Canberra quenches Beijing's energy
thirst By Purnendra Jain
HONG KONG - No other country today appears
to be more important in Australia's diplomatic and
political calculations than China, at least for
commercial purposes.
In the past five
years Australia-China trade has grown
exponentially, making China Australia's No 2
trading partner after Japan. The two-way trade
that was worth A$14 billion (US$10.4 billion) five
years ago had almost trebled by 2005, reaching
close to A$38 billion. Last year alone there was
more than 40% growth over the previous year. If
the present rate of growth continues, China will
soon overtake Japan as Australia's top trading
partner.
The growth in trade is primarily
driven by China's vast appetite for natural
resources, of which Australia has emerged as a
key
supplier. Iron ore alone
accounted for about one-third of Australia's total
exports to China last year. While Australia also
supplies coal, copper ores and other resources to
China, one of the biggest-ticket items from now on
will be liquefied natural gas (LNG).
In
October 2002 Australia signed a historic agreement
with China to supply LNG worth A$25 billion over a
period of 25 years, Australia's largest single
trade deal ever with any single country. Under
this contract at least $1 billion worth of LNG
from Australia will arrive annually, on average,
in China's southern province of Guangdong, starting this
month. This will certainly make the two-way trade
even larger, and prospects for further deals
exist.
Given China's top position in
Australia's diplomatic hierarchy and economic
importance, it is no surprise that Prime Minister
John Howard made a brief visit this week to the
southern city of Shenzhen - China's first special
economic zone and one of the world's
fastest-growing cities - to inaugurate a gas
terminal in Dapeng that will process Australian
LNG. The first shipment of Australian LNG, from
the Northwest Shelf field off Western Australia,
arrived at the Dapeng terminal late last month.
While LNG will help to satisfy China's
rising and unending demand for energy, it is also
considered a cleaner fossil fuel than oil or coal.
China is keen to reduce its dependence on coal,
which creates greater environmental damage than
gas, and wants to cut back on high-priced oil.
Australian LNG is thus highly welcomed, not only
by Beijing but also by both Guangdong and Hong Kong authorities, as
the latter very often would blame polluting
industries across the border for much of Hong
Kong's terrible air pollution.
Chinese
Premier Wen Jiabao was also present to greet his
Australian counterpart and to celebrate the
occasion. Wen commented that the LNG project was
"only the beginning" of a new relationship between
China and Australia. Howard declared the occasion
"a momentous one in the economic relationship
between Australia and China", and "not only is
this deal the biggest ever in Australia's history,
it is in every sense a symbol of what can be
achieved in the future between our two countries".
These remarks by the two leaders indicate grounds
are being prepared for further strengthening of
the bilateral relationship.
China's demand
for energy is so great that fossil fuel alone will
not be sufficient for its industrial development.
A new and controversial source on the energy
agenda is nuclear power. China is far behind on
nuclear power, for instance, compared with Japan,
where there are some 50 nuclear power plants in
operation. Currently China has only nine civilian
power plants, though it is planning to build 30
more in the next 15 years or so.
Fuel for
these power plants will most likely come primarily
from Australia, which holds some 40% of the
world's uranium deposits. During Wen's visit to
Canberra this year the two countries signed a
landmark agreement allowing Australia to supply
uranium to China.
China is not the first
Asian country to demand Australian resources to
supply its expanding industries. Indeed, Australia
supplied huge amounts of natural resources to
Japan to fuel its postwar industrialization. The
two nations, enemies during World War II, became
great allies in subsequent years. Japan today
remains Australia's largest trade partner, an
all-weather friend that shares values with
Australia in a wide range of areas, including
defense and security issues.
However, it
is highly questionable whether Australia-China
relations will, or can, follow a similar path to
that of Australia-Japan relations. China's
political system and its values and institutions
have little in common with those of Australia.
Australia's readiness to supply natural
resources to fuel China's growth is of course much
welcomed by the Chinese political leadership as
well as the business community. Not only is
Australia a stable and reliable source of supply,
but Canberra has also expressed few concerns about
China's rising military strength, its expanding
economic power and growing political influence
throughout the world. It is not surprising that
China is very keen to sign a free-trade agreement
with Australia, for which negotiations are
underway at the official level. If signed, a
China-Australia FTA would become China's first
free-trade deal with a developed economy. Both
leaders talked about the matter during their brief
meeting in Shenzhen this week, but no concrete
progress was made.
Concerns have been
raised both within Australia and elsewhere about
Australia's decision to supply uranium to China
and its rather muted response to China's growing
military power. But the current leadership in
Canberra views China in a different light from
Australia's major allies and partners. While both
the United States and Japan have expressed
concerns about China's rapid development in
modernizing its military and have raised doubts
about the country's strategic designs both in the
region and beyond, Australia is almost unconcerned
about China's rising power. Canberra is seemingly
so fixated on China that it does not perceive any
problem with supplying uranium to an authoritarian
and communist state while at the same time
refusing to supply it to India, a democratic state
that shares far more of Australia's core values.
Following an independent line in foreign
policy is Australia's sovereign right, and the
country must pursue its national interest. But as
a democratic nation with a long tradition of
liberal values, it must also make sure that its
key commercial partners share those values and
establish institutions that promote and nourish
those values. China certainly does not fulfill
these criteria, at least not yet.
Australia under John Howard and his
foreign minister Alexander Downer is treading a
dangerous path with its uncritical support for
China, and it is time for the country to take
stock of its foreign-policy priorities and strike
a more appropriate balance between pragmatic and
principled diplomacy.
Purnendra
Jain is professor and head of the Center for
Asian Studies at Australia's Adelaide University
and is currently a visiting academic at the
Chinese University of Hong Kong.
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