By Sean Sammon
In April 1984, President Reagan was disappointed during a visit to China when told by local officials that he could not visit the “free markets” he had read about. These free markets were places where Chinese farmers could trade goods between each other for profit and were symbolic of Deng Xiaoping’s opening up and reform after 30 years of communist central planning.
23 years later President Xi Jinping became the first Chinese leader to address the annual World Economic Forum at Davos. Described by many as a poetic speech, he painted a picture of free trade with the following analogy “pursuing protectionism is just like locking yourself in a dark room; while the wind and rain are kept outside, so are light and air."
A few days later the White House reported record crowds as President Trump was inaugurated as the 45th President of the United States. President Trump spoke of a world where;
“It's going to be America First. Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength.”
The world is facing a tectonic geopolitical shift when the President of the United States, the birthplace of Milton Friedman, is pushing a protectionist agenda and across the Pacific, the country founded under Chairman Mao is talking about the benefit of free trade. While China continues to take clear steps to further globalise its economy, it is yet to be seen what the Trump administration will actually do when it comes to economic policy.
While this uncertainty is capturing headlines globally, for medium-to-large Australian businesses it is important to have a realistic perspective on how operations are impacted by geopolitics. In reality, for the majority of Australian CEOs, this new world order is more likely to affect dinner party punchlines than bottom lines.
And while I joke about laughing into our Chinese trademarked glasses of “Ben Fu” Penfolds, in reality every Australian business person who is in China, or analysing a future in China, is looking to the news out of the US and trying to understand how Trump either adds to their risk profile or creates opportunity.
Either way, risk or opportunity, what the Trump administration reiterates for Sino-Australian relationships is the desirability of flexible business strategy. We do not know what words out of the Oval Office are business or bluster, but what we do know is the effect these words can have on short term market viability.
Be it tweets about US based manufacturing, comments on China-US relations, or rouge answers in press-conferences, Trump is a platform that shifts markets and creates diplomatic tensions. What we also know is that Trump's digital and personal outbursts create a short term effect: analysts report, the market responds and then the market corrects.
The businesses that will thrive in this time of political upheaval will be those that invest and stick to strategies aligned to measurable objectives.
The advantage Australia now presents to the commercial trade world is stability. Be it ChAFTA, a comparatively stable political system or proximity to China, we are in a position of strength. While the world argues through the media about the future of international relations, strategic businesses are taking advantage of the opportunity and recognising the risk, but also ensuring they can find the reward.