Can Australia trust China or the US?

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The AFR just can’t get enough China kowtowing:

Scott Morrison’s efforts to repair Australia’s relationship with Beijing have been welcomed in China but not with a huge amount of enthusiasm.

The consensus is that the appointment of Graham Fletcher, a career diplomat with deep China experience as Australia’s new ambassador in Beijing – along with the establishment of a $44 million foundation to improve bilateral ties – are steps in the right direction.

But they alone will not resolve problems with the relationship which some believe is behind restrictions on coal exports, a Chinese anti-dumping investigation into barley and the detention of Australian writer Yang Hengjun, accused of espionage. China last week rejected a request by Yang’s lawyers for him be released from detention on medical grounds.

The change to the relationship is structural not cyclical. The “peaceful rise of China” is over. An era of open strategic competition is upon us. To wit, from News:

The Philippines has protested the presence of more than 200 Chinese vessels swarming near a Philippine-occupied island in the disputed South China Sea.

Presidential spokesman Salvador Panelo said the Department of Foreign Affairs lodged the protest after the military monitored about 275 Chinese fishing-militia and military-controlled Coast Guard vessels near Thitu island, which is called Pag-asa by Filipinos, in the Spratlys, the most hotly contested region in the busy waterway.

The Chinese vessels have been sighted more than 600 times near Thitu so far this year, military officials said.

What makes their presence so intimidating is they are not fishing. Instead, they seem to simply be occupying the waters near the three sandbars between Pag-asa and Zamora (Subi) Reef.

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And Bloomie:

European Commission President Jean-Claude Juncker stepped up his criticism of Chinese trade practices just days after President Xi Jinping sought to soothe European concerns in Paris.

At the March 26 meeting, held together with French President Emmanuel Macron and German Chancellor Angela Merkel, the EU side explained that “it can’t stay like this, that Chinese companies have free access to our markets in Europe, but we don’t to the markets in China,” Juncker told lawmakers in the German state of Saarland on Monday.

He also said Chinese investments in the continent can make it harder in the EU to agree on foreign policy. “One country isn’t able to condemn Chinese human rights policy because Chinese investors are involved in one of their ports,” Juncker said. “It can’t work like this.”

This change is already embedded in Australian policy:

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  • Chinese takeovers will be rejected;
  • Chinese tech will be pushed back;
  • Chinese encroachments on the South Pacific will be resisted;
  • Chinese bribes in the Aussie parliament will be exposed;
  • the Chinese property bid is history.

These orders do not come from Canberra. They come from Washington (and Beijing). That will not change with a trade deal or a new denizen in the White House. That said, we should try to remain friends even as we seek greater political and economic diversification.

As Peter Hartcher rightly points out, there are risks:

The bad news? US allies should expect no loyalty. Many have already learned this, to their cost. Australia should learn from their experience. Trump has made decisions that hurt Australia’s national interests – the US abandonment of trade liberalisation, for instance, and Washington’s vandalisation of the Paris carbon agreement. But he has yet to inflict any direct injury on Australia in the bilateral relationship. Among US allies, perhaps only Israel has suffered as little.

…Every Australian prime minister describes the US alliance as the cornerstone of Australian security. The ANZUS treaty, never a guarantee, is probably less reliable now than at any time since it was signed in 1951. The cornerstone has the wobbles. Trump will trade away Australian interests without hesitation. He’s doing it now at the negotiating table with China, for example. Every time the US demands that Beijing increase America’s share of China’s imports, it cuts into Australia’s share.

The worse news? Stokes has made a study of how Trump has changed the American people’s attitudes to the world. After looking at decades of Pew polling, his main conclusions are threefold: that Trump has shattered any broad American consensus about the US role in the world, that he’s reshaped Republican voters’ opinion in his own image, and that these changes aren’t going to go away when Trump does.

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I’m not quite so worried. The Pacific is the US’s backyard. I can’t see it abandoning it, even the south Pacific. Having Chinese carriers and floating missile launchers roaming freely into the blue waters off Hawaii and LA is obviously less preferable to containing them to the Spratlys. Even the likes of Steven Bannon are very strong on this point. It would also entail the loss of Japan, South Korea and Thailand. This is the end of US hegemony itself.

But we can expect to be paying more and more for protection, and getting a dual passport may not be a bad idea.

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.