Originally published in Straits Times.
The International Security Program looks at strategic dynamics and security risks globally, with an emphasis on Australia's region of Indo-Pacific Asia. Its research spans strategic competition and the risks of conflict in Asia, security implications of the rise of China and India, maritime security, nuclear arms control, Australian defence policy and the changing character of conflict. The Program draws on a network of experts in Australia, Asia and globally, and is supported by diverse funding sources including grants from the MacArthur Foundation and the Nuclear Threat Initiative. It convenes international policy dialogues such as the 2017 Australia-ROK Emerging Leaders International Security Forum and has a record of producing leading-edge, influential reports.
Originally published in Straits Times.
Orginially published on ABC News.
Domestic developments in the Pacific Island states matter more than ever to Australia.
Originally published in Channel News Asia.
The Trump–Kim summit is a distinct new phase in the dramatic cycle that defines the North Korea nuclear issue and the peninsula’s highly theatrical brand of geopolitics.
In March, Prime Minister Malcolm Turnbull will welcome the ten leaders of ASEAN to Sydney for a special summit focusing on business and security ties. This is the first time Australia has hosted ASEAN. By any definition, it is a significant event in Canberra's diplomatic calendar, with the Department of Prime Minister and Cabinet taking on an across-government steering role in the long lead-up to the summit.
On one level, such an investment of time and energy demonstrates the growing prominence of South East Asia in Australia's foreign policy. Economically, it is a major market of over 600 million people, although it accounts for just 15% of Australia's trade. In security terms, South East Asia "frames Australia's northern approaches" and most important trade routes, and "sits at a nexus of strategic competition in the Indo-Pacific", according to the 2017 Foreign Policy White Paper.
Yet these same currents of strategic competition have also rudely exposed ASEAN's limitations as a supranational organisation, as less than the sum of its constituent South East Asian parts. This is particularly so on faultline issues like the South China Sea, where China has successfully played on intra-ASEAN divisions.
As a result, more of Canberra's diplomatic energies in South East Asia are being invested bilaterally and in new groupings such as the Australia-India-Japan-US quadrilateral – in effect bypassing ASEAN.
Canberra still sees ASEAN centrality as the main anchor for its big-tent diplomacy in the wider region due to its convening power over the 18-member ADMM Plus and East Asia Summit. Maintaining open and inclusive multilateral architecture remains a key organising principle for Australia's prosperity and security. Canberra does not want to see exclusive groupings emerge in ways that force binary choices between prosperity and security, or between China and the US. ASEAN has usefully muddied these waters by pursuing engagement and dialogue promiscuously, but at the cost of process-heavy obligations that eat into the schedules of ASEAN leaders, their beleaguered officials and dialogue partners.
ASEAN is more to be pitied than blamed for this. The 10-member association lacks real teeth for collective bargaining because its members consistently refuse to compromise national interests, or to cede sovereignty upwards – a point that many South East Asians will privately concede.
This mattered less in the past. But Australia has belatedly come to realise that it needs to do more heavy lifting in South East Asia, as questions mount over the US commitment to the region and China's economic heft and coercive footprint fills the space left behind. This is clear in the subtext of the 2017 White Paper, which emphasises Australia's bilateral relationships in South East Asia as a "high priority", alongside ASEAN engagement.
At the same time, Canberra's renewed interest in the Quad suggests it is actively hedging by developing alternative security structures that skirt ASEAN. This is something that past Australian leaders have been loathe to do. Kevin Rudd flirted with the concept of an Asia Pacific Community, but ultimately deferred to ASEAN centrality. But things have moved on, because ASEAN's strategic disunity can no longer be ignored.
The emphasis on "South East Asia" in Australia's latest foreign and defence policy white papers is also instructive. References to the "ASEAN region" are still popular in some quarters of the Australian foreign policy commentariat, where hope remains that Australia will one day join the grouping. But such proprietary terminology only flatters to deceive. Australia's engagement with ASEAN needs to be recognised as subordinate within a wider South East Asia policy, Timor-Leste included.
Canberra would like its various upgraded bilateral partnerships with countries such as Vietnam and Singapore, and "mini-laterals" including the Five Power Defence Arrangements and the Quad to be seen as complementary to Australia-ASEAN ties. Hopefully they are. But even as Australia prepares to stage an unprecedented ASEAN-Australia summit, Canberra is busy diversifying its diplomatic efforts partly in response to ASEAN's shortcomings.
Two major gatherings will be held on the sidelines of the ASEAN-Australia conclave, a business summit and a counter-terrorism conference. Terrorism, while important, is also a safe-bet denominator for security cooperation with South East Asia, given ASEAN's reluctance to overtly mention inter-state tensions and China's strategic challenge in particular. Several South East Asian defence ministers were recently invited to Perth for preparatory discussions on counter-terrorism, focusing on the potential flow-back threat to the region, as jihadists exit Iraq and Syria.
The ruinous siege in Marawi has shone a spotlight on the southern Philippines and the vulnerable urban environment in South East Asia at large as the next phase of terrorist challenges in Australia's region. Canberra has stepped up its bilateral defence assistance to the Philippines, including urban warfare training, taking advantage of the Duterte administration's positive disposition towards Australia. Australia's military capacity is modest. But without great power baggage, Canberra has opportunities to be nimbler than the US as it moves to deepen defence partnerships in South East Asia.
ASEAN still offers a worthwhile channel for Australia to help South East Asia counter terrorism and violent extremism, via the ADMM Plus. But there are risks attached. One is that Australia's focus on counter-terrorism could duplicate Indonesia's recently proposed Our Eyes initiative, involving six ASEAN members. Another is that concentrating too much on the military aspects of counter-terrorism could embolden regional militaries to take on roles best left to civilian law enforcement.
Yet counter-terrorism can offer useful "cover" for strategic security cooperation. Australian patrol aircraft sent to the Philippines during the latter stages of the battle for Marawi plugged surveillance gaps in the Philippine military's terrorist detection efforts. But they were also deployed in useful proximity to the South China Sea, to enable monitoring of China's continuing build-up of strategic infrastructure in the Spratly Islands.
Finally, the endemic problem of duplication in ASEAN-led processes could potentially undermine Australia's future counter-terrorism and maritime security capacity-building, including the trilateral Sulu Sea coordinated patrols, among Indonesia, Malaysia and the Philippines.
In light of this, Canberra should do what it can to support rationalisation and de-confliction efforts within ASEAN. This is one area where the Philippines was notably active during its year as ASEAN chair in 2017, producing a concept paper to cut back on redundant activities. The job of implementing these rationalisation efforts now falls to Singapore, the current chair.
One useful message that Turnbull could reinforce to ASEAN leaders in Sydney next month is the virtue of a "less is more" approach when it comes to meetings and summitry. That might sound a little awkward coming from the host of a celebratory summit. But it could help a lost ASEAN rediscover its much-celebrated "way".
This article is part of a series for the Australia-UK Asia Dialogue, co-hosted by the Lowy Institute and Ditchley Foundation, and supported by the Department of Foreign Affairs and Trade and the Foreign and Commonwealth Office.
Xi Jinping had a good year in 2017. It began on the international stage at Davos, when the Chinese leader, in sober suit and tie, assured his nervous audience that China was a steady ally that stood by its treaty commitments, including the Paris Agreement, and was firm in its commitment to globalisation. The contrast with the US president was too obvious to need stating.
As the year drew to a close, Xi, in his domestic capacity as chairman of everything, appeared to consolidate his leadership of Party, army and state into an unassailable, long-term dominance. It is worth asking, then, what Xi Jinping means by his commitment to globalisation and to tackling climate change, and, in what way China, the world’s biggest emitter of greenhouse gases, might fill the leadership vacuum created by the absence of the United States.
Xi’s backing for the Paris Agreement is not in doubt. China’s climate policy is closely aligned with its long-term industrial and economic strategy in support of a necessary transition from low added value, high emitting industry to a higher value, more efficient, cleaner and more advanced economic model.
China has long identified low carbon technologies as the technologies of the future, and the development of its strengths in these areas figures largely in the 13th Five Year Plan. China’s ambition to dominate the global market in low carbon goods – renewable technologies for example – is well advanced. The battle for dominance in electric vehicles and in the next generation of batteries is underway. Unlike Donald Trump, China’s leaders see the energy transition as an important economic opportunity, and one in which they have invested considerable time, money and political muscle.
This does not, in itself, make for an outstanding record. In some sectors, China’s record is impressive, and its leaders can certainly claim credit. Its domestic mitigation, however, is patchy and there are large, problematic sectors where the legacy of previous choices makes a transition slow and erratic - the use of coal in primary energy generation being the most obvious example. China could demonstrate leadership by raising its domestic ambitions and encouraging others to do the same.
Nor does China’s position add up to global leadership, or indicate that China will become the mobilising force that the world requires to ensure that global average temperatures rise no more than 2 degrees. The positive dynamic generated by the 2014 US-China climate statement and the cooperation that was built around it has dissipated with the arrival of Trump in the White House. As yet, China shows few signs of going it alone and the fact is that China is not yet a global diplomatic leader and may never become one, despite Xi Jinping’s assertion of China’s power.
There are other negatives in any judgment of China’s climate leadership: its external investments include substantial amounts of new coal fired power stations in Southeast Asia, for example, and its investment practices and external trade favour towards high carbon sectors. Exporting dirty industries may help China meet its own national mitigation targets, but it does not help the world tackle climate change.
China’s climate leadership takes other forms: in its ability, for example, to direct its capacity to manufacture at scale into low carbon technologies and to focus its research and development firepower on the urgent challenges of decarbonisation. China’s success in lowering the costs of renewable technologies has the capacity to enable other emerging economics to bypass the development of high emitting energy sources and go straight to renewables – potentially an enormous contribution to global mitigation. China could demonstrate leadership by promoting renewables over coal overseas, and by conditioning its overseas investment and lending on climate compliance.
In international forums, China could use its weight to advance climate goals, something that, absent US pressure, it lamentably fails to do. In the G20 and World Trade Organisation it could throw its weight behind the speedy elimination of fossil fuel subsidies, instead of using its muscle, as at present, to obstruct such initiatives.
The contradictions in China’s assertion of responsible leadership and its commitment to globalisation were in evidence as the 11th WTO ministerial conference opened in Buenos Aires: China is in dispute with the United States and the European Union over its claim for recognition as a market economy, while both the US and the EU argue that China’s economy remains too closed to qualify. For its critics, China’s embrace of globalisation tends too much in one direction.
On the question of responsible resource stewardship and climate change, China has not shown any inclination to abolish the damaging fossil fuel subsidies that enable its fishing fleet to reach the territorial waters of Argentina, among others. Many countries subsidise their fishing fleets, including the US, Russia, South Korea, Japan and the EU; but according to an EU study, China’s subsidies are the largest, averaging some €5.6 billion a year between 2011-2013, most of it on ship fuel. The operations of China’s fleet, now the world’s largest and heavily implicated in illegal, unreported and unregulated fishing, would not be financially viable without these subsidies. The sinking of a Chinese vessel by Argentine coastguard in 2016 was a sign of growing frustration with the operations of the Chinese fleet.
How much influence can external powers like Australia and the United Kingdom have on China’s climate policies? As far as its industrial policy is concerned, China’s decisions are made and do not require external input.
China does seek, and could benefit from cooperation in cleaner urbanisation and in conservation. In finance and investment, in the development of green bonds and low carbon investment, there are substantial opportunities for the UK to exercise influence. Yet Australia’s opportunities to exercise influence on China’s climate policy are constrained by the ambivalence of its own commitment to climate leadership.
This year’s Nobel Peace Prize has been awarded to the International Campaign to Abolish Nuclear Weapons (ICAN) for:
Its work to draw attention to the catastrophic humanitarian consequences of any use of nuclear weapons and for its ground-breaking efforts to achieve a treaty-based prohibition of such weapons.
ICAN was a major influence behind the negotiation of the Treaty on the Prohibition of Nuclear Weapons, which was opened for signature at the UN in New York on 20 September. The Nobel award ceremony will take place this Sunday in Oslo.
The ban treaty aims to prohibit all aspects of nuclear weapons: development, production and testing; acquisition, possession and stockpiling; transfer; stationing and deployment; and use or threat of use. This is the first treaty to seek a universal prohibition on nuclear weapons, though there are several nuclear weapon-free zone treaties that apply similar prohibitions. The Nuclear Non-Proliferation Treaty (NPT) also prohibits non-nuclear-weapon states from developing or acquiring nuclear weapons.
Although the NPT does not expressly provide for the elimination of nuclear weapons, all parties are required to ‘pursue negotiations in good faith on effective measures relating to cessation of the nuclear arms race at an early date and to nuclear disarmament’. In its landmark 1996 advisory opinion on the legality of use or threat of use of nuclear weapons, the International Court of Justice held this NPT obligation meant not only to pursue negotiations but to bring them to a successful conclusion, resulting in nuclear disarmament under strict and effective international control. In this, there are two major problems:
Not only are no nuclear disarmament negotiations in progress or planned, today nuclear arsenals are being upgraded. Military planners are considering new uses for nuclear weapons, scenarios for ‘limited’ nuclear wars have re-emerged and political leaders are even threatening the use of nuclear weapons (such threats clearly violate international law). Anger and frustration about this situation led to the ban treaty negotiations.
Will the ban treaty make a difference? It is too early to tell. This would not be the first time the Nobel Peace Prize has been awarded prematurely. In 2009 it was awarded to US President Barack Obama, citing his advocacy for a world free of nuclear weapons, but he did little to turn his vision into reality. As I have written in The Interpreter and elsewhere (for example, here and here), the ban treaty is contentious and deeply flawed. The treaty proponents made no effort to find common ground with the nuclear-weapon states and allies. There are substantive problems that undermine the requirement, unanimously endorsed by NPT review conferences, for universal high safeguards standards (on safeguards aspects, see here).
The greatest value of a ban treaty at this time would be to delegitimise nuclear weapons. However, the divisiveness of this treaty greatly diminishes its impact. It is regrettable that the treaty proponents were in a hurry to make a political statement and were not prepared to spend the time to find common ground. A high-level declaration of principles without the specific provisions that have proven so contentious could have been acceptable to a larger number of countries. As it stands, many countries will be unwilling to join the treaty, and the treaty will have no legal effect on non-parties, including those with nuclear weapons.
At the end of the negotiating conference, in July this year, the treaty text was voted for by 122 countries. Over three-quarters of these supporters are parties to nuclear weapon-free zone treaties, so the treaty adds little to their existing commitments. The treaty will enter into effect when it has 50 ratifications. Currently it has four (Guyana, the Holy See, Mexico and Thailand), and 49 signatories. Of the countries that voted for the treaty in July, 74 have yet to sign. While the current ratifications are well short of the number required for entry into force, formal ratification processes are usually time-consuming, so we can expect the number to increase over the next year or so.
What is more interesting is that so far less than half the countries that voted for the text have signed it. Domestic processes for signature can also take time, but it is possible that many countries, having made the political gesture of supporting the treaty, will not be in a hurry to follow through.
At least the treaty will help to remind politicians and the public that the need for nuclear disarmament has not diminished – quite the opposite. It will help build pressure for those countries with nuclear weapons to take the practical steps needed for disarmament. In this regard the award of the Nobel Peace Prize to ICAN is important in raising public awareness of the issues.
Should Australia sign the treaty? The current government has made it clear it will not do so. My advice to a future government is not to sign, because of the substantive problems in the text, but Australia should be doing everything we can to support the objective of nuclear disarmament. (I have a detailed discussion on nuclear weapons, the ban treaty, and practical disarmament steps in 'Nuclear War Must Never Be Fought: The Need for a New Global Consensus', a chapter in this book.)
Australia has a distinguished record in identifying the practical steps that are needed, especially through the Canberra Commission and, with Japan, the International Commission on Nuclear Non-proliferation and Disarmament. There is an urgent need to work with other countries in taking these efforts further. While the international political environment is far from encouraging, there is much that can be done. For example, Australia should be contributing to discussions in the US on defining the president’s authority to use nuclear weapons, including the adoption of a 'no first use' policy. Another important area of work is to resolve how the ban treaty will interact with the NPT, to ensure there is no damage to the latter.
This article is part of a series for the Australia-UK Asia Dialogue, co-hosted by the Lowy Institute and Ditchley Foundation, and supported by the Department of Foreign Affairs and Trade and the Foreign and Commonwealth Office.
Although both have been very open to foreign investment, Australia and the United Kingdom have for decades championed quite different regulatory approaches. In the UK very few foreign investment proposals require government scrutiny. In Australia, at least in principle, a great many do – though the result in both cases is to permit the vast majority of investments.
Increasingly, however, the UK and Australian approaches to foreign investment are becoming more alike, driven in both countries by the same policy perplexity. Both recognise the increasing importance of China's economy, both wish to welcome a growing global surge of China direct investment into their economies, and both wish to do so on terms that take account of the special character of China investment. That is, investment from China is often from state-owned industries, is assumed to be part of a larger strategic and government-directed plan of economic expansion, and, whether rationally or otherwise, is sometimes troubling to not only Australian and UK national security agencies, but also the major security partner of both countries, the US.
Since China is such a big, fast-growing economy, UK and Australian attitudes to Chinese investment are necessarily a part of their approach to the world's most flourishing economic region, Asia. On the regulatory control of foreign investment and especially foreign investment from China, therefore, Australia and the UK have much to discuss. It is one of the tender spots in both countries' adjustment to China's increasing economic weight.
Australia's economic relationship with China is now deeper and more extensive than the UK's. Australia since 2005 has received very much more Chinese foreign direct investment, largely because China's early interest in offshore direct investment was predominately in minerals and energy. According to the American Enterprise Institute, at US$101 billion Australia has received over twice the US$48.3 billion received by the UK over the 2005-2017 period (these AEI numbers may disagree in detail with the national authority numbers, but they have the advantage of being easily compared).
Australia is now second only to the US in the stock of China's outward direct investment, and in earlier years was often in front of the US. In both the UK and Australia the relatively low level of investment stock compared with older investors such as the US obscures the rapid nature of its growth. On Australian official numbers, a decade ago China direct investment in Australia was still negligible; since then China direct investment has grown 80-fold. Today the stock of Chinese investment is a quarter of the stock of US direct investment in Australia, compared to an eightieth ten years earlier.
Reflecting differences in their economic structure, Chinese investments in the UK and Australia have taken different directions. In Australia it is principally about resources (including farming), though it now importantly includes harbours, energy generation and distribution, and property development. In the UK, by contrast, it is principally about property. That industry accounts for nearly a third of Chinese direct investment in the UK, compared to one sixth for energy. Financial services are also important, with the standout China Development Bank investment of US$3 billion in Barclays.
For all the warmth of recent UK-China economic relations, China is also a far more important trade partner to Australia than it is to the UK. China accounts for a third of Australian goods exports, and a very considerable share of customers of its tourism and education services. For the UK, the US is by far its largest export market, followed by the large European economies. China is still well down the list.
While Australia has long insisted that all major foreign investment proposals must be presented to the Foreign Investment Review Board (FIRB), the UK has maintained far less intrusive scrutiny. The most important control is through merger laws, which apply equally to domestic and foreign businesses. The tests include national security, stability of the financial system, media quality and plurality and standards. There are regulatory rules on transport, energy and banking and insurance, applied usually in a non-discriminatory way by the applicable regulators. Defence-related proposed acquisitions have typically been dealt with by exception. Even under the 2002 Enterprise Act, intervention requires 'exceptional public interest grounds'. By contrast, the FIRB may recommend the Treasurer refuse any major merger or acquisition or for that matter greenfield investment on undefined 'public interest' grounds, with no substantive appeal to a court.
For all the differences in form, Australian and UK foreign investment regimes are closer than they appear. Though it scrutinises most major foreign investment proposals, the FIRB refuses very few of them and publicly portrays itself as a very light regulator. And while the UK regime is formally largely non-discriminatory, in recent years foreign investment proposals have met with greater scrutiny. In June the May government announced a new regulatory framework specifically to apply national security considerations to critical infrastructure proposals. The merger public interest test on national security, formerly applied only in the defence industry, has now been extended to non-defence industries. Both changes in the UK may presage a move to a specific foreign investment scrutiny regime closer to the Australian model.
The recent unease in both countries is driven by increasing security concerns over Chinese investment, especially in critical infrastructure. In 2016 the Australian Treasurer refused a Chinese investor proposal to acquire NSW energy distributor Ausgrid. In the UK there was considerable debate over the Hinkley Point nuclear project, in which a French Chinese consortium is a major investor and developer. The UK has now responded with greater scrutiny over 'critical infrastructure' foreign investment proposals. For much the same reason and in the typically translucent style of Australian foreign investment regulation, the Turnbull government in April appointed David Irvine as the chairman of FIRB. Irvine was formerly the head of Australia's foreign and domestic intelligence agencies. Earlier, the Turnbull government created a Critical Infrastructure Centre tasked to protect against hostile disruption, including through foreign ownership.
The UK and Australia have to some extent converged on foreign investment scrutiny, and largely in response to national security concerns over Chinese direct investment. But that is certainly not the end of the policy discussion, or of the issues which give rise to it. Neither country wishes to discourage direct investment from or slow the growth of trade with China. In both countries, economic officials recognise that China will become the single biggest national economic power in the world, if it is not already. They recognise, too, that it is China and not the West which will decide whether, when and to what extent China is prepared to privatise state-owned industries or loosen the central role of the Communist Party, and that China's economic model will not change on the West's say-so. And, finally, they recognise that while Australia may be the number two recipient of China direct investment and the UK number eight, the US has since 2005 received considerably more China direct investment than the UK and Australia put together, and continues to accept it in large volume. The US may scold its allies, but has had little hesitation in its own embrace of China's vast economy.