Celebrity Jacinda’s pig mistake

Trans Tasman Relations Observed, by Colin Chapman

Man, woman, person of the year has become a rather tiresome exercise in many countries across the world, including Australia. Yet media and public relations folk seem to like it, so like many other awards, the practice will continue its weary way. Once, when presenter of BBC TV’s The Money Programme, in the grand surroundings of London’s ancient Guildhall I hosted the final of the UK Small Business Award. The judges included some of the City’s foremost including Sir Jeremy Morse, chairman of Lloyds Bank and the most successful banker of his generation, and Sir Kenneth Cork, a cebrated corporate liquidator and one time Lord Mayor ofLondon.

To my dismay, and to the sure disbelief of our live viewers, they picked a rank outsider called Grease-Eaters. As the name suggests, the company made its living by removing grease from industrial plant. Within six months the firm was bust.

Recalling this, my train of thought turned to the best known of these annual awards, Time Magazine’s Person of the Year. In mid 2020, Time’s editors must be wondering who on earth to put on the shortlist.  Is there a world leader worthy of the title?  Or a business chief whose multi-billion corporation is paying its proper taxes?  Or a celebrity who has more substance than hype (and is not a ubiquitous cooking show host)? 

Time has made some strange choices in the past, so readers (who will soon be asked for their nominations) need not be too fussy. Picks have included many US presidents (but not Trump), very few from the Indo-Pacific, with China’s president Xi Jinping managing only to become a runner-up in 2017. There have also been some odd choices – Adolf Hitler in 1938, just one year prior to the declaration of World War II; Joseph Stalin, twice, before and after the war. These decisions were redressed in 1949 when Winston Churchill was chosen as the Person of the Half Decade. Since then there have been peacemakers, entrepreneurs, astronauts – all manner of people. More recently Time editors have gone for trendy people with short-lived reputations, like Greta Thunberg, the 16-year-old climate change activist from Sweden, who was chosen in 2019. 

So, who will be the 2020 Person of the Year?  Certainly not Donald Trump, for the simple reason he could be out of office by then, hopefully. Nor Boris Johnson – he’s told too many lies. Macron’s star is fading – and Time’s editors are not francophiles.  Which brings me, belatedly, to the point. One person who repeatedly in the news this year, and widely admired, is none other than Jacinda Ardern, 40th prime minister of New Zealand, who is in her 40th year. Ardern’s government has been one of the world’s most successful in containing the coronavirus, with her leadership widely praised in global media. She is expected soon to announce New Zealand is clear of the virus.  Of course, her strength and single-minded determination is to be admired, especially when compared with the hopelessness of Trump and the disingenuous Boris Johnson, whose ‘world-class’ test and trace system is his latest failure.

But some of our Australian readers have expressed irritation at the acclaim bestowed on Ms Ardern, one complaining she always appears to be smiling, with ultra-white molars gleaming.  Coalition supporters have groused that the same credit does not appear to have been accorded to Scott Morrison, whose firm handling of the pandemic has saved Australia from the kind of disaster now prevalent in the United States and Britain, achieving a parallel result to New Zealand but in a more metropolitan country.

This is factually correct. Australia has recorded the same number of deaths – four per million population – as New Zealand. In terms of cases per million, Australia has done better, only 285 cases per million, compared with 301 per million in NZ. (Compare with the UK’s 333 deaths and 5817 cases per million and the US’s 588 deaths and 4151 cases per million). The high death rate in British care homes may explain these figures. 

For those Australians who wish to indulge in a little trans-Tasman schadenfreude, I can report that Ms Ardern is not without some stern critics in her homeland, who have pointed out that she has allowed herself the occasional snarl, though seldom in front of the cameras of course. 

Ardern, daughter of a policeman, hails from the Kiwi’s metropolis of Auckland and, say her critics, is essentially an urban girl who favours the big supermarkets staffed by union members rather than the small shopkeeper. They cite the case of the prime minister deciding to shut down retail butchers as part of the national lockdown, a strategy that resulted in supermarkets becoming the major supply source for most of those who eat meat.

According to the New Zealand Taxpayers’ Union, pig farmers with unfulfilled contracts to supply independent butchers were unable to sell their stock, leaving them with a severe animal rights problem. Ardern’s ministers rejected her officials’ advice that retail butchers should be allowed to reopen. With a surplus of up to 5,000 pigs on farms every week, the Wellington government agreed to buy up to 2,000 pigs for processing and distribution to food banks. But they were not to be sold to the public. The scheme has a budget of $NZ 14.9 million. 

Yet the arrangement only covers 40 per cent of the surplus. The Taxpayers’ Union’s chairman says, in a note, “The other 60 per cent have to be destroyed. What a waste! Everyone knows how the life of a pig on the farm will end. Pigs are smart and sociable creatures and deserve to be treated with respect. When they do make the ultimate sacrifice, it should be for something noble like a bacon sandwich. Instead, 5,000 pigs a week are being killed for nothing. Where’s the kindness in that?”

My source tells me “They [the Ardern government] got so many things right so their failure to adjust their policy was seriously unfortunate and expensive. To me, the ministers’ decision reflected their seriously urban perspective on life. Doesn’t everyone go to supermarkets?    Answer no”.

The story would warrant a whole episode in my granddaughter’s favourite television series Peppa Pig, but for its tragic ending.

© AustralianStrategies.org. 2020. All Rights Reserved

China-Australia Relations UPDATE

Leading British Tories have joined the European Union in backing Scott Morrison’s call for an independent international inquiry into the origins of the coronavirus pandemic in Wuhan,China. So far prime minister Boris Johnson has not joined the chorus.

The BBC devoted much of its flagship Newsnight current affairs program to China’s flagging international relations, its bullying tactics against Australia, and changing Chinese policies since the leadership of chairman Xi Jinping.

Those supporting Morrison included Lord Patten, a former Conservative party chairman and one-time European commissioner, George Osborne, former chancellor of the exchequer and now editor of the Evening Standard, academics and former Australian prime minister, Kevin Rudd. 

Patten, Britain’s last governor of Hong Kong, was the most critical of the Chinese regime, accusing it of bullying Australia and lying during the early days of Covid-19. Rudd noted that the West was enthusiastic about relations with China prior to the ascent of Xi, but Chinese policy since then had induced increasing unease. 

European Commission president Ursula von der Layer

The European Union, unhappy about United States president Donald Trump’s antagonism with China, nonetheless strongly supports the need for a full independent inquiry. Ursula von der Leyen, the head of the EU’s executive arm, the European Commission, said she would like to see China work together with her organization, and other s, to get to the bottom of exactly how it emerged. She told broadcaster CNBC:

“I think this is for all of us important, I mean for the whole world it is important. You never know when the next virus is starting, so we all want for the next time, we have learned our lesson and we’ve established a system of early warning that really functions and the whole world has to contribute to that”.

Australia will continue to press its case, despite some misgivings from some academics, notably Nick Bisley. professor of international relations at Melbourne’s La Trobe University, China will not lightly ease up its bullying of Australia. The Chinese economy contracted 6.8 percent during the first quarter, and it won’t rebound quickly. Mr Xi needs a distraction.

Listen to BBC full interview with Tom Tugendhat.

You may also find interesting:

Kevin Rudd on the Australia-China relationship

NB We apologise for being off line for several days. There were hundreds of cyber attacks on australianstrategies.org. If any country, company or individual take exception to our content, we invite them to post a comment, please post a comment; we believe in freedom of speech.

Happy landings unlikely in Virgin’s flight path

by Australian Strategies sraff

The Queensland government has been mulling  over buying or taking a stake in the wreckage of Virgin Australia – this according to Nikkei, Japan’s news agency, one of the world’s more reliable sources of news.

Not much of a surprise there. The state government is desperate to keep the corporate and technical base of what it hopes will remain Australia’s second airline, based in Brisbane.

One should never underestimate the ability of the Palaszczuk government to spend money like a drunken sailor – witness $4.2 billion of Queensland taxpayers’ money to the Carmichael mine.  

It beggars belief that elected ministers could consider taking such a big risk as putting public money down a rathole like Virgin Australia which has over $6 billion in debt. Or that the government could run an airline, when there already is a successful one – the Queensland and Northern Territory Air Services, or QANTAS for short.

To be fair, the state-owned Queensland Investment Corporation appeared to have realised it was digging a hole for itself not long after Cameron Dick, state treasurer,  was reported as saying it was thinking of taking an equity stake.

In practice there are now only four shortlisted potential bidders for VA, all of them overseas based; two of them have already been involved in failed airline rescues. The Queensland government is now likely to hitch its wagon to whichever one, if any, gets the final nod from Deloitte,  Virgin Atlantic’s administrators, to put a detailed package to the creditors next month.

Several bidders are consortia or private equity groups, but those named on May 18 do not show existing shareholders – Singapore Airlines, Etihad, two airlines from China or Richard Branson’s Virgin Group — as lead bidders, nor any other airline of note.

The two potential bidders involved in airlines that collapsed or needed government support are New York-based investment fund Cyrus Capital and Indigo Partners.  Indigo is owner of an American budget carrier, Frontier Airlines, and the Hungary-based Wizz Air. Both airlines have had government bailouts. Cyrus Capital has been active in the airline sector, partnering with Richard Branson in the launch of Virgin America before it was sold to Alaska Air. It was also involved in talks to bailout UK airline FlyBe before it fell into administration last year.

So, the question now being asked is could any of these potential owners keep the airline going, or even gather together enough money to satisfy the creditors?

It’s doubtful. First, Virgin Australia is running out of cash. The $100 million it has may not be enough to keep even the very limited operations going until one of the four shortlisted bidders – or another white knight – has done its due diligence.  Its fleet needs reshaping for whatever future a new owner has in mind and, inevitably, some of its planes will be surplus to requirements. (Right across the world there are newer and better aircraft for sale or lease at knockdown prices).

The airline will need a new management. Virgin Australia was already in financial trouble during the years when it was run by the affable John Borghetti, a man of smooth talking and excessive optimism who bid to challenge Alan Joyce’s Qantas for the profitable business market, and seduced much of the Australian mainstream media. Aviation and travel journalists extended the same indulgence to Borghetti’s successor, Paul Scurrah in fairness, Scurrah  probably arrived too late to staunch the losses, while also having to deal with five major shareholders, and grasp the complexities of fighting a formidable foe in both domestic and international markets. Scurrah made mistakes, like selling off 65 per cent of VA’s frequent flyer program, Velocity. As Joyce was turning Qantas round from huge losses to profits, Scurrah piled up debt of over $6 billion.

Virgin’s new owners will not be short of outside advice. One of those with significant airline experience is Melbourne celebrity businessman Sir Rod Edington, chairman of JP Morgan Australia and Infrastructure Australia. Edington ran British Airways when the UK flag carrier was the self-styled ‘world’s favourite airline’, competing with Richard Branson’s Virgin Atlantic on the lucrative routes between London and the United States.

Edington, who inherited BA’s hugely successful Executive Club program – which was the model for the Qantas Club – made extensive use of the data about the airline’s customers. ( I was to write about it in a book I co-authored at the time The Intelligence Edge).

As Sir Rod was recently to tell the Sydney Morning Herald: “It was a crazy idea. They (Virgin Australia) bought it back at what turned out to be an expensive time, but by selling it they put themselves in harm’s way. Your frequent flier program has all your customer IP, it’s  the heart of your business, it tells you what customers like and what they don’t like”.

Sir Rod, who also once chaired Ansett and was on Rupert Murdoch’s boards, told the paper if he was in charge he would dump Virgin Australia’s international business, and then make a decision whether to return to the Virgin Blue model of a low-cost, no-frills airline with a single aircraft type or become a full service domestic carrier focused on profitable routes.

The problem with either of these strategies is their implementation. The first would pit a re-emerged VA directly against the Qantas-owned highly successful Jetstar, built by Alan Joyce before he took over the helm at Qantas.  The second option confronts the same problem: despite some weaknesses in the standard of QF’s ground services, it is tough competition. Moreover, Joyce has shown himself to be a better airline manager than Edington ever was.

Edington himself was personally responsible for one of BA’s biggest strategic mistakes. Before he took over, BA’s Go, a cut-price airline operating from London’s newly emerging third airport at Stansted, was run by the American Barbara Cassani.  Go was a classier version of what we know as Jetstar, not unlike America’s Jet Blue. It quickly established itself with a network of routes across Europe, competing with Michael O’Leary’s Ryan Air.

Instead of seeing Go as a valuable addition to BA, which dominated at London Heathrow, Edington saw it as an unwelcome competitor, possibly eating into BA’s profits. (There was no doubt Ms Cassani was a skilful operator and a brilliant marketeer.)  Edington sold Go for £100 million to a private equity management buyout involving Cassani.

Ryan Air went on to dominate Stansted and is now Europe’s largest airline. Cassani was later instrumental is selling on Go to Easy Jet, which is also one of Europe’s largest carriers, and dominates London’s second airport at Gatwick. Between them they operate 3150 routes in Europe. Last year EasyJet carried more than 28 million passengers, outstripping both Ryan Air and BA.

Of course, leaders cannot always get strategy right, and Rod Edington’s time at BA was not the success some claim. Had he kept Go and Cassani, it may have been different. But the real loser was Branson. He could have picked a female to run all three of his airline brands, and Qantas would likely have a competitor worthy of the name.

© Australian Strategies, 2020. All Rights Reserved

Time to reset China relationship

by Colin Chapman

Australia and China need to stop bickering with each other. In this chapter-by-chapter spat, it is easy to see Beijing’s Communist Party chiefs as relentless bullies, using the kind of tactics so beloved by Donald Trump: threatening lesser fry, offering a smattering of charm, and then racking up the threats again.

The latest episode coincides with the publication of a letter from a bipartisan group of members of the American Congress to Arthur Sinodinos, Australia’s envoy to Washington. This follows Scott Morrison’s sensible call for an independent international investigation into the origins of the coronavirus in Wuhan, China.

The senators and representatives on Capitol Hill not only backed the prime minister but issued an angry ripost to the Chinese threat.

“We unequivocally oppose this behaviour and strongly support Foreign Minister Marise Payne’s rejection of ‘any suggestion that economic coercion is an appropriate response to a call for such an assessment’ “, the letter said.

The latest Chinese threats come from Beijing’s trade officials who seek to impose a 73.6 per cent tariff on Australia’s barley exports, an increase of almost 50 per cent, calculated to cause $600 million worth of damage to Australian farmers, and diverting business to Canada.

Australian barley exports hit by higher tariffs, beef hit, but coal still the big earner

Less than 24 hours later, on May 12, Beijing’s bully boys came up with another hit – suspending imports from four of our leading beef processors. China’s ambassador to Canberra had earlier threatened to ban beef imports from Australia as a reprisal for Morrison’s call for an independent inquiry into the origins of the Covid-19 epidemic. China’s foreign ministry cited violations of quarantine and customs regulations, but provided reporters with no details. In the same breath, an official spokesman also attacked Morrison’s pursuit of a coronavirus inquiry.

China’s bullying tactics, while escalating, are not new. Several years ago, when I was president of the New South Wales division of the Australian Institute of International Affairs, hosting a delegation of Chinese Communist Party officials, I was told Beijing believed Chinese students should not be answerable to Australian law, but to China’s. 

Even so, Australia’s trade officials are not faultless. Despite a free trade agreement between the two countries, Australia has selectively imposed tariffs on Chinese goods for six years, and China is the principal target of Canberra’s anti-dumping inquiries. A particularly sore point for Beijing is the tariffs Canberra imposes on Chinese fabricated steel and aluminium products. Chinese trade officials correctly point out that the duty on steel pipes is currently 144 per cent, and that the raw material mainly comes from West Australian iron ore and Queensland coking coal. Moreover, the Productivity Commission has from time to time said that such anti-dumping measures do not enhance Australia’s flawed productivity. It is perhaps worth adding that Australia often appears to cast a blind eye to dumping from the European Union, as foodstuffs on the shelves of Coles and Woolworths show.

In an unconnected development, China is watching closely the liquidation of Virgin Australia, where two Chinese investors are involved. The signals from the administrator appear to have thrown the process into confusion, which is the polite way of putting it.

The bickering has to stop, but reparations need to go beyond that. The relationship is important enough for the leaders of the two countries to get round a table and reset it.

The problem is we don’t know whether this issue is even in the in-tray of President Xi, let alone a priority. It should be a priority for Morrison. He would need to go to any meeting not as a supplicant but as a credible leader of a G20 country in the Asia Pacific, not one under the influence of the odious Donald Trump. That should not be too difficult, should it?

Finally, the China Relations Institute at Sydney’s University of Technology (ACRI) has published a wordy paper analysing calls on the Coalition to decouple Australia’s relationship with China because of the impact of the coronavirus epidemic. The paper is worth reading and freely available, but it is a red herring. The fact that Covid-19 originated in Wuhan, allowing Trump repeatedly to describe it as the ‘Chinese virus’, is not the cause of the deteriorating relationship between Canberra and Beijing. 

The ACRI report appears to overlook that fact. Three things need to be said. First the official relationship between Canberra and Beijing was bad long before the coronavirus emerged, and had nothing to do with health. Secondly, relationships between Australians and their Chinese counterparts are generally good, despite official tensions. Third, most business people on both sides value the connections that have been made, and will continue to build on them.

Nonetheless, ACRI makes some interesting points worth thinking about both during and beyond the epidemic:

  • The latest data confirm Australia’s significant trade exposure to China. In 2018-19, this reached $235.0 billion, compared with just $88.5 billion with Japan, which is in second place. A comparative analysis shows that by share of total goods exports to China, Australia is first amongst OECD nations.
  • The last time a single market was as important to Australia was well over half a century ago when Britain took 40 per cent of Australia’s exports, in 1952. That changed, of course, when the UK joined the then European Economic Community. 
  • The ACRI paper argues that companies doing business with China “need to understand it is not the government’s responsibility to bail them out in the event of a downturn in the Chinese market”. Every company is expected to do it due diligence and undertake proper risk assessment modelling.
  • Further, ACRI’s paper says, “the government’s considerations of the national interest extend beyond the benefits of trade to encompass national security and the strategic outlook. Sometimes the government will take decisions it judges to be in the national interest, including steps to preserve Australia’s sovereignty and freedom of action.  One example is the August 2018 decision to ban Chinese technology companies, Huawei and ZTE, from participating in Australia’s 5G telecommunications rollout, following advice from agencies that they represented a security risk that could not be mitigated. 
  • The view that we are too dependent on China for trade assumes another country stands ready to buy Australian goods and services.
  • Just one country, China, has accounted for the 60 per cent jump in Australian exports over the last decade. The only diversification strategy that makes sense for Australia is China plus one. “Forcing trade away from China only guarantees less Australian income and jobs”.

This last point is undoubtedly true, but it begs several questions. Have we really done enough to increase our exports to countries within ASEAN and the Trans-Pacific Partnership?  We have costly trade missions galore, but are they really working?  Does it really make sense to have trade effectively as a junior partner in the Department of Foreign Affairs and Trade?  We have huge agricultural surpluses, but are we competitive enough, and generous enough to countries that are starving?

As a nation, Australia has been slipping down the World Competitive Index, and our productivity is lamentable. 

China’s bullying tactics are unedifying, and to be resisted, but they also serve as a reminder of the risks of dependency, and the need to rethink relationships.

© Australian Strategies, 2020. All Rights Reserved

Further reading:

China wants to know if you are for or against her.

https://asia.nikkei.com/Opinion/China-wants-to-know-if-you-are-with-it-or-against-it

Covid-19 and the Australia-China Relationship’s zombie economic  idea, published by the Australia-China Relations Institute.

Common sense, not mud-slinging, needed in China relationship

by Colin Chapman

Some folks at the Department of Foreign Affairs and Trade are increasingly worried about the escalating spat between Beijing and Canberra. They think it is getting out of hand. The publication by Cheng Jingye, China’s ambassador to Australia, of his version of a phone call received from DFAT’s head, Ms Frances Adamson, reflects this unease. Before her appointment as the country’s top diplomat four years ago, Ms Adamson had been head of Australia’s mission in Beijing and knows well how China’s Communist government works.

Ms Adamson called the Ambassador after the publication of bellicose comments by the editor-in-chief of  China’s state-owned Global Times. The article likened Australia to “gum stuck to the bottom of China’s shoe” and stated that free trade ties between China and Australia would be jeopardised if the Coalition persisted with its demand for an independent enquiry into the origins of the coronavirus outbreak in Wuhan. Other similar commentary from China makes it clear the Chinese leadership is angry and determined to bully Canberra into submission. 

Normal diplomatic policy when a country feels threatened or affronted is for the foreign minister to summon the offending country’s ambassador to the ministry to accept a diplomatically couched admonishment, especially when the issue at hand is political. In this case foreign minister Marise Payne deputed DFAT head Ms Adamson to the unenviable task of trying to calm things down. In doing so, she appears to have expressed her own doubts about pushing for an inquiry.

Enter Scott Morrison, who has done much to repair his leadership credentials with adept handling of the Covid-19 epidemic, after falling short with the January bushfire crisis. The prime minister refused to be cowed by China’s bullying tactics, saying it was “entirely reasonable and sensible” to call for an independent investigation into how it started, “so we can learn the lessons and prevent it happening again”.

And so it is. Morrison is not alone. Chris Patten, Hong Kong’s last governor, is among many who support the call. Alexander Downer, former foreign minister in the Howard government, in an article in the Australian Financial Reviewwhen further, demanding the Chinese leadership be held to account.

But the timing of Morrison’s call for international support was bad. Although he made it clear that he was acting independently of the incumbent in the White House, his statement to the Canberra press corps came only four days after Trump had railed against Beijing for starting the pandemic. The Chinese state scribblers seized the opportunity, accusing Morrison of being a lackey of the American president.

Yet neither Australian nor other Five Eyes intelligence sources, including the Pentagon, have any evidence – despite claims in the British and other tabloid press – that the virus leaked out from a Wuhan anti-virus laboratory. According to the Sydney Morning Herald, Morrison told Cabinet that he believes the virus originated, as the Chinese suggest, in the city’s wet market. Whatever the source of the virus, the Chinese authorities are culpable in covering up its breakout. Taken together, these factors justify an independent investigation and make it a necessity. It is not realistic to expect Xi Jinping and his colleagues in the Communist Party Central Committee to agree to it, as they know they will be found wanting.

So, what strategy should the Morrison government and the country generally adopt towards restoring Sino-Australian relations? I believe two approaches are required and they should run in parallel. First, as Morrison is already doing, avoid a slanging match with China. Do not respond to the rhetoric of the Chinese media or rise to the bait. Ignore Chinese threats to cut imports from Australia and to reduce the number of Chinese students enrolling in our universities.

SBS report asks whether Australian universities are too dependent on Chinese students.

Which leads to the second point. If Xi is petty enough to target Australian universities, so be it. There is an imbalance anyway. Sure, the universities will have to suffer a one-time reduction in income, and the weaker ones will have to chop out some of the weaker courses – media studies for a start.  But the adjustment, though painful, might lead to higher standards. It would be a good step towards reducing our universities’ dependency on Chinese students. 

Australia should also look at supply chains. Many other countries that do not want to be dependent on China, including Canada, the United States and now the European Union, are seeking and finding alternative sources for vital imports from other parts of Asia and Latin America. We should do the same. This should a gradual change, with diplomacy following suit, strengthening relations with ASEAN and Latin America. 

We are going to hear much discussion and argument about the China relationship in coming days. Next week the Australia-China Relations Institute at Sydney’s University of Technology will publish a detailed analysis on this important issue, including an assessment of the prospects for diversification of Australian economic relationships. It will be well-informed and is expected to reject the kind of policies advocated in the U.S.

The China relationship is the most important foreign policy issue on the prime minister’s desk, and it is one where common sense must prevail. As my old friend Stephen Fitzgerald, Australia’s first ambassador to Beijing, put it a couple of days ago, “It is no help for either side to be engaging in tit-for-tat.“  Dr Fitzgerald bemoans the fact that neither the foreign minister nor anyone in the federal government feels able to call a counterpart in Beijing and say “right, let’s work it out”.  How sad, and how true.

Related stories:

Trump seeking to use intelligence to link virus with Wuhan lab, reports New York Times.

Scott Morrison distances himself from Trump’s claim – ABC News.

Nationalism on the rise – China’s ‘Wolf Warriors’ and ‘Little Pinks’ –Australian Financial Review.

European divisions over pandemic threaten EU project, by Colin Chapman.

© Australian Strategies, 2020. All Rights Reserved