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Alan Kohler: What the nuclear submarines deal is really all about

A day after Australia, the US and UK launched a new anti-China military alliance, global sharemarkets had a conniption because of an insolvent Chinese company.

Is there a connection? Well yes, sort of.

Markets are worried that a heavily indebted Chinese real estate firm named Evergrande will be another Lehman Brothers.

The property downturn in China that is engulfing that company is the result of heavy-handed government intervention to take the heat out the market, one of many heavy-handed government interventions this year by President Xi Jinping.

The contest between America and China that went up a few notches this week is all about differences in their values, specifically freedom versus oppression, free market capitalism versus whatever China is doing (is it capitalism or socialism with Chinese characteristics?)

The gathering property collapse is both a symbol and a consequence of those characteristics.

Although Australia has thrown its lot decisively in with America, joining a Cold War against your biggest customer is definitely not ideal – a courageous move you might say, and it won’t be cheap.

In fact, a lot of hard work will be needed to ensure it is not one of the most expensive decisions ever made by an Australian government.

It’s not about submarines

China arguably started it by overreacting to Australia’s call last year for an independent inquiry into the origins of COVID-19, by launching a trade war with products it can get elsewhere, which is to say not iron ore.

Actively deceiving and then dumping France, thereby pi–ing off the whole EU, was a gesture of fealty to the United States, and it is not just about getting nuclear-powered submarines.

After all, the French subs are nuclear-powered and were having diesel engines installed for the Australian contract.

France offered to keep them as nuclear-powered, but was met with silence from Australia because we were secretly negotiating with the US and UK at the time.

There is justifiable scepticism about what practical difference the new submarine deal will make to Australia’s actual defence, especially in the short to medium term, but there’s no doubt the new alliance will have enormous implications for global power structures, and for Australia’s trade and commerce.

Australia’s external trade is going to become very difficult, harder than it already is, which is saying something.

China will actively look for alternatives, including for iron ore and other bulk commodities, and Europe will play hard now as well, and possibly refuse to sign the free trade agreement.

The Trade department, currently headed by Dan Tehan, will become the most important and difficult ministry in the government and will need to be led by quality people. That has so far not been in evidence during this government.

Likewise Industry, Science and Innovation, which has been scandalously neglected by this government, including with the appointment and now resignation of Christian Porter, the eighth minister in the job in eight years.

Trade and domestic industry and technology will both need plenty of high-quality attention in the years ahead if AUKUS is not to become more of an economic burden than a strategic benefit.

There is no sign yet that the government properly understands this, but there is still time.

The AUKUS announcement has raised questions around cost and transparency. Photo: AAP

Cold War 2.0

As for the geopolitical realignment that AUKUS represents, French President Emmanuel Macron’s comment in 2019 that NATO is “brain dead” has been vindicated.

It was a creature of Cold War 1.0 between America and Russia; the 21st century is all about Asia.

The new grouping of Australia, US and UK will no doubt expand to include the other two members of the so-called “Quad” anti-China grouping set up in 2007 – India and Japan – the leaders of which also went to Washington this week along with Australian PM Scott Morrison.

Submarines are a side issue, on the never-never.

AUKUS is about technology and alignment – and the core of Cold War 2.0, like Cold War 1.0, is nuclear weapons and mutually assured destruction (MAD).

America and Russia possessed bombs that would totally destroy each country, so they weren’t used, which was the point of them.

America won the Cold War against Russia not on the military battlefield, but on the battlefield of ideas.

East Germans overran the Berlin Wall because they wanted the freedoms West Germans had, as did Russians.

The contest with China, into which Australia has now leapt on the side of America, will likely end the same way and on that score, China is shooting itself in the foot.

‘Symbols of freedom’

Under Xi Jinping, China is becoming more repressive than Russia and East Germany were before 1989.

It’s not just the crackdown on property speculation, as well as political dissent, technology and after-school private education, but potentially more important will be the new restrictions on video games (no more than three hours per week, kids), the erasing of popular pop stars and actresses like Zhao Wei and Zheng Shuang, and the enforcing of traditional gender roles with a crackdown on LGBTQI that looks homophobic.

Noah Smith, writing in his newsletter Noahpinion, says: “Video games, pop stars, and gay pride can be the blue jeans and rock & roll of Cold War 2 — symbols of Americans’ freedom to be themselves and express themselves without an oppressive government breathing down their necks.”

But American liberty is also being compromised by the culture wars, in which both sides are attempting to force their point of view on the other.

Also America is getting poorer while China gets richer, something that definitely wasn’t happening with Russia in the 1970s and ’80s.

This Cold War is going to be painful and expensive for Australia, and we really need America to win, whatever that entails.

Alan Kohler writes twice a week for The New Daily. He is also editor in chief of Eureka Report and finance presenter on ABC news

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