Mark McGowan may soon have to grapple with the big political and economic equation facing WA.
Mark McGowan is rightfully enjoying peak popularity at home but it could soon be a different story for the Western Australian premier because of international events which threaten to burst the state’s comfortable cocoon of isolation and strong economic growth.
A whiff of what’s to come drifted across the border from South Australia last month at the opening of a controversial Chinese consulate in the suburbs of Adelaide, which triggered a noisy protest against China and SA Liberal Premier Stephen Marshall.
Most of the shouting came from supporters of the Uyghurs, an ethnic minority group in western China, which is widely reported to be suffering a form of ethnic cleansing.
But it’s what came after the consulate opening which was more important because a former SA trade minister, Tom Kenyon, who is a member of Mr McGowan’s Labor Party, called for the cutting of ties with China.
Mr Kenyon’s views carry weight because when he was a minister (until 2018) in the government led by Jay Weatherill, he championed ties with China, and trimming links with other countries, to develop closer connections with China.
What’s happening to the Uyghurs, plus China’s trade embargoes against some Australian exports and the breaking of a deal guaranteeing a form of independence for Hong Kong, have changed Mr Kenyon’s opinion of China.
Speaking in Adelaide, he said it was time to pull back because it was obvious China did not share the same values as Australia.
More importantly, he drew a comparison between the unacceptable behaviour of China and its “wolf warrior” diplomats, and Australia’s long-term relationship with the US.
Mr Kenyon said the days of having strong trading connections with China and a strong political friendship with the US was coming to an end.
“We no longer have that luxury,” he said.
“Australia needs to begin disengaging economically from China or, at the very least, limiting our exposure to the Chinese economy.”
Proposing a decoupling from China because of its bully-boy tactics is easy for a politician from SA, a state with limited direct trade links and those which it does have, especially wine, meat, barley and seafood, have already been hit by illegal Chinese trade sanctions.
Mr McGowan would find it difficult to agree with his Labor Party colleague from Adelaide that breaking away from China to make a moral point makes sense for WA, with its heavy reliance on China as a customer for the state’s minerals and metals.
But when Mr Kenyon compared the wide difference between Australia’s relationship with China and that with the US it will have rung alarm bells in the WA government because it wants to keep the two international relationships as far apart as possible.
The problem for Mr McGowan is that he is walking a tightrope between economic benefits and moral values and, while he might be able to perform that trick for a little longer, he will be hoping for a change in the way China behaves because there is an overdue day of reckoning – a fall in the price of WA’s principal export, iron ore.
When the iron ore price returns to a more normal setting of somewhere between $US50 and $US70 per tonne (more than half what it is today) then Mr McGowan will discover what a tight grip China has on the WA economy.
As the grip tightens it is extremely unlikely China’s wolf warrior diplomats will behave in a more diplomatic way, opting instead to step up their demands that countries such as Australia kowtow to demands of obeisance.
Mr Kenyon’s change of mind about China is an important shift for a left-leaning Australian politician who once saw China as a natural trading partner for his state.
But when China launched a direct attack on SA’s important wine industry it was a step too far, compounded by doubts about exactly why China needed a 5,600-square metre compound in the Adelaide suburbs when it was cutting back on trade with Australia.
The only answer to questions about the mega-consulate is that China wants to be close to the centre of Australia’s defence industry, especially the Woomera rocket range, which is frequently used by British and US forces for testing military equipment.
Until now no-one has questioned why China has a sprawling consulate in East Perth when the US needs a few floors in a central city office block.
The reason for the big Perth consulate is the same as the Adelaide delegation, with the focus of Chinese attention in WA not so much on trade but more on the Garden Island naval base, which is a calling point for US Navy ships.
As things stand today, Mr McGowan does not have to make a choice between China and the US. He can option is to side with the US, it would be wise to start doing what Mr Kenyon suggests: limit Chinese ties and bolster relationships with more civilised countries.
Rio storm in US
The last thing Rio Tinto needed after the bad publicity associated with the destruction of the Juukan Gorge Aboriginal site in the Pilbara was a re-run of the incident, though that’s what appears to have been happening in the US.
In a world where communications are instantaneous and global mining companies have become lightning rods for protest groups, it should not be a surprise to discover that the Juukan incident has a look-alike developing at Oak Flat (near Phoenix, Arizona), which is part of the Resolution copper joint venture between Rio Tinto and BHP.
Until last year an Apache tribe opposed to the mine had received little publicity but after Juukan Gorge it was able to make waves everywhere, including Rio Tinto’s hometown of London.
In a remarkable pictorial display, which would have horrified Rio Tinto’s London-based directors, the colour magazine of The Financial Times newspaper splashed page after page of the countryside around Oak Flat, complete with soaring eagles and delicate butterflies.
But it was the headline which galvanised opinion about what Rio Tinto and BHP are planning with their copper project: “Don’t murder this place: the sacred Native American land at risk.”
Going south on deal
South32, the Perth-based miner which was launched a few years ago with a fistful of BHP leftovers, might have just won the booby prize for the worst ever mining deal.
Rather than sell a South African coal mining business, which was the plan when the process started 18 months ago, South32 has been forced to pay the buyer more than $200 million to get the assets off its books.
Coal, of course, is not flavour of the month, and South Africa is not a favoured investment destination, so when the two are combined the effect is toxic and expensive – perhaps something BHP knew when it offloaded the assets.
