Struggle for supremacy in the Indo-Pacific region

The failure to agree on an official statement after the Asia-Pacific Economic Co-operation summit points to an intensification of great power competition in the Indo-Pacific that casts Australia in a pivotal role. In US support for a new joint naval facility at Manus Island, Australia has a token of the American presence that it has looked for as a counterbalance to China. But can the US be relied on with the erratic Donald Trump at the helm? And in one of the key quarrels at the summit — between protectionism and free trade — Australia is poised delicately between the US and China.

Our prosperity has been driven by China’s admirable progress and we have no interest or capacity to resist the rise of the Middle Kingdom. But the potential threat posed by an aggressive projection of Chinese power close to our northern approaches cannot be ignored. We cannot afford a repeat of the rule-breaking dominance asserted by Beijing in the South China Sea. At stake are national security, regional stability and skies and seas open to all.

Since 2013 China has invested almost $US700 billion ($954bn) in more than 60 countries, including island nations of the Pacific. The infrastructure projects of the Belt & Road Initiative are calculated to serve China’s hegemony by drawing nations into a network of influence so that US power is eclipsed. Australia’s response to this new reality has been sluggish. It was the Turnbull government that had to confront the reality of China’s intervention in our domestic politics and neighbourhood last year. At APEC China’s president, Xi Jinping, received an ostentatious welcome in Port Moresby, where his ambitions are impossible to ignore. Chinese investment in Papua New Guinea — already committed or recently promised — amounts to almost $US6bn. Beijing had been looking at development of a deep water port on Manus Island, which would bring the People’s Liberation Army Navy uncomfortably close to us. In Port Moresby Mr Xi met Pacific Islands leaders to pitch his BRI. This is the context for Scott Morrison’s announcement of a $2bn fund for Pacific infrastructure. And on Saturday US Vice-President Mike Pence signed on to a joint defence facility on Manus. Australia and Japan also have agreed to work with the US on infrastructure in the region. Mr Pence had a timely warning to Pacific nations courted by China: “Do not accept foreign debt that could compromise your sovereignty.”

There is already a backlash against BRI-driven debt in various countries. But the West will have to be careful in choosing its investments in the Indo-Pacific. One reason China’s money was welcomed was that it did not insist on anti-corruption measures or proper project-vetting as part of the deal. Pacific Island leaders who have felt neglected in the recent past no doubt will seek to capitalise on competition between their suitors. But the broader implications of Australia’s role in a new regional pushback against China may take time to sink in. It will be costly. Australia is a rich country but also an indebted one in which many incentives lead to government handouts rather than wealth creation and entrepreneurship. Our economy has to be strong enough to fund a credible military and serious engagement at a time of historic shifts in regional power.