Australia Must Repair Relationship With China, Opposition's Bishop Says

Australia must end tension with China and scrap a mining tax that threatens to stifle investment in the world’s biggest shipper of iron ore and coal, opposition foreign affairs spokeswoman Julie Bishop said.

“Military, strategic and economic cooperation with China is essential,” Bishop said. Chinese companies such as Sinosteel Corp. “are deeply concerned” about the impact of the tax on fledgling projects in Australia, she added.

The government isn’t “starry eyed about our relationship with China,” Foreign Minister Stephen Smith told the National Press Club in Canberra today during a debate with Bishop before the Aug. 21 national election. “There have been tensions.”

Prime Minister Julia Gillard, who ousted Kevin Rudd in June, clinched a compromise deal with BHP Billiton Ltd., Rio Tinto Group and Xstrata Plc for a 30 percent levy on the profits of iron ore and coal companies from mid-2012. China’s concerns have “fallen away” since the tax was watered down from Rudd’s planned 40 percent levy on resources, Smith said today.

The foreign minister under a Gillard government may change if Rudd, a former diplomat and Mandarin speaker gets the role, potentially reigniting tension with China, Australia’s biggest trading partner.

Australia’s two-way trade with China was A$85.1 billion ($76.2 billion) in 2009, up 15.1 percent from a year earlier, and iron ore makes up half the exports. Chinese investment, particularly in minerals and energy, also continues to increase. Since November 2007, the government had approved more than 160 proposals from China for investment of about A$60 billion as of May.

Team Member

Rudd will be a “senior member of our team” and Gillard will decide who gets the job as foreign minister, Smith said.

Rudd criticized China’s “secretive” handling of espionage charges in March against four Rio executives, including Australian iron ore executive Stern Hu, who received sentences of between seven and 14 years. China’s Foreign Ministry spokesman Qin Gang responded by telling Australia to “respect the result” and stop “irresponsible remarks.”

Opinion surveys have narrowed as voters weigh which side can best manage Australia’s A$1.2 trillion economy. Gillard’s ruling Labor party leads Abbott’s Liberal-National coalition by 51 percent to 49 percent, the Newspoll published in the Australian newspaper yesterday showed.

A Liberal-National government will “repair the damage done to a number of our key relationships after three years of untidy and sometimes chaotic behavior on the part of the Rudd-Gillard government,” Bishop said.

Trade Accords

The coalition would continue the Labor government’s talks to conclude trade accords with China, India and Japan, Bishop said. One in five jobs in Australia is trade-related.

An Abbott government would focus “foreign policy on our region, the Asia Pacific and the Indian Ocean” and cancel Labor’s ban on uranium exports to India, Bishop said, potentially opening up a new market for Rio-controlled Energy Resources Australia Ltd. and emerging uranium companies such as Western Australia-based Toro Energy Ltd.

India, the second-fastest growing economy behind China, wants access to Australian oil, gas, uranium, iron ore and coal to feed its steel mills and meet long-term energy security needs.

Both Labor and the coalition are committed to Australia’s soldiers serving in Afghanistan as part of international efforts to prevent the nation from being a haven for terrorists, and see the U.S. defense relationship as central to Australia’s security.

The U.S. is a “preeminent ally” that “should never be taken for granted,” Bishop said.

Abbott plans to visit Afghanistan within three months, if elected. Some 17 Australian soldiers have died since the nation’s operation in Afghanistan began in 2001 and 144 have been wounded, 44 of them this year.

To contact the reporters on this story: Marion Rae in Canberra at mrae3@bloomberg.net; Gemma Daley in Canberra at gdaley@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.