makers are better able to separate economic policy benefits from strategic policy concerns than many of us commentators.

Photo by REUTERS/Lucas Coch.


Fascinating interview with Peter Thiel, the billionaire Silicon Valley identity behind PayPal. Here's a grab on competition:

...as a business, you should strive for monopoly...competition is very overrated. We live in a world where we're always told to compete intensely. It's how we're educated. It's how so much of our system is organized. I think that if you want to compete super intensely, you should open a restaurant in DC. There'll be competition — but you won't make any money or do anything. Competition makes us better at that which we're competing on, but it narrows our focus to beating the people around us. It distracts us from things that are more valuable or more important or more meaningful.

And this assessment of the US intelligence community is dead-on:

I have a slightly different cut on the Snowden revelations. I think it shows the NSA more as the Keystone Cops than as Big Brother. What is striking to me is how little James Bond-like stuff was going on and how little they did with all this information. That's why I think, in some ways, the NSA is more in this anti-technological zone where they don't know what to do with the data they find. So they just hoover up all the data, all over the world. I think it was news to Obama that he was tapping into [German Chancellor Angela] Merkel's cell phone.

One way to think about this is that if the NSA bureaucracy actually knew what they were doing, they would probably need way less information. What's shocking about Snowden is how much information they had and how little they did with it...

...It's hard to judge but my sense is they're quite good at getting data and they're quite bad at finding any meaning or knowing what to do with it. I suspect that the bureaucratic momentum has pushed towards more and more data because, perversely, if you don't know what to do with the data, the tendency is to just get more and more, even though that never actually solves the core problem.

 (H/t Aaron.)


The East Asia and ASEAN Summit meetings in Naypyidaw last week drew attention to a wide range of issues concerning the Asia Pacific. They also prompted journalists and commentators around the world to take a closer look at Burma (Myanmar) itself.

There were three kinds of articles about Burma published in the news media earlier this month. Two were expected, and aired arguments which have become familiar since the advent of President Thein Sein's mixed civilian-military Government in 2011. The third set of articles, however, was unexpected and seems to reflect a major shift in international attitudes towards opposition leader Aung San Suu Kyi.

The first category of articles highlighted the slowing pace of reform in Burma, the Government's failure to achieve a ceasefire with ethnic armed groups, continuing discrimination against the Rohingya minority and parliament's refusal to amend the 2008 constitution so that Aung San Suu Kyi can run for the presidency in 2016. World leaders were urged to put more pressure on Thein Sein, even to reimpose sanctions. 

The second category of articles included a number of thoughtful commentaries by analysts who took a more strategic view. They recognised Burma's shortcomings but made greater allowances for the enormous challenges faced by Thein Sein and the reformers. After considering the alternatives, they argued strongly for the international community to be patient and to continue supporting the transition process.

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As these articles revealed, human rights campaigners and other activists remain focused on Burma's immediate problems. Governments and international organisations, however, are increasingly looking forward to wider reforms. They believe the democratisation process is real, but accept that it will be difficult and take a long time. They are clearly unwilling to do anything which might harm the prospects for further change.

While the broad positions outlined in these articles were not new, it was striking how Aung San Suu Kyi no longer seemed to be viewed as central to the resolution of Burma's problems. The focus was clearly on the national Government. Indeed, in a third category of articles, published in a number of leading magazines and newspapers, Aung San Suu Kyi was openly and strongly criticised for failing to exert a leadership role on a number of key issues.

As noted on The Interpreter last year, there was a time not that long ago when Aung San Suu Kyi was considered to be without peer and beyond reproach. According to one story in The Times, she was 'the bravest and most moral person in the world'. Her aura began to fade after she was released from house arrest in 2010 and elected to parliament in 2012. Few observers, however, anticipated the harsh criticism she is now receiving.

The first shot in the latest salvo against her was fired by TIME on 6 November, in an article headlined 'Aung San Suu Kyi's Silence on Burma's Human-Rights Abuses is Appalling'. This was followed on 12 November by a piece in The Diplomat by Tim Robertson under the title 'Aung San Suu Kyi: Colluding With Tyranny'. 

On the same day, two other articles appeared. They were a little more measured but were still quite critical of her actions — or lack of them. Jane Lerner published a piece in The New York Times under the heading 'For Some, Daw Aung San Suu Kyi Falls Short of Expectations in Myanmar'. On a lesser known website, Alan Lerner posted a piece entitled 'Obama's Tarnished Saint'.

As the titles of these and other articles suggest, there has been widespread disappointment over the Nobel Peace laureate's refusal to condemn the continuing persecution of the Muslim Rohingyas, and military operations against the Kachin and Shan. She has also drawn fire for appearing to support big business and for attempting to develop a relationship with the country's armed forces, which still dominate Burma. 

There was always going to be an adjustment in popular perceptions once Aung San Suu Kyi ceased being an icon under house arrest and began participating in the rough and tumble of Burmese power politics. She had been invested with such unrealistic hopes and expectations that she was bound to disappoint many. Also, many of her supporters seem to find it difficult to accept that politics requires difficult decisions, and that compromises are often necessary. 

It is often forgotten too that Aung San Suu Kyi, for all her charisma and popular support both at home and abroad, has few means of actually affecting political change in Burma. The constitution gives the Government and armed forces control of almost all the levers of power. In that sense, she is the leader of a small, and to all practical purposes, ineffectual group in the national parliament, which to the surprise of many has adopted a low profile. 

Aung San Suu Kyi is caught between two fires. She seems anxious to avoid taking any position that might alienate her predominantly ethnic Burman and Buddhist constituency. However, by failing to speak out on major human rights issues, she risks losing the support of her international backers, on whom she has relied to put pressure on the Government, the better to achieve her domestic political objectives.

Aung San Suu Kyi has declined to explain her behaviour, falling back as she often does on broad statements of principle. Whatever the reasons for her refusal to speak out on some important issues, her reputation is no longer what it used to be. No one is yet saying that she has feet of clay, but her image as a principled champion of universal human rights and determined fighter for democracy is certainly taking a beating.

In his article, Tim Robertson cites George Orwell's line that 'Saints should always be judged guilty until they are proved innocent'. This sentence, taken from Orwell's 1949 Reflections on Gandhi, continues: 'but the tests that have to be applied to them are not, of course, the same in all cases'. We need to know more about Aung San Suu Kyi's thinking to get the full picture, but some tests have already been applied, and she has not come out of the examination well.

Photo courtesy of Flickr user Jason.


Free trade agreements (FTAs) are back. After a lot of bureaucratic blood sweat and tears, Australia and China have signed a Declaration of Intent, and now both sides will prepare legal texts of the Agreement. This appears part of a broader pattern for China, which reportedly is becoming more frustrated with multilateralist attempts to free up trade through the WTO.

We are told that dairy, wine, and services are big winners. Maybe there are others. We are told that the agreement could be worth $18 billion.

But to be frank with you, any number bandied about right now is guesswork (OK, most economics is guesswork, but in this case, people are guessing the guess). The $18 billion number appears to come from a study that is ten years old. Much has changed since that point. China is a much larger economy than ten years ago, so it is possible that the benefits for our exporters are larger than calculated in that study. On the other hand, tariff rates in China have come down a bit, limiting the boost from liberalisation. Also, since that time the industrial structure and competitive environment has changed in both countries, which will affect the parameters used in the modelling.

Furthermore, the agreement modeled 10 years ago is very different to the agreement we will sign. Big issues appear to be the exclusion of sugar and rice, although it is difficult to tell without running the numbers.

In any case, suppose we take the report at face value. The modelling suggests the agreement will boost GDP growth by 0.04% per year for 10 years. Trend GDP growth is around 3% per year, so 0.04% really does not look like much. In fact, at trend growth, that is how much the economy grows in 5 days. Let me emphasise this point: it is not that the FTA is worth 5 days' worth of output. It is worth the difference between GDP today and GDP in 5 days' time. We should all just calm down a little bit.

In my next post, I will describe why the benefits of FTAs can in fact be negative. And why the political process is geared to deliver agreements of this type.


Chinese president Xi Jinping's impending visit to Fiji, where he will meet with all of the eight Pacific leaders whose nations diplomatically recognise China, means newspapers will be filled with ruminations on China's strategic influence in the South Pacific and what this means for Australia and the region. Here's a bluffer's guide to the top four most persistent myths that will stalk Australian media coverage over the next week.

1. China has a strong diplomatic presence in the Pacific

A favourite nostrum of New Zealand's cold warriors and Chinese officials, this is the most patently false myth of all. Even factoring in the low position of foreign affairs within the Chinese political pecking order (its minister struggles to make the top 50 in the Central Committee), China's representation in the South Pacific is paltry. Its ghost town embassies are typically staffed by a handful of people, many brought in from other ministries and provincial governments. Aside from East Timor, no embassy has a defence attaché. Or a café.

One ministry with clout is the Ministry of Commerce, and each embassy has an Economic Counsellor's office to represent it. In South Pacific nations, this office rarely amounts to more than one official. In PNG, the only Pacific embassy large enough to warrant a separate Economic Counsellor's Office, back in February we found only two staff responsible for China's trade, investment and aid. These officials were struggling to get through the day; there was little time to implement a grand strategy. The rule of thumb in China's bureaucracy is that importance is measured in ren, cai, wu: personnel, finances or materials. China's South Pacific embassies lack for all three.

2. China's development assistance is linked to the resources industry

The above example from PNG, the Pacific's most resource-rich nation, suggests otherwise. PNG's Economic Counsellor's Office lacks an aid counsellor, although they hoped one might arrive later in the year. In Africa, Deborah Brautigam has thoroughly debunked this myth, finding China's aid to be remarkably evenly spread, and the Lowy Institute's Phillippa Brant has similar findings for the Pacific. Large Chinese resources companies are able to access cheap lines of credit, but this not aid.

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There is anecdotal evidence that the largest companies, typically the national oil companies, are able to bring the state with them in the form of complementary infrastructure investment. Alas, in PNG, home to the largest Chinese resource investment in the Pacific (China Metallurgical Corporation's $1.8 billion Ramu Nickel mine), the only evidence for this is a short stretch of road from Usino Junction to Yamagi, built with a 22 million kina Chinese government grant.

3. China's development assistance, trade and investment are used to support undemocratic regimes

Exhibit A is Frank Banimarama's regime in Fiji. A recent Wall St Journal article claimed, 'When the West scaled back direct government funding eight years ago after the coup overthrew Fiji's elected government, Asia's biggest economy stepped up its aid and investment to fill the gap.'

The first problem with this assertion is that it suggests the Chinese state is able to direct where Chinese companies invest. This was true in 1974. It's not true in 2014. Chinese companies, like other companies, invest where there's a dollar, a kina or a CFP franc to be made. Yu Changsen, head of China's premier research centre on Oceania, found that Chinese companies trade more with Pacific nations that don't recognise China than in the countries that do. The Chinese government could leverage their banks to prefer certain regions, but the numbers don't show that they actually do this. The most active Chinese policy bank in the Pacific to date, China Exim Bank, has only two youthful staff responsible for the entire South Pacific.

Despite the former Commodore's efforts to give the opposite impression, Fiji has received far less aid than its nearest neighbours, Tonga and Samoa. Fiji's largest concessional loan projects were signed off early in 2006, before Banimarama seized power, a fact missed by newspaper reports at the time which accused China of 'bankrolling a pariah military dictatorship.' A Lowy Institute report has shown that these aid projects are still struggling to get off the ground, hardly evidence of China's desperation to fill the gap left by Australia and New Zealand.

4. China's leaders have closer ties to Pacific elites than Western leaders

An oft-repeated line is that new Pacific leaders all pay their first official visit to Beijing rather than Canberra, Wellington or Washington. Aside from the obvious counterfactual that six of the Pacific's 14 leaders don't recognise China, Pacific leaders aren't that predictable. In 2004, Vanuatu's then prime minister assaulted the Chinese ambassador for questioning the presence of the Taiwanese flag.

Claims of ever strengthening elite ties are used to argue that Australia should provide the same sort of lavish visit diplomacy that China does for Pacific leaders, and stop asking them to take off their shoes at Brisbane airport. The latter is sensible, but does visit diplomacy buy close ties, or just rent them? Obama won't be sitting down with the president of Nauru, because he doesn't have to. Real influence rests in global institutions and in being able to shape the future. Will future Pacific elites be graduates of Beijing No. 4 High School or Scots College? Will they have real estate in Shanghai or Cairns? Will they follow rugby or table tennis?

Xi Jinping does represent a new challenge for Australia's diplomats. Unlike his predecessor, he does not wield power reluctantly. Already labelled the 'new architect' of reform by the People's Daily, he walks the world stage with the confidence of man looking to shape China's path for the next thirty years, as Deng and Mao did before him. This will allow him to take new paths, as recent action on China-Japan relations and the climate change agreement with the US demonstrate.

But until China appoints a defence attaché to a South Pacific nation, staffs its embassies properly, or builds a military structure bigger than a ramshackle satellite dish in Kiribati, let's not kid ourselves that the South Pacific looms large in any Chinese 'grand strategy' and thus miss the chance to work with China in a region where they have remarkably little skin in the game.

  • It was a big week of summitry, and a full round-up of all the week's happenings will follow shortly. Thein Sein's opening address to ASEAN emphasised the importance of taking strong steps toward the ASEAN Community. Senior minister Soe Thane argued in a NY Times op-ed that Myanmar's transition needs time.
  • The White House released its round-up of the ASEAN-US Summit meetingObama took questions from young Southeast Asian leaders during his visit, including what he would do if he were President of Myanmar (14:30).
  • China came to the summit proposing a friendship treaty with ASEAN and with $20 billion for its Southeast Asian friends. Beijing signed $7.8 billion in deals with Myanmar and between $500-700 million annually in development loans to Cambodia. On the latter, Carl Thayer, noted that: 'The money is meant to send a message that China is the big sugar daddy of Southeast Asia and will outbid the US. It's a lesson for Laos, Myanmar and Singapore that supporting China will be rewarded.'
  • Joshua Kurlantzick took the red pen and graded Jokowi's first month. A Jakarta Globe editorial argued that  'A ballooning fuel subsidy that only benefits the nation's rich is President Joko Widodo's real challenge'.
  • Over at CSIS, Phuong Ngyuyen looked forward to the challenges of the Malaysian chairmanship of ASEAN in 2015. Ernie Bower argued that economics will remain the imperative in Southeast Asia.
  • Vietnam's president spoke on APEC and his country's moves toward a regional FTA. Meanwhile, Vietnam's formerly embattled PM received a strong vote of confidence from lawmakers. 
  • Each year in the US state of Oregon, a group of men gather to re-enact the Vietnam War:



What do we know now about President Xi Jinping and his views of China's relationship with Australia that we didn't know before he came to the G20 Summit and stayed for a bilateral visit, part of which was speaking to the members of the Australian parliament today?

The first thing to take away is something that was already appreciated. He likes us. He has been here five times. He talks about Australia with more than just courteous appreciation. Even before elected members, he is effusive about the diversity, the cultural and educational links and the good image Australia has back in China. Not only does he like us, he wants us to know it. This explains Xi's less guarded manner of speaking today than his register in the US or the EU.

The second thing is that he sees a relationship which is good and which he has used political and diplomatic capital to improve. Before Xi's speech, Australia was accorded 'strategic partnership' status. Now it is promoted one level above this: 'Comprehensive strategic partnership.' And added to the the bilateral and strategic dialogues that Australia and China have established to deliver a broader relationship, they will now have a wide ranging free-trade agreement.

But Xi has made it clear that there needs to  be more diversification, and one of the routes to diversification is finance and services. Xi's recognition of Australia as a place where this sort of business can be done for Chinese today is a big deal. Now it is up to us to re-imagine our relationship with China along lines that are broader than just exporting resources and foodstuffs. If we go this way, we are pushing on an open door.  

This is especially so because Xi clearly wants us to get closer, beyond matters of commerce. He referred to the toughest issue of all – security — in terms of both countries needing to maintain peace and stability in the region, and creating 'political trust'. His words here about China's role as a preserver of peace and security show that Xi sees Australia as key potential regional security partner, and a country which needs to have a concept of the China relationship in which we can talk to China more about these issues, and at least identify clearly where our interests are different from those of the US. Read More

Xi also made it clear that he sees Australia as a partner for China in its internal development. The centennial goals of creating a middle-income society by 2020 and preparing for the hundredth anniversary of the foundation of the Communist Party are already starting to figure heavily in Chinese leaders' speeches. We need to think of ways Australia can be a partner in this, working intellectually, economically, and geo-politically with China as it tries to answer some of its sustainability issues, creating an urban middle class and a higher value-added economy. Xi's words today show that there is a role here for Australian enterprises, partnerships and ideas.

This brings us to the final take-away point. With all these opportunities and warm words, what is the mindset Xi has most forcefully revealed? It can be summarised in one simple sentence: for Australian economic prosperity, security and growth, China matters hugely, and its current leader knows this. Xi's speech was littered with evidence of just how mutually dependent we are becoming, and how inevitable is the deepening of this dependence. Cascades of impressive economic statistics fell from his lips: over 50% of China's iron ore comes from Australia; we have 200,000 Chinese students here; every third dollar we get from export earnings comes from the People's Republic.

Xi didn't say it, but it was clear in all his words: look up, down, left and right, wherever you are in Australia, and China is present as a trading partner, a source of growth, of tourists, of students.

President Xi came to Canberra to deliver a simple message. We are here, and we are not going away (and by the way, we are not going to go soft on our territorial demands). Xi's final point: Australia and China 'should be more more visionary and set more ambitious goals.' Over to you, Mr Abbott – the ball is in your court.

Photo courtesy of @TonyAbbottMHR.


Well, I suppose it was inevitable.

After President Obama's performance in Brisbane over the weekend, whenever a foreign leader now talks about climate change on Australian soil — as German chancellor Angela Merkel did this morning in her 2014 Lowy Lecture — it will be read in the media as an attack on Prime Minister Abbott.

All quite avoidable, of course. As Mike Callaghan explained in his G20 wrap-up yesterday, if the Government had taken a little more care in its public messaging in the lead-up to last weekend's G20 summit, the stories might not have been framed that way. But it's also a bit tiresome and reductionist, as if the issue matters primarily for how it affects the PM's fate.

What's more, climate change wasn't the only important thing Merkel talked about this morning. We will have a transcript available soon, but for now, my thoughts on the highlights of the speech:

  • Merkel of course referenced Germany's dark past in the first half of the twentieth century, and said the creation of the EU was a guarantor that this would never happen again in Europe. Whether the memory of two world wars can serve any longer as a justification for European unification is a question we addressed recently on The Interpreter.
  • She said Europe's economic crisis is 'under control', but that its effects are not behind us.
  • Merkel said that, as Asia's big powers grow economically, inevitably they will throw their strategic weight around. She added that Asia was the only region to consistently record increases in military spending since the end of the Cold War, but she offered little about how great-power competition in the region can be managed, suggesting only that for Asian states taking the rocky road to political pluralism, Europe can help.
  • If every reference to climate change is going to be read as a criticism of Abbott, one could do the same about Australia's record in the UN Security Council. In opposition, of course, Abbott criticised the campaign to win the non-permanent seat, but Merkel praised Australia's record richly, particularly on Syria. As Nick Bryant has written, Australia's role has been somewhat overlooked at home.
  • I think that what we tend to look for in political leaders is not so much intelligence but wisdom, and Merkel's was on display in the Q&A, where she cautioned patience on Europe's response to the crisis in Ukraine. As someone who saw Germans give up hope of their country ever being reunified, she said we ought not to be too pessimistic about future change in Russia's attitude. But it might take some time for Europe's most powerful tool, its economic might, to take effect. The only danger for Europe is that it becomes divided in the meantime.
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  • Another piece of folk wisdom from Merkel: we are never well advised to listen only to our worries. This was in response to a question about Germany's position on Britain's place in the EU. Recently Merkel was reported to have said that she would accept the UK's exit from the EU, but today she sent an altogether warmer signal. She said the UK gave continental Europe a broader perspective on the US and Asia, and prevented the EU from being too inward-looking. She said Germany will do all it can to persuade the UK to remain in the EU.
  • On Europe's economic crisis, Merkel warned that there must be more centralisation, because it is difficult to run a single currency with 18 central banks and 18 economic policies. The slowest member of the currency union cannot set the pace.
  • Merkel's China answer was fascinating. What sort of world order do China's leaders want? They see their country as part of a 2000-year story of Chinese world leadership, punctuated by 200 recent years of decline and now a massive resurgence. China's current leaders want to be part of that story, and will do everything they can to restore China to its leading place in world affairs.
  • Merkel's answer to the last question, about US spying on her telephone and those of other German officials, was a delight. She seemed baffled by the logic of it all: if Americans want to know what the German political class is thinking, why not just take them to lunch? Dead right, and it's an observation that could just as well be made about Australian snooping on Indonesia's leaders.
  • One personal observation: I'm not sure Merkel was fully aware of the goodwill in the room today. She strikes me as a highly popular figure in this country (witness coverage of the Brisbane selfie), and I got the sense that the audience was waiting for her to open up and let her guard down a little bit. As a female political figure with global standing, her stature is similar to that of Hillary Clinton, who since losing the 2008 presidential primary to Barack Obama and then serving as Secretary of State has developed a whole new level of global popularity. But whereas Clinton seems aware of her new-found hipness (and is ready to exploit it), Merkel shows no sign of responding. It seems like a missed opportunity.

It seems that anyone who spends enough time in the Middle East these days is destined to lose someone they know – a relative, a friend, or a colleague. Two years ago I wrote about the unfortunate death of Anthony Shadid, who lost his life on a trip to Syria and whom I had been fortunate enough to meet just before he passed. Yesterday we received the tragic news of the murder of my friend Peter Kassig, the American aid worker kidnapped in Syria last year.

I got to know Peter during my time in Beirut. His career in humanitarianism began in 2012 when he visited the Palestinian camps in Beirut. He made the decision there and then to actually do something practical to help the people of the region.

He began by offering his services to local hospitals in Tripoli, Lebanon, where wounded fighters from the Syrian crisis were being treated. As the year passed he started an NGO called SERA (Special Emergency Response and Assistance), which was focused on providing emergency medical aid and supplies.He worked extremely hard to raise funds for medical equipment that he could then donate. He also continued to provide emergency medical assistance. Peter always argued for the impossible — that he didn't want to get involved with the politics of what he was doing. He would always say that he just wanted to give practical aid wherever and whenever it was needed. But in this part of the world, identity matters, as does whom you choose to assist.

Peter was never idle. Usually when I saw him he was on the run from A to B delivering medical supplies to whoever needed them. He never had any money of his own; he spent all his resources assisting others. On the odd evening when he did take a break he was to be found in deep conversation with someone about his work or an issue he felt strongly about. He lived out his beliefs with an authenticity that is unusual. Peter was charming, eloquent, intelligent and highly passionate. It was the last trait that got him into trouble.

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In 2013 he obviously made the decision that he could be of greater benefit inside Syria than from without. As a result, he started making regular forays, something we all warned him against. He was a US citizen and he had a military background; it seemed obvious he was walking a dangerous path. He compounded the risk by continuing to write posts that clearly indicated he was in Syria.

And then one day Pete disappeared. It took all of us a few weeks to notice he wasn't posting on Facebook anymore. It took a few more days of contact between friends to discover our fears for him had been realised.

I feel like we lost Pete after the news of his kidnapping. His death in some ways simply feels like he has moved to a different level in my consciousness. The long wait for news of him ended last month in the worst possible way, with ISIS parading him on camera and naming him as its next victim. The news of his death brings bitterness which comes from knowing I will never again share a drink or a meal with one of the warmest people I ever knew.

Experts have suggested the reason there is no recording of Peter speaking from a script on behalf of ISIS is because he refused to do so. I like to think that’s the case, and that he went down fighting. Frankly, it wouldn't surprise me.

Photo courtesy of SERA.


I give the Brisbane G20 Summit a tick of approval. It produced outcomes broadly in line with what I suggested in advance would be necessary for Brisbane to be called a success.

The Brisbane Action Plan, which outlines the reforms countries are proposing in order to increase growth and create jobs, is a more substantive product than similar documents from past summits. Introducing the economic growth target helped push countries to at least promise they would undertake more ambitious reforms.

The real challenge is to implement these reforms. But G20 countries have said they will be held accountable for their performance and have called on the IMF and OECD to monitor and report on their progress in implementing their commitments.

The establishment of the Global Infrastructure Hub has to be kept in perspective. It is being presented as the silver bullet for unleashing trillions of dollars of private sector financing into infrastructure. The hub will make a contribution. But increasing infrastructure requires a lot more than having a hub for improving data flows and best-practice in project documentation. It requires countries improving their investment environment and having a rigorous approach to project selection and planning. The IMF's note to the Summit warned leaders that they had to raise the quality of infrastructure investment by improving the public investment process through better project appraisal and selection.

The deal between the US and India which saw India remove its veto to advancing the WTO agreement on trade facilitation was a godsend for the Brisbane Summit.

If India had not agreed to progress the WTO trade deal, it would have undermined the value of any commitments on trade liberalisation coming from the Summit. Fortunately, the measures on global trade outlined in the leaders' communiqué are positive, particularly the commitment to implement all elements of the Brisbane package, define a work program to complete Doha, and find ways to make the WTO work better.

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Cracking down on tax evasion and avoidance was another priority area. Again there are no silver bullets, but Brisbane maintained the G20's momentum on this issue. The introduction of the automatic exchange of tax information will end bank secrecy. This is a big outcome. And the momentum has been maintained in international efforts to combat aggressive tax-planning strategies of companies.

The design of many important aspects of financial regulation were landed, particularly in relation to the problem of some banks being seen to be 'too big to fail', and thus at risk of needing to be bailed out by the taxpayer if they got into trouble. Important outcomes were also achieved on anti-corruption, such as principles to disclose the beneficial ownership of companies. The agreement to improve international energy governance arrangements is also significant.

Not bad for a weekend's work. (Of course, all this was not achieved in one weekend but reflected years of work.)

So Brisbane was a success. But the main press story around the Brisbane Summit was Australia's embarrassment in trying to prevent climate change being discussed in the face of the dramatic deal between China and the US to reduce emissions. It was claimed Australia had lost control of the agenda.

This was a problem of Australia's own making.

Imagine if Australia had adopted a less negative approach during the course of 2014 on how climate change would be handled in Brisbane. The Prime Minister could have said that the G20 is not the place for negotiating emission targets, as that is the role of the UNFCC. But he could have added that he expected leaders would likely discuss climate change in advance of the important UNFCC negotiations next year, and he could have noted that the G20 is dealing with directly related issues such as energy efficiency.

Prime Minister Abbott basically said this at his post-summit press conference. But it was too late. If Australia had adopted a more positive approach well in advance of the summit, rather than conveying an impression that it was doing everything possible to avoid the mention of climate change in Brisbane, it could have latched onto the US-China deal on emissions and presented the Brisbane G20 Summit as an important step in building momentum for next year's UNFCC negotiations.

So for all the good work Australia did as G20 chair in 2014 and the substantial outcomes from the Summit, it missed an opportunity for Brisbane to be presented as a major success across all fronts, rather than being overshadowed by the US-China agreement.

It's a pity, because in every other way Australia had a successful G20 year.