Yesterday Mr Robb rose from his sick bed to celebrate the latest “Aussie sell out” deal with one of our trade ‘partners’.
These agreements are not about trade they are about unproductive capital exports from China to Australia – end of story.
Long ago we reduced our tariffs on Chinese goods imported to Australia so we already have the benefit of low cost imported goods. Anyone out there struggling to find some cheap Chinese imported goods in the shops?
So the only relevant trade issue is why the Chinese have not already removed their tariffs on all of our exports and why even after signing this agreement they will still maintain tariff and other barriers on a range of potential Australian exports.
But trade is a side issue as all these “FTA” agreements are really about is giving our exchange rate manipulating trade ‘partners’ an even easier path to exchange rate manipulation which they do by exporting ‘capital’ to Australia via several key channels that are described below.
To induce chumps, like Andrew Robb, to make the path easier, the counter-parties to these FTA agreements sprinkle around some loose change in the form of some easily dodged promises that they may relax some of their existing tariffs on some of our goods at some point in the future – mostly goods they actually want to import anyway as they plan to turn them into finished goods they can export back to us and other countries.
As noted above the Chinese are going to maintain a whole bunch of tariffs on anything they don’t want Australia to export to China.
What a stupendously dud deal – they are going to keep a bunch of tariffs on our exports even though we removed our tariffs on their exports years ago.
Why does China – a poor developing country – want to export capital to Australia anyway?
When unproductive capital is exported to Australia by China (and other currency warriors) by buying:
- hundreds of billions of IOUs from our banks (yep that is where those low mortgage rates comes from that result in massive household debt bidding up house prices), and;
- hundred of billions of Australia government bonds (Joe’s big debt is being sold offshore), and;
- assets in $1 Billion chunks (no questions asked).
it forces up the $AUS and forces down their own currencies.
All that exchange rate manipulation amounts to a massive tariff on Australia industry and workers. Our exports are more expensive and as a result industries like car manufacturing and other key industries shut down – probably for good.
One thing you will NOT be hearing about over the next few days and weeks is how lopsided the China FTA is with regard to capital flows into China. You see when it comes to capital flows it is a one way street. Exchange rate manipulators don’t see much point in allowing capital flows the other way.
Isn’t it odd that a developing country where the average wage is about $US7000 doesn’t need capital from one of the rich economies like Australia?
Isn’t it weird that boof heads in Australia try to argue the reverse – that Australia needs Chinese capital to develop?
Sure the agreement has a bit of wilted parsley to get it past the 6 pm news, in the form of allowing a few Australian Universities to set up ‘information kiosks’ in China or perhaps allowing a few ‘joint ventures’ in China in hospitality or nursing homes (or – kid you not – ‘fast food’) – but this is small cheese – the big stuff is all the other way.
Ask Mr Robb how many Chinese manufacturing businesses, key industries, land or other significant economic assets the Chinese government plans on letting Australians buy outright and operate without interference – the answer is ZIP.
By the way the point of a “joint venture” from the Chinese perspective is to maximise the likelihood that any useful skills Australian companies have will be transferred to their Chinese ‘partners’. Of course there are no such constraints on Chinese investment in Australia. Surely, if the Chinese force Australian companies into joint ventures when we invest in China the same should apply to Chinese investment in Australia. Instead the FTA provides that not only Chinese firms can buy Australian assets outright but bring their own staff with them.
Sadly, too many Australian are completely clueless about the significance of capital flows and how they are used by our trade competitors to place a tariff on our industry and workers.
Instead most Australians, in a breathtaking act of cognitive dissonance, just keep demanding lower interest rates so they can maintain consumption – while ignoring how that demand results in a much higher $AUS and a hollowed out economy.
So next time some politician dances around telling you:
- how they will keep ‘…interest rates lower…’ by allowing our banks to rely on cheap capital imports
- why ‘foreign investment’ is such a swell idea even though our super funds have almost $2 trillion in savings.
- that Australia has a history of selling off chunks of its assets to foreigners to fund consumption and the process is as natural as Waltzing Matilda.
- that foreign investors ‘can’t take the assets with them ‘ – (No but they can sure repatriate the profits and BYO a workforce)
just remember the price that your kids and grandkids will pay as they grow up in an economy that has been sold off and massive foreign debt incurred on their behalf.