Mundo #20 - The geopolitics of Australian farming

Updated: Dec 8, 2020

G'day, and welcome to edition 20 of Mundo. In this edition I analyse the rising political risks that Australian farmers face, the growing role of Florida's Colombian community in the coming U.S. election, and the case for sharpening our critical thinking skills to counter false and misleading information.


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Approximate reading time: 5 minutes.


Home town geopolitics

Growing up in Warwick in rural Queensland, "geopolitics" centred on controversial selections in junior cricket and hockey teams between neighbouring towns. However Beijing's recent bans on Australian agricultural exports, including a ban on beef from Warwick's John Dee meatworks, highlights the growing political risks Australia's agriculture industry faces with its largest export destination. Earlier this week, Beijing suspended barley imports from CBH, Australia's largest grain exporter. The suspension of beef imports from John Dee follows import bans from four other Australian abattoirs earlier this year. Australian wine imports have also been threatened in recent weeks.



These developments highlight the growing political risks facing third countries triangulated in ongoing U.S.-China tensions. It's common to focus on in-country social, political, and economic risks. Advanced economies like Australia, with stable political and legal systems rarely concern political risk analysts by these metrics. However its increasingly complicated security and economic relationships with the United States and China expose it to international political risks from these two powers.


The Perth US-Asia Centre recently released a report on the political risks facing Australian agriculture. Two factors expose Australian agriculture to heightened political risk in 2020 - the U.S.-China Phase 1 trade deal, and of course, the Covid Crisis.


The purchase commitments made as part of the Phase 1 deal (discussed in Mundo 18) increase supply competition in commodities where the U.S. is already established, and open up competition from American suppliers in other products through relaxed restrictions. Competition from other exporting nations leaves Australian farmers vulnerable to state-encouraged consumer boycotts. Particularly vulnerable Australian products highlighted in the Perth U.S.-Asia Centre report are summarised in the table below.



Additionally, there are fears of politically motivated "anti-dumping" measures on Australian wine, dairy, seafood, oats, and horticulture being imposed. The report's authors note that threatened action against oats could be hollow, given China has limited alternative suppliers.


China's actions on Australian agriculture must be viewed in the evolving political economic dynamic of the Covid Crisis. Beijing responded forcefully to the Morrison government's push for an international inquiry into the origins of the coronavirus. The bans on Australian imports are part of this response.


Beijing is also more willing to act against Australia than the United States, eager to avoid attracting further retaliatory tariffs from Donald Trump, while they manage their economic recovery from the pandemic. Likewise, Trump is deflecting attention from an underperforming trade deal to security and human rights issues, as I detail in Mundo 18.


Looking ahead, these two risk drivers are likely to remain elevated for the coming months. I give the purchase commitments associated with the U.S.-China Phase 1 trade deal a 70% likelihood to remain in place, unchanged until the U.S. election in November. This will incentivise China to continue to preference U.S. agricultural exports over competing products from Australia and elsewhere. In the 30% likelihood I give to Trump levying additional tariffs on China and jeopardising the trade deal prior to the election, it's difficult to see how this will land for Australian farmers. This would depend on Beijing's willingness to substitute U.S. for Australian goods, at the risk of further inflaming the Trump Administration. It would also be predicated on Prime Minister Scott Morrison's response. Prior trade drama saw China take a measured approach to Trump's tariff increases, by responding with proportionate but not escalatory actions.


The ongoing social and economic impact of the pandemic will colour the attitude of political leaders in the United States and Australia with regards to China's initial handling and management of the outbreak. A Biden Administration would almost certainly lower tensions on this front, reducing the triangulated pressures on Morrison to walk in step with Trump's inflammatory rhetoric, while also lessening pressure on Beijing to turn their diplomatic wrath on Australia, as a U.S. ally.


The first driver can be managed through ongoing efforts by the Australian government to deepen agriculture exports to Indonesia, Vietnam, and possibly India, as noted in the Perth U.S.-Asia Center report. However these markets aren't as large as the Chinese market, at present. The second driver is far more volatile, and while the Covid Crisis has sparked the latest tensions, the spectre of ongoing rivalry between China and the United States makes for a heightened risk state for Australian farmers looking to China.


Australian agriculture exporters will be best served by deepening and broadening their commercial relationships with their Chinese commercial counterparts, and continuing to establish their brand as a quality product, independent of its Australian origin. Any opportunities to align with China's economic development and food security goals should be taken. The Australian natural resources industry has done this. Yet even they're not completely immune from Beijing's political retaliation, and their overtures to China have generated separate political implications in the Australian political-economic landscape, as I discussed in Mundo 11.



A follow up: Colombians in Florida

In edition 17 I analysed how presidential politics in Florida is influencing the Trump Administration's Venezuela strategy. A similar dynamic is occurring with Florida's Colombian community, the third largest Latino community in Florida. As Tim Padgett explains, the state's Colombian community has historically shied away from an active role in U.S. politics. Despite many Colombian-Americans supporting conservative Colombian president Iván Duque, they've historically voted Democrat in U.S. presidential elections.


Yet with the state forming a crucial step in the path to victory in November, the Trump and Biden campaigns are campaigning to energise the Colombian vote. In mid-August, the Trump Administration's National Security Advisor Robert O'Brien unveiled a USD $5 billion investment program for Colombia in front of an audience of Colombian-Americans in West Palm Beach, en-route to Bogotá. The program forms the key feature of the Administration's new "América Crece" strategy, focused on "near shoring" manufacturing from China to Latin America. The Florida stop-over signals the Trump campaign's hopes that this program energises Florida's Colombian community to shift their American political allegiances come November.


Think!

We live in a world with and abundance of information from a vast range of sources, spanning a credibility spectrum from honest best efforts, to misleading, and outright falsehoods. Since the earliest days of the covid pandemic, governments and the WHO have struggled to overcome false and misleading information in what the WHO termed an "infodemic". And with the US election fast approaching, there's great concern over the influence of social media before and after election day.


False and misleading information continues to evolve into areas such as "deep fake" videos that are hard to detect, while transitioning off public forums to private groups such as WhatsApp. Fighting these threats through technology is a largely reactive pursuit.


Our ability to critically judge the media we consume goes a long way to helping us filter reality from falsehoods. Twenty-four years ago, Linda Elder and Richard Paul's research detailed the six stages of critical thinking. Their words couldn't be more applicable today:


"...if I am to develop my critical thinking ability I must both "discover" my thinking and must intellectually take charge of it. To do this I must make a deep commitment to this end.


Why is this so important? Precisely because the human mind, left to its own, pursues that which is immediately easy, that which is comfortable, and that which serves its selfish interests. At the same time, it naturally resists that which is difficult to understand, that which involves complexity, that which requires entering the thinking and predicaments of others."


Misleading information and conspiracy theories exploit our minds' laziness. Overcoming this takes conscious effort and humility, but it's the surest way to judge and critique what we hear and see. Being aware of where you might fall on this scale is a powerful step to better understanding the world around you.


  • Stage 1: The unreflective thinker

  • Stage 2: The challenged thinker

  • Stage 3: The beginning thinker

  • Stage 4: The practicing thinker

  • Stage 5: The advanced thinker

  • Stage 6: The master thinker


There are many offshoots from this. For example, my friend, VC investor Scott Hartley's book "The Fuzzy and the Techie" argues for the value of critical thinking ("fuzzy") skills in the tech world, where it's trendy to specialise in narrow technical domains. My wife's family's business focuses on developing foundational precursors to critical thinking skills from early childhood.

 

Thanks to everyone who has emailed me with their thoughts and ideas. Keep them coming! Forward this along to others who might find this an interesting read. Stay calm, think of others, stay healthy. Mitch

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