What would modern Australia look like without China? The Australian Financial Review, 25 November 2016
Over recent years, there’s been no shortage of commentary on China from the glass-half-empty brigade. So it’s sometimes useful to ask the basic question: what would Australia be like today had China not opened its economy in 1978?
Based just on merchandise exports, Australia’s economy would be almost 5 per cent smaller. That’s $8,000 less for every Australian household every year.
Prices would be higher. Since 2007, the price of goods we import from China has fallen 20 per cent while the price of goods we produce at home has increased by 20 per cent.
Our universities would be nearly $6 billion poorer each year. They would educate almost 100,000 fewer students.
Our tourism sector would earn $6 billion less each year with 1.2 million fewer visitors visiting our attractions, eating in our restaurants and buying our souvenirs.
If China had remained in autarky, Australia would have had no mining boom, and not much of a dining boom. I’m guessing that if we removed from your home every item bearing a ‘Made in China’ sticker, you’d think you’d been robbed.
Let’s go further still, and imagine what Australia would be like in a world without China. There would be no Chinese New Year celebrations. No books by Jung Chang, Sun Tzu or Cao Xueqin. No art works by Luo Zhongli, Ai Weiwei or Li Jin. Among the inventions to come out of China are paper, printing, gunpowder, the compass, lacquer, acupuncture, dominoes, public service exams, kites and nail polish. And that’s before we get to Chinese food. What would life be like without dumplings?
Luckily this is not the Australia we live in today. But when extremists denounce free trade, oppose immigration and promote inward-looking societies this is presumably the sort of Australia they long for. But very rarely do we hear such politicians articulate what the costs of disengaging from the world would be to our economy and our society.
Xenophobia is on the rise. Its success is built on the same strategy: purveyors of hatred appeal to people’s darkest fears, arguing that voters can have whatever they want with no cost. But as the ancient Western proverb goes: there’s no such thing as a free lunch.
Take trade as an example. Analysing data from 40 countries, economists Pablo Fajgelbaum and Amit Khandelwal found that free trade increases the purchasing power of the rich by 28 per cent. But more importantly it increases the purchasing power of the poor by 63 per cent. The cost of abandoning free trade is that many people on an average income could no longer afford the clothes they wear, the smartphones they love, the furniture in their house, the cars they drive or the petrol they put in them. Far-right wing politicians rarely discuss these costs when they advocate abandoning free trade or slapping tariffs on Chinese imports.
This is also true for immigration. A 2014 OECD analysis found that migrants contribute more in taxes and social contributions than they receive in individual benefits and can provide a net benefit of up to 2 percent of national income to the public purse. Australia’s skilled migration program helps to curb the growth in the cost of health care, higher education and technology services.
But international engagement isn’t just about trade and immigration. It is about working together to solve global problems. On climate change, Australia and China are working together to deliver ambitious commitments under the Paris agreement. There are opportunities to share Australia’s experiences on many of the complex environmental issues that China is facing like tailoring engineering solutions to address water scarcity and promoting sustainable agriculture. There are untapped opportunities to export Australia’s fresh, clean and safe agricultural produce for consumption by a growing Chinese middle class.
International collaboration benefits Australia, China and the rest of world immensely. Tackling challenges like human rights and adherence to international maritime law is best done through engagement, not withdrawal. Extremists risk reversing the progress that has been made and making all of us worse off. As the Chinese proverb goes, ‘the person who says it can’t be done should not interrupt the person who is doing it’. Let’s hope the far right hears this message.
Andrew Leigh is the Shadow Assistant Treasurer. This is an edited extract of a speech launching the Australian Centre on China in the World’s latest China Story Yearbook and first appeared in the Australian Financial Review on Friday, 25 November 2016.