As China slowly strangles our exports to break our will, Australians have responded with a range of emotions from anger and denunciation to self-blame and resignation. Difficult though it may be, we cannot afford to let emotion cloud our response to Beijing’s pressure tactics. Cool heads are required and, above all, an astutely targeted strategy that shields us from irreparable damage while working to stabilise the relationship and keep the door open to some form of reconciliation, no matter how distant the prospect.
But first we need to understand better why China is punishing Australia. This means cutting through the confused reactions and misperceptions that have obscured China’s real aims and tactics. Asserting we should “keep a low profile” or avoid “irritating China” is not a strategy.
Nor are trite motherhood statements that we should “work on the relationship”. At best, they are prescriptions for inaction. At worst, they suggest studied indifference to the real job and income losses being inflicted on our farmers and primary producers through economic coercion.
It’s clear why we are being punished. By failing to comply with China’s demands we have made ourselves a target. We are being taught a lesson in the realities of hard power by grandmaster Xi Jinping, a muscular devotee.
As Rowan Callick has written in Inquirer, the Chinese President can’t afford to have “small” nations defy him because this would undermine China’s authority and position in the world. Australia presents an acute risk as an influential, democratic middle power and close ally of the US, China’s main competitor for global leadership. Our defiance could embolden others to resist China’s mix of blandishments and heavy-handed coercion, leading to the emergence of an anti-China alliance that would threaten the Middle Kingdom’s expansive ambitions.
But these strategic considerations don’t fully explain the perverse excesses of China’s rhetorical assault. Xi’s anger seems tinged with a personal edge born of disappointment that the political capital expended in wooing Australia through decades has failed to bring us into China’s orbit. Like a spurned suitor, retribution has been swift but lacking in emotional intelligence.
The now notorious wolf warrior tweet by Foreign Ministry spokesman Zhao Lijian was totally counter-productive to China’s interests and reputation, and a profound misreading of Australia’s democracy, forcing even the most ardent pro-China advocates to concede that it was over the top.
To compound the error, the insults and self-serving justifications have continued to flow from Chinese officials and the state-run media, with no recognition of any culpability for the sorry state of the relationship.
Cultural autism has played a role. Bilahari Kausikan, a former head of Singapore’s Foreign Ministry, says the “ethno-nationalism that animates Chinese policies often leads to arrogant, diplomatically clumsy and tone deaf — if not culturally autistic — behaviour. Implicit in China’s narrative of victimhood and rejuvenation is a sense of entitlement, reinforced by the more ancient Chinese tradition that harmony in relationships is only possible by acceptance of hierarchy with China at the apex.”
This doesn’t exclude the equally plausible explanation that Zhao’s tweet depicting Australian soldiers as child killers was a calculated barb designed to appeal to nationalist sentiment in China and portray Australia in the worst possible light, to undermine our moral standing. Coming from a Communist Party with a long history of suppressing its own people, this is unlikely to win many converts internationally.
The decision to begin imposing economic costs on Australia through de facto trade sanctions first became evident in May with the suspension of beef shipments, repeated this week just before the passage of legislation that will allow Foreign Minister Marise Payne to scrap Victoria’s controversial Belt and Road Initiative agreement with China. In tactics reminiscent of those used in its trade war with the US, Beijing has singled out the agricultural sector because farmers are an important part of the Coalition’s political base while the cost to China is small. The absence of Australian wine and lobsters on the dinner tables of middle-class Chinese is an inconvenience, not a disaster.
Three conclusions can be drawn from China’s tactics.
First, there is no doubt that Beijing has deliberately targeted Australian exports for geopolitical purposes. University of Queensland researcher Scott Waldron says China’s economic coercion is meant to serve as a warning to other industries and countries in a tactic known as “kill the chicken to scare the monkey”. And it’s being prosecuted on an industrial scale. Since 2018, there have been 152 recorded cases of Chinese economic coercion globally.
Second, China’s trade sanctions are disruptive but manageable. They are not going to bring Australia to its knees although this is little consolation to the affected farmers and producers.
Iron ore is another matter. Any attempt to play havoc with iron ore exports would be extremely serious, with more than $85bn in export revenue at stake. But that’s unlikely to happen. Suspending Australian iron ore would be a foolish act of economic self-harm. China’s critical manufacturing sector relies on Australia for 60 per cent of its iron ore and there are no immediate substitutes.
Third, it would be unwise to expect any lessening of China’s trade pressure in the short term without a political circuit-breaker, a remote prospect given the rapid escalation in tensions and the examples of Norway and South Korea. When the Nobel Peace Prize was awarded to Chinese democracy activist Liu Xiaobo in 2010, Norway was punished with licensing and Customs restrictions on its salmon exports and an effective freeze on diplomatic relations that lasted six years. Seoul’s decision to accept a US missile defence system in 2016 led to a protracted dispute and an array of informal Chinese boycotts on South Korean exports that cost the country an estimated $US7.5bn.
In an analysis for the Lowy Institute, political risk consultant Henry Storey says these two cases convinced Beijing that coercive statecraft works as the Norwegian and South Korean governments made significant political concessions to mollify Beijing. He concludes: “Absent any kind of concession — and possibly even with them — Australia might be in for the long haul. In both cases, Beijing showed a strong resolve to maintain coercive measures until satisfied it had sent a message and got its way.”
The broader lesson is that an effective, targeted response to coercion is necessary and achievable, notwithstanding the misgivings of sceptics. Defeatism and appeasement will only validate and entrench the use of coercion.
The objective of our strategy must be to change Xi’s risk-reward calculation by dispelling the notion that he holds all the cards. This means leveraging our not inconsiderable strengths while preserving what we can of the relationship pending better times. Pushing back against the excesses of CCP Inc requires a seamless integration of political, diplomatic, trade and defence policy.
The Chinese Communist Party deliberately attempts to divide and rule, so Scott Morrison and Payne should reach out to Anthony Albanese and opposition foreign affairs spokeswoman Penny Wong to seek bipartisanship on the fundamentals of China policy. Strategic patience in a team-based defence of our interests is the only way to blunt China’s wedge tactics. The Opposition Leader must resist political pointscoring. It plays into Beijing’s hands and won’t win Labor votes given the public backlash against China’s trade punishment and political overreach.
Criticism that the Prime Minister has not done enough to repair the bilateral relationship is largely misplaced. China was the first mover in wielding the trade stick after several years of provocations ranging from political interference to cyber attacks and aggressive diplomacy. The government had little choice but to push back with protective legislation and other defensive measures.
But a further escalation is in neither country’s interests. It would be smart politics to send an unambiguous message to Xi that the time has come for a leaders meeting to reset the relationship. Acceptance by Xi would go a long way to reversing the dangerous escalatory trend. If Xi refuses, Morrison will occupy the moral high ground, enabling him to rebut critics that he hasn’t done enough to get relations back on track.
Proactive diplomacy, in co-operation with allies and friends, is essential to balancing China’s otherwise overwhelming power and plays to Australia’s natural strengths as a respected, well-regarded democracy. Going it alone against the largest country to inhabit the planet has only one ending. But we need to raise our game by repositioning Australia at the centre of a matrix of like-minded countries to defend our collective sovereignties, a task made easier by China’s mistaken belief that it can get its way by bullying others into submission.
Matrix diplomacy would be a significant departure from our reliance on the hierarchical hub-and-spokes architecture of the US alliance. This is not an argument for weakening the alliance but strengthening it through diversification and democratisation.
Uniting other countries fearful of a coercive China in an interlocking but differentiated set of arrangements, partnerships and understandings would make it much more difficult for China to pick off member countries at will.
The contours of this new multilateralism are already evident. The longstanding Five Eyes intelligence arrangement of Australia, the US, Britain, Canada and New Zealand is evolving into a strategic alliance with Japan as a virtual sixth eye.
India’s border problems with China and new-found willingness to work more closely with Australia, the US and Japan has strengthened the once moribund Quadrilateral Security Dialogue. With a combined population of 1.8 billion contributing about 35 per cent of the world’s economy, the Quad of leading Indo-Pacific democracies is emerging as a serious regional and global counterweight to China.
We also should work more closely with Europe to increase pressure on China to rein in its bullying tactics. A few short years ago, Europeans were still seduced by the vast promise of the China market in a similar way to Australia before it became apparent that China’s rise had a dark side. But anti-China sentiment is on the rise in many European countries as they, too, are subject to Beijing’s wolf warrior diplomacy and coercive behaviour.
In a draft plan to revitalise Europe’s frayed relationship with the US, the European Commission has called on the incoming Biden administration to seize a “once in a generation” opportunity to forge a new global alliance. This would include working together as open democracies and market economies to agree on the strategic challenge presented “by China’s growing international assertiveness”.
We should support the commission’s plan to create a trans-Atlantic technology space that would form “the backbone of a wider coalition of like-minded democracies” to resist China’s attempt to dominate the information highway and bake authoritarianism into its architecture.
And we should endorse the complementary idea of a T-12 grouping of technologically advanced liberal democracies, working with Europe and the US to extend a rules-based, trusted technology space to the Indo-Pacific to counter CCP propaganda. Unless we want to suffer the fate of Norway or South Korea, we cannot allow China to ratchet up its economic coercion cost free. Joint retaliation is the key to imposing reciprocal costs on China and the best way of stopping it from beating up on other countries.
If he isn’t already, Morrison should be having discussions with US president-elect Joe Biden about building on the Trump administration’s plan for creating a system to collectively absorb the economic punishment from China’s coercive diplomacy and offset the cost. If China boycotts imports, collaborating nations would agree to purchase the goods or provide compensation. Alternatively, the group could jointly agree to assess tariffs on China for the lost trade.
Australia is not without leverage. Although no one wants to go down this route, the nuclear option would be to delay or suspend iron ore shipments to China. This is the only unilateral action that would really hurt China. It could be a body blow to the Australian economy and for that reason an option of last resort. But if Xi continues to play his power games we should keep this card in play.
If Xi is to be persuaded that it’s folly to continue on his present path we must have a fit-for-purpose defence and national security strategy that unites all elements of China policy. The government’s recent defence strategic update is a good start. This signalled a willingness to develop more lethal, long-range military power and further measures to combat the hybrid politico-military “grey zone” tactics that China uses to impose its will on others.
Unfortunately, most of the mooted capabilities — especially our new submarines — won’t be ready when they are needed most. By the end of this decade, if not before, many ageing Western legacy systems will be outnumbered, outgunned and outranged by the ultra-modern Chinese equivalents pouring out of factories and shipyards in unprecedented numbers. Where possible, the development and deployment of new defence equipment must be accelerated, especially long-range missiles that fly at hypersonic speed.
The aim is to prevent a war, not start one. Xi will be deterred from reunifying Taiwan by force, or further adventurism in the East and South China Seas, only by the threat of a credible military response. For the same reason, the steady build-up of defence and national security infrastructure in northern Australia must be expedited. It’s moving too slowly to provide the necessary support for a defence force with real teeth. US, Asian and European partners who want to train and exercise with the Australian Defence Force will need assurance that the Top End has the facilities to host, supply and maintain their ships and aircraft to a high standard.
Finally, strategic policy should march in lock step with foreign policy. We should look for innovative ways to reinforce the work of our diplomats by broadening and deepening our defence partnerships. Although the US will remain a core provider of security goods there is scope to do much more with France and Germany, Britain and often neglected Southeast Asian neighbours.
None of this is guaranteed to insulate us from Beijing’s ire or protect our farmers. But a failure to respond robustly and strategically will lead only to further coercion and loss of independence.
Alan Dupont is chief executive of political and strategic risk consultancy The Cognoscenti Group and a nonresident fellow at the Lowy Institute.