Scott Morrison will warn of the danger of any further escalation in US-China tensions and declare Australia won’t let its relations with China be dominated by inevitable differences, in a major speech ahead of this week’s G20 meeting.
Walking a line between Australia’s major ally and its largest trading partner in a Wednesday address on the economic dynamics of the Indo-Pacific region, Morrison will stress the need for these two great powers “to resist a narrow view of their interests”, noting that with great power comes great responsibility.
He will also emphasise the range of Australia’s regional involvement and promote its willingness to play its role as a middle power in a moveable scene. “We won’t be fazed, intimidated or fatalistic”.
Morrison’s speech to Asialink, issued ahead of delivery, follows his outlining of the re-elected government’s immediate domestic economic priorities on Monday.
“The world’s most important bilateral relationship – the US-China relationship – is strained,” Morrison says, pointing to the spreading collateral damage of the rising trade tensions.
“The global trading system is under real pressure. Global growth projections are being wound back. The impact of any further deterioration of the relationship will not be limited to these two major powers,” he says.
“The balance between strategic engagement and strategic competition in the US-China relationship has shifted.”
Australia has and would continue to welcome China’s growth and development, Morrison says.
“However, the ground has now shifted. It is now evident that the US believes that the rule-based trading system – in its current form – is not capable of dealing with China’s economic structure and policy practices.”
Morrison acknowledges the legitimacy of many of the concerns about China, such as its intellectual property theft and industrial subsidies.
“The rules-based system is in need of urgent repair if it is to adequately respond to these new challenges, including the rise of large emerging economies, changing patterns of trade and new technologies,” he says.
“Our prosperity, and that of our Indo-Pacific partners, depends strongly on the maintenance of an open global economy and a rules-based trading system in which the rights of all states are respected.
“It will also depend on a positive, productive and cooperative bilateral relationship between China and the US,” Morrison says.
“As a rising global power, China also now has additional responsibilities.
“It is therefore important that US-China trade tensions are resolved in the broader context of their special power responsibilities, in a way that is WTO-consistent and does not undermine the interests of other parties, including Australia.
“It is in no-one’s interest in the Indo-Pacific to see an inevitably more competitive US-China relationship become adversarial in character,” he says.
“There are risks of further deterioration in key relationships and consequent collateral impacts on the global economy and regional stability.
“There is also the challenge of adjusting to the potential for decoupling of the Chinese and American economic systems, whether this be in technology, payments systems, financial services or other areas.
“But these are not insurmountable obstacles,” Morrison says.
Australia would not be a passive bystander but would play its part, based on principles including a commitment to open markets with trade relationships based on rules.
While continuing to work with other partners in the region, Australia would also “deal directly with our great and powerful friends”.
Its relationship with the US “has never been stronger,” Morrison says.
“Our alliance with the US is the bedrock of Australia’s security, providing us with irreplaceable hard power capabilities and intelligence. Australia is a stronger regional power because of the US alliance.
“We are committed to working with the US internationally because we agree it has borne too many burdens on its own. Australia will continue to pull its weight.
“And we will work with the US to reform international institutions, including the WTO, to ensure they’re fit for purpose and serve their members’ interests.”
The government is also “committed to further enhancing our relationship with China” – a relationship with “many strengths”.
“While we will be clear-eyed that our political differences will affect aspects of our engagement, we are determined that our relationship not be dominated by areas of disagreement.
“The decisions we make in relation to China are based solely on our national interests, just as theirs are towards Australia, and these are sometimes hard calls to make.
“But they are designed always to leave large scope for cooperation on common interests and recognise the importance of China’s economic success. This success is good for China, it is good for Australia.”
Port Moresby may not be Yalta, nor, it might be said, is it Potsdam. But for a moment at the weekend the steamy out-of-the-way Papua New Guinea capital found itself at the intersection of great power combustibility.
When this latest chapter in America’s relationship with China is written, the Asia-Pacific Economic Cooperation (APEC) forum in Port Moresby in November 2018 may well come to be regarded as a moment when Washington exposed its determination to reassert itself in the region.
The failure of APEC leaders for the first time in the organisation’s history since 1993 to agree on a final communique, due to a standoff on trade between the United States and China, points to more trouble ahead.
Unless frictions on trade and other issues are eased over the coming months, Washington and Beijing will have embarked on a course that threatens to destabilise the whole region.
These are significant moments in the evolution of a fractious relationship between an established and a rising power.
The US has long wrestled with a workable approach to an ascendant China. It has oscillated between a hedging strategy, elements of containment, and a process of engagement.
None of these approaches has gelled.
Now, it appears to be moving towards a policy of strategic competition and economic confrontation. This is a combustible formula.
Competing worldviews were on show in Port Moresby as leaders of the two countries put aside diplomatic niceties.
US Vice President Mike Pence’s declaration that the US would not “change course” in its trade dispute with China until that country “changes its ways” could hardly have been more provocative.
China’s leader, Xi Jinping, took a swipe at the US when he said countries that embraced protectionism were “doomed to failure”.
Failure to secure American and Chinese signatures to a leaders’ communique arose from differences over the need to reform the World Trade Organisation.
China dug its heels in on language that might have posed challenges to the role of state-owned enterprises, and also on the question of differential treatment of developed and developing countries.
China has long benefited under WTO rules from being regarded as a developing country.
Both Pence and Australian Prime Minister Scott Morrison warned loans to Pacific countries were being used as a “debt trap” to assert Chinese influence. Xi strongly rejected these assertions.
Whatever the upshot of these skirmishes, America’s posture in the Asia-Pacific has shifted to one in which it seems to be spoiling for a fight. Canberra should be wary.
The Barack Obama pivot to the Asia-Pacific ended up lacking substance and has been superseded by a combative Trump administration. Its approach has less to do with engagement than with confronting China’s regional ambitions.
The pressure point for regional competition lies in the South China Sea, where China is developing base facilities on disputed features. That strategic competition now extends to the southwest Pacific.
Pence’s announcement that the US would partner Australia and Papua New Guinea in the development of a naval base on Manus Island overlooking the Bismarck Sea is, arguably, the most significant American security initiative in the Asia-Pacific since the end of the Vietnam War. Pence said:
We will work with these nations to protect sovereignty and maritime rights of the Pacific Islands as well.
Thus, Beijing was put on notice that America would adopt a more forward-leaning posture in the Asia-Pacific. Where this leads is hard to predict, but what is certain is that trade and other tensions will have a security overlay.
American bases on the Korean Peninsula and in the Japanese archipelago will now stretch into the southwest Pacific. The Manus base will overlook maritime routes on Australia’s northern approaches.
From an Australian strategic perspective, this is a hugely significant development, and one that will test Canberra’s ability to balance its security relationship with the US and its commercial partnership with China.
Beijing will correctly view the Manus facility as a joint endeavour to neutralise China’s thrust into the southwest Pacific, where it has been cultivating micro-states as part of attempts to spread its power and influence across the region.
Belatedly, Canberra is responding to this Chinese assertiveness in its backyard by ramping up its diplomatic engagement, expanding its aid programs, and now partnering Papua New Guinea and the US in the development of a joint naval facility.
In the period ahead, Australian diplomacy towards China will need to be more nimble and subtle than it has been in the recent past.
Beijing will be watching.
Morrison was not understating the case when he said US involvement in the Lombrun base on Manus would elevate Australia’s relations with its ANZUS alliance partnership to a “new level”.
How this “new level” plays out will depend on careful management of relations with China by whatever government is in power.
A joint naval facility will inevitably make it more difficult to avoid being caught in an American slipstream in any confrontation with China.
Finally, in the lead-up to what is shaping as one of more important encounters between world leaders in years – the meeting between Xi Jinping and Donald Trump at the G20 in Buenos Aires this month – Australian policymakers would be advised to read Pence’s October 4 address to the Hudson Institute in Washington.
Assuming Pence’s speech represents an administration view, this should be regarded as a deeply antagonistic statement verging on a declaration of hostilities.
Pence accused China of: seeking to influence America’s mid-term congressional elections; engaging in cyber attacks against American institutions; stealing American property rights; and adopting ruinous trade practices:
When it comes to Beijing’s malign influence and interference in American politics and policy, we will continue to expose it, no matter the form it takes.
We will work with leaders at every level of society to defend our national interest and most cherished goals.
Some viewed the Pence speech as the forerunner of a new cold war. That probably overstates the case, but it is also true that relations between Washington and Beijing have taken a turn for the worse.
Watch this space.
United States Vice President Mike Pence’s remarks at the end of this year’s summit season just about blasted the word “cooperation” out of the APEC acronym. Amid ill-concealed US-China tensions, it had already been looking out of place.
Pence unveiled US plans to help Australia and Papua New Guinea – APEC’s host this year – expand a military base on Manus Island, which is in PNG. In September, Australia had already announced funding for an upgrade of the facility.
Former Australian foreign minister Gareth Evans famously declared in 1993 that APEC was “four adjectives in search of a noun”. As one of APEC’s founding fathers, he could be forgiven for getting the parts of speech slightly wrong.
But 25 years on, “cooperation” is looking doubtful. The Asia-Pacific Economic Cooperation forum set sail in Canberra in 1989. Two former prime ministers, Bob Hawke and Paul Keating, lay some claim to its parentage. APEC has grown to boast 21 member economies (where China, Hong Kong and Taiwan are listed as separate member economies).
APEC is part of summit season in Asia in November, and the one closest to Australia’s heart, given its origins in Canberra. Three other big set pieces are also held within this week each year and bring all the key players in the region together, ostensibly to talk about advancing cooperation, community building and grappling with common problems. Two others relate to ASEAN, the grouping of 10 South-east Asian nations – its annual summit, and the ASEAN Plus 3 meeting where they bring in South Korea, Japan and China. Then there is the East Asia Summit, which comprises the 10 ASEAN members, plus Australia, China, India, Japan, New Zealand, South Korea, the United States and Russia. These talk-fests give states and economies, great and small, the chance to advance a broad-ranging positive agenda.
But the many handshakes, photo ops and positive sounding joint-statements could not mask the reality of hardening US-China geopolitical competition. It is a cruel irony that a group of meetings created to advance cooperation became the platform for what amounted to a very public drawing of lines of great power competition.
Feelings were mixed when it was announced US President Donald Trump would go to Europe for the centenary of world war one’s truce this year, instead of Asia’s summits. The signal sent that the president does not prioritise the region is unmistakable.
During his visit, Pence put on a stern face on US policy, and in his speech to the APEC CEO Summit he reinforced the United States’ wish to build a relationship with China, based on “fairness, reciprocity, and respect for sovereignty”. In earlier comments to the Hudson Institute he accused Beijing of stealing military blueprints, “and using that stolen technology, the Chinese Communist Party is turning ploughshares into swords on a massive scale…”.
Washington now sees itself in full spectrum competition with China for regional and global influence. Pence portrayed China as an aggressive and almost imperial power with a malign regional vision. In contrast, he emphasised that the US wanted to protect an open and rules-based system of genuine partnerships. He underscored the long-term nature of this commitment.
The problem, both for Washington and its partners, is that this new muscular approach to China is, as yet, not fully resourced, and does not align the military aspects with trade – notwithstanding the Manus announcement.
Trump’s economic nationalism jibes badly with the interests of its partners and its long term regional strategy. A free and open Indo-Pacific sits uncomfortably with America’s economic nationalism, imposing tariffs on allies and pleas for multilateral approaches being summarily dismissed.
At the same CEO summit, Xi Jinping gave a rare major address outside of China. Like Pence, he sought to lay out a vision for the region that presented China as a force for economic openness, integration and development.
Continuing the themes first articulated at Davos in 2017, the unstated but obvious point of contrast was with America. Xi also rebutted criticism of the Belt and Road Initiative, declaring it was neither a trap nor a geopolitical gambit but an “open platform for cooperation”. But as with his earlier efforts to paint China as a defender of economic openness, the claims remain unconvincing.
Hosting APEC in PNG was fitting, given the south-west Pacific has become a key site of US-China competition. The Manus announcement, along with another that a group of Western allies would collaborate to drive a massive electrification project in the country, gives a concrete sense of what this means for the region. As in the Cold War, when Soviet-American rivalry led to bidding wars in the developing world, today China and the US are competing for influence in the form of infrastructure and development funding.
If the speeches laid down rhetorical battle lines, APEC’s conclusion showed the consequences of this competition. For the first time in the grouping’s history, APEC members were unable to agree on the wording of a final communique. While a new Cold War is not yet here, this is another worrying step toward a serious rift in the global economy and geopolitics.
The biggest loser of the summit season is probably ASEAN. Founded in 1967 to wall off the newly independent states of south-east Asia from Cold War competition as the Vietnam war escalated, the grouping’s principal purpose has been to ensure the region does not become the wrestling mat of great power competition. It had been crucial to ensuring this goal was met in the Cold War and its aftermath. Events of this past week show it is finding that much harder to achieve as the geopolitical temperature rises.
If there were any doubts, Asia’s summit season confirms that the region has entered a new phase. Great power competition is now Asia’s most important dynamic. Even though the set piece theatre is about community building and cooperation, the reality is that China and the US have irreconcilable visions for the region and its future.
The only question is how much they are willing to pay to prevail in the contest for Asia’s future.
When G20 finance ministers met in Bali last week to review economic developments in the lead-up to the annual G20 summit, they could not ignore troubling signs in the global economy driven by concerns about an intensifying US-China trade conflict.
Last week’s slide in equities markets will have served as a warning – if that was needed – of the risks of a trade conflict undermining confidence more generally.
China’s own Shanghai index is down nearly 30% this year. This is partly due to concerns about a trade disruption becoming an all-out trade war.
IMF Managing Director Christine Lagarde’s call on G20 participants to “de-escalate” trade tensions or risk a further drag on global economic growth might have resonated among her listeners in Bali, but it is not clear calls to reason are getting much traction in Washington these days.
Uncertainties caused by a disrupted trading environment are already having an impact on global growth. In its latest World Economic Outlook, the IMF revised growth down to 3.7% from 3.9% for 2018-19, 0.2 percentage points lower than forecast in April.
The IMF is predicting slower growth for the Australian economy, down from a projected 2.9% this year to 2.8% next year. The May federal budget projected growth of 3% for 2018-19 and the following year.
Adding to trade and other tensions between the US and China are the issues of currency valuations, and a Chinese trade surplus.
In September, China’s trade surplus with the US ballooned to a record U$34.1 billion.
This comes amid persistent US complaints that Beijing has fostered a depreciation of the Yuan by about 10% this year to boost exports, which China denies.
These are perilous times in a global market in which the US appears to have shunned its traditional leadership role in favour of an internally-focused “America First” strategy.
So far, fallout from an increasingly contentious relationship between Washington and Beijing has been contained, but a near collision earlier this month between US and Chinese warships in the South China sea reminds us accidents can happen.
This is the background to a meeting at the G20 summit in Buenos Aires late in November between US President Donald Trump and Chinese President Xi Jinping. That encounter is assuming greater significance as a list of grievances between the two countries expands.
US Vice President Mike Pence’s speech last week to the conservative Hudson Institute invited this question when he accused of China of “malign” intent towards the US.
Are we seeing the beginning of a new cold war?
The short answer is not necessarily. However, a further deterioration in relations could take on some of the characteristics of a cold war, in which collaboration between Washington and Beijing on issues like North Korea becomes more difficult.
By any standards, Pence’s remarks about China were surprising. He suggested, for example, that Chinese meddling in American internal affairs was more serious than Russia’s interventions in the 2016 president campaign.
He accused Beijing of seeking to harm Republican prospects in mid-term congressional elections and Trump’s 2020 re-election bid. This was a reference to China having taken its campaign against US tariffs to newspaper ads in farm states like Iowa.
Soybean exports to China have been hit hard by retaliatory tariff measures applied by Beijing in response to a first round of tariffs levied by the US.
“China wants a different American president,” Pence said.
This is probably true, but it could also be said that much of the rest of the world – not to mention half of the US population – would like a different American president.
All this unsteadiness – and talk of a “new cold war” – is forcing an extensive debate about how to manage relations with the US and China in a disrupted environment that seems likely to become more, not less, challenging.
Australian academic debate, including contributions from various “think tanks”, has tended to focus on the defence implications of tensions in the South China Sea for Australia’s alliance relationship with the US.
This debate has narrowed the focus of Australia’s concerns to those relating to America’s ability – or willingness – to balance China’s regional assertiveness.
This assertiveness increasingly is finding an expression in China’s activities in the south-west Pacific, where Chinese chequebook – or “debt-trap” – diplomacy is being wielded to build political influence.
Australian policymakers have been slow to respond to China’s push into what has been regarded as Australia’s own sphere of influence.
Leaving aside narrowly-focused Australian perspectives, it might be useful to get an American view on the overarching challenges facing the US and its allies in their attempts to manage China’s seemingly inexorable rise.
Among American China specialists, few have the academic background and real-time government experience to match that of Jeffrey Bader, who served as President Barack Obama special assistant for national security affairs from 2009-2011.
In a monograph for the Brookings Institution published in September, Bader poses a question that becomes more pertinent in view of Pence’s intervention. He writes:
Ever since President Richard Nixon opened the door to China in 1972, it has been axiomatic that extensive interaction and engagement with Beijing has been in the US national interest.
The decisive question we face today is, should such broad-based interaction be continued in a new era of increasing rivalry, or should it be abandoned or radically altered?
The starkness of choices offered by Bader is striking. These are questions that would not have entered the public discourse as recently as a few months ago.
He cites a host of reasons why America and its allies should be disquieted by developments in China. These include its mercantilist trade policies and its failure to liberalise politically in the three decades since the Tiananmen protests.
However, the costs of distancing would far outweigh the benefits of engagement to no-one’s advantage, least of all American allies like Japan, India and Australia.
None of these countries, in Bader’s words, would risk economic ties with China nor join in a “perverse struggle to re-erect the ‘bamboo curtain’… We will be on our own”. He concludes:
American should reflect on what a world would be like in which the two largest powers are disengaged then isolated from, and ultimately hostile to each other – for disengagement is almost certain to turn out to be a way station on the road to hostility, he concludes.
Bader has been accused of proffering a “straw man argument’’ on grounds that the administration is feeling its way towards a more robust policy, and not one of disengagement. But his basic point is valid that Trump administration policies represent a departure from the norm.
At the conclusion of the IMF/World Bank meetings in Bali, Christine Lagarde added to her earlier warnings of “choppy” waters in the global economy stemming from trade tensions and further financial tightening. She said:
There are risks out there in the system and we need to be mindful of that…bIt’s time to buckle up.
That would seem to be an understatement, given the unsteadiness in the US-China relationship and global geopolitical strains more generally.
Compassion seems to have been lost in the asylum seeker debate in Australia, with the Kevin Rudd led Labor government taking a massive shift to a hardline position in refugee policy. The links below are to articles reporting on the new stance.
For more visit:
Leadership tensions developing in the Liberal Party perhaps?