Home' Policy Magazine : Policy Vol 31 - No 3 Contents BOOK REVIEWS
50 POLICY • Vol. 31 No. 2 • Winter 2015
this argument are implying that Australians are
better than foreigners.
It is of course a fairly easy step from here to racism.
Takeover recites some ugly examples of racism
related to foreign investment in Australia’s early
history and more recent examples, particularly
relating to Chinese investment in real estate.
In addition, it wouldn’t be surprising if many of
the arguments against foreign investment are actually
put to mask discriminatory reasons for opposing
Returns on investment going offshore
Various commentators worry about the profits or
returns on investments in Australia flowing offshore.
There really should be no objections to foreigners
receiving normal returns on investments – but this
doesn’t stop ill-informed complaints from those
who don’t understand gains from trade or how
financial markets operate. This is particularly
evident in the ‘buy Australian owned’ campaign.
Uren doesn’t focus on these concerns, instead
focussing on the more legitimate concerns raised
about above normal returns (or rents) going
offshore. The obvious solution to the existence of
rents is to remove any regulations that generate
rents. This will eliminate the rents, so there would
be no excess profits to be paid overseas.
However, Takeover explores in more detail the
alternative way to deal with rents: impose a tax on
these rents. In particular, the book documents the
sorry history of the Rudd Government’s attempt
to impose a (very badly designed) rent tax4 on the
mining industry, the attempt to improve the tax,
and its eventual abolition. The irony is that the
mining industry itself actually supported the concept
of a rent tax to replace existing mining royalties5.
This is a great example of a good policy idea being
destroyed by poor design, poor consultation
and poor implementation.
Supply chain control
Commentators are also critical of foreign countries
using investment to control ‘too much’ of a supply
chain. In particular, concerns have been raised
that Chinese could eat food grown at a Chinese-
owned farm employing Chinese guest labourers.
Interestingly, Takeover shows that this is not a new
concern – in 1991, concerns were raised that a tourist
from Japan could come to Australia on a Japanese
airline, stay at a Japanese-owned resort and shop
at Japanese retail stores.
In fact, most of these concerns are entirely
misplaced, reflecting (again) a lack of understanding
of gains from trade. The only legitimate concern
is with tax transfer pricing, and that is best dealt
with through tax rules. This is one of the areas
where Uren avoids criticising misplaced concerns.
Problems with business activities
Some concerns about foreign investment actually
relate to the activities to be financed by the
investment. For example, Takeover notes some of
the complaints about the Shenhua Watermark
mine near Gunnedah were about dislike of mining
rather than the source of the investment funds.
But there is no difference between an Australian
financed mine and a foreign financed mine. The
concern is with the mine, not who is doing the
investment. Of course, concerns over land use are
best dealt with by planning and environmental
laws rather than foreign investment rules.
Particular complaints have been made about farm
land being converted to mining and threatening
Australian food production. Takeover shows that
this concern is ill-informed: the area of land used
for mining in Australia is about 0.02% the area
of improved land used for farming6. Furthermore,
Uren notes that Australia produces much more food
than it uses, and there is no risk to this.
Commentators sometimes argue that foreign
owners will ‘misuse’ an Australian asset in the way
an Australian wouldn’t, for example by failing to
invest in the asset, or by transferring work offshore.
Of course, there isn’t evidence of this being a real
problem, but this doesn’t stop people mounting
the argument. Some examples raised in Takeover
include the debate over foreign ownership of
Qantas and the ASX. Takeover notes that those who
mount these arguments can have vested interests,
for example unions not wanting jobs to shift
overseas. In any case, it isn’t clear that a foreigner
would ‘misuse’ an asset more than an Australian.
It is just as profitable for an Australian to make full
use of an asset as a foreigner. Australian owned
businesses can move jobs offshore just as much as
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