Senator JOYCE—I apologise, I have been going backwards and forwards to meetings all
night, which have been compulsory, not optional. Do you see inherently that there is a problem,
as manifestly prescribed by the Stern Hu affair, where a nation that invests as a nation, which is
what sovereign/state owned entities do, creates immense complications for us?
Dr Fisher—We are unused to having lots of investment from those sorts of sources. It is only
relatively recently that we have had investments from sovereign wealth funds and some state
owned enterprises, so we are adapting effectively to a new world order, in my view. As I said
before to the committee, I think we are going to have to adapt to that world because that is where
the majority of savings are going to come from in the future. I am in no position to comment on
the Stern Hu affair, because I do not know what the background is. I have no evidence and no
information about that other than what I read in the newspapers and I imagine that that is highly
unreliable.
I think the key point is that the growth in savings around the world has shifted from Europe
and the United States into Asia and the Middle East. The economic arrangements in those
countries are different from what we are used to, and as a consequence of that we are going to
need to adapt to investment from those sources, and in the long term trade is linked to
investment flows. As a small open economy we need desperately to trade with those growing
nations and, as a consequence of that, we need to adapt our systems to cope with new investors
in Australia.
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Senator JOYCE—I am going to ask a technical question. With respect to China’s reserves
and capacity to purchase things—I am just speaking about China because there is an inherent
lack of transparency with what goes on there—when China goes out and buys something in
Australia, for instance, Shenhua’s purchase in the Liverpool Plains or Chinalco, with the reserves
that they rely on when they purchase those assets what stops China from saying, ‘Just write the
number down in the book and send them the cheque’? How do we know that it relates to an
accounting based certifiable allocation of funds? What stops China from saying, ‘They want
$200 billion or $300 billion. Just send them a cheque’? How are they ever going to know
whether this money is real or not? They use it to trade back with us, it stimulates our economy,
so who cares?’
Dr Fisher—In the final analysis if you are selling something to somebody you are going to
need some hard currency, otherwise you are not going to transfer the property.
Senator JOYCE—The Chinese are trying to change from dealing in American dollars to
Chinese yuan and using that around the globe. I think Argentina and a few other countries are
coming on board with that as their term of trade. They are trying to move away from the US
dollar. Once they do that they have a printing press and they can do what they like. They then
have the vehicle of a 100 per cent owned government entity to be an arm to go out and purchase
what they want with their printing press.
Dr Fisher—It is going to be some time before we see the Chinese currency accepted around
the world as a reserve currency. In the long term that is coming. If we were sitting here in 2050
we will probably be perfectly happy to deal in yuan rather than US dollars.
CHAIR—That will not happen until those transparencies are there surely?
Senator JOYCE—How do we know that they are not just buying things at that stage with
their printing press rather than with any sort of realisable and accountancy based background of
wealth?
Dr Fisher—We face exactly the same problem with the United States.
Senator JOYCE—But the US do just print the money.
Dr Fisher—They do, exactly.
CHAIR—Where does that leave us?
Dr Fisher—In the past when they have done that they have caused enormous surges of
inflation in the world. You can go back to the Vietnam War and you can see those effects. No
matter who it is that is in control of the reserve currency we are going to have that sort of
problem, but we have not invented an international exchange system that is actually better than
that.
Senator JOYCE—Technically they could just do that. There is nothing really to stop it. It is
good to get this on the record. They could purchase something just with the printing presses.
They could say, ‘Tell them we are buying 195 square kilometres of the Liverpool Plains. Turn on
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the printing press’, and send over the dough. Or they would just send a cheque. It is the fact that
they have control of the mechanism of financing trade, not that they are actually sending you
anything; sitting behind it is no more than an intention to print money.
Dr Fisher—Except that, if we are talking about the Liverpool Plains today, I imagine the
transaction was going to be done in US dollars. You would have to worry about President Obama
more than the President of China.
Senator JOYCE—When they purchase it with the US dollars what stops the Chinese from
saying, ‘We’ll purchase a heap of US dollars.’ Turn on the printing press. ‘Here you go. You
have our yuan and we’ll have your US dollars.’ Send the US dollars over to them?
Dr Fisher—Anybody with a US dollar is not going to give the Chinese a US dollar unless the
Chinese give them some goods in exchange—except you and I. If we go to China you and I are
going to exchange US dollars for the local currency because we want to buy things in restaurants
and it is easier. If you are making large exchanges in international markets then basically those
exchanges are being made in exchange for goods. If the US is importing vast amounts, which
they are—or at least until the crash they were importing vast amounts—of Chinese washing
machines, TVs, air-conditioners and so on, those goods were being exchanged for US dollars.
Senator JOYCE—I suppose in a fashion that is exactly what is happening. The Americans
turn on the printing press and they buy the goods. The Chinese get loaded up with a currency
which for all intents and purposes they have some serious concerns about. Then they think,
‘How do we mitigate our risk? We will buy a substantive asset in Australia with this cash.’
Dr Fisher—That sounds like a very wise idea to me.
Senator JOYCE—Except if we are in Australia and all of a sudden the sovereignty of our
nation is being taken into this maelstrom and we are losing a connection. We are not losing it to
a corporate entity. We are losing it to the long-term strategic aspiration of a government.
Dr Fisher—This case goes back to the discussion we were having previously about trade
following investment and a genuine desire on behalf of the Chinese people to see their economy
develop, and the need for resources. When we think about Australia’s past, our economic welfare
has been enhanced by foreign investment from the United States and the United Kingdom,
which was really driven by a need for products produced by Australians. The English did not
come here just because they liked the weather. They came here to invest in agriculture, beef and
wool so that those products could go back to Europe—in the case of wool—and feed the textile
system.
Senator JOYCE—With respect to trade development, it might be politically incorrect but we
have to say it: when you deal with America, Europe, Japan or India there is also sitting behind
it—it might not be at the level that we expect—individual rights and judicial and democratic
principles that are comparative. How many of these do we have to compromise when we deal
with a country that says, ‘For us the democratic principle is irrelevant because we do not have a
democracy.’ The judicial principle is a function of the government, which is basically by
appointment. It is a mechanism of control rather than a mechanism of justice. The individual
principle is: ‘As long as you don’t put your head up too high, you’re going to go along all right,
Monday, 10 August 2009 Senate E 41
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but watch out if you do.’ We saw what happened recently with the Uygur lady and also the attack
on the arts festival launched from China. Their principle of liberties and how they manifestly
search over the horizon to inflict their views on other people is completely and utterly at odds
with anything we have experienced in the past.
Dr Fisher—The real question it comes down to is: if you perceive that those things are not
optimal, how would you go about changing them? In my view, I do not believe that I have any
right to dictate to a sovereign government how it should run its country. That is a bridge too far.
Even if you go past my bridge too far, from my personal point of view, what facilitates change in
an economy and a society seems to me to be economic prosperity, growth, change and openness
to the world. I do not think we see many of those changes as a consequence of attempting to beat
people into submission. It is far better to trade with people slowly, talk about openness, introduce
others to the way we do business and try to do business on some sort of equal footing on a caseby-
case basis.
Senator JOYCE—Obviously we are talking about guidelines and things that should be
brought into guidelines. Is it either naïve or duplicitous that we can moralise about the Sudanese,
have trade embargoes with the Burmese and tell the Zimbabweans how terrible they are, but
because they are exceptionally powerful we do not dare do those sorts of things with the
Chinese? Are we compromising ourselves as a nation and in the process of compromising
ourselves making ourselves a lesser place, or is this just the reality of the new world, that all that
humanity has tried to build up over such a long period to advance the right of the individual
should now, at this point in time, be set aside because the price is right?
Dr Fisher—I am not too sure that it is actually about the price being right. There are 1.3
billion Chinese people who have a different view. They have a culture that has grown up pre-
Roman times, basically, and they have evolved into a different sort of civilisation. We have
evolved for different reasons into a European-style civilisation with different views about
individual rights. We have two different systems.
Senator JOYCE—Are those rights and beliefs endemic and ubiquitous across all people or is
it only a certain group of people who have this aspiration of the liberty of the individual, the free
expression of belief, freedom of movement and freedom of religious belief? Are these things just
peculiar to us—without trying to be too contentious—because we are of some sort of European
genealogy; other areas are different and they do not believe in those sorts of things? Surely these
rights are just ubiquitous across all people?
Senator PRATT—Maybe they are interpreted in different ways in different places.
Senator JOYCE—Therefore, we should be trying to sponsor that and assist that in any way,
shape or form, and you are not assisting it if you just hand across a whole mechanism of wealth
to support an institution which at this point in time runs completely at odds to those desires.
Dr Fisher—There is no doubt that what you are describing is a view of the world that we
have inherited from our European roots. The Chinese view of the world is different. It is based
on a view that the family and the clan is more important than the individual.
Senator JOYCE—Filial piety.
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Senator PRATT—It is not that different to here.
Dr Fisher—Is that right or wrong?
Senator JOYCE—It all depends which side of the transaction you are on. If you are on the
side that is, for instance, a Tibetan or a Uygur, you are in a camp in North Korea or you are
being subjugated to the Janjaweed’s extermination of a whole group of people in southern Sudan
you would probably say that it is not working out very well for you.
Dr Fisher—There are certainly circumstances that I am sure are not optimal for the
individual. But if we look at the attempts in the past to impose change on societies by economic
sanctions, you cannot think of a single case where that has been a raging success. We have
imposed sanctions on the Burmese.
Senator PRATT—I think the ban on foreign investment in South Africa was pretty
influential.
Senator JOYCE—That is an interesting point. I will touch on that, too.
Senator PRATT—I take your point, Mr Fisher.
Senator JOYCE—There was immense pressure put on South Africa because of their
apartheid regime, which people felt was intolerable. There was immense economic pressure and
sanctions that eventually brought about the change in the function of government in South
Africa.
Senator PRATT—China is probably a bit too big for that.
Senator JOYCE—Therefore, it is a relative thing; we will insist on our viewpoint on the
world unless we feel that you are too big, in which case we will let you get away with whatever
you want.
Senator PRATT—No. I do not think that is what anyone is arguing.
Senator JOYCE—Let us look at another issue. Let’s talk about foreign investment. If we go
pre-1938 Germany, people dealing with Krups or any of the major investment houses in
Germany did so because of commercial expediency. Have we got any right to look back in
history at them and say, ‘That was immoral’, when basically in another form we are doing
exactly the same thing now?
Dr Fisher—I do not think I can comment on that. In fact, I would not comment in any way on
a comparison between Nazi Germany and modern China. It is just not—
Senator PRATT—Dr Fisher, you would agree that we need to make progress on human
rights issues in China? I do not think that is really in question here.
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Dr Fisher—Yes, I believe that we should make progress on human rights issues everywhere,
no matter where they are. What I am really saying is that trying to do that via foreign investment
rules in Australia is, firstly, not in our best interests and, secondly, almost certainly will fail.
Senator JOYCE—Where do we draw the line on what we are willing to compromise in
Australia? I will be more direct. Is there a line you draw in your Foreign Investment Review
Board guidelines in Australia that has any reflection on what many would believe is a manifest
desire of so many human beings to live with a certain sense of stability, freedom, democratic
principle, right of the individual, or is that not a line you ever countenance in Foreign Investment
Review Board guidelines?
Dr Fisher—I do not think it is sensible to go there.
CHAIR—We are two minutes off an hour now with this segment. Dr Fisher is probably
desperate for a cup of coffee.
Senator PRATT—Can I just ask a very quick question?
CHAIR—Yes.
Senator PRATT—To what extent can we influence be they environmental outcomes or
labour standards in another country when we are talking really about how we control foreign
investment in our own?
Dr Fisher—I do not believe we can have other than extremely marginal influences on those
things elsewhere.
Senator PRATT—Which might be to give some visibility to the issues in public debate.
Dr Fisher—Precisely. What we should do is ensure that the behaviour of those entities in
Australia is up to Australian standard.
Senator PRATT—Can we make a contribution to improving standards overseas by doing
that?
Dr Fisher—I believe so. If people observe the way our mines operate and they take some of
those lessons back with respect to safety, for example, that has to be a good thing.
Senator JOYCE—What exactly do we do, though, when that state owned enterprise involved
in Australia, which is backed up by a regime so powerful that we dare not make any comment
about their people’s liberties, rights, aspirations or the way they function in their country, decides
to push the envelope in our country? If we cannot stand up to them at the start how on earth do
we ever stand up to them later on?
Dr Fisher—I am not exactly sure how you are anticipating they might push the envelope.
Senator JOYCE—Let us use an instance where they are in Australia and there is a transfer
pricing issue. All of a sudden you are saying to this enterprise, ‘You are not ever paying any tax.
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You seem to be putting in a return each year that says you are not making any money. We know
quite evidently that that is not the case.’ They say, ‘Stick it up your jumper. I’ve got no interest in
talking to you.’ Then we say, ‘If you don’t do that we’re going to ... Hang on, we can’t do
anything because you’re too strong.’
Dr Fisher—In the final analysis if there are transfer pricing issues and the Australian Taxation
Office cannot deal with them, presumably there are other sanctions against that company. In the
final analysis, presumably those assets actually reside in Australia.
Senator JOYCE—It is quite self-evident. If they have the capacity to lock up a senior
director of a company without really delivering any charge sheet, just saying, ‘We think he’s
broken the law’ and that is it, then what are you going to do when they say, ‘You’d better not
touch any of our assets or watch out’?
CHAIR—That is interesting.
Dr Fisher—I think those questions are more for the lawyers.
Senator JOYCE—Unfortunately it is diplomatic relations. It almost becomes a question for
the Defence Force and they might say, ‘Don’t do anything about it because we don’t have any
capacity or any influence over them. You just have to live with it.’
CHAIR—That is a possibility. Most wars are caused over resources, if you look through
history—water and other things. One way of avoiding wars is not to cause problems with
resources. Even the Japanese activities in World War II were about looking for resources. With
that I think we will close, as we are over time. Thank you very much, Dr Fisher.
Dr Fisher—Thank you.
Committee adjourned at 6.46 pm