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Navigating the US-China Confrontation: Australia's Constrained Space

Interview with Bates Gill

INTERVIEW - 20 May 2019

In what is deemed to be a surprise election outcome, Australia’s current Prime Minister Scott Morrison and his liberal coalition have secured reelection on May 18. As an ally of the United States whose prosperity and growth depend highly on trade and business relations with China, Australia has enormous stakes in the current U.S.-China confrontation. We asked three questions to Dr. Bates Gill, Professor of Asia-Pacific Security Studies at Macquarie University in Sydney, and Associate Fellow with the Royal Institute of International Affairs (Chatham House), London, who shares his analysis of Australia's space between the United States and China.

How did US-China trade war—and more broadly the "strategic choice" question—factor in the election?

Generally speaking, as in many other countries around the world, domestic issues—taxes, education, health—dominated the election discussion, not foreign affairs.

In spite of China’s importance to Australia’s economic well-being, and the close Australia-US diplomatic and security relationship, the US-China trade dispute did not figure all that prominently in the election cycle. Of course, the Australian media covered the drama coming out of Washington, but the nature of Australia-China trade ties—largely bilateral and transactional—means Australia will be less affected than others who need to worry about manufacturing facilities in China, extended value chains involving China, and the like. It is possible that in the future, if and as the Trump administration chooses to pressure allies to "decouple" from China, the US-China economic rivalry would have a bigger impact on Australia. But we have not come to that—yet.

However, the larger issue of US-China competition and the ostensible "strategic choice" facing Australia did make a showing late in the election cycle.

Many analysts and pundits have made the case that "getting China right" is the most important long-term strategic challenge facing Australia—this has been true for many years.

It is important to note that this is certainly not a new issue. Many analysts and pundits have made the case that "getting China right" is the most important long-term strategic challenge facing Australia—this has been true for many years, and especially over the past two to three years. This was the subject of the book I co-wrote with Linda Jakobson in 2017—China Matters: Getting it Right for Australia.

More recently, I have argued that Australia and many other countries are entering a period of "bounded engagement" with China. This means that while we must engage and seek to benefit from relations with China, the parameters of the possible will narrow as the relationship enters a more difficult and less trusting phase.

In the weeks just prior to the election, the debate began to tilt toward a less nuanced, black-and-white discussion, which unfortunately has been too often the norm in Australia. On one side, there are prominent voices such as that of former Labor Prime Minister Paul Keating, who openly ridiculed Australian intelligence services during the campaign as "nutters" who have "lost their strategic bearings" for being too alarmist about China and Chinese influence operations in the country. On the other hand, there are a range of think-tankers and pamphleteers who see China as an immediate threat to the Australian way of life, some verging on the xenophobic. 

These views make for good political theatre and headlines, but not good policy. In the middle, many of Australia’s mainstream political leaders seek a middle ground: continuing constructive, though constrained relations with a rising China and quietly managing ties with an often-unpredictable America.

What is latest in the Australian debate over the influence of the Chinese Communist Party?

Over the past year, in preparation for the election, Labor leaders have argued in public speeches that their government would be firm, but also more respectful and professional, in asserting Australian interests vis-a-vis China. This was part of an effort to cast the anti-foreign interference rhetoric of former Prime Minister Malcolm Turnbull as too ham-handed and unnecessarily provocative. Turnbull’s remarks in late-2017—in Chinese and channeling his best inner Mao Zedong—that "Australians had stood up" ("澳大利亚人站起来了") to counter Chinese Party-state influence, were not happily received in China. And with the ultimate passage of legislation aimed to counter foreign political influence in early 2018, Australia-China diplomatic ties went in to a further downward slide from which they are yet to fully recover. The ouster of Turnbull from leadership several months later was welcomed in Beijing.

Both sides of the political spectrum express concern about Chinese Party-state influence operations. And public awareness about such activities is far greater today—in part because of regular media coverage on the issue. Still, somewhat paradoxically, even with its surprise victory, the newly-elected Liberal government will be reluctant to make the influence issue a high-profile matter with Beijing. Specific examples of Chinese influence did not feature prominently during the federal election cycle so would not be a part of any "mandate" for the new government.

If a major, new episode of unwelcome influence arises, the Australian government will need to respond firmly, even if it risks some damage to the bilateral relationship.

If there is a "consensus" on China policy across the former and current government, it seems to take a page from Deng Xiaoping: "keep a low profile and bide your time." Indeed, look for the new government to use the upcoming G20 meetings in Japan as a chance to mend some fences with Beijing.

That said, the problem of Chinese Party-state influence operations in Australia is firmly planted in the minds of politicians and the public, and is a matter of continuing concern to Australian intelligence services. If a major, new episode of unwelcome influence arises, the Australian government will need to respond firmly, even if it risks some damage to the bilateral relationship.

Is the concept of a "free and open Indo-Pacific" (FOIP) of interest to Australia? What is the future for relations with other potential FOIP partners such as Japan and India?

As in other countries—including India, Japan, and the United States—the concept of a "free and open Indo-Pacific" is mostly slogan with little substance to speak of. Australia faces the same concern that other putative FOIP partners face, though perhaps more so than others. Namely, Australian political leaders do not wish to take overt steps under the FOIP banner which could be interpreted as being "against China."

About one-third of Australian exports by value go to China, which places this country as one of the most China-dependent, in trade terms, in the world.

Given the economic factors at play, there is simply too much at stake for Australia to put its relations with China at risk. About one-third of Australian exports by value go to China, which places this country as one of the most China-dependent, in trade terms, in the world. These exports are primarily from the politically-powerful mining sector—iron ore, natural gas, coal. But other key sectors, such as education, tourism, agriculture, have grown in recent years as a proportion of Australian exports to China.

Moreover, with a relatively small population (about 25 million), Australia cannot meet its capital needs domestically, and has long-relied on foreign capital flows to support its advanced G20 economy. China is still a comparatively small investor in Australia, but is among the fastest-growing. And it holds out enormous potential as a future investor in areas such as agriculture, real estate, and possibly infrastructure.

Australia will nevertheless be keen to strengthen its ties with others in the region, in part to balance against China’s rising influence and in part to hedge against an uncertain American presence in the region. Relations with Japan have the best potential—Japan is already one of Australia’s most important trade and investment partners, and the two sides have been taken steady, if tentative, steps to bolster their security relationship, including through defence-industrial cooperation.

In another example of deepening Australia-Japan ties, in November 2018 the Japan Bank of International Cooperation (JBIC), the Australian Export Finance Insurance Corporation (EFIC), and the US Overseas Private Investment Corporation (OPIC), signed a joint agreement to cooperate in financing infrastructure and other development projects in the South Pacific and Southeast Asia.

So, while seeking a continued constructive relationship with China, Canberra will look to strengthen other partnerships with like-minded countries in the region such as Japan and India—but will not do so in ways that might put ties with China at risk.

 

Copyright : SAEED KHAN / AFP

 

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