Contradictions in Australian Economic Co-operation - Case Study Example

Table of Contents TOPIC PAGE Economics and Morality in Geo-Politics 2 The Niche Route to National Competitive Advantage 2 Contradictions in Economic Cooperation and their Resolution 3 Life Cycle Thinking for Stability in the Economic Environment 4 Delightful Cultural Threads of Trade 5 The Services Sector as an Entry Mode 6 Expositions for Understanding Country Profiles 7 Secular Considerations in Bilateral Trade in the APBR 8 Economics and Morality in Geo-Politics (Appendix 1) Australia has changed substantially in modern times from the inward-looking and highly natural resource oriented economy which it once was (Nolan, 1996). It is a country with which every other nation should be privileged and keen to do business. Hence the exaggerated and coordinated genuflection of Australian politicians, both in and out of power, to meet the alleged expectations of the present regime which rules China, with respect to the isolation of the Dalai Lama. The report in Appendix 1 suggests that the establishment lacks confidence in the strengths of the Australian economy. Military rulers are not given to granting favors to democratically elected governments: China needs energy from Australia at least as much as this southern continent values the business value of this trade. Similarly, Chinese producers, with their great penchant for achieving rapid top-line growth, are under greater pressures to hold their shares of Australian demand for their goods, than the domestic compulsion to reign in inflation ‘down under’. Australia’s special relationship with the United States in this connection, should also serve to protect ideological integrity. Many goods produced in China depend on American branding, and it is therefore premature to conclude that courtesy to a visiting spiritual leader would blow the lid off inflation in Australia! The politics of democracy is so fundamentally different from the tyranny of military dictatorship that economic relationships between countries and blocs which follow one or the other extremes of representation of their respective citizens that trade links should strictly adhere to the principles of professional business management. The industrial, commercial, and financial fronts of Australia (Nolan, 1996), the United States, and other like-minded countries are of dimensions which Beijing can neither deny nor sacrifice at the alter of its maniacal annexation of Lhasa. The amazing and dominating growth of trade between Japan and Australia, to which Appendix 1 refers, has occurred specifically during an age when democracy has replaced an executive monarchy in that country. The autonomy which the Dalai Lama seeks within the embrace of Chinese national union is an excellent model for many agrarian communities in ruled by the Beijing of today. Just as the Balkanization of the erstwhile Soviet bloc has helped rather than hurt the economy of the United States, so the extension of freedom throughout the APBR makes excellent business sense for Australia. The Parliamentary rebuff of the Dalai Lama is an affront to the freedom-loving people of Australia, and represents poor business judgment at the same time! The Niche Route to National Competitive Advantage (Appendix 2) It is not unlike the David and Goliath fable. Lesser communities would have collapsed under the weight of numbers, but unyielding resilience is par for the course in Taiwan. The combined agricultural potentials of the APBR as a whole and of Australia in particular, are so overwhelming that no one would blame a relatively tiny territory for succumbing to the economies of scale advantages that the World Trade Organization confers on its territorially best endowed members (Australia, not dated). It is not as though Taiwan has shown any hesitation or reticence in the most aggressive possible expansion of its industrial prowess. However, the 20% growth target taken by the Council of Agriculture, over the next 3 years, is uncommonly bold. How can this tiny piece of land in the South China Sea achieve growth in agricultural exports? Specialization is Taiwan’s one-word answer. Chickens, tropical fruit, exotic flowers, and rice, may evoke indifference at best, and ridicule at worst, in the financial services and information technology dominated global economy of today, but Taiwan has used these nutritious, delicious, and beautiful sectors of general world neglect, to take an admirable if small position in the entire APBR. The hygiene and food safety standards (Australia, not dated) of exacting countries such as Australia and Japan are daunting for lesser APBR members, but Taiwan has overcome even a bad reputation and track record in respect of bird-flu, over-fishing, and related disasters, to forge new export market entries in sophisticated territories. The value-additions for small farmers in the country are so high relative to their peers on the mainland that the breakthroughs have important implications for social justice apart from the macro-economic benefits. It has been known for some time now that countries can and should strive for competitive advantage. A larger issue is the use of Business Management principles and disciplines for purposes of national governance. Appendix 2 does not specify the managerial resources of Taiwan’s Council of Agriculture, but the end results of its systematic efforts, and its bold and unequivocal trade projections are illustrative examples for students of niche marketing, competitive intelligence, understanding customers, segmentation, and targeting. Since agriculture plays such a seminal role for the multitudes of most of the APBR, the lessons of Taiwanese agriculture and its impressive accomplishments in this regard, should not be lost (Asia Pacific Business Forum, 2005). Further, these is no reason for agricultural giants such as Australia and the United States to worry, since niche exports and the economies of scale on which the large agricultural land holdings of field crop production depend, are supplementary rather than in competition with each other. Contradictions in Economic Co-operation and their Resolution (Appendix 3) How can Australia reconcile its neighborly and membership duties towards the APBR while simultaneously giving economic teeth to its emotional, cultural, and security ties with distant partners in freedom? Do the exigencies suggested in Appendix 3 represent the only possible course? Could there be business angles apart from ethical worries in taking short-term advantage of an irrational set-back to an ally? An exclusively altruistic perspective is not essential in an economic sense, though this may pre-occupy some Australian and U.S. minds. Experience shows that claims of disease free meat (Australia, not dated) are not water-tight; fears over consumption of such cooked meat are not entirely validated on clinical grounds in any case! Therefore, business links based on such tenuous bases could never have been thought of as sustainable in the first place. Similarly, the restoration of South Korean consumption of U.S. meat should, in principle, have no links with a free trade agreement between the 2 countries: no thinking government can risk fatal encephalitis for its people in order to assuage the feelings of the farmers of another country! Australia, with its own losses of mineral exports due to inclement weather (Australian Bureau of Statistics, 2007), should know this better than most other countries! The lesson here is that while all paying trade is welcome, windfalls arising out of transient postures that an APBR member takes against the United States are not permanent highways to economic cooperation. Australia should have especially little cause for worry in this specific case, because its trade links with South Korea are variegated and strong (Australia, not dated). This is not to say that Australia should neglect the new business opportunities of free trade agreements with APBR colleagues, but rather that it should leverage this and related routes for new economic links. A global review of Australian trade during the first half of 2007 (Australian Bureau of Statistics, 2007) shows that falls in the exports of cereals, cereal products, meat, iron ore and non-monetary gold have adversely affected the national deficit in the balance of payments. Simultaneously, rising imports of crude, also contribute to the deficit. These facts should be adequate and comprehensive to drive Australia’s ambitions for economic cooperation. The country should strive for long term contracts for these items in the basket, and develop a new working plan for energy security at the same time. Cooperation should be with long term and genuine interests in view, with a clear platform of mutuality of benefits. Life Cycle Thinking for Stability in the Economic Environment (Appendix 4) The short-term wins again! Should Australia rest content with spot purchases of coal by Japan because of Chinese intransigence? Stability in the economic environment has benefits which extend beyond present terms of democratically elected governments. However, the pressures to make hay out of disruptions in trade arrangements of APBR members, is not entirely political. The very nature of collaboration between sectors of national industry and domestic governments must be called in to question if stability in the economic environment is to be valued. Cover for fixed costs, capital pay-back in long gestation projects and investments, assured contributions to government coffers, as well as protection of jobs with relatively low skills, are key considerations in the coal trade within the APBR. The full impacts of these factors can only be uncovered by traveling the entire length of the industry life cycle. Such an exercise cannot stop at the producer’s or the supplier’s end. It is therefore evident that cost advantages are crucial for keeping the share of coal in the region’s energy scene. Chinese demands for contract price increases in the 50% ball-park are effectively phlegmatic means of refusal to continue supplies. It would not make sense for the Japanese to use steam coal at such prices. However, they too cannot cope with spot purchases indefinitely. This disruptive development is an opportunity for an APBR member near Japan to strike a deal for long term stability in its economic environment. The negotiation has to involve national governments because the relative balance of payments should reflect in price negotiations in a way which an individual industry cannot resolve. Coal has been such a leading commodity in Australia’s exports (Nolan, 1996) that the country has much to gain by bidding to replace China’s past shares of Japan’s purchases. Australia is one of the leading countries of the world in terms of demonstrated reserves of both black and brown coal (Australian Bureau of Statistics, 2007). Unlike China, Australia would not lay any claim to such a jump in domestic demand as to require a disruption of exports. Japan is also Australia’s largest foreign supplier of goods after the United States (Nolan, 1996). The export of coal against the import of manufactured goods is not an ideal situation from Australia’s perspective, but it would help with the balance of payments nevertheless. Therefore, the price increases for coal exports demanded of Japan by China is an opportunity to forge new stability in the Australian economic environment. Delightful Cultural Threads of Trade (Appendix 5) Are contradictions between culture and business inevitable? Can there be alternatives to copying ancient handicrafts, and mass producing them without any credit or compensation for the indigenous people who are at the centers of the originating cultures? Australia, with its strenuous efforts to integrate in to the APBR (Nolan, 1996) and to forge strong ties with its immediate neighbor Indonesia, can do more than collect superlative examples of ikat in its galleries. Exotic and intriguing culture is a distinctive strength of the entire APBR. The individual heritage of each indigenous community has many qualities which are worth preserving. This is not for conservation reasons alone, but because there is strong potential demand for its forms and applications in the modern world. Impoverished agrarian communities can be helped to find economic stability, while the fashion conscious and well-to-do enjoy new colors and textures in their wardrobes and in their homes as well. Ikat is an especially important example of the business potential of handicrafts since it can be used to decorate interior spaces, apart from being used in and as clothing. The cooperative organization of ancient communities with precious inherited skills of arts and crafts, marketing their wares directly to global customers, and the intricate logistics of standard deployment of the raw materials they use, with attendant supply chains which reach customers anywhere in the world, are all management and organization challenges, which should suit the strengths of the services sector of Australia in eminent manner. Australia has an aboriginal cultural wealth of its own apart from the trade potential of this sector for the rest of the APBR. It is therefore a wonderful opportunity for Australia to build on a new leadership position in the region. Traditionally, governments in the APBR have looked after the heritage interests of small indigenous communities in their jurisdictions, while private entrepreneurs, especially in China, have sought to do surreptitious business based on such cultures, but on modern formats in copying modes. The original handicraft is inevitably at a disadvantage in this set up, and the consequence is as tragically described in the Appendix for the ikat of Indonesia. It need not be so. Business management methodology should be applied for the benefits of the poor, and meet an unfulfilled potential need within more prosperous segments at the same time. The scope is immense and the example of ikat in Indonesia can spur new business within and from the APBR based on its cultural wealth. The Services Sector as an Entry Mode (Appendix 6) Australia has a distinct edge over most APBR members in terms of quality standards followed by its entire services sector. That is why the Thailand decision to extend the Free Trade Agreement with Australia to include restaurants, hotels, chefs, spas, tour operators, freight, and traditional Thai massage is such good news. Most of the sectors just included by Thailand in its Free Trade Agreements relate directly or indirectly to tourism. This is already a significant part of the economy in parts of Australia such as in Queensland (Nolan, 1996). Overall, services make up more than 60% of Australia’s economy (Nolan, 1996). Though the declared Thai interest in this development, according to the Appendix, is to stimulate greater financial investment inflows, the Australian angle could relate more to quality management, infrastructural development know-how, and the leverage of other related non-financial resources. Tour operators and hotel chains are likely to be amongst the first and most prominent beneficiaries of this expanded Free Trade Agreement. Traditional Thai enterprises related to indigenous recreation and relaxation modes can also benefit from the professionalism and modern culture of Australian entrepreneurs. Though the domestic economy is so dominated by services, Australia’s trade links with APBR countries has been traditionally dominated by its agricultural production and natural resources sectors. The growth of services in Australia’s dealing with countries such as Thailand will provide new impetus for both countries. The management and development of services has features which are distinct from traditional export areas such cereal products, meat, and minerals. Australia will need to gear up its human resources appropriate for investments in this sector within the APBR. However, the pay-off will be sustained as the services sectors in all APBR countries are likely to experience above-average growth rates. The services sector also offers a new entry mode within the APBR for the Australian community, since it calls for greater people-to-people contacts than the export of bulk commodities and finished products. Financial services, health care, and education are some prominent and high value parts of the services sector which Thailand has chosen to ignore. This marks an area for immediate Australian government intervention because the country has much to contribute to Thailand and to other APBR members in these matters. There seems to be a need for Australia to show-case its strengths in a broad-based manner so that it is not perceived only as a provider of natural and farm products within the APBR. Expositions for Understanding Country Profiles (Appendix 7) Cold statistics may fail to uncover many nuances of any country (Australian Bureau of Statistics, 2007). Qualitative descriptions (Nolan, 1996) and first hand accounts help in uncovering many new opportunities for relations between nations, which mere figures and graphs do not make obvious. This applies to Australia and to the APBR in general as well. Many of the smaller and newer governments in the region do not even have current and reliable data published and in the public domain. The exposition format, as seen by the example covered in the Appendix, is a very pleasant way of exploring for new business projects. Expos serve not just the host country, which is the relatively small and highly data resourced Singapore in this instance, but also other entities which participate through kiosks, in seminars, and as mere visitors as well. However, expositions in the greater public interest should not be reduced to mere free vacations. Therefore, a great deal of preparatory work should go in to each exposition. Organizations should be screened before being invited to participate so that unproductive foot fall is avoided. Participants without clear intentions to start new business, or without matching and interesting budgets, will only strain the infrastructure, and load the free services on offer, without any hopes of returns on investments of organizers and sponsors. Extended dialogue between exhibitors and potential customers is another feature of successful expos. Both sides should make sincere efforts to cover as much ground as possible before the expo dates, so that the face-to-face meetings are fully productive. There is little merit in traveling long distances to merely exchange cursory information which could have been done instantly on the Internet! Tentative proposals and initial expressions of interest should be followed through to fruition after the exposition is over. Should individual states and parts of a country participate in global or regional events? It makes eminent sense to present Australian wines and gourmet foods at any exhibition, but the selective promotion of Western Australia or the great southern can set an unhealthy precedent for the country. It is not as though New South Wales or Victoria lack excellence in farm production (Nolan, 1996). All governments in APBR should take more active roles in sponsoring and attending expositions throughout the region and in other parts of the world. This format presents a country much better than any published material can. People, who represent the country at events of this kind, need special skills to build bridges with their peers from other nations, and to meet cultural norms of host entities as well. Secular Considerations of Bilateral Trade in the APBR (Appendix 8) China should take little if any credit for Hong Kong’s famed gateway position for the vast mainland due North, because this territory has played such a role even during British times. It is not just a matter of proximity or governance-the people of Hong Kong have assiduously built a reputation for liberal trade, negotiation skills, and commercial acumen. Hong Kong serves as regional headquarters for a number of European entities, a position which Australia may covet. New Zealand is a prominent trading partner and close ally of Australia (Nolan, 1996). There is unrealized potential for Australia to stabilize and to strengthen its links with the populous Indonesia as well. The Hong Kong example can be emulated by many other APBR members, developing strengths and images to serve as launching pads for other countries. A candidate with great potential in this respect is the United States. This is not just because of the special relationship between Australia and the U.S. but also because adverse trade balances impede U.S. commercial interests in many parts of the APBR. This may be on political grounds for some poorly governed economies, but it can also be sheer economics as in the case of Japan. Australia’s commanding position in farm product and mineral supplies to APBR countries can be leveraged to serve the U.S. as a strong link for trade expansion in the region. Most bi-lateral links are built between neighboring countries. This may have evolved naturally or because global trade started with low value commodities in bulk. However, with knowledge resources and high technology taking vanguard positions in new global trade, Australia can emerge as a gateway for deep penetration in the APBR by the entire first world. However, Australia cannot ignore the Hong Kong platform to consolidate its business with China. The size of the mainland opportunity needs a multi-pronged approach in any case. It should be particularly interesting for Australian capital to take a greater interest in Hong Kong’s financial structures in order to take a position with respect to ownership and eventual control of domestic companies in China. The varied nature of APBR members means that it is nearly inevitable for spatial and cultural sub-blocs to develop within the region as a whole. Therefore all its members and countries from outside the region as well, should keep tangential opportunities in view when negotiating trade arrangements with each other. 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