SA-Shandong economic ties must avoid ChAFTA pitfalls

(Above: SA Minister for Investment and Trade Martin Hamilton-Smith welcomes the Shandong Delegation to SA)

Ned K.

While at the national level the issue of trade has been dominated by the China Australia Free Trade Agreement (ChAFTA), at the state level in South Australia successive governments have been developing a relationship with Shandong Province in China since the mid-1980s under the Bannon Labor Government. 30 years later there is a push to renew it in both increased trade between Shandong and South Australia and increased investment in the state by Chinese corporations.

Last May Premier Weatherill led the largest ever trade and investment delegation from SA to Shandong. Weatherill was welcomed to Shandong by the secretary of the provincial committee of the Chinese Communist Party, Jiang Yikang.  This led to the signing of 29 separate agreements between businesses at the state-province level.

 

From September 8-10, Secretary Jiang reciprocated, leading a mission of more than 150 trade, investment and cultural delegates to SA.  He and Weatherill signed a three-year SA-Shandong Friendly Co-operation Action Plan to further boost economic ties between the two sides.

 

Significant investors like the Shandong Landbridge Group will be investigating opportunities in SA port infrastructure and wine. The company recently bought Queensland’s Westside Petroleum for $200 million.

 

This month the SA Government announced that SA iron ore mining company Iron Road would open a new iron ore mine on Eyre Peninsula near Wudinna and export to Shandong. It has signed non-binding Memorandums of Agreement with five “globally significant” Chinese steel companies. Sydney-based private equity infrastructure investor AIXI will be involved in port and rail developments on behalf of what a spokesperson said were “tier 1 international pension funds with very deep pockets”.

 

Local dairy interests such as Beston Foods also hope to export dairy products to Shandong. To what extent any formal agreement between the South Australian Government and Shandong Province is dependent on the national China Australia Free Trade Agreement remains unclear as the "fine print" of the Friendly Co-operation Action Plan has not been made easily available to the public.

However, a press release from the Premier’s office referred to the Action Plan as “as a model sub-national relationship in the context of the China Australia Free Trade Agreement,” leaving not much room from doubt that it will mirror substantially the clauses in ChAFTA which Weatherill has so prominently and publically embraced.

One thing is certain, namely, that Shandong Province is no novice when it comes to trade and investment agreements. At the Shandong Province display at the Royal Adelaide Show this month, there was a large poster with some astounding facts about the sheer scale of trade and investment between Shandong Province and many other countries and regions within countries.

• Shandong has a population of 97 million people compared with South Australia's population of about 1.6 million
•  In 2014 Shandong's GDP was US $967.4 billion   
•  In 2014 its export/import value was $277.12 billion
• In the last year 1352 foreign owned investments in Shandong were approved by the Provincial Government
• Actual foreign investment in Shandong Province was $15.2 billion and 524 new enterprises were set up abroad
• Approved Chinese investment from Shandong overseas was $6.2 billion
• Contract foreign projects by companies based in Shandong amounted to $9.25 billion
• Investment abroad from Shandong in the first 6 months of 2015 was $23.72 billion
• In 2014 60,000 workers from Shandong were sent abroad to work on the above mentioned contract projects

So for Shandong Province, trade and foreign investment in Shandong and by Shandong Province based companies are "business as usual".

The Weatherill Labor Government is desperate for foreign capital from China to fill the void left by US and Japanese imperialist interests exiting from manufacturing in South Australia.

 

When China was a socialist country in the era of Mao Zedong and Zhou Enlai, it stressed “that countries should carry on economic and technical exchanges on the basis of respect for state sovereignty, equality and mutual benefit, and the exchange of needed goods to make up for each other’s deficiencies.”

 

Already, Shandong Steel chairperson Ren Hao whose company was one of the five to sign an MoU with iron Road, has said that “If the costs are controlled then this product will be welcomed by the market, not just ShanSteel”.   Australian workers are in no doubt about what “controlling costs” usually means to a big overseas investor!

Whether Mao and Zhou’s vision of trade relations on the basis of mutual benefit can be achieved for the people of South Australia and Shandong remains to be seen.

 

On the question of the impact on jobs for South Australians, perhaps Premier Weatherill should investigate the impact on host countries of those 60,000 Shandong overseas project workers and investigate the working conditions and rights of those 60,000 workers when they were in the host countries.