Speaker 1: Two months ago, we devoted an episode to a tropical
Speaker 1: paradise that was fast becoming a geopolitical football. That paradise
Speaker 1: was the Maldives, the subject economic and political rivalry between
Speaker 1: China and India. But things move fast. There's another superpower
Speaker 1: playground that's getting hot, the South Pacific. China's sway is
Speaker 1: increasing in a region that's traditionally a sphere of American,
Speaker 1: French and Australian influence. The country most in focus is Vanuatu,
Speaker 1: where China is dishing out lots of loans and beefing
Speaker 1: up the nation's infrastructure. But sooner or later, critics say
Speaker 1: China will want to convert some of that leverage into
Speaker 1: a base for its military. Welcome to Benchmark, a show
Speaker 1: about the global economy. I'm Daniel moss Net, aonomics writer
Speaker 1: and editor at Limburg Opinion in New York. And I'm
Speaker 1: Scott Landman and economics editor Limburgh News in Washington. So
Speaker 1: what's at stake in Vanawa to in the South Pacific?
Speaker 1: How has the region's economic and political profile changed and
Speaker 1: what are the consequences. Our guest Jonathan Prike from the
Speaker 1: Lower Institute in Sydney, will try to explain it for us, Jonathan,
Speaker 1: thanks for joining us, Thanks for having me guys. First
Speaker 1: of all, why should we care if China's influence in
Speaker 1: the South Pacific is growing or shrinking? Well, yeah, why
Speaker 1: don't we start with a bit of geography on on
Speaker 1: what we mean by the South Pacific. The South Pacific
Speaker 1: is the region of the Pacific Islands that makes is
Speaker 1: made up of fourteen sovereign nations, and they range from
Speaker 1: in size from tiny New a country of fred people,
Speaker 1: to Papua New Guinea, a country of more than eight million.
Speaker 1: They take up of the world surface and are rich
Speaker 1: in fishery resources, but are smaller people numbers. I think
Speaker 1: total population of the Pacific Islands is somewhere around thirteen
Speaker 1: million people. But because they make up of the world surface,
Speaker 1: because of that, the fisheries and exclusive economics own resources
Speaker 1: that they have. There is a significant some significant interests
Speaker 1: in the region. But when you step back and look
Speaker 1: at the South Pacific in the global geopolitical sphere, it's
Speaker 1: really hard to see a huge amount of significance. It's
Speaker 1: not on major shipping routes. It's it's distant from from
Speaker 1: the power bases in Asia. But when you look to
Speaker 1: World War Two, you can see at the significant role
Speaker 1: that the Pacific Islands region has played in geo strategy
Speaker 1: in the past. And why is it important. Well, it's
Speaker 1: important particularly for Australia because we see the Pacific as
Speaker 1: really our backyard. Former Prime Minister of pup Guinea sorry
Speaker 1: of Australia, John Howard once called the Pacific our patch.
Speaker 1: So we now have changed that language to call in
Speaker 1: ourselves the partner of choice for the Pacific and that's
Speaker 1: a relation, a relationship that we want to make tame
Speaker 1: in the region. So it's definitely this, this rise of
Speaker 1: China and the Pacific is definitely causing a great degree
Speaker 1: of anxiety in Canberra and in other traditional power bases
Speaker 1: that have had a role to play in the Pacific,
Speaker 1: that of Tokyo, Washington and Wellington. So how did Vanua
Speaker 1: to become the geo strategic flashpoint in all this, especially
Speaker 1: with regards to China and Australia right now? Yeah, So
Speaker 1: it's it's important to note that China's rise in the
Speaker 1: Pacific hasn't happened overnight. Indeed, China has links to the
Speaker 1: Pacific that go back hundreds of years, generations of Chinese
Speaker 1: migrants that are in the Pacific that play an important
Speaker 1: role in a lot of these communities. But really since
Speaker 1: about two thousand and six, we have seen a ramping
Speaker 1: up of China's engagement in the Pacific. And I also
Speaker 1: note that China's only engaged formally with eight countries in
Speaker 1: the Pacific Islands. There remain reign six support Taiwan, and
Speaker 1: they now make up just one third of the of
Speaker 1: Taiwan's remaining support based in the United Nations. So that's
Speaker 1: such just an interesting little little elements of China's engagement.
Speaker 1: But since two thousand and six, China has really been
Speaker 1: been ramping up its engagement in the Pacific. A lot
Speaker 1: of that has come in the form of what we
Speaker 1: see what China's doing elsewhere in the world, the form
Speaker 1: of concessional loans to build large infrastructure projects, and China's
Speaker 1: been doing this in a big way in a number
Speaker 1: of countries in the Pacific, Vanawatta being one of them.
Speaker 1: For research from the Lower Institute has shown that that
Speaker 1: China has injected over one point eight billion dollars of
Speaker 1: lending and grants into the Pacific Island region since two
Speaker 1: thousand and six. That would put it anywhere between the
Speaker 1: top three and top five donor to the Pacific Islands region.
Speaker 1: Vanawatu has immerges a flashpoint for this engagement this year
Speaker 1: because when you take a look at the all the
Speaker 1: different projects that China's engaged in, all the infrastructure projects,
Speaker 1: most of them to pically are pretty benign. In a
Speaker 1: lot of these countries, you know that big government buildings
Speaker 1: that rehabilitating city centers that not really you can't really
Speaker 1: see how they could be of dual use as we
Speaker 1: have seen China do in other parts of the the world.
Speaker 1: So they're not critical infrastructure. That not deep seaports and
Speaker 1: not airports. They're not these these projects that China might
Speaker 1: want to consider doing an asset buyback or um you
Speaker 1: want to use as a dual use facility later down
Speaker 1: the road. That's different in Vanuatu. In Vanuatu, China has
Speaker 1: rehabilitated a port, a deep sea port on the country's
Speaker 1: largest island, but one of its least inhabited. And you know,
Speaker 1: analysts are from around the world look at look at
Speaker 1: that project. Look at this now deep sea port that
Speaker 1: reports have sean has the capacity to host an aircraft carrier.
Speaker 1: They look at that project with a great degree of anxiety. Jonathan,
Speaker 1: How have the region's economics changed. Is it a shift
Speaker 1: in the contours of foreign aid traditionally dominated by Australia,
Speaker 1: France and the US, or is there something else going
Speaker 1: on here economically? Yeah, well, the economics of Pacific Islands,
Speaker 1: of these smaller countries is quite unique. You know, most
Speaker 1: of these countries are not going to follow a traditional
Speaker 1: traditional economic development pathway just because of the small size
Speaker 1: of most of these economies and just their remoteness to market.
Speaker 1: So in the case of Vanuatu, Vanuatu is one of
Speaker 1: the most tourist dependent economies in the world, but foreign
Speaker 1: aid is always going to also going to be a
Speaker 1: significant contributor to economic development and to the the economies
Speaker 1: more broadly in these countries. So the fact that China
Speaker 1: is injecting a lot of infrastructure into Vanuatu does have
Speaker 1: an impact on on Vanuatu's economy, but it's not nearly
Speaker 1: as important as the as the tourism markets that Vanawatu
Speaker 1: benefits from, which are dominated by Australia and New Zealand,
Speaker 1: and from cruise ships. So you know, well, the sport
Speaker 1: that they have built is as sensibly to to increase
Speaker 1: the amount of tourism arrivals. We haven't actually seen that eventuate.
Speaker 1: But there is also another lends to look at this
Speaker 1: Chinese lending through is that of the debt that Vanawata
Speaker 1: is stacking up by taking on these loans, and that
Speaker 1: debt profile gives China significant economic leverage over Vanawatta. How
Speaker 1: they can use that leverage to their advantage is a
Speaker 1: question I'm everyone is wondering. I'm not convinced that Vanawata
Speaker 1: can really be brought through through this economic leverage. That
Speaker 1: this is a country with with agency and you know,
Speaker 1: their their foreign minister has come out recently after these
Speaker 1: recent Saga has hit the press and said emphatically that
Speaker 1: there is no way that they would let China develop
Speaker 1: any sort of dual use military assets or any sort
Speaker 1: of fixed base in Vanawatta. They just have no interest
Speaker 1: in doing it. So just because China has this economic
Speaker 1: leverage over Vanuata doesn't mean they're going to be able
Speaker 1: to wield it as they might like in the future.
Speaker 1: Jonathan talking about economic leverage from another point of view.
Speaker 1: Here in Washington lately, we're spending a lot of time
Speaker 1: writing and following what's going on between the US and
Speaker 1: China over trade, with the potential for a trade war
Speaker 1: looming high in a lot of people's minds, is there
Speaker 1: any connection between how China might approach trade negotiations with
Speaker 1: the United States or with other trading partners end China's
Speaker 1: approach to influence in the South Pacific or just the
Speaker 1: Greater Asia Pacific region. Well, yeah, that's a it's a
Speaker 1: really interesting question, I guess. In the South Pacific, trade
Speaker 1: is really insignificance component of the relationship or China's export
Speaker 1: to a degree to these countries, but it's not at
Speaker 1: all significant for China's trading profile so far. More important
Speaker 1: I think for their engagement in the South Pacific is
Speaker 1: to build political and formal influence in these countries, to
Speaker 1: get support at the United Nations, to get our geopolitical support,
Speaker 1: and too, yes, secure their support in the future. PUPN
Speaker 1: New Guinea is a different story. Pup New guineas country
Speaker 1: of eight ten million people that is rich in a
Speaker 1: whole range of natural resources that China might be interested
Speaker 1: in securing. But yeah, the trade component of this relationship
Speaker 1: hasn't really eventuated in any significant degree at the moment.
Speaker 1: China's engagement with Australia. A major component of that is
Speaker 1: the trade relationship, and it has a significant influence on
Speaker 1: the way in which we in Australia interacts with China,
Speaker 1: and I guess it does shape the lens of the
Speaker 1: way Australians are looking at China in the Pacific and
Speaker 1: our immediate region because of just the challenges we're having
Speaker 1: with our bilacteral relationship between Australia and China. There's been
Speaker 1: some commentary that Britain wants to play a role enshoring
Speaker 1: up the neighborhood. Jonathan, is this a joke? I mean,
Speaker 1: Britain can't decide what its relations with France and Germany
Speaker 1: should be, how can they give the South Pacific any
Speaker 1: serious attention? Yeah, look, that's a great question. And I
Speaker 1: think people have taken the announcements of Britain opening three
Speaker 1: new diplomatic missions in the Pacific as a lot of
Speaker 1: people have been heralding it as a potential game changer
Speaker 1: or a Pacific pivot, and you know, I think that's
Speaker 1: all nonsense. To be honest. First of all, the United
Speaker 1: Kingdom has colonized half of the region, and to think
Speaker 1: that they can come in and now act as as savior.
Speaker 1: I think you know, we've seen how that story is
Speaker 1: played out in the past. And just because they are
Speaker 1: it is a post Brexit, UK is expanding its geopolitical
Speaker 1: network again. It wants to establish itself more as a
Speaker 1: global player. The South Pacific has been and will always
Speaker 1: be on the fringe of geopolitical interest for the United Kingdom.
Speaker 1: France has also committed to doing more in the South Pacific.
Speaker 1: But if we are expecting them to really change the
Speaker 1: landscape in any significant way, then um, I think we're
Speaker 1: all going to be let down. The real owners should
Speaker 1: be on the traditional powers that have been involved in
Speaker 1: the Pacific for a long time, Australia, New Zealand, Japan
Speaker 1: and the United States two look at the way in
Speaker 1: which we're engaging with the Pacific and to really up
Speaker 1: our game, to do more to maintain our positions as
Speaker 1: being the partners of choice in the Pacific Islands region.
Speaker 1: As the United States been alarmed at these developments at
Speaker 1: all lately or or monitoring the situation in the South Pacific. Yeah,
Speaker 1: so it's an interesting relationship between the United States and
Speaker 1: Australia with regards to the Pacific Islands region, and it's
Speaker 1: it's quite a unique one in that the United States
Speaker 1: really does take a quite a hands off approach with
Speaker 1: this part of the Pacific because they see Australia has
Speaker 1: been a safe set of hands to be looking after
Speaker 1: this part of the world, and they really do look
Speaker 1: to us for guidance as to how they should be
Speaker 1: engaging in this part of the world and in Banawatu
Speaker 1: and other countries in the Pacific. So I'm sure there
Speaker 1: have been some stern conversations between American and Australia about
Speaker 1: as to what is going on in our immediate neighborhood
Speaker 1: and asking whether Australia has dropped the ball here. But
Speaker 1: I think the reality is that there was not much
Speaker 1: Australia or the United States could have done to to
Speaker 1: really curb the way in which China has been engaging
Speaker 1: to this point. It would have or it would have
Speaker 1: taken a very concerted effort, but we past that point
Speaker 1: now and we have to work make sure we work
Speaker 1: with China as much as possible to make sure what
Speaker 1: they're doing in the region is beneficial to everyone. Jonathan,
Speaker 1: You've done some work on labor mobility in the South Pacific.
Speaker 1: What are the microeconomics of this issue. Have the internal
Speaker 1: economies of these island states changed significantly and is that
Speaker 1: playing a role here? Oh yeah, so later mobility is
Speaker 1: going to be a critical component for economic development in
Speaker 1: a lot of these countries, as Australia, New Zealand and
Speaker 1: other Western nations. We go through labor shortages, particularly in
Speaker 1: areas of the economy such as agriculture and horticulture and
Speaker 1: the care industries, where there just aren't enough Australians to
Speaker 1: fill these demand We should be looking more and more
Speaker 1: to the Pacific to help fill our labor shortages, and
Speaker 1: we have been doing that more in recent years that
Speaker 1: we have seasonal worker programs where we bring Pacific Islanders
Speaker 1: into Australian New Zealand who work in fruit picking and
Speaker 1: the benefits speak for themselves. I mean, the average income
Speaker 1: for these people increases by more than fourfold, and they
Speaker 1: all want to come back, and they all are incredibly
Speaker 1: happy with the scheme. And on the employer's side, increases
Speaker 1: productivity of their employe, of their workforce by almost by
Speaker 1: bringing these Pacific Islanders in. So it's really a win
Speaker 1: win for everyone and it shows just how important labor
Speaker 1: mobility will be as a component of economic development for
Speaker 1: the Pacific in the future. Now as to how it's
Speaker 1: changed the economies of these countries, it's not a one
Speaker 1: size fits all. I mean, Tonga is a country that
Speaker 1: has really lent into lab mobility in a big way.
Speaker 1: And now I think that the last numbers I saw
Speaker 1: with something like of the working age male population of
Speaker 1: Tonga now every year work abroad and that is having
Speaker 1: a significant impact on the domestic economy. And you know
Speaker 1: that there's now labor shortages back in Tonga as a
Speaker 1: result of so many workers going abroad. But when you
Speaker 1: look to other countries like Solomon Islands pop in New Guinea,
Speaker 1: where there is a much larger workforce waiting to and
Speaker 1: ready to go, then you know you can still see
Speaker 1: how the untapped potential of lab mobility in the Pacific.
Speaker 1: It just we need to have a better balance of
Speaker 1: where these workers are coming from, because I think having
Speaker 1: that many workers from from Tonga every year is just
Speaker 1: going to be unsustainable practice for the tongue and economy.
Speaker 1: Go Tonga. On that note, Jonathan, thank you so much
Speaker 1: for joining us. Thank you. Benchmark will be back next
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