Australian Financial Review
August 5, 2020

Scott Morrison sounds PM-style polite but blunt. Both China and the US have a special responsibility to uphold a “common set of rules” that build an international society, he says.

The Prime Minister’s foreign policy address to an American audience on Wednesday is as much an appeal to the US President as it is to China’s.

But neither leader will pay that message much heed as both countries hurtle towards ever more open confrontation, including the dangerous escalation of military tensions.

That makes a volatile three months to November’s US election look particularly high risk given Donald Trump’s determination to bolster his chances by blaming China for the economic and health crisis.

Xi Jinping seems just as determined to use the global distraction of COVID-19 to aggressively extend China’s claims of authority within and beyond its borders. This includes the burgeoning fields of cyber and trade warfare as well as renewed flashpoints like Taiwan.

It’s likely a Biden administration would at least take more care in fostering America’s alliance system as well as in challenging China in what has become a new cold war of the super powers.

Trump, despite the bonhomie he exhibits towards Morrison, has repeatedly been willing to ignore the interests and arguments of its allies in his fractured promotion of America First.

Testing times

But Australia clearly has to prepare for either an even more exaggerated Trump administration or new Democrat version overseen by a leader whose approach to deal with the “special challenge” of China will be quickly tested.

So the Morrison government is determined to present a framework for Australia’s own national interest in a much more threatening Indo-Pacific region.

That means focusing on the urgency of greater co-operation with other countries and alliances in the region as a bulwark. International institutions, in his view, are only effective if driven by and responsive to the society of sovereign states that form them rather than being unaccountable global bureaucracies.

This is all much easier for a middle-sized power like Australia to proclaim than it can hope to deliver, of course.

Morrison is clearly alarmed by the need to react to a world no longer underpinned by the verities of what was often called “the American century”.

“The reaction of some has been to fret about the weakening of the rules-based international order. Fair enough,” Morrison said.

“We want to see international engagement framed by agreed rules and norms, not crude economic or political coercion. But nor do we practically think longing for the past amounts to a strategy.

“The configuration of power in global politics has changed.”

Defence boost

He is naturally keen to emphasise, particularly to a US audience, that Australia is willing to pay more of its way in terms of upping its own defence spending.

The idea of contributing 2 per cent of GDP, particularly given a much reduced GDP, becomes a floor rather than a target.

But the government has recently been careful not to echo the more emotive language of US Secretary of State Mike Pompeo, despite praising the growing strength of the relationship and the two countries’ mutual interests.

But its other diplomatic response is to try to tie Australia more closely into new groupings of like-minded countries in the region to expand mutual co-operation in managing this precarious balance. It’s not certain how effective that can be.

Martin Parkinson, now chancellor of Macquarie University and former head of the Department of Prime Minister and Cabinet under Malcolm Turnbull, describes countries like Japan, Vietnam, Korea, Indonesia and India as Australia’s “natural partners” in this effort.

In a podcast with Blenheim Partners, Parkinson says the competition between China and the US and centred in the Indo Pacific will only get worse.

Multilateral approach

“We are more effective when we join with other countries in dealing with China,” he says.

“Big countries like to conduct relations bilaterally because they have all the power. Countries like Australia need a multilateral system.”

But he says Australia’s language must still be measured. That’s why he argues it was “naive” for the government not to have lined up other countries ahead of time to simultaneously call for an inquiry into the origins of COVID-19 and was not helped by Australia’s reference to this being akin to sending in UN-style weapons inspectors.

Even so, according to Parkinson, the subsequent trade threats made by China’s ambassador, Cheng Jingye, actually did Australia a favour.

“Australians can no longer pretend about what the Chinese government is,” he says.”The reality of it is right in front of them now.”

The economic impact of that political reality is still softened by China’s continuing demand for Australia’s key exports such as iron ore.

Official figures this week show China’s share of Australian exports is now at a record high of 48.8 per cent and underpinning Australia’s continuing strong trade surpluses.

Despite the banning of some industries, goods exports to China now equate to 8.5 per cent of Australia’s GDP.

It’s another indication of how much the Australian economy is exposed to its largest trading partner at a time when China is far less accommodating of any criticism of its activities.

China’s own self-interest will ensure it won’t switch off its demand in areas where it does not have competitive alternatives readily available – such as iron ore.

Other less crucial Australian exporters of services and goods to the Chinese market are far more apprehensive about vulnerability to the deteriorating political environment.

Canberra’s exhortations about diversified markets come regularly but even if this is possible, developing new customers in the region often takes years.

COVID-19 is increasingly overwhelming the economy thanks to Victoria. It’s far from the only threat in 2020.

Article by Jennifer Hewett, Columnist


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