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No one planned it, but a series of related events has suddenly given China the future power to disrupt transport between the east coast of the of the nation and Western Australia. And given WA and its resources supply a key part of the raw material requirements of China, this is a dramatic an important development in our long-term security.
In the past five months China has shown how it can strangle the giant rail link across the Nullarbor connecting the east coast and WA. Such a weapon was not on the original agenda of Chinese President Xi Jinping: he planned to attack coal, wine and other agricultural products. But the COVID-19 crisis has shown him how China can open a new front, helped by the strong anti-rail forces in Canberra.
Readers may remember that last year I described how low-cost, foreign-crewed container ships were taking significant market share from the rail carriers and had captured about 21 per cent of the east-to-west market. (See: Australia’s rail freight crisis deepens, August 10, 2020; and Rail freight network facing death sentence, undercut by road and sea, July 30, 2020).
It looks like the market share peaked at about 23 per cent. Then came a boom in shipments to America and other COVID-19-related forces, which pushed up the price of using containers. It caused the Chinese exporters to instruct the shipping companies not to take containers from Melbourne and Sydney to Perth but rather to go straight back to Hong Kong or China.
Initially among the two rail carriers there was jubilation, but as the swing gathered momentum the 23 per cent container market share more than halved in the months between October and January. The rail carriers had reduced capacity to cater for the increased use of ships and a rise in the government-subsidised road operators, so there was no longer the capacity on the rail for the huge volumes previously using containers.
Some of the big users of the foreign-crewed container ships are the major brewers — the Japanese-owned Foster’s and Tooheys — plus American-owned Kellogg’s. Some of the majors used their muscle to force rail to take some of their product destined for containers, which squeezed out other products. Rail simply didn’t have the capacity to suddenly take another, say, 12 per cent of the market and the situation was made worse by WA bushfires.
Road picked up some of the slack, but in the essence WA couldn’t get supplies.
At the same time the anti-rail forces in Canberra have a scheme to make it easier for container ships to take more market share from rail, when there are plenty of containers. So we are setting ourselves up for a major China squeeze play.
Already, the container share is recovering and that recovery is likely to gather pace this year. And if the new rules come into play, the foreign-crewed container ship share will rise from about 23 per cent to around one third.
Accordingly, if Canberra’s anti-rail forces succeed, the two rail operators — Pacific National and SCT — must cut back their capacity, which also makes it harder for goods to go from west to east by rail. Xi will then be able to instruct Chinese exporters to tell the shipping companies to return the containers straight back to Hong Kong and China and not go via Perth.
With an even bigger influx of goods onto rail, the operators, having cut back capacity, simply would not cope. Then China could later release the ban, only to reimpose it once again when the time is right.
Accordingly, China has the power to disrupt the freight movement both ways between the east and the west coast of Australia. The US, our partner in the Quad, does not yet know what we are about to do. But when they do, there will be disbelief that we could be so stupid to allow China to control our east-west transport link. The Americans are very careful to make sure that local shipping controls most of the US domestic sea-based transport systems.
This is one of the few policies where Donald Trump and Joe Biden have agreed, because both understood the power of China — a power simply not understood by too many of our Canberra politicians, which is why we are happy to wait for 20 years to gain submarines and gamble that the new technology will succeed.
The anti-rail forces in Canberra have had a huge victory in setting the subsidy/infrastructure stage so cargo travelling from Melbourne to Sydney goes via road and not rail. The same technique is being used on the Sydney-Brisbane route. Canberra has started building an inland rail from Melbourne to Brisbane which, if it was constructed, might reverse the trend, but construction is being blocked because the route may increase the impact of floods. By the time the link is built (if it is), it may be too late. On the east coast, subsidised road is used, and subsidised road may be required to replace rail across the Nullarbor. Road is subsidised because, unlike rail, it does not pay its share of infrastructure costs.
If in the next federal election the Liberals get wiped out in WA, they will look back at their attempts to destroy the rail link to WA and to hand control of the east-west supply chain to China as part of the reason for their defeat.
Down the track, they will also need to make the GST distribution fair for both Victoria and WA and stop using their GST money to subsidise other states.
This article first appeared on www.theaustralian.com.au
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