By Kirsty Needham and Philip Wen
In 2017 the Turnbull government delivers its first foreign policy white paper in more than a decade into a geopolitical landscape of extraordinary unpredictability.
United States President-elect Donald Trump's Twitter diplomacy is turning geopolitics on its head.
Trump's tweets poured petrol on the latest flashpoint in the South China Sea this week, as he publicly accused China of "stealing" a US Navy Research drone, "ripping it out of the water".
By the week's end, the missing drone was returned. But the outburst, which follows the storm unleashed by Trump's tweeted announcement he had discarded decades of American practice to receive a phone call from Taiwan's leader, Tsai Ing-wen, have dampened hopes the next US president will put down the smart phone.
Do global clouds loom for international trade? Brokenwood Wines winemaker Iain Riggs and viticulturist Kieth Barry in the vineyard. Australian wine exports to China leapt 50 per cent this year.Credit: Peter Stoop
Foreign Minister Julie Bishop has said the 2017 white paper will set out a vision for Australia's international engagement for the next decade.
With no sign of Trump's anti-China rhetoric abating, and the appointment of Peter Navarro, an economist who has urged a hard line on trade with China to Trump's new trade council, the tension between Australia's largest trading partner – China – and its traditional security backer – the United States – is ratcheting up.
China bought $85.9 billion in Australian exports last year, or a quarter of Australia's total exports to the world. It is the top destination for Australia's agricultural products, resources and services.
The China Free Trade Agreement, one year old this week, has seen wine sales, in just one example, leap 50 per cent on the back of tariff cuts that have given Australian wineries such as the Hunter Valley's Brokenwood an edge over European rivals. China has surpassed the United States to become Australia's biggest wine export market. Wine tariffs will fall further, to 5 per cent, on January 1.
Chinese President Xi Jinping (right) shakes hands with Prime Minister Malcolm Turnbull at the G20 Summit in September.Credit: Getty Images
Looking at the Chinese tourists who made up more than half the customers doing tastings at his Pokolbin cellar door on Thursday morning, Brokenwood managing director and winemaker Iain Riggs, who visits Shanghai each year, was feeling confident of continued growth in Chinese export sales. But he is wary of the global clouds gathering.
Asked about Trump, he replied: "You don't like to see a successful Australian wine export market go belly up. We've seen lots of that in the Australian wine industry."
Donald Trump's Twitter diplomacy has injected new uncertainty into the global order.Credit: AP
Both the British and American export markets for Australian wine had collapsed in the past 10 years, he recalls.
"If Trump's people have a policy that carves 1-2 per cent off China's economic growth, that could tip Australia into recession, losing contracts, jobs and profits," warns former foreign minister Bob Carr, director of the Australia China Relations Institute. "Australia is more integrated with China than any other advanced economy."
Carr expresses frustration that Trump's "Twitter diplomacy" is "forcing conflict onto the agenda that doesn't need to be there".
Australia needs to be explaining to Washington "patiently and professionally … we don't go along with this," he says.
Prime Minister Malcolm Turnbull, and Tony Abbott before him, have a track record of holding firm when Australia's interests diverge from Washington's over China policy, and this must continue, to protect the trade relationship, says Carr.
China would have noted Turnbull's swift affirmation of the One China policy in the wake of Trump's questioning of the United States' long-standing Taiwan policy, he says.
He predicted there may be renewed requests for Australia to join US freedom of navigation patrols in the South China Sea, which have to date been deflected. "Clearly the Australian government in Canberra have made a decision that we shouldn't be doing it. We can't do it now. To do it now would look like we are joining Trump," says Carr.
Australia's differences with China over the South China Sea need to be dealt with through diplomacy, says Carr, noting that Bishop's recent comments about the apparent militarisation of artificial islands creating an environment of "tension and mistrust" – but not naming China – were consistent with Australia's call for all claimants to respect international law.
ANU professor of strategic studies, Hugh White, says: "Trump's personality, ambiguity about his standing, his policy, whether he has any idea about how to deal with China – the Trump presidency may be the bit of evidence to persuade Australians that they can't rely on America."
He says Trump doesn't have a coherent China policy, and he doubts one will emerge from the Trump administration, but the key thing to watch is how Trump as president responds to what China does.
China has shown a determined course to undermine the US alliance in Asia after Barack Obama used the Australian parliament in Canberra to announce a United States pivot to Asia in 2011, he says. China has been testing US resolve in the Scarborough Shoal and South China Sea since.
"Will Trump muscle up or back off? Either way will be bad for Australia. We won't get what we need, which is sophistication and resolve," says White.
White has argued that Australia needs to find its own place in Asia, and acknowledge that the era of US dominance in Asia, and relying on the US alliance for regional security, is over. It is in Australia's interests for a form of power sharing, that avoids escalating rivalry between the US and China in Asia, to evolve.
The 2017 white paper needs to deal with the rise of China as the biggest change in Australia's international circumstances in decades, says White. But he says this is unlikely to happen because leaders of both major parties have so far shied away from it. Former Labor prime minister Julia Gillard's clear speech on the Asian Century failed to translate into policy, and Malcolm Turnbull's articulation of the challenge of China's rise before he became prime minister has since been replaced by orthodoxy, White says.
"The more erratically Trump behaves the harder it is for Australian political leaders to do as they have hitherto done, which is say, don't worry, we trust America," he says.
Peter Drysdale, the head of the Australian National University's East Asian Bureau of Economic Research, says even if Trump had not been elected, populist momentum against globalisation and free trade had already entered mainstream politics in the United States.
"Of course Trump brings a particular colour to that change which increases the uncertainty in how those changes will be managed in the US," he says. "Whilst some things remain the same, countries' interests remain the same, the world has changed quite significantly and Australia has got to take that into account in calibrating foreign policies toward the region and the world."
He says the relationship with China is now more important than ever in this context.
Rather than sit back and hope for the best with the incoming Trump administration, Drysdale says the Australian government should advance its economic and strategic interests by engaging with other major nations in the region, including Japan, India, Indonesia and China.
He said Australia has always played an important role in efforts at collective leadership in Asia.
"That role now begs greater effort, an even more intense effort. If we don't step up to that we risk everything that we have at stake in that matter. I think it's not a question of lying back and taking what cards are dealt up. It's a question of working with others to help shape the environment."
Hou Minyue, an expert on Australia-China relations at the East China Normal University in Shanghai, suggested Australia needed to "rethink" the paradigm through which it regarded its strategic concerns around China.
"I don't think it's simply because [of] the size of China," Hou says. "It's largely because of the different values and also different political systems and ideologies – the Cold War mentality is still there.
"This is the intention of China for a long time to develop close relations with Australia but China never thought it must win over Australia from the United States. What China wants is that Australia will keep balanced relationships with China and the United States."
Carr observes the Chinese have been "cool headed" in their response to Trump: "They have seen numerous Washington administrations in the past get elected with strident anti-China rhetoric and then run pragmatic China policy."
President of the Australia China Business Council, former Victorian Premier John Brumby, says he is confident of continued strong export growth to China in 2017.
"There have been extraordinary wine exports. Ten years ago China didn't rank in the top five, now they are No.1. In full-fee paying overseas students they are No.1; tourists, apart from New Zealand, they are number one. China will become more important," he says.
Brumby says he would be "very surprised" if the Trump administration carried through on threats to increase tariffs, sparking a damaging trade war, because he says this would run against the interests of many US companies. Instead, he predicts the US could tighten anti-dumping provisions and use non-tariff trade barriers.
He contrasts the $20 billion spent online by Chinese consumers on Singles' Day, the November 11 shopping event at Alibaba, China's e-commerce giant, with the $4 billion spent on America's biggest comparable online shopping day, Cyber Monday.
Brumby argues e-commerce in the hands of the burgeoning Chinese middle class will reduce the impact of any protectionist trade barriers. Australian products for sale through these channels will continue to reap the benefits of growth – clean and green food, dairy, vitamins.
New Chinese investment in Australia could focus on technology development and biomedical research, he says.
"China is the second-biggest investor worldwide in research and development, second only to the US," says Brumby, who is also a director of Chinese telecommunications giant Huawei.
Chinese investors have been on a sports buying spree internationally, spending billions of dollars buying up European football clubs.
"Sports diplomacy, sport action, sport TV and sport investment will be the next wave," is his tip for 2017.