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Australia and the Indo-Pacific's shifting power dynamics

Updated: Mar 12, 2021

Originally published by In Focus, September 2020 and, if you don't have time to read the whole piece, an abbreviated version was published by Asia Global Online, March 11, 2021.

Australia has become a flashpoint in the new geopolitical contest between China and the “West”. Alleged cyber-attacks, political influence operations and economic coercion by China provide salacious headlines. Australia is pushing back, banning Huawei, resisting China’s aid to the South Pacific and adopting a more aggressive military posture. Trust in Australia’s continued economic interdependence with China is collapsing, but at the same time continuing to outsource its security to an increasingly erratic United States appears a risky bet. A new, more independent Australia may yet emerge from the current geopolitical shift, which will axiomatically require deeper partnerships with its regional neighbours to shape a more stable Indo-Pacific. Australia may not face a choice between the US and China, as both major powers perceive it, but rather may finally develop a grand strategy for living with Asia. This may require some rethinking about itself, as it is, rather than how is once wished it could be.

Australians have not traditionally given much thought to geopolitics. Despite being less than half a per cent of the world’s population, Australians have a whole continent to themselves, at the end of the South East Asian archipelago, distant from the world’s traditional points of conflict and fortunate to have enjoyed almost uninterrupted peace in modern times. Australia was famously described as the “lucky country” (Horne, 1964), abundant in natural assets, wealth and social capital, generally well governed by high quality institutions. The phrase was intended to be ironic, however, coined to reflect on Australia’s generally mediocre leadership. Despite presiding over twelve per cent of the world’s surface, territory rich in resources and a remarkably successful social model based on a blend of forward-looking egalitarianism and liberalism, Australia has never formed an independent identity or grand strategy to stake its position in the world. Initially formed as a dominion of the British Empire, Australia waged no battle to create its nation, it evolved through democratic gradualism and continued to see itself as a cultural outpost rather than a new world.

In the absence of a grand strategy to secure its good luck, Australia has consistently gone to war in support of its “great and powerful friends” to demonstrate its loyalty, in the hope that such loyalty will be returned should Australia ever be directly threatened. So persistent is this loyalty that even after the failure of the British Empire to defend Australia in the Second World War, loyalty was simply transferred to the US from 1941 onwards. This dependence syndrome, which has deep cultural as well as military roots, sustained a cultural gaze that skipped over the neighbourhood and remained firmly focused on the United Kingdom and the US. After supporting independence for Indonesia in 1945, few Australians learned the language or did business with the fourth largest nation in the world to its immediate North West. After giving independence to its former colony, Papua New Guinea, in 1975, most Australians barely gave the young nation to its immediate North a second look, despite a massive development aid relationship.

From time to time in the post-war era, Australia demonstrated an appetite to play the role of “middle power”, engaging and partnering with a broader range of partners than its traditional “great and powerful friends” to pursue its interests. Australia formed coalitions that were influential in peacekeeping, arms control, trade negotiations and other areas that shaped its environment, with its influence, to be sure, bolstered by the US-led, rules-based order. But Australia’s motivations and priorities were inconsistent, flipping whenever governments changed between multilateralism and bilateralism, regionalism or nostalgia for an Anglosphere. Its engagement with nations in its immediate region, the world’s most diverse range of societies and economies stretching across South East Asia and the South Pacific, continued to be erratic. While the composition of Australia’s population changed over the course of recent decades from high immigration, to become a remarkably cohesive multicultural society, it barely noticed and commonly misunderstood its neighbourhood.

Greater attention was paid to the great economies of North East Asia, where Australia found its prosperity in modern times from pragmatic economic interdependence, first with Japan and, more recently, China. Indeed, over recent decades Australia became the most economically integrated of all developed economies with China, given the strong complementarity between the two. Not only did China depend on Australian resources for its economic modernisation, but Australia was a major destination for Chinese investment, migrants, tourists and students. In turn, Chinese demand fuelled a remarkably strong Australian economy, at least until Covid-19. In 2017 Australia, with only 25 million people, generated the fifth most wealth in the world (Credit Suisse, 2017). The Australia-China relationship nonetheless remained largely transactional, demonstrated by its steady deterioration in recent years as anxiety about geopolitical competition engulfed Australian domestic politics and US global strategy.

In the last few years the narrative, and indeed the power balance, changed. Despite commonly held Western expectations that China was on a path to liberalisation, China under Xi Jinping doubled down on authoritarianism at home. Abroad, it flexed its muscles at a time of apparent Western weakness after the (Atlantic) Global Financial Crisis. China’s militarisation of disputed formations in the South China Sea, flouting the UN Convention on the Law of the Sea, led to widespread fears China would undermine the international rules-based order. Its Belt and Road Initiative appeared to geopolitical analysts to be more than benign infrastructure connectivity projects and a likely vast play for asymmetric power through debt diplomacy and potential new military bases across a vast geography (Maçães, 2019). Notwithstanding the normative bias of much of the narrative (US flouting of the Law of the Sea is rarely cited, nor the history of conquest and plunder by other rising powers), the Chinese Government failed to generate “soft power” despite clumsy efforts to do so. With its firm grip on power, the Chinese Communist Party may have underestimated how its more assertive actions would be interpreted in the West, although because of the opaque nature of its political system we are unlikely to ever know.

Australia, with its large Chinese community, its deep economic ties and pool of China expertise, might have been expected to take a nuanced approach in response, to develop a strategy as advocated by others in Asia (Mahbubani, 2020), to engage rather than confront China. Seasoned observers have indeed encouraged engagement over confrontation (Varghese, 2020). There may have been such an opportunity in Xi Jinping’s posturing as champion of globalisation and multilateralism, while the US appeared to be walking away from the institutions it had built for global governance. But instead of pursuing nuance, Australia poked the dragon. Whether it was provoked to do so is difficult to establish from information on the public record. The intelligence community regularly fed Australia’s sensationalist media allegations of cyber-attacks, espionage, political influence operations and military base plans. The ensuing China panic provoked a storm of sentiment directed against China (Lowy Institute, 2020).

Australia’s China panic occurred as its traditional “great and powerful friend”, the US, switched from constructive engagement with China to strategic competition, advocating decoupling of key industries, resistance to China’s Belt and Road Initiative and a game of chicken with the Chinese military in the South China Sea. The narrative that Australia must “choose” between China and the US became more pronounced than in other countries that are interdependent with both major powers. In Australia, its interdependence is more commonly described as “dependence”. Unlike most nations, Australians do not yearn for national independence. Geographically and culturally distant from its traditional “great and powerful friends”, Australia’s dominant international relations narrative is “fear of abandonment” (Gyngell, 2017). Australia has yearned for continued dependence since the formative events of its nation, federation (when six colonies became a self-governing “dominion” of the British Empire), the White Australia Policy (the founding philosophy of racial purity that set infant Australia against its neighbourhood and its original inhabitants) and the ANZAC myth (simultaneous “mateship” and loyalty to Empire, even in unwinnable and indefensible battles). These three pillars perpetuated the fiction that Australia was part of an enduring empire and embedded a notion, still culturally powerful, that only Anglo Australians can be truly Australian. Those who, after a century of modernisation, liberalisation and internationalisation, still subscribe to these founding myths continue to imagine Australia as a small, dependent country unable to make its own way in the world.

Even Australia’s democracy – one of the world’s most stable and resilient on any measure – can be imagined to be under threat. After the apparent Russian influence in the 2016 US presidential election, the narrative of “foreign influence” was seamlessly picked up in Australia when some Australian politicians were found to be soliciting foreign donations from China. Subsequent legislation to protect against foreign influence was unexceptional (and welcome). However it was wielded to create a media storm of blame, led by the then prime minister, Malcolm Turnbull, who, under siege from malcontents on his right wing, claimed to be “standing up” to a China threat. In fact, conservative parties had for many years resisted calls for greater transparency around political donations, and greater accountability in the institutions of Australian democracy, such as calls for an independent commission against corruption. Few compelling examples of actual foreign influence have subsequently been exhibited on the public record (as opposed to clumsy Chinese public relations exercises), but the China threat narrative has proved politically valuable ever since. Notably in the midst of an embarrassing lapse in border security that allowed a cruise ship full of Covid-19 cases to disembark in central Sydney, the Australian Government ramped up demands for an independent inquiry into the origin of the virus. The call appeared to have all the makings of a pure public relations exercise, in the absence of any apparent diplomatic preparation, unlike the ultimately successful European Union efforts for a more realistic World Health Organisation inquiry into the pandemic.

Meanwhile the Australian Government embarked on a redrawing of the map, reimagining Australia’s position in the world. Its 2017 Foreign Policy White Paper (Australian Government, 2017), abandoned the language of the last half century positioning Australia to benefit from the opportunities of engagement with the “Asia Pacific”. That region had been envisaged as a set of relationships along a vertical axis, from North East Asia, through South East Asia, to Australasia, along which most of Australia’s trade, tourists, migrants and students flowed. In that set of relationships, China and Japan were of central economic importance, while Australia’s preferred regional architecture encompassed the US as the all-important “Pacific” balancer, given the uneasy co-existence of some actors in the region. Australia’s advocacy of an “Asia Pacific” community perhaps reached its climax with its role in creating the Leaders’ meetings of Asia Pacific Economic Cooperation (APEC). But reference to the “Asia Pacific” was eliminated in the 2017 White Paper and from Australian Government foreign and security policy language ever since. “Asia” had come to signify the rise of China and, with the US shifting to a quasi-containment/quasi-confrontation policy, a new binary concept was invented that all but deleted discussion of Asia. The “Indo-Pacific” (Medcalf, 2020) was created, in close alignment with US and Japanese language, which described the maritime region across a semi-circular arc of actors many of which happened to be in strategic competition with China, from the US to India. The era of geo-economics appeared to be over and a new era of geopolitics had begun.

With this new zero-sum geopolitical outlook, China’s growing economic engagement with countries in the region (no matter how the region was labelled) became framed no longer as fuelling regional growth but threatening regional influence, power and ultimately dominance. Ironically it has taken China’s rise to focus Australian eyes on the nations in its immediate neighbourhood, the small, aid-dependent and potentially unstable nations of the South Pacific. While Australia maintains defence superiority in its immediate region, its military-intelligence community has an understandable concern about any erosion of that superiority. For Australia, the gravest threat to the South Pacific would be the establishment of a Chinese strategic presence. For the Pacific island countries, the gravest threat is climate change, and most (apart from four that have diplomatic relations with Taiwan) welcome Chinese aid and investment. Indeed, ten Pacific island countries have joined China’s Belt and Road Initiative, keen for infrastructure connectivity to the major markets of East Asia and welcoming China’s less stringent conditions for finance (Regenvanu, 2019).

In recent years, Australia has announced a Pacific “step-up”, an array of new initiatives for the Pacific islands region to strengthen security cooperation, although it continues to resist stronger action on the issue of major concern to its neighbours, climate change (Handley, 2019). A key risk in Australia’s approach is its tendency to perceive the island countries as pawns in a geopolitical game, rather than to engage with the needs and perceptions of the people of the region themselves. This was graphically illustrated when a hawkish member of the Australian Government lashed out at Chinese-financed and constructed “roads going nowhere” in the Pacific (Graue & Dziedzic, 2018). The move backfired, as it followed a series of blunders in which Australian ministers appeared condescending or dismissive of islander concerns, with the comments widely interpreted as attacking the decision makers of the Pacific who had solicited the Chinese support for new infrastructure. Australia’s own record of supporting infrastructure in the region has been mixed, despite its massive development aid budget for governance, health and other services, often delivered by Australian consultants. In resisting the extension of the Belt and Road Initiative to the region, therefore, Australia risks weakening its influence rather than achieving its goal of weakening China’s influence.

Most spectacularly counter-productive were claims of planned Chinese military bases in the South Pacific. Australian intelligence agencies appeared to be the source of media stories in 2018 that claimed a Chinese military base was planned for Vanuatu, a small Pacific island nation to the north east of Australia. The claim was swiftly denied by the Vanuatu Government (Wroe, 2018). Claims by unnamed Australian officials that China could “seize” a wharf complex and convert it into a base aligned with an emerging “debt trap” narrative, yet subsequent investigation revealed that there was no debt equity clause in Vanuatu’s funding agreement for Luganville wharf (Bohane, 2018) and neither was Vanuatu at risk of debt distress (Fox & Dornan, 2018; Kliman, et al, 2019), although the nation had suffered significant political instability. Australian fears of potential Chinese bases in the South Pacific have persisted. Based on publicly available information, the claim China was planning a military base in non-aligned Vanuatu appears unlikely, and yet consistent with a longstanding tradition of intelligence-leaked media “revelations” in earlier decades of planned Libyan or Russian bases in the South Pacific (Gyngell, 2017). Former Australian Prime Minister Paul Keating subsequently intervened in Australia’s 2019 election campaign to issue a veiled warning to intelligence heads not to play politics (Wroe & McCauley, 2019).

There has been, as yet, no step up in Australia’s relations with the nations of South East Asia. Indonesia, the fourth most populous nation in the world, and the largest Muslim nation, straddles Australia’s northern approaches. Historically, Australia supported Indonesia’s struggle for independence, but mutual indifference has endured for long decades. The two have no competing geopolitical interests and could form a closer strategic relationship to contribute to stability in the region, although Indonesia is likely to resist being drawn into a binary US-China competition. More broadly, the Association of South East Asian Nations (ASEAN) will seek coexistence and engagement with China rather than confrontation or conflict. Singapore Prime Minister Lee Hsien Loong, like other regional leaders, emphatically rejects being forced to choose between the US and China (Lee, 2020). Australia’s potential to more deeply cooperate with ASEAN will depend on whether it is perceived as contributing to, rather than unsettling, that consensus.

Australia’s relationship with Japan has deepened over many decades and further collaboration is likely, with Japan doubling down on a strategy to maintain a “free and open Indo-Pacific” in alignment with well governed partners including the Republic of Korea, Taiwan, Vietnam, Singapore, Australia and New Zealand (Arase, 2020). Meanwhile regional economic integration efforts continue, with most countries in the old North East Asia - South East Asia – Australasia vertical signing up for further trade liberalisation and new standards in key industries under the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, both of which build on Asian open regionalism of the pre-Covid-19, globalisation era.

To date, circumstances have only encouraged gradualism, rather than a transformation, in Australia’s security (as opposed to economic) engagement with its neighbours. Ironically, prospective future actions by its ally, the US, could change that. In a deteriorating US-China strategic contest in the Pacific, future points of conflict include unpredictable events on the Korean peninsula, conflict over Taiwan or scuffles in the East or South China Seas. It may not be in Australia’s interests to get involved in any of these, yet the US would expect Australia to do so – and indeed the joint military-intelligence facilities in Australia effectively make Australia a party to any US operations in the region. This is a tension that is unlikely to go away.

In almost any conceivable future scenario, Australia will need to diversify its relationships. It will need the option to become less interdependent with China if the geopolitical climate continues to deteriorate, and will need to strengthen its trust and interdependence with others, including large powers such as India and Japan, emerging powers such as Indonesia and Vietnam, and small nations distributed across the region. Working together with the region, Australia is more likely to bolster rules and norms for co-existence and cooperation than by neglecting its neighbours.

It appears the Australian Government is starting to think that way. A recent defence update (Department of Defence, 2020), announcing new weapons systems and cyber warfare capabilities, was interestingly framed as strengthening Australia’s capacity for self-reliance and a re-focus on Australia’s own neighbourhood. This was a radical departure from military-intelligence priorities of the last two decades supporting US adventurism in the Middle East. While not eschewing the US alliance, which continues to enjoy broad support in Australia and is regarded as simply common sense, the shift does reflect a lack of confidence in the reliability of the US in future, after the experience of recent years. Whether this leads to a long-term shift towards a greater diversity of partners, including those in Australia’s neighbourhood, is yet to be seen.

One great untapped asset is Australia’s multicultural population, with highly-skilled and educated citizens drawn from across the region and the world, committed to Australia’s high quality, democratic institutions and a global rules-based order. A generational change is underway, as leaders emerge from these communities who are likely to patiently build a more modern Australian identity that no longer needs to define itself through the eyes of others. Rather, Australia can look at the world through uniquely Australian eyes. Rich, politically stable and socially cohesive as it is, Australia no longer needs to fret about its distance from Europe or America. It can develop confidence as an indispensable actor in Asia, or is that the Indo-Pacific?

In the short term, a powerful normative narrative has hold of the Australian debate, in which China is cast at the villain and risks are catastrophised as threats. It is not encouraging nuance in the debate. Strangely, China’s mass internments in Xinjiang, hostage-taking of Canadian citizens or its other numerous human rights abuses have not featured very much in the narrative. Rather, the Turnbull and Morrison Governments have made it a badge of honour to provoke China in areas where evidence is safely confidential and not open to assessment, using language known to cause acute cultural sensitivity (Gribbin, 2017), implying blame for a virus outbreak, or assuming a telephone company cannot be trusted (Australia was the first country to ban Huawei on fears that it could theoretically engage in cyber espionage and sabotage). This is a sharp break from the evidence-based, constructive engagement of the last four decades. The discourse has become flooded with authoritative assertions that China is engaged in cyber-attacks, economic coercion and military base planning. None of which is impossible, and indeed China’s actions have begun to look more like a conventional major power and so it is entirely conceivable that China is acting in such a way. Indeed, the US has for decades engaged in cyber espionage, economic coercion and military bases around the world. Australians, if told they must choose between one major power bully or another, will naturally choose the one that is more familiar and has democratic potential for checks and balances.

Yet the zero-sum narrative is too simplistic, particularly if its logic leads towards confrontation and perhaps war in the Pacific rather than co-existence based on a new balance. Australia may have long been dependent on seeing the world through the eyes of its “great and powerful” friends, but it just might be beginning to assess things from its own position on the map and from the perspective of its strengths, rather than its imagined weaknesses. It is manifestly not in Australia’s interests for the region to be dominated by an authoritarian China, but neither is it in Australia’s interests to make itself China’s enemy. Australia’s overwhelming geopolitical imperative is to maintain a stable balance in its region. Neither the US nor China are stabilising influences at this point in their strategic competition. Australia is therefore compelled to both strengthen its self-reliance and also to work with partners to sustain regional stability. Further policy innovation is likely in the years ahead.


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