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Neil Newman

TRADE ROUTES
A long time ago in a land far, far away, a large ship that had travelled a great distance slipped quietly into a perfect natural harbour in paradise. Her captain got off, stuck a flag in the sand and said “this is ours”, and in the process seized rich deposits of natural resources, food and water. He was soon followed by a fleet of ships, military equipment and hordes of invaders. The evil empire had once again expanded its territory.
This is exactly what happened in April 1770 when captain James Cook first arrived in Australia on the HMS Endeavour, to be quickly followed by the British First Fleet of 11 ships and 1,500 people under the command of captain Arthur Phillip to colonise the place.
At the time there wasn’t anyone tough enough to say, “you can’t do that!”, but times have changed and one definitely cannot go plant a flag today without a backlash.
Soon after Australia was colonised, the British started to ship marine products, wood and wool from the colony. By the late 1800s even frozen lamb was being sailed back to the British Isles, followed by grain, dairy and other agricultural products. Australia became key for the old country’s food security.


I believe China’s move into the South China Sea, through which a third of global shipping passes, is as much about food security as anything else. And much less to do with the expansion of its empire than is commonly claimed. It must grapple with a rapidly ageing population, with many of the people farmers. If that sounds familiar, it’s because Japan faced the same demographic challenge, and today has to import 64 per cent of what the country consumes. Little wonder, then, that Chinese leaders were tempted by the rich stocks of fish in southern waters. The venture was somewhat legitimised after Chinese firms were invited to set up in coastal Australia by leasing the port of Darwin and Papua New Guinea started to accept investment in Daru. The two spots are on either side of the Torres Strait, a stretch of water crawling with lobsters.
Fish and lobsters don’t seem to care much about national borders, but still find themselves the focus of territorial and political spats. China’s camping out in the South China Sea, coupled with its tough trade tactics, provides perfect fodder for the rattling of sabres.
The chips are down for Taiwan, ‘so where the bloody hell are you’ Australia?
PINEAPPLE WARS
This month China added Taiwanese pineapples to the laundry list of foods it will no longer import, boosting local pineapple prices and helping ageing Chinese farmers. But just like Australia and its coal, Taiwan had made itself overly dependent on just one export market, with China buying 91 per cent of its pineapples. The knock-on effect from the painful import ban, which China attributed to contaminated stock, has added to the growing anti-China sentiment in the Asia-Pacific.
The Australians were quick to come to the rescue by agreeing to buy Taiwanese pineapples. Although the Aussies grow more than enough for their domestic market, six tons of pineapples are on the way to top pizzas from May. Pitying the Taiwanese, Japan joined in, with a prominent news network running a “let’s eat Taiwanese pineapples” campaign, and Japan pre-ordered 6,200 of the oishii fruit by March – a record in any full year.

A new fruit export economic zone was discussed by Taiwan’s foreign minister, Joseph Wu, who launched his “Freedom Pineapple” campaign on Twitter and likened the debacle to China’s recent imposition of harsh duties on Australian wine. Taiwanese president Tsai Ing-wen didn’t miss a beat either, calling for people to “support our farmers and enjoy delicious Taiwanese fruit”. By the end of the following week, more pineapples had been ordered by non-Chinese entities than China has typically bought, solving the problem of having a single customer. Solidarity for “Freedom Pineapples” was heard from as far away places as the UK, Denmark, India and the United States.
China has a history of using harsh trade tactics, or bullying as it’s often referred to. Examples abound over the past 20 or so years, raising the question: why do exporting countries continue to expose themselves in this way? Simply, it requires much less effort to keep selling to China than trying to find new markets for exports.
China-Australia clash may be more about Beijing’s economic fears than Covid
THE ROYAL NAVY WADES IN
The UK exported £690 billion (US$962 billion) of goods in 2019, about a third of its GDP, making it the fifth largest exporting nation with a truly global footprint. The British maritime industry is a critical UK trade activity and supports about 95 per cent of the country’s total imports and exports, of which about 12 per cent passes through the South China Sea and the Pacific Ocean.
Furthermore, 5-6 million Brits live overseas, or about 10 per cent of the total number of British citizens. Some 2 million are resident in Asia and Australasia.
As a result, the Royal Navy plays an essential role in guaranteeing the safety of those trade routes, including fending off modern day pirates and being on call in a crisis to protect British interests and citizens overseas.

Prime Minister Boris Johnson delivered to the House of Commons this week his “Integrated Review of Security, Defence, Development and Foreign Policy”, and boosted the budget of Britain’s armed forces. It’s not that I’m against military spending or having effective armed forces – they are essential. But the statement, and its tone, will undoubtedly raise tensions around the Asia-Pacific at a time when they need to be lowered.
The review allocates a substantial new budget of £24 billion to the armed forces, and notes that aircraft carrier HMS Queen Elizabeth’s first overseas deployment this year will be leading a strike group to the Indo-Pacific and back. Relearning how to compete with nations that have “opposing values” is critical, and as China was mentioned three times and “Indo-Pacific” twice, you could practically hear the grinding of teeth in Beijing from here.
With the UK now seeking membership in the Trans-Pacific Partnership, and with British territory in the Pacific with a resident population to protect, the Royal Navy will have to have a greater ongoing presence as Britain’s share of trade that flows through the region increases.
PINEAPPLE PEN
From pineapples and power projection to freshly inked trade agreements, the messages being sent to China lately have not been subtle. But equally, the messages China has been sending to politicians abroad through its trade policies – “we don’t like what you are doing” – are also very direct, and have a harsh and immediate impact.
If a country worries it may one day fall on China’s bad side, it had better not rely on that single market for important industries.

Additionally, China is angling to secure its long-term food security. To do so, it has shown it’s not afraid to go where it can and source what it must. History shows that if great powers in such a predicament need to expand their empire to solve their problems, then that is what will happen. How we will deal with this eventuality in the 21st century is a crucial question.
With this talk of potential conflict, fortunately or unfortunately, there is a relevant historical precedent in the Falkland Islands and their surrounding deposits of oil and natural resources. In the 40 years since the 10-week war between Britain and Argentina, the oil has not been touched. Should a fight break out in the Asia-Pacific, for whatever reason, everyone will remain on edge for decades with the situation so tense, no one can touch the resources.
I hope the meeting of the Chinese and the Americans in Alaska this week to tone things down will be the first step to defusing the standoff, although the participants see little chance of an immediate resolution. And with Australia, South Korea and India invited by Boris Johnson to the G7 in June, this will undoubtedly be perceived in Beijing as once again ganging up on China.
Without a focused effort to reduce tensions, or rethink trade relationships and clarify intentions in the Asia-Pacific, the region looks increasingly dangerous next year.
Neil Newman is a thematic portfolio strategist focused on pan-Asian equity markets


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South China Sea

Pineapple wars may show Beijing’s real motives in the South China Sea

A farmer loads pineapples onto a truck at a plantation in Nantou County, Taiwan. Photo: Bloomberg

Taiwan Pineapples, get them while you can. Photo: Neil Newman

A Chinook helicopter flies over the HMS Queen Elizabeth aircraft carrier, following an event to commemorate the 75th anniversary of the D-Day landings, in Portsmouth, southern England, on June 5, 2019. (Photo by Glyn KIRK / AFP)

Taiwan President Tsai Ing-wen attends an event promoting Taiwanese pineapples after China announced a ban on imports of the fruit from Taiwan, in Taipei, Taiwan March 3, 2021. REUTERS/Ben Blanchard

This Week in Asia

Opinion

Comment


The actions of China, as its farmer population ages, are likely more about food security than empire building
But as China realigns its trade relationships, the Asia-Pacific looks an increasingly dangerous place



As China realigns its trade relationships, the Asia-Pacific is looking like an increasingly dangerous place, writes Neil Newman.


Taiwan

China food security

Britain

Australia

China's ageing population

Ageing society

Tsai Ing-wen

Japan

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

Abacus

Abacus | Pineapple wars may show Beijing’s real motives in the South China Sea

The actions of China, as its farmer population ages, are likely more about food security than empire building But as China realigns its trade relationships, the Asia-Pacific looks an increasingly dangerous place

The actions of China, as its farmer population ages, are likely more about food security than empire building

But as China realigns its trade relationships, the Asia-Pacific looks an increasingly dangerous place