Prime Minister Morrison was invited (for the third time) to the G7 summit along with India and South Korea. A sign that the G7 are bringing together the great economies that can be trusted.
It implies a growing solidarity of western-style economies and nations against Beijing, which has shown its willingness to use trade as a coercive weapon instead of an abide-by-the-rules based international economic system.
While the Prime Minister’s speech to the gathering again called for an investigation into the origins of the covid19 virus – as Greg Sheridan points out – his real solution to trade coercion was for countries like Australia to secure supply chains in all the things that count: new tech, artificial intelligence, machine learning, rare earths, medical equipment and so on.
Each nation can’t and shouldn’t make everything, but a reliable supply chain means manufacture by a reliable country that doesn’t engage in trade coercion and hopefully shares key values and interests with us. The more meaty bits of the speech effectively talk of trade, and the world, being divided between countries you trust and countries you don’t trust.
Australia’s problem arises because we not only trade with China, we have become dependent on China being our major trading partner. For the moment, our exports of iron ore are earning record trade dollars for Australia, and this pays for the vast array of manufactured goods we no longer produce but import.
The real solution for Australia is to decouple from China, for economic and strategic reasons.
While Morrison’s big spending budget will stimulate our economy, the government should have focused this spending on building strategic industries that ensure the nation can continue to function, should our global supply chains be threatened or cut by a major regional conflict or another pandemic. (See post below, “Just how vulnerable is Australia? Very.”)
Again I emphasise, to that end, the NCC’s Time to Build Campaign, based on the NCC’s recent White Paper Manufacturing: Double production by 2035, calls for Australia to declare the strategic industries that are needed both to defend the nation and to ensure economic survival and sovereignty in the face of an international crisis.
Given our defence and supply chain vulnerabilities, I outline the strategy Australia needs in my recent post: NOW is the time to stop riding on short-term economic policies.