Economic Intelligence and Australian Wine

When Duncan Lewis, head of Australia’s Security Intelligence Organization (ASIO), warned that Chinese businessmen posed a risk to Australia’s election integrity, he was acting to protect Australia’s security. While protecting Australia was his agenda, his statement, and the subsequent bill being debated in Australia’s government, had the unintended consequence of potentially costing Australian exporters millions in revenue.

Australia’s Foreign Interference Bill

In December, Lewis and the ASIO helped lead a charge against “foreign interference” in Australia’s elections alleging that individuals with ties to the Chinese government helped certain Australian politicians get elected. This, in turn, led to the creation of the foreign interference bill, which, if adopted, would prohibit foreign political donations. To say the bill is controversial is an understatement: Prime Minister Malcolm Turnbull admitted in April that the bill has damaged relations with China.

Diplomacy Affects the Economy

The impact of the bill may have gone past mere diplomatic relations. According to the Wall Street Journal, China recently enacted new customs regulations that have prevented Australian wine from being imported. While the impact of a potential wine ban is huge – valued at over $1 billion – the potential impact on other Australian exports is even bigger: China accounted for over $130 billion in export revenues, almost one-quarter of Australia’s total trade.

Was there anything that Australian exporters could do? Possibly. One potential safety valve involves our concept of corporate foreign policy and one of its foundational principles, economic intelligence.

Historic Analogs

Within economic intelligence, historical analogs would have provided insight into how China has used its economy to punish countries critical of its government policies. One recent example occurred in 2010 when Norway awarded the Nobel Prize to Chinese dissident Liu Xiaobo. In retaliation, China banned Norwegian salmon from being imported. Knowing how China acted in a similar situation would have proven useful in determining potential reactions to Australia’s foreign interference bill.

Economic Analysis

Additionally, an economic analysis of the full understanding of the China-Australia trade relationship would have helped to grasp how much actual leverage China had in the bilateral relationship. As Australia’s top export market, China can use its economy to impact Australian policy. This knowledge, when combined with the historical analogs, would help to generate potential scenarios; scenarios that could help minimize the financial fallout from changes to Chinese government policy.