BY JOHN LEE
Throughout much of the previous year, China regularly admonished Australia for viewing the former through ‘tinted glasses’ — read ‘Western bias’ — and warned Australia to remain neutral with respect to the deepening tension between the United States and China or face consequences.That ham-fisted diplomacy has had the opposite effect. To a large extent, Australia is ignoring these entreaties. Shinzo Abe’s Japan has emerged as the leader amongst regional democracies when it comes to espousing a vision of a free and open Indo-Pacific, and Australia is right behind Tokyo. Both are the two most forward-leaning of all U.S. allies when it comes to preparedness to stand strong against China.
The exception is the unresolved and deepening economic war with China. Australian Defence Minister Christopher Pyne told an audience in Singapore ‘there is no gain in stifling China’s growth and prosperity.’ During a speech the following day at the G’Day USA Dialogue jointly hosted by the United States Studies Centre and Perth USAsia Centre, Australian Foreign Minister Marise Payne cautioned that “no one wins from a trade war.” Other political elites and business groups in Australia and throughout much of Asia would agree.
President Donald Trump shot himself in the foot when he withdrew from the Trans-Pacific Partnership (TPP) trade agreement upon assuming the presidency. It was left to Japan and Australia to pick up the pieces and proceed with the inelegant sounding Comprehensive and Progressive Agreement for Trans-Pacific Partnership which is the original TPP minus the U.S.
Even so, policy introspection must apply to all countries. Australia loudly champions the liberal rules-based international order in every speech delivered by its leaders, as they do privately. There is Australian acceptance that China games the global economic system through currency manipulation, hidden subsidies to state-owned firms and other national champions, and the like. It is also the case that China cheats, especially through the theft of intellectual property and forced know-how and technology transfers engaged through joint-ventures with foreign firms in the Chinese domestic economy.
But to China’s delight, Australia is largely remaining on the sidelines when it comes to economic issues. What is the reason for Canberra’s passivity and complacency and what can the Trump administration do to drag Australia and others in from the sidelines?
The simplest reason for Australian inaction is that it benefits greatly, or at least does not suffer, from current arrangements. Consider its major exports to China: mineral, energy and agricultural commodities; education; and tourism. With respect to commodity trade, it is largely performed through arms-length transactions involving third-party traders. With respect to education and tourism, Chinese citizens come to Australia. Despite China emerging as Australia’s largest trading partner since 2012, its firms have limited experience dealing with the opaque and arbitrary rules which are characteristic of the Chinese political-economy. In addition to the Australian business community holding relatively benign views of the Chinese system, why rock the boat when things are going swimmingly?
The Trump administration might be frustrated but is hardly blameless.
The first problem is lack of clarity and consistency as to what the administration seeks to achieve. Is it primarily about reducing deficits with China and other major trading partners? Is Trump picking a fight just so American firms can sell more goods and services to China? If so, no country will want to join Trump’s economic offensive and share the costs for doing so if they do not pocket any benefits.
Perhaps it is about punishing China for stealing intellectual property and the illicit forms of financial and other support given to its state-owned firms and national champions. As a matter of principle, Australia and others would find that laudable. The question is still whether it is on behalf of American firms or on behalf of any international entity participating legitimately in the global economic system.
The second problem is that Trump has personalized the strategy and tactics. In May 2018, Trump abruptly revealed on Twitter that he and President Xi Jinping were working on lifting a ban on U.S. suppliers doing business with China’s ZTE and that he had instructed his officials to ‘get it done.’ Lawmakers on both sides — and much of his administration — were taken by surprise. Whether he raises tariffs on $200 billion worth of Chinese imports to 25 percent on March 1 depends on whether the President is personally satisfied with what Beijing is prepared to offer.
Even now, allies remain fearful that Trump will blindside his own administration and allies by concluding an economic deal with Xi to merely reduce the U.S.’s current account deficit with China. The President might have no intention to do so, but Australia and others are none the wiser with respect to where Trump is going. The point is that allies and partners will not join on to a trade war if they are left in the dark about White House tactics and the intended outcome.
Australia can fight the good fight and seek to work with the U.S. to confront the egregious economic and trade practices of China or they can leave the U.S. to do the heavy lifting and do their best to avoid collateral damage.
The onus is on the Trump administration to convince Australia and others that it seeks the reassertion of — rather than retreat from — American economic leadership.