East Asia Forum - Peter Drysdale on The importance of reliable resource markets to Australian and Asian security

Recent talk that would encourage government messing with Australian iron ore markets sits awkwardly in the context of the core strategic importance of raw materials in Australia’s economic relationships with Asia, both sides round. Understanding this central fact of the country’s economic circumstance in the world is an essential credential of responsible political leadership in Australia — one that it seems has to be learned, again and again.

Australia supplies over half of Northeast Asia’s externally procured strategic raw materials, such as iron ore, and is a crucial element in the region’s economic security. Australia is not the only supplier, of course, as Asia’s vast appetite for industrial inputs is satisfied from suppliers around the world, including Latin America and increasingly Africa. Asia is heavily dependent on a range of external suppliers for strategic raw materials including energy, though Australia is the single largest element by far, because it has developed an industry that is unmatched internationally in its efficiency and technologies and has the cost advantage of serving customers in Asia — its own backyard. Even though it exports no oil, Australia supplies around a quarter of Japan’s energy requirements (in the form of LNG, coal and uranium), more than Saudi Arabia.

That is why Asia takes Australia seriously. It represents a crucial element in Asia’s security in terms of strategic resource and energy supply; it is a role that is immensely important to the security of the region and a role of considerable responsibility, regionally and globally. The relationship is also, it hardly needs saying, a critical element in Australia’s prosperity and political security. From this perspective, Australia’s economic relationship with Asia can be viewed as a grand deal between Australia and the region in the form of reliable supply of strategic resources and energy commodities through open and competitive markets in return for prosperity and good political relations with the region.

After the international scramble over industrial raw material supplies and disastrous conflict among the imperial powers before the Second World War, the development of open and reliable markets for resources and other goods under the rules that were set up to guarantee open trade was a major pillar not only of economic, but also of political, security in the aftermath of the war.

Australia has sensibly been at the forefront of promoting and protecting the open rules-based system through the expansion of its world-leading resource trades in Asia — first with Japan, then South Korea, Taiwan, China and increasingly now with India. In the beginning, the trade rules did not work exactly symmetrically to limit against controls and restrictions on resources trade in the same way as they did on trade in manufactured goods. But, steadily through its international economic diplomacy, Australia has helped to balance that out (including through its undertakings to Japan in the Treaty of Friendship and Cooperation of 1976 and its approach to the issue in the GATT/WTO, APEC and other forums) and become an exemplar of reliability in international resource markets.

Read the whole article at East Asia Forum.

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Updated:  27 November 2018/Responsible Officer:  JI Management Group/Page Contact:  Japan Institute