China’s stranglehold over PNG and South Pacific trade a crisis for Australia

The Judith Neilson Institute, in association with The Guardian, is running a comprehensive series of investigative articles under the theme "Pacific Plunder" which highlights the full extent of China's stranglehold over exports from just about every South Pacific Island nation as well as Papua New Guinea.

The forensic work the Institute is undertaking, and publishing via The Guardian, is in its early stages, but what has already been revealed is truly alarming – and ought to be a massive wake up call to Australia, and our allies such as New Zealand and the United States.

In my articles of the China influence in PNG and the South Pacific my focus has been on debt trap diplomacy – infrastructure and communications loans in particular – that is allowing PRC companies dominate the construction and technology sectors in most countries. Generally the funding comes from Exim Bank and other PRC finance houses that require the work to be undertaken by designated PRC construction companies.

It remains my view that Australia's response has been wholly inadequate. It has so far, via the Pacific Step Up program, made very little difference. The simple truth is that China's domination of these key sectors has not slowed at all.

The Judith Neilson Institute is highlighting what may be an even more consequential aspect of China's expanding "influence in PNG and the South Pacific".

In this contribution I want to focus on just two aspects of this expanding influence and what Australia might do about it.

The Institute's study claims that over half the total exports from PNG and the South/Central Pacific goes to China. Its growth has escalated in recent years as China has sought to entrench and broaden its economic influence in particular. Infrastructure and construction are the driving forces but it is clear that trade is now just as influential.

The main exports from the region to China are timber, fisheries, and gas and minerals. Exports of agriculture are also on the rise.

On face value, Australia's imports from the region look reasonable, but gold and crude oil make up 96 per cent of our imports from the region, principally from Papua New Guinea.

The question which surely arises is what can Australia do and do urgently to increase our imports from the region and lessen the region's growing dependence on China? That dependence will be even more consequential than the unaffordable debt burden most countries have run up.

While timber exports harvested legally and illegally are increasingly dominated by China (it once was Malaysia) it is a very complex area that Australia really cannot do much about in the short term. We could not justify importing high quality and unprocessed timber products from PNG and the Solomon Islands on environmental grounds alone. China and a couple of other Asian countries are under no such constraint

But there are two industries we could take significantly more PNG exports from – and do so relatively quickly.

The first is fisheries. And what an absolute debacle our record in this major industry sector is.

When it comes to seafood exports from Papua New Guinea, Fiji, Solomons and Vanuatu we don't even rate. Thailand is the main destination ($300m), followed by Philippines ($199m), Japan ($130m), China ($100m) and the United States ($100m). It can be safely assumed that exports to China are at least double that as there are dozens of Chinese fishing boats operating in the region without any local scrutiny.

Australia imports around half the seafood we consume. It comes from Thailand, China, Bangladesh, and other South East Asian countries, as well as New Zealand.

Papua New Guinea is our closest neighbour. We have an extensive common sea boundary. The fish that inhabit PNG waters also surely inhabit Northern Australian waters.

Yet Australia imports almost no fisheries products from Papua New Guinea, or the Solomon Islands or Vanuatu or Fiji. No wonder China regards our neighbours as "open season" when it comes to fisheries exploitation.

Apparently the "biosecurity" reason that has been used to effectively block PNG fish, prawn and lobster exports to Australia for years remains in place.

Late last year I wrote extensively about plans for a PRC state-owned fishing company – backed by the PRC Embassy in Port Moresby – to build a multi-million dollar "fisheries industry" and large port at Daru, the town closest to Australia, and only about 7km from the northernmost Torres Strait island community.

The project has not advanced but it remains very much alive at least as far as the PRC Embassy is concerned. And it has most certainly not been ruled out by the PNG Government or the Western Province Provincial Government.

Australia has done three fifths of not much in response. An unsuccessful visited by well dressed Australian officials, and a meaningless MOU has been about all that has happened since.

What Australia needs to do is work with the local community to develop a viable fishing industry, including a processing plant, and funding more fishing boats for the local Daru community. And we need to bring the PNG Government on board to ensure the project is effective.

Australia should undertake to take a substantial share of the fish, prawns and other seafood caught in PNG waters and processed at Daru. We should also directly fund local business groups to participate with the assurance we will take as much of the catch and production as possible.

This needs to be a pilot project, one that is emulated in other coastal communities along the Papuan coast in particular. If we do so we won't stop China's fisheries exploitation but we will be able to slow it down, and highlight that our contribution is more sustainable and offers significantly greater benefits to PNG as a whole, and to coastal communities.,

Sadly one reason why our tight biosecurity controls have not been challenged is that the Australia seafood import sector is not really interested in PNG seafood which will be more expensive that what we import from Asia – but surely of a higher quality!

It may well be the Australian importers will need economic incentives to import seafood from PNG, and the Solomons, Fiji and Vanuatu, but it is surely in our national interest to slow, if not stop, the exploitation of our neighbourhoods vast maritime resources?

And while we neglect this sector, China in June last year signed a seafood export agreement with Papua New Guinea. At the time the PRC Ambassador forecast that exports from Papua New Guinea to China would increase dramatically.

If we lift imports from almost zero to a sustainable level we need to directly help our neighbours with value-adding onshore processing that boosts local economies and wins us friends where we really need it.

The second industry sector we need to help Papua New Guinea and other neighbours their production of coffee, tea and vanilla beans.

Sadly the importing of these essential commodities (essential for local communities across PNG in particular) has dropped from $60 million a year in 2010 to just $20 million in 2020.

I suspect that one reason for the massive decline is a decline in real engagement by our trade authorities with PNG exporters.

In the meantime, China has wasted no time is taking up where we have faltered. In October 2019, Papua New Guinea joined the China International Coffee Alliance which essentially promotes China's engagement with member countries to boost exports to China.

When PNG joined the alliance, Chinese officials promised to take much more of PNG's coffee and cocoa production in the future. The official pointed out that coffee consumption in China is rising by about 20 per cent a year.

Again time is therefore not on our side. There is no reason why Covid-19 restrictions should prevent significant marketing for PNG coffee and cocoa in Australia from being undertaken in Australia, where coffee consumption is also increasing.

I can assure readers that PNG coffee is of the highest quality. It is just increasingly difficult to buy it here.

These are just two areas where we can strengthen our trade links with our nearest neighbour in particular.

If we don't do so urgently and comprehensively then China's dominance of agricultural exports from the region will be absolutely entrenched.

And when that occurs the chance of lessening the region's economic dependence on China will be just about zero.

The exports to China stranglehold is potentially more consequential than debt trap diplomacy which I and others have written extensively about!