Pascometer burns red on China panic

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The Pascometer has wandered onto new territory today in tackling international relations and Australia’s relationship with China:

The fallout from Sam Dastyari’s entitlement and stupidity is considerably greater than his unimportant political career. The immediately obvious stuff is the embarrassment for Labor, the gift for the government, the impetus for a federal ICAC (if either major party had sufficient integrity) and the warning it gives casually venal politicians. Dastyari is to expenses payments what Bronwyn Bishop was to helicopter charters.

Much more damaging but apparently unnoticed is what Dastyari has done to the possibility of Australia developing independent policy on China, of a sensible debate that includes consideration of China’s point of view, of acting in our own best economic interests rather than remaining in unquestioning lockstep with hypocritical American doctrine.

…Uncle Sam does not have unimpeachable credibility while pontificating on the Scarborough Shoal and complying with the US Convention on the Law of the Sea – a convention which the US itself has refused to ratify…The thing about islands is that they don’t move. They hold a forward defensive line to China’s east, doing what its wide open spaces do to the west and north.

The US has 10 technologically superior military islands that do move. Its aircraft carrier battle groups project power and military threat. They are offensive in capacity and purpose. No other nation has anything like them and certainly not China. The US is campaigning for an alleged moral right to move those offensive islands onto China’s populous eastern doorstep at will without challenge, without risk to its rear. And for that, Australia is prepared to damage relations with its key economic partner.

A Washington Post story on the G20 meeting’s petty diplomatic snubs carried an alarming claim while providing background to the current Sino-American tensions. Wrote William Wan:

“The pivot boiled down to the idea of rebalancing US foreign-policy attention from the Middle East to Asia – an area that will have clear long-term strategic importance in coming years.

“Those overseeing the pivot strategy, senior US officials said at the time, had studied examples in history when one power was rising while others were declining: Germany’s rise in Europe after World War I; Athens and Sparta; the rise of the United States in the 20th century.

“Out of those studies, they developed a belief that China would respond best to a position of strength.”

So the US sees China as a Nazi Germany, missing the more obvious comparison with Germany feeling encircled before World War I. In the rich array of American foreign policy blunders over the past half century, that is up there with the worst of them. From Australia’s point of view, it potentially is the worst.

OK, so let’s unpack this a little. The assumptions that underpin the argument are:

  • that it matters that the US is a “hypocrite”;
  • that Australia can have an “independent” policy on China;
  • that the US view of China is based upon the rise of Nazi Germany.
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None of this language is typical of international relations discourse so let’s try to give it some wider context.

Point one suggests that Australia should make a negative value judgement about its strategic partner. Values based foreign policies can be useful in a multi-lateral context say, for instance, in the pursuit of universal human rights and even humanitarian interventions in sovereign states. But when deployed in bi-lateral contexts it very often ends up in bad outcomes, like the invasion of Iraq. Moreover, when transposed upon a middle power caught between two Great Powers, making value judgements about either is pretty suicidal. I mean, if the US is a hypocrite on the South China Sea and we should act to distance ourselves accordingly, then what is China on any number of fronts in trade, sovereignty, democratic process, liberal economics or human rights? Downright wrong but should we restrict access to iron ore to pressure them to fix it?

A more stable way to discern any path forward is the traditional “realist” school of thought, which assumes that nations follow their interests, and that it is usually best to navigate their movements based upon the same. That does not mean one must abandon one’s values but it is best to at least park them at the door when considering grave decisions in the national interest.

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That brings us to the second assumption in the Pascoe worldview, that Australia can have an “independent” foreign policy on China. Perhaps we can. But can we do it without alienating our strategic partner in the US to the extent that it no longer bothers with us? An independent policy on China will almost certainly involve greater economic integration, which is what Pascoe clearly wants. That, in turn, will increase Chinese influence over Australian strategic decision-making, dramatically. Indeed, the more we integrate the growth area of ‘citizenship exports’ the more we will fall within China’s sphere of influence. To the point where – when all of your wealth and jobs are tied to the one economic partner – you really have no choices left.

I put it to you that this path is not one to an “independent” foreign policy on China but one that trades away the US for China as Australia’s primary strategic as well as economic partner. That’s fine if you want to go that way. Security in Asia not from Asia.

Which brings us to Pascoe’s last point, unfortunate rhetoric aside, that the US is driven by power in its view of China. This is true enough as far as it goes. But that’s just the world of international relations, not something new, startling or frightening. It’s exactly what China would expect of the US too. It’s the precise reason that Australia has been targeted by China’s soft power aimed at weakening the alliance. All nations think this way, a point Pascoe himself makes elsewhere in his piece. What it isn’t is a reason to give up on the US. W’ll just end up with the same from China.

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To my mind the choice is pretty simple. We can be a US client state with Chinese economic links or we can be a Chinese client state. There is no in between. We can, and should, of course continue to inveigle both in multi-lateral forums that seek to engage the two. My own view is that the US is worth supporting because its record in international relations has, on balance, been a positive one over many decades despite its large missteps. We do not need to make a value judgement about it to recognise that its record as the Liberal Empire of our time has supported a rules based system of international relations that has benefited Australia enormously. We simply have no idea if China will do the same. That is the punt embedded in Pascoe’s argument.

That’s why my solution for our strategic bind is to add some subtlety to our treatment of Chinese investment. We should give them free access to the raw materials that they need to build their prosperity (including agriculture) while blocking sales of strategic assets, real estate and the services sectors that will undermine our commitment to the alliance. And we energetically re-engage with the US as strategic regional hegemen.

It’s not perfect but it is a path forward that satisfies both of our great and powerful friends into the future without taking undue risks with the national interest.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.