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The grand bargain fine-print


Graeme Dobell

21 July 2011 16:03

Here is some draft (not daft, please) text and explanation of what this column has grandly named the Australia-China Pact of Engagement, Amity, Cooperation and Economic Partnership. The PEACE Partnership is an attempt to capture the ambitions and the adventures involved in a grand bargain between Australia and China. That bargain has to reflect political and strategic needs as well as trade rules. 

As the previous column argued, the aim of the treaty will be to shape the way two extraordinarily different peoples and polities think about each other. The central proposition is the need to re-frame key language and the habits of mind as well as frame big policy interests. 

Australia and China need to move beyond the language of 'mutual respect' towards the uplands of cooperation, understanding and trust. For Australia and China, 'mutual respect' has been the phrase applied to hose down or step around serious and intense arguments. Mutual respect is what Canberra seeks in confronting diplomatic firestorms or when claiming the right to be 'clear and robust' in talking about sensitive subjects such as human rights.

Mutual respect tends to be invoked as the minimum standard. It has become an oft used phrase, encompassing everything from 'don't push me' to 'get off my policy' to 'you're hurting my economy as well as your own interests'. Thus, it is significant the phrase has had such prominence under the Howard, Rudd and Gillard governments.

In much the same way, the two nations need to shift beyond a 'relationship' to a partnership. This is an extraordinarily profitable 'relationship', but it has had its abusive side. The partnership aspiration is about mixing a lot more understanding in with the profit motive.

The grand bargain idea gets much of its inspiration from Professor Peter Drysdale. Taking ideas from Peter has been standard procedure for decades, whenever trying to write about the geo-economics of the Asia Pacific. As always, though, Peter is entitled to an all-care-no-responsibility disclaimer. He is ever-careful in offering his inspiration; the way I have used it is completely my responsibility. All blame and shame (including naming rights) for the PEACE Partnership resides with this column.

The PEACE Partnership draws on the NARA Treaty (the Nippon-Australia Relations Agreement), the 1976 Basic Treaty of Friendship and Cooperation and Protocol, the 2005 Joint Declaration on Comprehensive Partnership between Australia and Indonesia and the 2006 Australia-Indonesia Framework for Security Cooperation

Perhaps most importantly, the PEACE Partnership seeks to draw the positives from a gritty and hard-won document, the 2009 Australia-China Joint Statement. The Statement achieved a ceasefire in a bruising diplomatic spat between China and Australia. The ceasefire gave 'mutual respect' a good workout, but also underlined how much Australia and China can possibly do together. The purpose of the Joint Statement was to end a diplomatic war; the PEACE Partnership would be the creation of calmer times, embedding basic understandings in a highly visible statement of intent and interests.

When things get tough again, as the inevitably will, future ceasefire language can reach higher than mutual respect. The treaty can also take inspiration — and lots of language — from Kevin Rudd's ruminations on the need to engineer the next stage of the partnership, 'Australia-China 2.0', so the two countries can get the most out of the glorious possibilities of the next 30 years.

The ceasefire statement, hammered out two years ago at a time when tempers were high, can provide the words for the opening of the Pact before picking up the broader sentiments of the NARA and Indonesian approaches. Beyond the heartfelt affirmations of friendship, the treaty will fall into two halves. Engagement, Amity and Cooperation will do broad principles and range over everything from politics and people-to-people contact to the bilateral dialogue on human rights to a restatement of Australia's One China commitments. 

The Economic Partnership half will cover the achievable nuts and bolts that are on the table after six years of negotiation for a free trade agreement. Thus, the draft offers a suitable florid preamble and then some thoughts on the deals to be done.

Pact of Engagement, Amity, Cooperation and Economic Partnership — Australia and China

Sharing the view that cooperation between Australia and China has great potential and prospects for a new era of Partnership,
Committed to bringing their two economies and peoples ever closer together,
Agreeing that stronger cooperation contributes to peace, stability and prosperity in the Asia-Pacific region and the world at large,

Affirming the spirit of friendship and co-operation on which relations between the two countries are based, and wishing to place their relations on an even closer and more concrete basis,
Resolved to provide wider opportunities for their governments and their peoples to work together in a spirit of understanding on matters of mutual interest in the political, economic, trade, commercial, social, cultural and other fields,
Convinced of the importance of strengthening and diversifying their relations on an equitable and mutually advantageous basis in a long-term perspective,
Building on the vital trade in minerals and fuels, and determined to cooperate to develop sophisticated services in areas such as in education services, banking, financial and wealth management, architecture and design, green technologies and tourism,

Australia and China have resolved to conclude a Pact of Engagement, Amity, Cooperation and Economic Partnership. 

Engagement, Amity and Cooperation

The two nations resolve to properly handle differences and sensitive issues in accordance with the principles of partnership, non-interference and equality, and take concrete measures to safeguard the overall interests of the sound and steady growth of China-Australia relations.

This article is straight from the 2009 ceasefire statement, but 'partnership' takes the place of 'mutual respect'. The Engagement articles can be where Australian reiterates its one-China position on Taiwan and expresses respect for China's sovereignty and territorial integrity (specifically mentioning Tibet and Xinjiang). Equally, the treaty can give formal expression to the the bilateral dialogue on human rights.

Engagement and Amity can be the catch-all area for all sorts of bits that can be both building blocks and points of difference, from China's 'new security thinking' to the role of multilateral institutions such as the G20, APEC, the East Asia Summit and the ASEAN Regional  Forum. Australia's strategic dialogue with China — and quest for some military transparency from Beijing — can have a prominent part in these big picture elements. The language of defence cooperation may not be as effusive as that used between Canberra and Jakarta, but the discussion with Beijing of the ambition and ambit of such a treaty element will be deeply interesting.

Economic Partnership

Recognising that strong economic complementarity of the two nations, it serves the common interests of both sides to advance economic, trade and investment cooperation on the basis of reciprocity and mutual benefit. Australia is a long-term stable supplier of mineral and energy resources to China. China is a competitive supplier of goods to Australia. The two sides will continue to conduct mutually beneficial trade in accordance with market principles. The two nations reaffirm their commitment to open trade and investment policies, opposition to protectionism in all forms and support for the workings and principles of the World Trade Organisation.

The heart of the NARA treaty was a set of assurances about Most Favoured Nation status (no country will get a better deal) and people movement (no other country will get a better deal). Despite all that has happened over the last 35 years, these issues still raise vital questions. China will never give Australia a better trade deal than it will to others. So MFN would be a useful check (and future cheque) for Oz. We want as much assurance as we can get that China will not discriminate against us.

The stutters and dramas over Chinese investment in Australia are only going to intensify. Canberra has not always played its strong hand on foreign investment as smoothly as it should. The treaty will be the place to embed as much explicit language as China needs about the Foreign Investment Review Board and the Foreign Acquisitions and Takeovers Act. The 2009 Joint statement is a good starting point for these articles:

Australia states in the clear terms that it welcomes investment from China, as China welcomes investment from Australia. Australia sees China's increased investment interest as a positive development that will further consolidate the Partnership. Both sides will adopt active measures to facilitate trade and investment cooperation between enterprises of the two countries.

And that brings us to the six-year agony of the free trade negotiations. To comprehend the pain, consider this record of the 15 rounds of talks. The 15th bout happened in July last year, so they haven't even bothered to do formal combat for a year. Australia gave China what it really wanted to launch the talks — recognition of China's status as a market economy. Having won that, Beijing sees no need to give much in return. 

Whatever has been agreed during the negotiations can be salvaged and enshrined within the grand bargain of the PEACE Partnership.