Navigating wild wasteland of the US-China ‘cold war’

No matter what the world has thrown at us in the past 30 years, and there has been no end of turmoil, Australians have taken solace in two verities. First, the US, our principal ally, is predictable and dedicated to multilateralism and free trade. At its best, America is the security blanket and confidence booster for the liberal order. Under Donald Trump, the US has retreated to “America First”. Second, China, our prime trading partner, despite its antithetical political and social order, would adhere to a mutually beneficial economic compact: richer together.

These two realities have collapsed because of a contest for global supremacy between the US and China. As security analyst Alan Dupont observes, this conflict over trade, technology, strategy and values “has precipitated a new cold war”.

Finding a path through this is not beyond our ken or skill, even though we face perhaps the greatest threat to national security, centred in our region, since the end of World War II, and the worst economic malaise since the Depression. China, too, is hurting, facing “challenges like never before”, according to Premier Li Keqiang.

On Friday, in Beijing’s Great Hall of the People, he said China would be ditching a gross domestic product target this year — the first time it has omitted a growth target since 1994, when it began the practice. In the March quarter, China reported its first GDP plunge in more than four decades. To pull itself out of the mire, Beijing plans to lift infrastructure investment, a boon for our iron ore producers.

Yet any thought of decoupling from the rising power is fanciful. One-third of our exports go to China, the same amount we sell to our next five markets — Japan, South Korea, the US, India and New Zealand. Our economies are complementary, if not in harmony. Still, China’s enmity, in word and deed, arrived this week through penalties on primary producers and a blitz from Communist Party trolls because of Canberra’s quest for an international inquiry into the source of COVID-19.

Inexplicably, local comrades, Labor MPs and tenured pandas abetted these outrageous trade sanctions and aired slurs that the nation was a US “deputy sheriff” and the Morrison government was “vilifying” China. Beijing will use this against us as part of an aggressive game plan against democracies for dominance, which extends to media manipulation, subversion, debt-trap diplomacy, intellectual property theft and growing militarisation.

The test for Australia is not choosing between the US and China per se but navigating the subzero wasteland. “The problem now is we need to rethink virtually every area of policy because our major trading partner has become actively hostile towards us and our principal ally is capricious and self-interested,” Dr Dupont told Paul Kelly.

One of the easier calls should be not falling for money traps like China’s Belt and Road Initiative. Victorian Premier Daniel Andrews has exposed taxpayers to a dud deal, but even more recklessly ignored the advice of national security agencies. Our path is also diverging from Washington’s. Canberra is committed to free trade and the Paris agreement; it has not withdrawn funding to the World Health Organisation; nor does it endorse the view coronavirus came from a Wuhan lab. Mr Trump has threatened to end offshore manufacturing of parts of the Joint Strike Fighter, imperilling Australian jobs. Such hot conflicts, however, are mediated, given our shared values, trust and mutuality.

Australia’s interest is in promoting security, prosperity, openness and global co-operation. As it did in pushing for a global inquiry into COVID-19, Canberra worked through established institutions to get a result that should benefit all humanity. Former prime minister Kevin Rudd sees both the US and China weakened by the pandemic, at home and abroad, and a slow, steady drift to international anarchy.

Who can lead in such a world? As Scott Morrison outlined in October, we remain committed to multilateralism, but key bodies must be fit for purpose. Confronted by a dual dilemma, we must play to our strengths and interests. We need deft policy adjustments; some are under way, others will be hastened by necessity. The strategy must include a step-up in our region, a more robust, diversified and flexible economic base, better strategic competency — and the courage to take the lead when other partners falter in the coming big chill.