By Jason Scott and Margaret Talev - Nov 14, 2011 8:21 AM GMT+0700
President Barack Obama arrives this week in an Australia whose economy is reliant on billions of dollars in mineral and energy contracts from emerging superpower China and whose security depends on an alliance with the U.S. -- China’s biggest rival.
Personal ties between Obama and Prime Minister Julia Gillard, born within two months of each other, underscore the nations’ political bonds as China expands its security interests toward southeast Asia. Obama, the first black U.S. president, and Gillard, Australia’s first woman prime minister, share a struggle to overcome resistance to their agendas -- from universal health care in the U.S. to a mining tax in Australia.
“This relationship between Obama and Gillard has some warm, fuzzy atmospherics -- their interests are congruent,” said Michael McKinley, a lecturer in international relations at the Australian National University in Canberra. “China is the elephant in the room for Obama and Gillard,” said McKinley, whose analysis has been used in parliamentary testimony.
While Obama will stop at the non-commercial cities of Canberra and Darwin in a visit commemorating 60 years of postwar ties, the most recent trip by China’s premier focused on business. Wen Jiabao signed a long-term contract for A$100 billion ($101 billion) in uranium during a 2006 visit, while then-Prime Minister John Howard came away from Shenzhen in southern China after witnessing the first Australian delivery of liquefied natural gas worth A$25 billion over 25 years.
Trading Partners
China has risen to become Australia’s top trading partner, surpassing Japan and the U.S., which is now third, compared with second in 1988. Two-way trade with the U.S. has risen 4.4 percent on average in Australian Bureau of Statistics data that go back to 1988, outpaced by 20 percent for the nation’s commerce with China, and 16 percent for India.
By contrast, the U.S. defense relationship with Australia is tightening, with Obama’s visit likely to feature an agreement on enhanced security cooperation. The two sides have discussed an accord allowing the pre-positioning of U.S. military vessels, aircraft and personnel at Australian bases and ports, a defense official said in September.
“The U.S. is deeply engaged in our region and that will continue,” Gillard said on Nov. 12 in Honolulu, where she was attending Asia-Pacific Economic Cooperation summit. “It’s possible for us to have an ally in Washington and a friend in Beijing.”
Football and Vegemite
Obama and Gillard, both 50, have a warm relationship, illustrated most recently when the pair passed an Australian football back and forth in the Oval Office during a Gillard visit to the White House in March. The president joked that she “almost broke a bust of Lincoln.”
They visited a high school in Arlington, Virginia, where Obama ribbed Gillard in front of students about the Australian spread Vegemite, saying, “It’s horrible” and told the students it was a “quasi-vegetable-byproduct paste that you smear on your toast for breakfast. Sounds good, doesn’t it?” The president said the U.S. has no stronger ally than Australia.
“They just clicked,” said Ben Rhodes, the White House deputy national security adviser. “They enjoy being around each other. Her personality meshes well with the president’s. She’s fundamentally like the president.”
The leaders have been battling sinking poll numbers as they deal with the backlash against unpopular domestic programs and a dimming outlook for the global economy. Obama’s signature initiative, an overhaul of the U.S. health-care system, is under challenge in court and the nation’s unemployment rate has been stuck at about 9 percent for more than two years.
Majority Disapproval
With a vote on his re-election a year away, Obama’s approval rating was 44 percent in a Washington Post/ABC News poll from Oct. 31 to Nov. 3. Fifty-three percent of those polled disapproved of the way he’s handling the presidency. It sampled 1,004 adults and had a margin of error of plus or minus 3.5 percentage points.
While Gillard gained a victory on Nov. 8, when the government passed laws to make polluters pay for their carbon emissions, her Labor Party got 32 percent support in a Newspoll survey of 1,158 people from Nov. 3 to Nov. 6, against 44 percent for the opposition Liberal-National coalition. The poll had a margin of error of plus or minus three percentage points.
A separate Herald/Nielsen poll published today showed Labor at 30 percent and the coalition at 45 percent. The survey of 1,400 voters was conducted Nov. 10 to Nov. 12 with a margin of error of 2.6 percentage points.
Culture of Blokes?
Gillard’s government, facing an election in 2013, is encountering opposition to its plan for a 30 percent tax on iron ore and coal profits, forecast to raise A$7.7 billion in the first two years should it be approved by parliament.
Hawaii-born Obama was dogged through the 2008 election and afterward by questions from some political opponents about whether he was born outside the U.S., and therefore constitutionally ineligible to hold the presidency.
Wales-born Gillard, who with her family migrated to the city of Adelaide after contracting bronchial pneumonia when she was four, faces what she herself calls the nation’s “blokey” culture. The first Australian prime minister who isn’t married, Gillard has no children and lives in the national capital of Canberra with her partner, hairdresser Tim Mathieson.
‘Family’ Values
A former labor lawyer, Gillard ran against an opposition leader who repeatedly told voters he was a supporter of “family” values in a 2010 election campaign. In one speech, Tony Abbott, leader of the Liberal-National coalition, said “the most conservative instinct of all” is to have a family. She was shown in a 2005 Sydney Morning Herald photograph in her “eerily stark” kitchen, adorned only with an empty fruit bowl seen by some as a symbol of her life-choice as a professional.
“The opposition leader’s hints at a more proper domestic position for women say more about him than they do about the prime minister, and they do him more harm than good,” said James Clad, a former deputy assistant secretary of defense who had responsibility for relations with Australia until 2009 and lived there and in New Zealand as a young man, in an e-mail.
The prime minister has signaled strong affinity with the U.S., choking back tears during a Washington visit this year when she recounted, during an address to Congress, her childhood feelings of amazement upon seeing an American land on the moon. She used the image to urge the U.S. to be bold and get back on its feet economically.
Sports Fans
Obama and Gillard are dedicated sports fans. The president plays golf on weekends and basketball on occasion, and supports the Chicago White Sox baseball franchise. Gillard roots for the Western Bulldogs, a working-class team in western Melbourne that plays in the Australian Football League, the nation’s most popular spectator sport. She is a regular at Bulldog games, where she wears the team’s red, white and blue colors.
Less than a month before she ousted former Prime Minister Kevin Rudd in June 2010, Gillard downplayed her then-rising popularity by saying: “There’s more chance of me becoming the full-forward for the Dogs than there is any chance of a change in the Labor Party.”
Americans and Australians have a “similar sort of open frontier spirit” that places a “premium on individualism,” Obama said during Gillard’s March visit. He visited Australia as a boy when he passed through Sydney from Indonesia, where he lived with his mother for four years, during trips to visit his grandparents in Hawaii.
‘Strong’ Relationship
“The relationship is a strong one between the prime minister and Obama and that will only be reinforced with the visit,” said Stephen Koukoulas, Gillard’s former macroeconomic policy adviser.
Gillard’s unpopularity with voters comes even as the country had economic growth of 1.4 percent in the three months to June 30, fueled by China’s appetite for its iron ore, coking coal and gold. That helped Australia escape a recession during the 2008-2009 global economic slump.
Two-way trade between the nations in the 12 months ending Sept. 30 reached A$110 billion, up 22 percent from the year before, according to the Australian Bureau of Statistics. Since overtaking Japan as the biggest buyer of Australia’s iron ore in 2004, China now purchases an amount of the steel-making material from Australia that’s more than four times than its Asian rival.
For the U.S., China is a source of imports, resulting in a trade deficit with the Asian nation last year of $273 billion, while also generating concern about its currency policy and strategic intentions.
Trade War Risk?
“Australia is basically a Western country in Asia with a strong history and alliance with the U.S. and massive trade ties with China,” said Peter Kenyon, professor of economic policy at Curtin University’s Graduate School of Business in Perth. Australia “can act as a conduit for ideas from the U.S. and China, and discretely report back to each side through diplomatic relationships.”
In Congress, the Senate adopted legislation Oct. 11 that would let U.S. companies seek duties to compensate for what lawmakers say is an undervalued Chinese currency. The measure risks stalling in the Republican-controlled House, where Speaker John Boehner of Ohio has called it “dangerous” and said it “poses a very severe risk of a trade war.”
The Obama administration, while continuing to criticize China over its currency valuation, has raised concerns that the bill would violate U.S. obligations under international law.
Security issues are a concern. Defense Secretary Leon Panetta said in a visit to Japan last month that China is expanding its military with “a troubling lack of transparency.”
Military Attack
“The Americans, every now and again, let Australia know that they don’t want to see a close strategic relationship between China and Australia,” Australian National University’s McKinley said. “Australia is very reliable and very useful, because it’s geographically situated in the right place. It supports the U.S. global strategy uncritically. Australia can provide real estate for their military bases.”
Obama will travel to Canberra to address a joint session of parliament, and then north to Darwin, site of the first foreign military attack on Australian soil, when the Japanese bombed the city in 1942. Announcements of major trade deals aren’t expected, Kenyon said.
China bought $2.32 billion worth of uranium from Australia from 2006 to 2010, according to the Department of Foreign Affairs and Trade, as part of the contract signed during Wen’s April 2006 visit. The natural-gas contract Howard agreed has so far reaped $166 million in sales, according to DFAT.
‘Dangerous President’
Obama’s Nov. 17 address is likely to be less controversial than visits by his predecessor, George W. Bush. In October 2003, Green Party leader Bob Brown was suspended from parliament for interjecting during Bush’s speech. Earlier that year in parliament Mark Latham, then a member of the Labor front bench and a former close colleague of Gillard’s, called Bush “the most incompetent and dangerous president in living memory.”
Obama is in Australia to mark the 60th anniversary of the alliance between the two nations early in the Cold War. The relationship began a decade earlier when Australia turned to the U.S. for protection against the Japanese in World War II after its founder and traditional ally, the U.K., which was battling Germany, failed to aid the isolated Pacific nation.
The U.S. shouldn’t feel slighted by Australia’s strengthening relationship with China, Curtin University’s Kenyon said.
“The U.S. is still a very important trading partner,” he said. “Australia won’t suddenly chuck out its relationship with the U.S. and throw in its lot with China. The U.S. is still the most important economy in the world and it will eventually get out of its current malaise. Australia knows that.”
To contact the reporters for this story: Jason Scott in Perth at jscott14@bloomberg.net Margaret Talev in Washington at mtalev@bloomberg.net
To contact the editor responsible for this story: Edward Johnson at ejohnson28@bloomberg.net
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