Yahoo Finance 4 ways India can solve Australia's China problem: Tony Abbott
There’s no easy fix for Australia’s trade issues with China – but stronger ties with India could be the solution to our over-reliance on the Asian superpower, former Prime Minister Tony Abbott believes.
Abbott, who is Australia’s special trade envoy to India, visited the world’s second-most populous country last week to meet with Indian ministers, and business leaders to strengthen the economic relationship between the two countries.
And with Canberra’s currently frosty relationship with Beijing showing no signs of thawing, we should concentrate our efforts on India instead, Abbott believes.
"The answer to almost every question about China is India,” Abbott wrote for The Australian today. “India is perfectly placed to substitute for China in global supply chains.”
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Here’s why he thinks India can not only replace China, but do an even better job:
1. India isn’t as threatening as China
Abbott described China as becoming “more belligerent almost by the day”. Beijing placed several trade sanctions on Australia last year in moves that were widely interpreted as political punishment for Scott Morrison’s calling for an independent inquiry into the origins of COVID-19.
It was a mistake for us to create such close trade ties with China, said Abbott.
“The basic problem is that China’s daunting power is a consequence of the free world’s decision to invite a communist dictatorship into global trading networks. Back then, the assumption was that rising prosperity and more economic freedom would lead, eventually, to political liberalisation too,” he said.
“But the current capricious boycotts of Australian coal, barley, wine and seafood show that, for the Beijing regime, trade is used as a strategic weapon.”
Australia’s wine export values are expected to plummet by $480 million in 2025 if the industry doesn’t find new markets, according to government figures.
Meanwhile, India and Australia are both “like-minded democracies” with a relationship that is growing closer and ought to be further developed, according to the former Prime Minister. Australia is already conducting naval exercises with India alongside the US and Japan.
2. We’re too reliant on China, who has ‘exploited’ us
Global trade links have become too tied with China, which now should be viewed as a political adversary rather than a strategic partner, Abbott indicated.
“China has exploited the West’s goodwill and wishful thinking to steal our technology and under-cut our industries; and in the process, become a much more powerful competitor than the old Soviet Union ever was,” he wrote.
The Asian superpower is now a “first rate economy” in the process of developing a “military to match”.
“The pandemic has put up in flashing neon lights the extent to which the world has become dependent on Chinese imports, including in critical supply chains, that can be turned on and off like a tap.”
But India is well-poised to take China’s place, Abbott said.
“Although currently not as rich as China, as a democracy under the rule of law, and as the world’s second-largest producer of steel and pharmaceuticals, and with its own version of Silicon valley, India is perfectly placed to substitute for China in global supply chains.”
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3. We already have a lot in common with India
Abbott drew on commonalities between Australia and India, describing the two countries as “natural partners” with troops that fought together at Gallipoli, in Malaya and at El Alamein.
The former prime minister also pointed out that nearly a million people with an Indian background now call Australia home.
“We are big and sophisticated enough to be useful but not so big as to be intimidating. Unlike others with India, we don’t have to live down a fraught history,” Abbott said. But there’s more work to be done, he said.
“Our challenge is to overcome India’s traditional protectionism, and the tendency to see trade talks as a zero-sum game, in order to seal a deal that will make the world safer for democracy.”
4. Australia already has a solid trading relationship with India
Australia's strong trading relationship with India need only be strengthened, Abbott believes. India is Australia’s seventh-largest trading partner, and has a working trade relationship despite various trade tariffs.
For more than a decade now, India has placed 150 per cent tariffs on Australian wine exports and a number of tariffs on wool exports, as well as a double taxation to the tune of $35 million a year on Aussie online services delivered from India.
But the two countries are now working on an ‘early harvest’ trade agreement in efforts towards establishing a closer trade partnership, Abbott said.
For instance, Australia can increase the number of students sent to study abroad in India and could “readily replace China” regarding India’s demand for rare earths and minerals. India is also currently implementing a “spectacular infrastructure program” that could afford Australian investment funds with long-term opportunities, he added.
“With this pandemic accelerating changes to the world order, there’s a wider resonance to Australia’s efforts to give India a leadership role among the great democracies,” Abbott said.
“If Australian businesses and officialdom were to make the same effort with India that they’ve long made with China, there’s potential for a ‘family’ relationship with India that was never likely with China, especially under the party-state.”
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