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How Australia Poked the Dragon – and What to Do About the Consequences

Thursday, March 11, 2021

Australia’s political and economic confrontation with China is partly a result of its government’s close alignment with Donald Trump’s America, argues political risk consultant David Morris of the Sustainable Business Network of the United Nations Economic and Social Commission for Asia and the Pacific. The nation’s multicultural population means a generational change is underway, and future leaders are likely to build a more modern Australian identity and outlook that engages patiently with, rather than fears, Asia.

How Australia Poked the Dragon – and What to Do About the Consequences

Dragon dance to mark Chinese New Year 2019 in Ballarat, Victoria: For the foreseeable future, China may perceive Australia as its enemy (Credit: Chris Fithall)

Australia, the US ally that got rich from its deep economic integration with China, has now been caught in the US-China geopolitical contest. After decades of balancing its relationships with both powers, Australia made a dramatic shift during Donald Trump’s presidency, voicing fears of Chinese military bases, political influence, and cyber threats. After decades of free trade, Australia began blocking Chinese investments and banned Chinese telecommunications firms. Then in 2020 it championed an independent inquiry into the origin of Covid-19.

Now the dragon is hitting back. China has frozen imports of Australian coal, beef, barley and more. While Australia’s economy suffers, it is serving as a case study for both major powers. For the US, it serves as an example of Chinese bullying and economic coercion, while for China it serves as a warning to others who might stand against it. Meanwhile, trust has been undermined all around. In the short term, Australia has cleaved to its default position as the US’s most loyal ally, but it will need to develop a more sophisticated strategy for a multipolar future, especially if new US President Joe Biden moves to ease tensions with Beijing.

Distant from the world’s traditional points of conflict, Australia has been fortunate to enjoy almost uninterrupted peace and prosperity. Famously described as the “lucky country”, abundant in natural assets, wealth and social capital, Australia has generally been well governed by high-quality institutions but never developed its own grand strategy for its place in the region. Initially a loyal dominion of the now-defunct British Empire, Australia has remained enthusiastic to demonstrate its loyalty to the US ever since. Australia continues to exhibit a dependence syndrome, perceiving itself as a cultural outpost rather a leader in its neighborhood.

Yet Australia has long pragmatically embraced the need to trade with Asia. While the US remained the sole global superpower, after the Cold War, Australia comfortably became deeply interdependent with the growing Chinese economy, as it had earlier with Japan. It supplied vital minerals and energy for China’s growth and safe, quality produce for Asia’s demanding middle classes. It funded a massive expansion of its education and research sector and built an international tourism industry on the back of Asia’s “frequent flyer” generation. In 2017, at the same time as Trump confronted China, Australia – with only 25 million people – generated the fifth-biggest pool of wealth in the world, according to Credit Suisse. Much of that was fueled by its economic integration with China and other economies of East Asia.

From time to time, Australia has demonstrated an appetite not only to reap economic benefits from Asia’s growth but also to build broader security and other relationships with its region, bolstered, to be sure, by the US-led, rules-based order. Australia’s geopolitical imperative is to maintain a stable balance in the region. But Canberra’s priorities have proved inconsistent, flipping whenever governments changed between multilateralism and bilateralism, or flopping from constructive regionalism back to nostalgia for an imagined ruling Anglosphere. Relations with its close neighbors, Indonesia and the Pacific island countries, continue to be erratic and patronizing.

Today, Australia‘s relationship with its major trading partner has all but collapsed. Chinese government leaders are refusing to take phone calls from their Australian counterparts and Australian wine and lobster are off the menus in Shanghai and Shenzhen. So, what happened?

Australia made a fateful switch around 2017 to side with Trump’s US in confronting, rather than engaging, China. The US had amassed a consumer debt-driven deficit with China and populist rage underpinned a trade war. At the same time, China’s challenge to American global power prompted a switch from engagement to “strategic competition”. Australia, unlike the US, enjoyed a huge trade surplus with China. But it was the geopolitical change that began generating Australia’s “China panic”.

Xi Jinping’s China was asserting its major power status in the South China Sea and funding infrastructure across the developing world under its ambitious Belt and Road Initiative (BRI). These were interpreted by Western geopolitical analysts as a vast play for global power that would undermine the US-led world order. Australia, with its large Chinese community, its pool of China expertise and its deep economic interdependence (including its leverage as supplier of critical resources), might have been expected to craft a nuanced strategy to prosper in the new multipolar world. Instead, Australia’s conservative government opted to poke the dragon.

The intelligence community started to regularly feed Australia’s sensationalist media allegations that either directly named or strongly hinted at China as the source of sinister and threatening acts, from espionage to military-base plans. Australia was the first country to block Huawei and ZTE from participating in a 5G network, claiming theoretical threats to critical infrastructure, an alarming escalation from previous US threat assessments of possible espionage. Several planned investments by Chinese firms were blocked on unspecified national security grounds. China “threats” were regularly stirred up by junior members of the government, who impugned the loyalty of those who did not toe their hawkish line. Australian popular sentiment towards China, which had been quite high prior to the Trump years, plummeted.

After the apparent Russian influence in the 2016 US presidential election, Australia’s media seamlessly picked up the US narrative and applied it locally as “Chinese influence”, when some Australian politicians were found to be soliciting foreign donations. Subsequent legislation to protect against foreign interference in Australia’s democracy was largely unexceptional (and welcome). It was, however, wielded to create a storm of fear and blame, led by the then prime minister, Malcolm Turnbull, who, under siege from malcontents on his right wing, claimed to be “standing up” to a China threat.

In fact, the conservative parties had for many years resisted calls for greater transparency around political donations in Australia. Few compelling examples of actual foreign influence have subsequently been exhibited on the public record, although to be sure the United Front Work Department is active within diverse Chinese-Australian communities. Australia’s new security laws, in their implementation, may help to distinguish between often clumsy Chinese public-relations exercises and any actual, serious foreign interference.

Last year, in the midst of an embarrassing lapse in border security that allowed a cruise ship full of Covid-19 cases to disembark in central Sydney, the Australian government ramped up demands for an independent inquiry into the origin of the coronavirus, complete with “weapons inspector” powers. The call lacked any diplomatic preparation, unlike the ultimately successful European Union (EU) efforts for a more realistic World Health Organization (WHO) inquiry into the pandemic.

Meanwhile, the Australian government embarked on a redrawing of the map, wishing away “Asia” and embracing an “Indo-Pacific” arc of partners from the US to India, all strategic rivals of China. Gone was the hopeful language of half a century of positioning Australia to benefit from the “Asia Pacific”, with the terminology eliminated from new foreign and security policy papers. “Asia” had come to signify the rise of China and, with the US shifting to a quasi-containment/quasi-confrontation policy, Australia’s conservative government endorsed the new binary geopolitics.

Ironically, it took China’s rise to focus Australia’s eyes on the long-neglected nations in its immediate neighborhood, the small, aid-dependent and potentially unstable Pacific island countries. Australia enjoys defense superiority in its immediate region and its military-intelligence community has an understandable concern about any threatened erosion of that advantage. In the South Pacific, where US forces last defeated invading forces from Japan in World War Two, Australia’s worst fear would be the establishment of a Chinese strategic presence. As far as the non-aligned Pacific island countries are concerned, the gravest threat they face is climate change. Furthermore, most (apart from four that have diplomatic relations with Taiwan) welcome Chinese aid, trade and investment.

In reaction to increased Chinese presence in the Pacific islands, Australia announced a Pacific “step-up”, an array of long overdue new initiatives to strengthen relationships, mostly with a security focus. Yet the Australian government continued to resist stronger action on the major concern of its neighbors, climate change. A key risk in Australia’s securitized approach to the Pacific is that it dismisses the needs and perceptions of the people of the region themselves. This was illustrated when a hawkish member of the Australian government lashed out at Chinese-financed and constructed “roads going nowhere” in the Pacific. The move followed a series of blunders in which Australian ministers appeared condescending, criticizing decision makers in the region for soliciting Chinese funding for infrastructure including roads going, not nowhere, but to people’s homes and jobs. Australia’s strident opposition to China’s BRI weakened its influence in the Pacific rather than achieve its goal of countering China’s influence, although no doubt it played well in Washington.

More spectacular still were Australian claims of a planned Chinese military base in the South Pacific. Intelligence agencies appeared to be the source of media stories in 2018 that claimed that Vanuatu, a small nearby island nation, was considering such a facility. Vanuatu and China swiftly denied it. Unnamed Australian officials asserted that China could “seize” a recently built wharf complex and convert it into a base through a “debt trap”. Subsequent investigation revealed there was no debt-equity clause in Vanuatu’s funding agreement for the wharf. Australian fears of potential Chinese bases have nevertheless persisted.

Based on publicly available evidence, these fears appear fanciful and yet the stories are consistent with a longstanding tradition of intelligence-leaked media “revelations” in earlier decades of planned Libyan or Russian bases in the South Pacific. Former prime minister Paul Keating felt compelled to intervene in Australia’s 2019 election campaign with a veiled warning to intelligence heads not to play politics.

Australia has a longstanding, broad consensus of support for its close alliance with the US, which this author shares, but public opinion has divided over the tendency of conservative governments to follow blindly every case of US adventurism, from Vietnam to Iraq. Despite its economic integration with Asia, such as its membership of the recently signed Regional Comprehensive Economic Partnership (RCEP), which also includes China, Australia had been the most vocal leader of the US cheer squad during the Trump years, something it may come to regret.

Australia’s longstanding fear is that it will one day be overwhelmed by an invading power. As an open society, it naturally finds common cause with the US and would prefer to side with the major power it trusts than a major power it does not. It is manifestly not in Australia’s interests for the region to be dominated by an authoritarian China, but neither is it in Australia’s interests to make itself China’s enemy.

Quad foreign ministers meet in Tokyo, October 2020: There is broad support in Australia for its alliance with the US, but the public is divided over the tendency of some governments to follow blindly American adventurism (Credit: US Department of State)

Quad foreign ministers meet in Tokyo, October 2020: There is broad support in Australia for its alliance with the US, but the public is divided over the tendency of some governments to follow blindly American adventurism (Credit: US Department of State)

Furthermore, what if both the US and China begin to act in a destabilizing manner because of their geopolitical competition? It might not be in Australia’s interests to side unquestioningly with one side. But the joint-intelligence facilities in Australia make it a party to US operations by default (not to mention Australia’s membership in the Five Eyes intelligence-cooperation group that also includes Canada, New Zealand, the UK and the US, and in the Quadrilateral Security Dialogue, or Quad, along with India, Japan and the US, which was to convene virtually its first-ever summit on March 12). China may, for the foreseeable future, perceive Australia as its enemy.

Australia needs to live with an Asia that continues growing richer and more stable, not a region wracked with geopolitical conflict. More international-relations observers are starting to think Australia needs to diversify further and deepen its other relationships so that it is not trapped by a binary “choice” between the US or China. It will certainly need to become less interdependent with the Chinese economy if the new confrontational geopolitics continues.

Australia might also need to become less joined at the hip with the US, at least when its interests diverge from Washington’s. Australia should pursue regional institution-building partnerships with Japan, broaden its superficial links with India and invest in more resilient relationships with other regional powers such as giant Indonesia on its doorstep, and reinvigorate its links with Papua New Guinea, which is an under-rated potential security partner for Australia.

Instead of just being the “deputy sheriff” to the US, Australia could more constructively work to encourage the whole region, including China, to build rules, norms and security guarantees for co-existence and cooperation. Asia may indeed be more likely to settle into a multipolar balance and Australia will need a grand strategy for how it fits in such a new order. A more independent, yet still Western-allied, Australia could yet play a normatively influential role.

Signs are that Australia may be – tentatively – beginning to think more independently. A recent defense update, announcing new weapons systems and cyber-warfare capabilities, was interestingly framed as strengthening Australia’s capacity for self-reliance and a refocus on Australia’s own neighborhood. This was quite a departure from the priorities of the past two decades supporting US interventions in the Middle East.

While not eschewing the US alliance, the shift to more self-reliance does reflect a lack of confidence in the reliability of the US, after the experience of recent years, especially during the Trump presidency. As one of the richest countries in the region, Australia can well afford greater defense self-reliance. Unfortunately, Australia has degraded its foreign-policy expertise, soft-power projection and Asian-studies capabilities, and those will take decades to rebuild.

Australia will need to find its way in a new multipolar world and a richer, more unpredictable Asia. One great untapped asset is its multicultural population, with highly skilled and educated citizens drawn from across the region and the world, committed to Australia’s high-quality, democratic institutions and to a global and regional rules-based order. A generational change is underway, as leaders begin to emerge from these communities who are likely to want to build a more modern Australian identity and outlook patiently engaged with, rather than fearing, Asia.

It is beyond time that Australia should see itself and the world through its own eyes, rather than as a cultural outpost. Rich, politically stable and socially cohesive, Australia no longer needs to fret about its distance from Europe and America. It could yet develop confidence as an indispensable actor in Asia – or is that the Indo-Pacific?

Opinions expressed in articles published by AsiaGlobal Online reflect only those of the authors and do not necessarily represent the views of AsiaGlobal Online or the Asia Global Institute

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