PM’s declaration of independence

Scott Morrison insists Australia will not be bullied by China … or the US.

Scott Morrison meets Xi Jinping during the G20 in Osaka, Japan, in June last year. Picture: Adam Taylor/PMO

China’s targeting of Australia’s highly successful $1.1bn wine export market, the latest threat in its campaign of trade retaliation, is a small cog in the larger global revolution where the US and China are decoupling in trade and technology — the lurch into a potentially demoralising long-run confrontation.

Prime Minister Scott Morrison offered his established refrain when asked about economic coercion from China on wine exports: “We will never trade away our sovereignty in Australia on any issue. We will be consistent. We will be clear. We will be respectful and we will get on with the business.”

Morrison was sending two messages that transcend the wine issue — Australia will not be bullied by China but it stands ready to repair the damage on the China trade front. This is a different message and position from that of US President Donald Trump, now in campaign mode, with the US embracing an ideological war with China in the cause of free societies and moving along the path of technological decoupling.

Herein lie Australia’s post-COVID-19 conundrums. First, our economic integration into East Asia and China will become more important and guarantees our superior recovery (compared with OECD nations), yet our political relations with China are deteriorating. The virus will reinforce East Asia and China as the focus of our trade and the US and Britain as the focus for our investment.

Second, our “dual play” with America becomes pivotal. In this world where China’s tactics are to exploit the COVID-19 chaos to expand its power, the Morrison government is deepening its security and defence ties with the US but is also asserting its independence within the alliance as America plunges towards an economic and technological schism with China that poses serious risks for Australia.

Trump’s executive order prohibiting Americans from dealings with the parent companies of social media platform WeChat — the digital anchor of Chinese communities worldwide — and video-sharing app TikTok is being assessed in this country.

While Australia was the first of the Five Eyes intelligence community to ban Huawei from the 5G network, Morrison said of TikTok: “There’s nothing at this point that would suggest to us security interests have been compromised or Australian citizens have been compromised.” He did, however, issue a “buyer beware” warning.

America’s escalation of the technology war with China will impinge upon billions of people. Australia does have serious security worries about WeChat but following Trump’s order is unlikely and would damage China’s travel and student markets with Australia, taking economic tensions to a new low.

Illustration: Tom Jellett

As the US-China schism grows, Australia is readjusting. We have no choice. Australia wants to align with the US to combat China’s strategic assertiveness but Australia cannot sign up to any US campaign of ideological conflict, bordering on regime change in China, or economic decoupling from China as a strategic goal.

America is moving into dangerous waters, typified by what might be called the Pompeo Doctrine as enunciated at the Richard Nixon Library last month. US Secretary of State Mike Pompeo declared a global struggle that should involve all nations since “securing our freedoms from the Chinese Communist Party is the mission of our time”.

The Trump administration calculates that by intensifying economic pressure on China its model of Communist Party capitalism will shatter from within. This may become the critical calculation of the coming decade. There have been multiple predictions that China’s huge debts, rampant corruption and state-run capital direction cannot endure. The risk, however, is that America has misjudged and China’s so-called fatal internal contradictions might not be realised for many years.

This is the context for the brand of Australian distinctiveness that Morrison is now carving out; witness his remarks at the Aspen Security Forum earlier this month.

Morrison said: “So you know, to assume Australia and the US (have) an identical outlook on China would be false because the circumstances are completely different. The geography is completely different. And while we are highly integrated and aligned on our overall macro view, how we pursue that and express it and do it will be always uniquely Australian, as it should be.

“We’re an independent sovereign nation. And I think one of the errors that is made about analysing Australia’s position, and one of the criticisms that is made of Australia, is that somehow that it’s tied inextricably to the precise rhetoric of what is done in the United States. Now that is just simply not true.”

Morrison’s message: there is a distinct separation between Australia and America. This is pitched to both America and China — to America it meant we don’t share all your views on China, and to China it meant don’t think we subscribe to everything the US does.

The implication cannot be missed — Australia will follow neither Trump nor a Democratic president Joe Biden down the road of ideological confrontation and growing economic decoupling from China, if that is their course.

Referring to the China trade relationship, Morrison said: “It’s a mutually beneficial economic relationship. And it does go broader into a strategic partnership. It is a two-way mutually beneficial relationship for Australia and China. And we want to see that preserved. The United States has a different lens on this problem.”

Having just written an article for The National Interest magazine titled “Who Lost Australia?” professor of history at Sydney University, James Curran, told Inquirer: “Australia now finds itself jammed between unreliable belligerents. Washington and Beijing are both squeezing Australia now, and hard. Washington has always been a demanding ally, and that will only intensify as its strategic rivalry with Beijing heats up.

“Arguably, Australian does more as a US ally than either Britain or Japan. But the US is making it clearer it wants allies to do much more and to sign on to its hardening stance against China that looks every day more like a full-blown, Cold War-style containment policy. Some hardliners in the US ideally want Australia to decouple economically from China — that is, they want Canberra to economically self-harm. They think new markets for Australia’s exports will appear as if by magic overnight. This is delusional. There are times when the US does not understand Australia’s particular geopolitical perspective on China’s rise, when it wants what Australia can’t possibly deliver.

“This is the longest deep freeze in the China relationship since 1972, with no prospect of a thaw in sight. Australia has to continue to lay down clear lines to Beijing about what it will and won’t accept. But it also has to keep emphasising to Washington that there are limits to how much it will go along with its China policy.

“It’s pretty clear that the Pompeo speech put allies in Asia on edge. They’re not up for an ideological crusade. That includes Canberra. But it’s going to grate on Washington: they will see Australia continuing to pick and choose on where it supports the US on China.”

Curran says Australia is far from “lost” to America since the Morrison government is deepening alliance co-operation. Yet there is another story: Australia “will find it difficult to align itself with a full-throated US-led policy of containing China”. That applies in both an economic and strategic sense.

Morrison keeps reminding that Australia has a “comprehensive strategic partnership” with China, an arrangement largely moribund now, but still a signal to China. There is no ministerial contact and no meaningful dialogue. Morrison’s signal is he would prefer to get back to business with China but that is China’s choice. The Prime Minister faces no domestic political pressure because the public understands the collapsed relationship is largely China’s decision.

Beijing’s retaliation against Australia’s barley and beef exports — with wine probably next and concerns about milk powder — is hurting. At the same time, however, it only convinces the public that China’s fixation on punishing Australia exposes it as a bullying and distrustful power prepared to break norms for self-aggrandisement.

Yet China’s share of Australian exports is only increasing. Good luck to the defence boffins demanding that Australia cut its economic dependence on China. If you look solely at the trade numbers you conclude China will become more important to Australia post-virus. It depends whether market or political forces prevail.

Latest figures show exports to China tipped an all-time high of 48 per cent of goods exported, led by high prices for iron ore. There is a big message — even when political ties are busted, trade ties are galloping. Looking at the first six months of 2020 compared with 2019, the value of total exports fell by 3.7 per cent but rose by this amount with China. If Beijing and Canberra let commerce rule, the mutual gains will be hefty. But is it politically viable to take these gains anymore?

Economist and former Reserve Bank board member John Edwards, in an analysis for the Lowy Institute last week, said: “Because the East Asian economy will perform much better than Europe or North America, Australia’s economic integration into the region will likely increase as a result of the pandemic. On IMF forecasts, the economic contraction in the United States, the whole of the Euro area, the United Kingdom and Canada will be twice that of Australia.”

In its trade retaliation against Australia, China tries to maintain plausible deniability that it is operating on trade concerns, not politics. And Trade Minister Simon Birmingham treats the issue at that level. That’s smart. The government, of course, knows it is dealing with a Beijing political campaign and it doesn’t expect relief any time soon.

Meanwhile, Morrison’s promotion of Australian national interest distinctiveness was on display at the recent AUSMIN meeting that authorised a range of closer Australia-US security arrangements. Foreign Minister Marise Payne, at the media conference, in front of Pompeo and US Defence Secretary Mark Esper, said: “The relationship that we have with China is important. And we have no intention of injuring it.” She added that while Australia and the US were close allies, they “don’t agree on everything though”. Payne said Pompeo’s speech was “his own” and Australia’s positions are “our own”, a neat formula that tells a lot.

At the same time, the decisions taken at this meeting were significant — deeper collaboration to check China’s regional assertiveness, more exercises in the South China Sea, enhanced joint military efforts in the Northern Territory, stronger ties with Japan, India and ASEAN, an agreement on force posture priorities in the Indo-Pacific and action to strengthen supply chains, military interoperability and work on advanced defence technologies.

The government is also sending a message to the Australian people. The story, in dangerous times, is the imperative for stronger strategic alignment with the US while emphasising independence within the alliance. But this cannot conceal the dynamics in any showdown. Curran said we would have no real choice if the crisis came on Taiwan — saying “no” was untenable if Australia “wants the alliance to survive”.

He said: “The military, strategic and intelligence relationship is so deeply embedded that Australia would find it near impossible to say no. But you’d hope the choice would be somewhat more agonising than some suggest.”

Australia’s success in recent years is rarely mentioned — having a sustained series of policy differences with the US yet preserving the alliance in better working order than ever. The Australia-US differences encompass global trade, the Trans Pacific Partnership, the origin of the COVID-19 virus and the response to China’s new Hong Kong laws. Morrison, moreover, won’t embrace the US label of China as a “strategic competitor”.

China’s propaganda outlets depict Australia as a running dog of the US. But the facts are different. Indeed, this week Professor James Laurenceson and Elena Collinson from the Australia-China Relations Institute at UTS, released a research paper, “Australian Policy on the PRC: Is it Independent of the US?”, and concluded in the affirmative.

The paper said that Morrison, during his 2019 visit to the US, repeatedly called China a “comprehensive strategic partner” of Australia and said engagement had been “enormously beneficial”.

Morrison rejects any viewing of the PRC through an ideological lens, saying in October 2019 that seeing the rise of China “as some great ideological struggle between two world-views” was dangerous. He added that “I don’t subscribe to that analysis” and t“I don’t think it’s in Australia’s interests”. This is a world away from the Pompeo Doctrine.

On trade, while Morrison has expressed understanding of US complaints about China, Australia has not sided with the US in the current trade battle. Birmingham has urged both the US and China to avoid “digging an ever-deeper hole”. He said of Trump’s tariffs: “We do not approve or support the US actions of increasing tariffs in a unilateral way on Chinese goods.” That’s right, Australia dissents from Trump’s defining economic initiative.

Australia supports the global trade rules embodied in the World Trade Organisation against the sabotage of the Trump administration. The Morrison government has been actively working with nations — including China — to keep the Appellate Body functioning to adjudicate on disputes in the teeth of US undermining of the WTO.

On the South China Sea, the US wants Australia to conduct the same type of freedom of navigation operations within the 12-nautical-mile zone and, while Australia has toughened its legal position on this issue, it still declines to follow such US operations. Morrison’s stance is to “say it the Australian way”.

The research paper concludes there is alignment in Australian and US policy on issues such as the exclusion of PRC companies from participation in 5G networks and rejecting the Belt and Road Initiative. There are, however, many areas of policy difference between Australia and the US over China. You need to close your eyes to miss them.

The report concludes Australia’s stance overall is best described as “pro-Australia”. It said if China is seriously committed to mutual co-operation, it should “tackle Australian concerns on their merits instead of dismissing them as being articulated at the behest of the US”. Sensible advice.