Australia’s China choice

From The National Interest comes Richard Fontaine, president of the Center for a New American Security and recently served as the inaugural Alliance 21 Fellow at the University of Sydney’s US Studies Centre:

A senior U.S. Army officer recently generated headlines on both sides of the Pacific by highlighting the strategic and economic challenges facing Australia today. Keen to maintain close ties with both their American ally and their chief economic partner in China, Australian officials are today conscious of the potential tensions that lie ahead.

According to Col. Tom Hanson, the time has come for Australians “to make a choice.” The Assistant Chief of Staff at U.S. Army Pacific, Hanson noted that “it’s very difficult to walk this fine line between balancing the alliance with the United States and the economic engagement with China,” adding that “there’s going to have to be a decision as to which one is more of a vital national interest for Australia.”

A Pentagon spokesperson immediately dismissed the comments as personal views and stressed that “the idea that Australia, or any country” needs to choose between the United States and China “presents a false choice.”

Yet the notion that there is a looming “China choice” facing Australia is gathering support among portions of its strategic elite. Some foreign policy leaders hold that, faced with such a dilemma, their country should double down on the U.S. alliance, whatever the economic costs. Others believe that Canberra would do well to be on better terms with Beijing in light of its trade and investment, China’s regional ascendance, and doubts about American staying power in Asia. And still others advocate a more neutral Australian course in the future, neither aligning with China nor signing up for every American effort to resist Beijing’s assertiveness.

The reality is more complex. An all-or-nothing China choice would damage both Australian and American interests, and in Canberra such a dilemma should be viewed as a policy failure rather than the inevitable outcome of economics and geopolitical competition. Rather than single, stark option, Australia will instead face a series of “China choices” on discrete issues that require Canberra to balance its economic and security risk. And therein lie the challenges.

Australia’s close and growing commercial ties with China have fueled its domestic economy but created worrying asymmetric vulnerabilities. A third of Australian exports now go to China, a higher percentage than any other G20 country, and China buys more than half of its exported iron ore. Chinese investment in Australia is on the rise and the government recently rejected, on national security grounds, a Chinese bid for a major electricity grid in New South Wales. Nearly 50,000 Chinese students started courses in Australian universities and schools over the past year, boosting the country’s “education export” industry. China is the largest buyer of Australian government debt and a million Chinese tourists visited Australia in 2015.

Foreign Minister Julie Bishop points out that never before has Australia’s chief ally and top economic partner existed in a highly competitive relationship. Complicating matters significantly is Beijing’s habit of employing economic tools to punish perceived foreign policy transgressions. In the past several years, for instance, China stopped exports to Japan of rare earth materials during the Senkakus crisis, banned the import of Philippine bananas around the time of the Scarborough Shoal flare-up, and promised trade and commercial benefits to Seoul if rejected Washington’s proposed deployment of theatre missile defenses.

The result, however, is not Australia’s forced selection between a binary outcome in Asia: a continuing alliance with an America that may or may not maintain regional primacy, or continued good economic ties with a China that aspires to regional dominance. Such an overarching strategic choice is not one that even the United States would make. Washington too has a complex relationship with Beijing that mixes areas of cooperation, such as trade and investment, climate change, and Iranian nuclear diplomacy, with issues of fierce competition, such as in the East and South China Seas and in the cyber domain.

The Australian aim, as is the American objective, should be not to choose or to contain but to hedge and balance. In that sense, economic dependency on China enhances rather than diminishes the rationale for a closer security relationship with the United States and others. A neutral, quiescent, or China-leaning Australia would undermine both the regional balance and the conditions necessary to ensure Australian foreign policy independence, while a stronger and more regionally connected Australia reduces the risk associated with its Chinese economic ties.

Yet it is also untrue that Australia can avoid choosing at all. The likely scenario is that Australia will face many, relatively modest choices about how to balance its economic dependence on China, its alliance with the United States, and its desire to bolster the regional rules that Beijing increasingly transgresses.

The first of these challenges may be close at hand. Australia’s view on Chinese behavior in the South China Sea has been clear across multiple governments. Officials routinely urge all claimants to resolve their disputes peacefully, and note that Australia will continue to exercise its rights to freedom of navigation and surveillance overflights. It followed naturally when Canberra called on China to respect the recent Permanent Court of Arbitration’s judgment on the South China Sea.

Yet after it did so, a Chinese foreign policy spokesman pronounced his government “shocked” by Australia’s “wrong remarks.” China’s notoriously jingoistic Global Times went further, calling Australia a “paper cat” and warning that if it “steps into the South China Sea waters, it will be an ideal target for China to warn and strike.”

The exchange has thus far generated little more than rhetorical heat, but it represents the kind of difficult trade off that Australia may well face in the future. It might, for example, wish to conduct freedom of navigation exercises in the South China Sea, as Washington would like, but risk Chinese economic retaliation if it does so. It might seek to fly through any air defense identification zone established by Beijing in the South China Sea; China has already protested even existing Australian P-3 surveillance flights out of Malaysia.

A second kind of challenge could arise amid a significant disagreement between the United States and Australia over China. Already, Washington has expressed displeasure with the decision to grant a 99-year lease for the port of Darwin, located near the deployment of U.S. Marines, to a Chinese firm. Similarly, Australia and the United States found themselves on opposite sides of the debate over whether to join the China-led Asian Infrastructure Development Bank. None of these differences amounted to much, but disagreement on a more important matter – for example, whether to impose economic sanctions on China over its South China Sea activities or its cyberattacks and intellectual property theft – could produce a cleavage.

A third set of challenges could result from Canberra and Washington’s shared enthusiasm for giving ever-greater concrete meaning to the alliance. Australia might, for instance, one day express openness to the Pentagon’s interest in rotating new bombers and tankers through Australian air bases – already, nuclear-capable B-2s and B-52s take off from Australian airfields. China has warned Australia against new deployments, and it is conceivable that Beijing could object even to the continued rotation of existing bombers.

In any of these scenarios, Australian policymakers would undoubtedly weigh the potential economic punishment that might result from appearing to side against China or with the United States; indeed, it would be irresponsible not to take such matters into consideration. And in a vibrant democracy like Australia’s, it would be natural for some domestic business leaders to press on Canberra a policy of distancing itself from the United States in order to preserve good commercial ties with China.

The task before Australia and the United States today is neither to make an all-or-nothing China choice nor to deny that choices of any kind lie ahead. Instead, they should focus on mitigating the risks that such dilemmas pose to an alliance that has done so much good over the decades.

There are a number of starting points. Washington and Canberra should endeavor to prevent the kind of flare-ups with China that would force such choices in the first place, by broadening the application of existing rules for handling potentially dangerous incidents at sea. They should remind the Australian public and business sector of non-Chinese commerce to the economy; the country’s top foreign investor, for example, is not China but the United States. Australia should couple a better understanding of its specific economic vulnerabilities with an honest conversation about how much risk its leaders are willing to assume in order to help push back against unwanted Chinese actions.

Above all, policymakers and business leaders should understand that Australia does not, in fact, face a singular and nearly existential choice between security and prosperity. The country’s leaders have a task that is at once less consequential but more difficult: to make many choices, on many issues—and for years to come.

Exactly, we need heavy engagement with both and a way to manage the dual relationships that keeps all three close. That is why MB proposes a new trade regime for Australia’s Chinese engagement that allows us to assist China along it developmental path while at the same time bulwarking US hegemony and its oversight of the existing rules-based multi-lateral international relations system. That boils down offering China free access to raw materials – including agriculture – while preventing access to strategic assets including existing housing, cleaning up the political process and reducing the overall immigration intake.

That takes social and economic pressure off ANZUS and reassures China of Australia’s commitment to its peaceful rise.

Meanwhile, former ambassador to China Geoff Raby enters the debate:

That is right, I think, though as I noted yesterday:

It seems likely that Australia is on the receiving end of some kind of concerted Chinese soft power effort but its best not to think of it as emanating from some single-source of coordinated villainy. All governments are chaotic and China is no exception.

The best way to frame this, I think, is that Australia is being colonised by China’s economic imperialism. We’ve seen this before from our great strategic ally the United States through much of the twentieth century, who’s global power grew unchecked for fifty years following the second world war via a chaotic thrust of US interests that included corporations, government and spooks. Much of it was progressive but not all. Go ask certain South American or Middle Eastern counties if there is any real difference between a distant US or Chinese overlord!

In the case of Chinese economic imperialism, until recently it was largely about securing raw materials. China in Africa and South America over the past decade has traded infrastructure investment for access. In Australia it has been similar.

But now, as China attempts to jump up another level on its developmental curve to a richer country, and it muscles out in foreign policy terms, the outflow has turned to the acquisition and provision of services. To what end is unclear. Perhaps it’s to undermine American supremacy in the Pacific. Perhaps it’s to acquire intellectual property. Perhaps it’s just to get rich. Perhaps it is to bolster Communist rule at home. It’s probably all of the above in the usual chaotic mix of the power politics of nations.

Viewed through this prism, the horrible irony confronting Bob Carr is that as he argues for greater sympathy to the Chinese cause and, in his mind, for Australian independent foreign policy, his utterances are already colonised by whatever vague form it is that Chinese economic imperialism has taken on. Likewise, for Australia, Bob Carr’s path to greater Chinese economic integration will not lead to an independent foreign policy. On the contrary, it will curtail Australia’s strategic options as its economic dependence mushrooms.

That’s the rub in this debate. If you pursue greater economic integration with China now – which pretty much represents a full blown colonisation of Australia’s burgeoning “citizenship exports” economic model – then you are not running an independent foreign policy at all. On the contrary, you are running straight into the Chinese sphere of influence and it will not be many years – probably in the single digits – before the cost of refusing China anything is so high economically that a strategic outlook reliant upon US interests ceases to have any meaning at all.