Australia’s China policy emerges in the USA

The post mortems on Australian Prime Minister Scott Morrison’s US visit and speech in Chicago on Chinese state trade distortions didn’t wait for the trip to finish. We’ve had the line from opposition leader Anthony Albanese that the big issue was that the speech was delivered in the US. And another from the Chinese Communist Party paper the China Daily that ‘Australia still needs to fine tune its perceptions of China’, which was echoed by some strident visiting Chinese university folk.

We’ve even seen a repackaging of the much loved ‘Australia needs to reset its relationship with Beijing by changing the tone and language’ mantra. It now appears to be necessary for a new reason—because, apparently, Australia has joined the US–China trade war.

The visit had its hokey moments and lots of Trumpian theatrics, certainly. It was an important demonstration that the Australia–US relationship is deep and as much an economic as a strategic one. But the big outcome of the trip is a further articulation of Australia’s emerging China policy.

On the Albanese call: there are two tests for any Australian prime minister speaking on a critical issue like China policy. The first is whether the same speech could have been given anywhere—in Beijing, Canberra, Delhi, Brussels, Jakarta, Port Moresby, Washington or Rockhampton. This one could have.

To focus on its being delivered in the US as an indicator of Australia’s alignment in the trade war is superficial and tactically political. Before rushing to such a judgement, it’s worth actually reading the speech, because Morrison did not endorse US President Donald Trump’s deficit-focused trade war. Instead, he called for international action on underlying issues. The more important question is whether Morrison will be consistent if and when he visits Beijing.

That brings us to the substance. Morrison’s speech sketched out the changes to China’s economy since it joined the World Trade Organization in 2001. The case is well founded and consistent, with analysis from organisations like the OECD and the European Commission, as well as reports of the US Trade Representative. It also aligns with the views of almost all G20 leaders and finance ministers, and sits well with APEC’s unreleased communiqué of 2018 that all leaders agreed to except Chinese President Xi Jinping.

It’s based on some simple big things. Since 2001, the combination of China’s new wealth, the leadership’s prioritisation of trade and high-end economic development, and a comprehensive set of structural policies—including intellectual property theft at scale, forced intellectual property transfers, state subsidies and market protections—has distorted world trade to the disadvantage of many economies that engage with China’s. That’s because their own firms have been put at a competitive disadvantage by the Chinese state’s policies and practices.

China’s fabulous growth in recent decades has been enabled by other economies, including Australia’s, engaging with it on these terms. However, now China’s wealth, and its use of that wealth in its distorted international economic engagement, is a global problem that must be addressed.

It has resulted, for example, in Chinese ‘national champions’—like Huawei—using their home market protections and advantages to compete against firms that haven’t been given these state-derived boosts when bidding for work—such as building others’ national 5G networks.

The fact that per capita GDP in China is still well below that of other countries possessing large, highly developed economies like much of China’s is as much about how Xi and previous leaders have used China’s new wealth. They have chosen not to spread it broadly, but instead created a large middle class and a sizeable luxury class of ultra-wealthy individuals—the China Daily boasted last October that China had produced the most billionaires globally in 2017.

Those decisions have resulted in a two-track economy: the developed bit is deeply engaged with the international economy, and the undeveloped portion is lagging behind.

Priority has also been given to increasing the capacity of the Chinese state’s internal security forces to confront and control their own citizens, and strengthening China’s external military, cyber, space and intelligence power.

Xi’s three signature programs—the Belt and Road Initiative, ‘Made in China 2025’ and military–civil fusion—continue his focus on growing strategic, technological and economic power to be used by the state. At the same time, the BRI will attempt to spread the economic largesse from China’s highly developed coastal regions inland along its spines, although not at the expense of internal security or the People’s Liberation Army.

The visiting Chinese university team, accompanied by embassy minders, reacted to Morrison’s Chicago speech by claiming Australia is the pioneer of a global anti-China campaign.

That statement contains a truth hidden in an obscuration: there is a global anti-China campaign—but it’s being led by Xi, not Australia.

Former CCP leaders, from Deng Xiaoping to Hu Jintao, were subtle enough to grow China’s economic and state power quietly and well. Xi, by contrast, is a man in a hurry, and since 2012 he has switched the national agenda to a much more aggressive, assertive and confident use of China’s newly built military, economic, technological and cyber power in pursuit of his ‘China Dream’ of a Sino-centred world.

Think of the military’s takeover under Xi of chunks of the South China Sea. And of the Chinese state’s aggressive cyber hacking, including into Australia’s parliament and our three major political parties. And of its large-scale foreign interference in other countries’ politics. And of the steps it has taken to establish military bases and a presence beyond the PLA’s first overseas base in Djibouti—for example, in Cambodia.

Xi is also galvanising international opposition over his increasingly repressive use of state security forces and technology against China’s own people. Xinjiang and Hong Kong are two obvious examples.

As Isaac Newton told us, for every action there’s a reaction. Xi’s actions have been the catalyst for a broad and growing international reaction to Chinese structural economic policies and practices and the Chinese state’s use of its power domestically and internationally. Again, 5G and Huawei are a prime example; the Indian, Japanese and EU nations’ considerations about their various national networks are being informed by this reaction. Who can tell what strategic adjustments are being urged on Xi or what pressures are developing within the CCP leadership?

Regardless, this is bad news, obviously, for China and the world. But it also means that Australia is not alone in needing to manage this new kind of China. Morrison is in good company with the directions he set out in Chicago.

For the future, he will need to continue to centre his public policy engagement with Australians and with every other leader as he has to date—on Australia’s national interests.

That will become increasingly important if Albanese continues with his Chicago sound bite about Morrison’s China policy being an endorsement of the US in the Trump–Xi trade dispute. It’s more likely that Albanese is smart enough to see that any tactical political advantage to him from driving a bipartisan divide into Australia’s China policy isn’t worth the damage it would do to our national interests.

And he’ll have to get past shadow defence minister Richard Marles’s odd line that ‘ultimately, we have made a decision to engage. We made that decision back in 1972. We continue with that decision now’—as if we are somehow powerless to adjust how we engage in the face of the fundamental changes that have occurred since 1972 in China’s power and the way the CCP uses it.

Albanese has a ready solution to hand here, given his Labor colleague Penny Wong’s speech on the international economy, China and the US. As with Morrison’s speech, the shadow foreign minister’s remarks align pretty closely with the broader concerns expressed by G20 leaders, the OECD and the EU and so provide a continued basis for bipartisanship on this crucial set of issues.

All the handwringing from pro-CCP advocates about Australia needing to reset the relationship—which seems to involve apologising for and reversing decisions made in our national interest—needs to be seen in this broader context. No prime minister should apologise for acting in Australia’s national interests. And no political leader should fall into the trap of characterising tension in the relationship as attributable to the ‘vibe’ of Australian language rather than the facts of Chinese state actions.

There’s also the comforting and practical observation that fears of Xi’s state taking large punitive economic actions against Australia have simply not materialised, because our trade relationship with Beijing is one of interdependence. In fact, our two-way trade relationship has continued to grow and is now worth some $215 billion. The Chinese economy needs our resources and services, arguably even more at a time of growing economic challenges.

The Chicago speech put Australia’s approach to Chinese economic policies and actions right in the middle of the crystallising consensus in OECD and G20 nations. Australia is similarly in good company in pushing back on Chinese state conduct in Hong Kong and Xinjiang. None of this will make it any easier to deal with Xi’s strategic, technological and economic agenda, but it’s a good place to be.

Beyond economics, the prime minister and the opposition are both yet to craft a clear approach to domestic China policy. The Gladys Liu affair shows the problems in seeking to distill the diverse Australian Chinese communities of 1.2 million people into a single individual. And the government has yet to articulate a way to empower these diverse voices, so that public debate on China is informed by more than the ‘curated garden’ of groups and voices the Chinese embassy and its consulates manage.

Morrison also has yet to confront intrusive Chinese state interference—either by attributing the hacks on the parliament and political parties to the Chinese Ministry of State Security now that Australian agencies will have done the forensic work to allow this, or through prosecution when presented with the first case of an individual with undisclosed financial links to Beijing under Australia’s new foreign influence transparency scheme.

Unless those around Xi convince him to change course, the hard times for many states engaging with his China, for the 1.4 billion people living under party rule, and for Xi and the CCP in return, are yet to come. Australia has at least begun to build a framework for this new difficult era.

This article was published by The Strategist.