Five Eyes partners mull joint sanctions as allies hit back at China trade coercion

The Five Eyes allies are quietly discussing a plan to retaliate against China’s aggressive new trade tariffs that have hit Australia hard.

Exclusive: The Five Eyes allies are quietly discussing a plan to fight back against China’s aggressive new trade tariffs by introducing joint retaliatory sanctions on Chinese goods and produce.

News Corp understands officials from some of the Five Eyes nations have been discussing how best to respond to China’s attempts to pressure Australia by harming some of our export markets, notably beef, wine and coal.

One option is that all five nations – Australia, the United States, the United Kingdom, Canada and New Zealand – respond with their own sanctions on Chinese goods and services.

A second option would be for Australia to respond with retaliatory tariffs on inbound products from China, and the four allied nations support the move by refusing to buy extra product from China if Beijing looked to make up its losses elsewhere.

Talks are at a preliminary stage, but the idea is gaining traction in Canberra, and is being seriously considered in Washington.

News Corp has been told the problem had been discussed at high levels within the Morrison Government, but that talks so far remained at the level of officials.

The discussions come as the Five Eyes alliance, formed decades ago as an intelligence-sharing agreement, continues to expand into diplomatic and economic policymaking, largely in response to concerns about Chinese aggression.

“Five Eyes co-operation is off the charts at the moment,’’ a source said, pointing out even the Social Services Minister Anne Ruston had a recent Five Eyes link-up with her fellow ministers.

Under options being discussed to respond to China’s trade hostilities, the Five Eyes security agencies would jointly conduct an intelligence assessment of each new sanction announced by Beijing on Australian exports.

If the agencies deemed the sanctions to be a coercive economic move designed to pressure Australia for political purposes, a retaliatory sanction would be imposed, to the same or a higher value than the one imposed on Australia.

The other Five Eyes nations would then ensure China could not turn to them to make up any shortfall in sales.

Alternatively, each Five Eyes nation could respond with sanctions of their own.

ASPI’s Fergus Hanson, who authored a report calling for consideration of a Five Eyes economic response to trade sanctions similar to NATO’s article 5, which states an attack on any one NATO country is an attack on them all. Picture: Stuart McEvoy/The Australian.

Fergus Hanson, the director of the International Cyber Policy Institute at the Australian Strategic Policy Institute, authored a report in September which recommended the Five Eyes consider a “collective economic security measure’’ along the lines of NATO’s article 5, which states that an armed attack against any one NATO country would be treated as an attack against them all.

“The Chinese Communist Party is trying to cause political pain in Australia to attempt to get the Australian government to change some of their decisions,’’ he told News Corp.

He said retaliatory sanctions would “look to do the same thing in China to make sure the CCP realise it’s a two-way street.’’

The aim was to “push the CCP into normal ways of doing business’’ and resolve trade disputes through recognised channels such as the World Trade Organisation or formal negotiations.

“I think it’s pretty clear our current approach is not a solution to this problem. What we are doing now is a failing strategy,’’ he said, of Australia’s current decision not to take China to the WTO or publicly accuse Beijing of economic coercion.

“It is absolutely critical we turn the tide on this.’’

“You’d only have to do it once to demonstrate coercive diplomacy was now too costly.’’

ANALYSIS: WHAT IT MEANS

The Five Eyes alliance is expanding beyond the boundaries of its original mission, which was to share intelligence gathered by the security agencies of Australia, the United States, the United Kingdom, Canada and New Zealand.

The agreement, which has been running for more than 70 years, has helped maintain the close ties between the five countries, all democracies with similar values and respect for the rules-based international order.

In recent years the Five Eyes alliance has strayed beyond intelligence sharing and into domestic and economic policymaking.

A shared determination to push back harder against Chinese expansionism and aggression is turbocharging the evolution of the Five Eyes. Japan has even suggested it could be included and become part of a new Six Eyes agreement.

Using the might of the Five Eyes to push back against China’s blatant use of coercive financial sanctions is an attractive proposition for Australia. As a relatively small economy and middle power, it can be more easily bullied than the United States or the UK.

And Australia has weakened its position by allowing itself to become too dependent on China as a main market for our exports.

Retaliatory sanctions would not be popular with free trade supporters and those who still believe in the China-Australia Free Trade Agreement, despite China trampling all over it. Those with a more hawkish view on how Australia should assert itself in the face of Beijing’s bullying would be delighted to have the support of our big northern allies, who bring the might of their enormous economies with them.

The US seems particularly enthused by a potential Five Eyes bloc at the ready to tackle sanctions, with hints appearing in the US media in recent weeks about an “informal alliance’’ of western nations prepared to jointly retaliate against Beijing.

The US has already had a bona-fide trade war with China, while Canada and the UK have clashed with Beijing, as Australia has, over security concerns involving Chinese telco Huawei.

New Zealand, with its more neutral position on China, would likely find a collective retaliation more uncomfortable.

Originally published as Five Eyes partners mull joint sanctions as allies hit back at China trade coercion