New era brings a pro­found change in strate­gic con­di­tions

Aus­tralia has had more than one heads-up lately about the de­te­ri­o­rat­ing strate­gic en­vi­ron­ment

The Weekend Australian - - THE NATION - GREG SHERI­DAN FOR­EIGN ED­I­TOR

The US and China have shifted de­ci­sively from a re­la­tion­ship of co-op­er­a­tion to one of con­fronta­tion.

This is a new era in US-China re­la­tions. And it is a new era in Aus­tralia-China re­la­tions, too. It marks a pro­found change in Aus­tralia’s strate­gic cir­cum­stances and one we are a long way from be­ing able to cope with yet.

The events of the past two weeks make this trans­for­ma­tion ab­so­lutely clear, as do the judg­ments of our most im­por­tant strate­gic lead­ers.

This week, we saw Amer­i­can and Aus­tralian shares tum­ble, with the Aus­tralian mar­ket los­ing $50 bil­lion in one day, in part be­cause of the US-China trade ten­sions. The IMF iden­ti­fies these ten­sions as a dan­ger for the global econ­omy and specif­i­cally for the Aus­tralian econ­omy.

The US and China have shifted de­ci­sively from a re­la­tion­ship of co-op­er­a­tion to one of con­fronta­tion. This is a new era in USChina re­la­tions. And it is a new era in Aus­tralia-China re­la­tions too. It marks a pro­found change in Aus­tralia’s strate­gic cir­cum­stances and one we are a long way from be­ing able to cope with.

The events of the past two weeks make this trans­for­ma­tion ab­so­lutely clear, as do the judg­ments of our most im­por­tant strate­gic lead­ers.

This week we saw Amer­i­can and Aus­tralian shares tum­ble, with the Aus­tralian mar­ket los­ing $50 bil­lion in one day, in part be­cause of the US-China trade ten­sions. The IMF iden­ti­fies these ten­sions as a dan­ger for the global econ­omy and specif­i­cally for the Aus­tralian econ­omy. Scott Mor­ri­son iden­ti­fied them as a cloud over the global eco­nomic out­look. The op­po­si­tion’s Penny Wong said it would be­come more dif­fi­cult for Can­berra to man­age the Bei­jing re­la­tion­ship.

There has been a steady drum beat of in­ci­dents and con­fronta­tions. On Septem­ber 30, in the South China Sea, the USS De­catur was con­duct­ing a free­dom-of-nav­i­ga­tion ex­er­cise near the Spratly Is­lands, within 12 nau­ti­cal miles of Gavin and John­son Reefs, which Bei­jing claims as sovereign ter­ri­tory. It was chal­lenged by a Chi­nese de­stroyer which came within 40m of col­lid­ing with the De­catur, forc­ing it to take rad­i­cal eva­sive ac­tion. About a week ear­lier, an Aus­tralian guided mis­sile frigate, the HMAS Mel­bourne, also sailed through the Spratlys. It ap­proached the 12 nau­ti­cal mile limit but did not cross it.

The most im­por­tant re­cent event, how­ever, came only a week ago when US Vice-Pres­i­dent Mike Pence gave a pow­er­ful speech on China to the Hud­son In­sti­tute in Wash­ing­ton DC. Since Pence’s speech, both he and Don­ald Trump have made fur­ther tough re­marks, but Pence’s speech is the his­toric marker. He said the Trump ad­min­is­tra­tion wanted friendly re­la­tions with Bei­jing, but would not back down from tough new trade and se­cu­rity ac­tions.

In a blunt speech, Pence laid out the cat­a­logue of US com­plaints against Bei­jing. The Vi­cePres­i­dent charged that the Peo­ple’s Repub­lic of China was steal­ing US com­mer­cial secrets on a mas­sive, in­dus­trial scale; that it sys­tem­at­i­cally vi­o­lated the rules of trade; that it was en­gaged in both covert and overt ac­tions to med­dle in US pol­i­tics; that it was equally in­volved in covert and overt ac­tions to im­prop­erly in­flu­ence a range of US in­sti­tu­tions such as uni­ver­si­ties; that it forced US com­pa­nies to yield com­mer­cial and in­dus­trial secrets as the price of do­ing busi­ness in China; that it was en­gaged in a vast co­er­cive pro­gram to sup­press re­li­gion and hu­man rights in China; that it had built a uniquely pow­er­ful sur­veil­lance state against its own cit­i­zens; that it was en­gaged in “debt trap” diplo­macy with Third World na­tions to ma­nip­u­late govern­ment debt so as to se­cure mil­i­tary fa­cil­i­ties for it­self in those na­tions; that it had il­le­gally oc­cu­pied and mil­i­tarised the South China Sea.

Pence also said that, far from back­ing down on the tar­iffs it has im­posed on $US250 bil­lion worth of Chi­nese ex­ports to the US, the Trump ad­min­is­tra­tion would an­nounce new mea­sures.

Trump is much more im­por­tant than his Vice-Pres­i­dent. But the choice of Pence to de­liver this speech was de­lib­er­ate. It shows, as one in­sider puts it, “these ac­tions aren’t just Trump, they’re Trump and the swamp”. Or, a lit­tle more po­litely, the Pence speech, de­signed to con­vey grav­ity and stead­fast pur­pose, in­di­cates that the whole US sys­tem is be­hind this pro­gram.

Pence and a con­gres­sional re­port both drew at­ten­tion to the se­cu­rity dan­gers posed to the US of hav­ing Bei­jing play a cen­tral role in sen­si­tive sup­ply chains. Ob­servers say the US is es­pe­cially ex­er­cised by the out­size Chi­nese role in telecom­mu­ni­ca­tions tech­nol­ogy.

In the past week there was also a well-sourced re­port in Bloomberg that Bei­jing had im­planted what are in ef­fect “spy chips” into the moth­er­boards of com­puter equip­ment it sold to the Pen­tagon, the CIA and nu­mer­ous big Amer­i­can com­pa­nies. The US will be look­ing to limit Bei­jing’s role in these sorts of sup­ply chains.

US De­fence Sec­re­tary Jim Mat­tis can­celled a visit to China. US Sec­re­tary of State Mike Pom­peo was roundly crit­i­cised, to his face, by China’s For­eign Min­is­ter Wang Yi, dur­ing a visit Pom­peo made to Bei­jing. Pom­peo’s re­sponse was the terse ac­knowl­edg­ment that Wash­ing­ton and Bei­jing dis­agreed.

In some re­spects this vast cat­a­logue of dis­pute and con­fronta­tion em­bod­ies con­ti­nu­ity with ex­ist­ing trends, rather than a rad­i­cal new cri­sis. But it makes the new sit­u­a­tion un­de­ni­able. The US-China re­la­tion­ship has moved from one of co-op­er­a­tion with el­e­ments of com­pe­ti­tion, to one of com­pe­ti­tion, even in­tense or ad­ver­sar­ial com­pe­ti­tion, with re­main­ing el­e­ments of co-op­er­a­tion. Bei­jing and Wash­ing­ton have changed. This means a new strate­gic era for Aus­tralia.

In an in­ter­view with The Week­end Aus­tralian, Den­nis Richard­son, the former head of the De­fence De­part­ment and be­fore that of For­eign Af­fairs, char­ac­terised US-China re­la­tions this way: “On the ques­tion of the bal­ance be­tween en­gage­ment and com­pe­ti­tion, I think the US has cer­tainly moved to con­front China in a com­pet­i­tive re­la­tion­ship. The el­e­ment of com­pe­ti­tion over­shad­ows en­gage­ment. But peo­ple are wrong to use the word con­tain­ment. The US strat­egy is not one of con­tain­ment.”

Former prime min­is­ter Kevin Rudd also judges that the USChina re­la­tion­ship has piv­oted fun­da­men­tally this year. In a speech this week to the US Naval Academy at An­napo­lis, Rudd com­mented: “I be­lieve that when we look back at 2018, his­tory will mark this year as a pro­found turn­ing point in the re­la­tions be­tween the two great pow­ers of the 21st cen­tury — the United States and China.”

Peter Vargh­ese, a former head of DFAT and be­fore that di­rec­tor gen­eral of the Of­fice of Na­tional As­sess­ments, in a speech a week ago to a univer­sity au­di­ence, said Bei­jing had shifted fun­da­men­tally from the China of Deng Xiaop­ing to the China of Xi Jin­ping.

Although he ar­gued Bei­jing would not be a com­pletely re­vi­sion­ist power and would seek to up­hold parts of the rules-based sys­tem while chal­leng­ing other parts, he said: “What it wants is to be­come the pre­dom­i­nant power in Asia”.

Although nec­es­sar­ily much more mea­sured than Pence, and not shar­ing by any means all of Pence’s judg­ments, Vargh­ese’s anal­y­sis does chime with Pence’s charge that Bei­jing wants even­tu­ally to ex­pel the US from the western Pa­cific.

Such a devel­op­ment would be a disas­ter for Aus­tralia strate­gi­cally. Vargh­ese also de­clared “the Aus­tralia-China re­la­tion­ship has en­tered a new phase”.

This was not al­to­gether well recog­nised, Vargh­ese sug­gested, be­cause Aus­tralia had made all its pol­icy set­tings on the ba­sis of the Deng China, not the Xi China.

Peter Jen­nings, of the Aus­tralian Strate­gic Pol­icy In­sti­tute and a former deputy sec­re­tary of the De­fence De­part­ment, and prob­a­bly our most in­flu­en­tial strate­gic an­a­lyst out­side of govern­ment, agrees the US-China re­la­tion­ship is now dom­i­nated by clear strate­gic com­pe­ti­tion be­tween the gi­ants.

All these Aus­tralian judg­ments are con­firmed by the most im­por­tant strate­gic an­a­lysts in our re­gion. Bi­la­hari Kausikan, a former head of the Sin­ga­pore for­eign min­istry, wrote this week that: “US-China re­la­tions have en­tered a new phase of height­ened longterm com­pe­ti­tion.”

In­ter­est­ingly, he ar­gued the Chi­nese had over­es­ti­mated US strate­gic de­cline be­cause of the weak­ness of the pres­i­dency of Barack Obama. He also thought the Trump ad­min­is­tra­tion had been so far suc­cess­ful in achiev­ing many of its aims and that while the next pres­i­dent may have a more con­ven­tional style than Trump, the basic US dis­po­si­tion towards Bei­jing was un­likely to change.

Jen­nings ar­gues the Wash­ing­ton-Bei­jing strate­gic ad­ver­sar­ial re­la­tion­ship pro­duces many chal­lenges for Aus­tralian pol­icy. One ur­gent na­tional chal­lenge, he be­lieves, is to di­ver­sify our ex­ter­nal eco­nomic pro­file. He told The Week­end Aus­tralian: “There’s been a lot of Aus­tralian lazi­ness to pre­serve that Chi­nese eco­nomic ben­e­fit. It’s built a re­ally un­healthy level of de­pen­dence. We re­ally need to track away from that. China will al­ways be a big trad­ing part­ner but this shouldn’t be to the ex­tent that its lever­age can stop us from pro­tect­ing our na­tional in­ter­ests. We need an ur­gent strat­egy of mar­ket di­ver­si­fi­ca­tion — in ed­u­ca­tion, tourism, ser­vices, across the board.”

Vargh­ese also called on Aus­tralian uni­ver­si­ties to di­ver­sify their sources of for­eign stu­dents. Last year there were 350,000 for­eign stu­dents in Aus­tralia and 38 per cent of these were Chi­nese. Vargh­ese com­ments that this de­mand will surely de­cline as China’s own uni­ver­si­ties de­velop, but it could also de­cline be­cause Bei­jing may de­cide for po­lit­i­cal rea­sons to stop en­cour­ag­ing its stu­dents to come to Aus­tralia.

There are seven na­tions, Vargh­ese noted, which had in ab­so­lute num­bers fewer stu­dents in Aus­tralia than they did 25 years ago, in­clud­ing Aus­tralia’s crit­i­cal re­gional part­ners In­done­sia, Sin­ga­pore, Thai­land and Ja­pan. Vargh­ese nom­i­nates In­dia and In­done­sia as cen­tral to any di­ver­si­fi­ca­tion.

None of these judg­ments re­flects any hes­i­ta­tion about wel­com­ing eth­ni­cally Chi­nese peo­ple into Aus­tralia, nor any re­flec­tion on the mag­nif­i­cent mil­lion-strong Aus­tralian com­mu­nity of Chi­nese ex­trac­tion. Aus­tralian con­cerns are en­tirely with the govern­ment of the Com­mu­nist Party of China in Bei­jing.

The hard-headed judg­ments of Jen­nings and Vargh­ese are qui­etly but widely shared across the fed­eral govern­ment.

There is some in­di­ca­tion that there may have been a slight soft­en­ing of Chi­nese di­rect in­vest­ment in Aus­tralia this year and some busi­ness and aca­demic fig­ures lamented that this week. How­ever, it is Bei­jing which has im­posed for­eign cur­rency re­stric­tions on its cit­i­zens. As well, Can­berra has taken non-dis­crim­i­na­tory mea­sures to re­strict for­eign ab­sen­tee land­lords from ex­ces­sively in­flu­enc­ing the hous­ing mar­ket.

The shal­low­ness of so much busi­ness com­men­tary was ev­i­dent in re­marks this week from Heather Rid­out, who chairs Aus­tralianSu­per. “We don’t have to be evan­ge­lists for lib­eral democ­racy in the world,” she said.

Apart from the wretched moral and po­lit­i­cal vacu­ity of this state­ment, there is no ev­i­dence at all that our prob­lems with Bei­jing arise from a mis­placed Aus­tralian cham­pi­oning of hu­man rights and democ­racy. We have huge in­ter­ests of our own to pro­tect in IP theft, the US strate­gic pres­ence in our re­gion, the mil­i­tari­sa­tion of the South China Sea, cy­ber vul­ner­a­bil­ity and all the other prob­lems Pence and oth­ers have al­luded to.

This new strate­gic en­vi­ron­ment is an enor­mous chal­lenge to Aus­tralia. This week, we’ve had more than one heads-up.

‘There’s been a lot of Aus­tralian lazi­ness to pre­serve Chi­nese ben­e­fit’

PETER JEN­NINGS CHINA EX­PERT

Mike Pence de­liv­ered a broad­side against Bei­jing

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.