A View from Australia

Australia’s relations with China have not been healthy for some years, but they deteriorated further in 2020-2021 when Beijing introduced savage import restrictions to punish Canberra for proposing an independent international review into the origins of the coronavirus pandemic. This commentary is drafted at a time when other countries are looking closely at the Australian experience. The aim is to provide a domestic Australian perspective on how, when, and why relations turned sour, and to take measure of Australia’s resolve to get by without China if it must. The decision to go forward with AUKUS, highlighted by an agreement for the purchase of nuclear-powered submarines from the United States and the United Kingdom, points to the long-term significance of deteriorating relations with China.

Three things stand out from this review. One is that the original source of bilateral friction lies in China’s actions in the East China Sea and its extensive maritime claims and intensive fortifications in the South China Sea. Canberra regards Beijing’s conduct since 2013 as threatening the regional rules and arrangements that have served Australia well for 75 years and which provide a foundation for sound planning into the future. Preserving this order is in Australia’s national interest. Canberra could have responded more deftly to China’s destabilizing actions, but it could not yield to them.

The fury of Beijing’s reaction to Australian stubbornness points to a second thing of note, a systemic failure on Beijing’s part to understand where Australia is coming from and what it wants. Far from Australia misunderstanding China, as its critics allege, China got Australia very wrong. Beijing’s miscalculation may portend others under the sway of its “wolf warrior” polemics.

The third is that the damage wrought by Beijing’s deployment of trade restrictions to pursue crude political objectives is likely to be deep and lasting. As former Prime Minister Tony Abbott told a British gathering in October 2021 “the Beijing government sees trade as a strategic weapon to be turned on and off like a tap, to reward friends and to punish foes.”¹ Australians are drawing long-term lessons from that experience. Others may do so, too.

What went wrong?

It has long been assumed that there was no future for Australia that did not involve China in a big way – through trade and investment, traditional and non-traditional security, educational and cultural exchanges, international movements of people and migration, and cooperative action on climate change, pandemics, and the international architecture of trade and development aid. Events in 2020-2021 turned that assumption on its head. The turnabout came in April 2020, when Foreign Minister Marise Payne spoke on national television about the need for an independent review into the origins of the coronavirus pandemic.² Prime Minister Scott Morrison endorsed her comments over the following days.³ China’s government blasted the comments as “disrespectful,”’ pulled out a red card, and sent Australian government and business packing.⁴

Australia had earlier been shown several yellow warning cards for speaking out against China’s expanding claims in the East and South China seas from the moment Xi Jinping’s government proclaimed an air defense identification zone (ADIZ) over the East China Sea in 2013—his first year in office.⁵ “Wolf warrior” rhetoric toward Australia made international headlines in 2018-19. Even so, a red card was unprecedented. Calling for an independent international inquiry into the origins of a pandemic, at a time when Xi Jinping was taking personal responsibility for pandemic management in China, was regarded in Beijing as an insufferable offense demanding the severest of penalties.⁶

In the wake of that judgement, authorities in China rolled out a series of measures to punish Australia, ranging from ministerial alerts about the risks of racist violence faced by visitors to Australia to “technical” bans on Australian imports. On June 5, 2020, China’s National Ministry of Culture and Tourism issued a travel alert to prospective visitors to Australia, warning of a “significant increase” in racial abuse and violence. Four days later, the Ministry of Education issued a similar warning to Chinese students planning to study in Australia. As Trade Minister Simon Birmingham observed at the time, neither of these claims stood up to scrutiny.⁷

Over the following months, Beijing placed “technical” bans on Australian beef producers, prohibited the import of Australia lobsters, imposed prohibitive tariffs on Australian barley and wine, and ordered China’s industrial consumers to stop buying Australian coal. While each of these sectors felt the impact in Australia (and some in China), a concerted trade-diversion policy saw the damage limited in all respects but wine and seafood. Paradoxically, with the bans still in place, the value of Australian exports to China increased 24% over the following year 2021.⁸

Damage to bilateral relations is likely to be more lasting than the impact on Australian trade. Beijing’s actions in pressuring Canberra to comply with its demands over several years, and then punishing Australia for failing to respect China’s wishes, diminished China’s standing in the Australian community and hardened Australian government resolve. Australia’s government became more outspoken on China’s human rights abuses and entered into new defense arrangements with partners and allies who shared its concerns.

Chronological Background

Readers of The Asan Forum have had a close-up view of deteriorating Australian relations with China since the launch of Xi Jinping’s “New Era” in 2013. The earliest public alert concerning the implications for bilateral relations of Beijing’s interference activities in Australian public life, in support of its geostrategic goals, appeared in this journal in 2014.⁹ Later issues explored whether Australia could say “no.”¹⁰ In 2020-2021, Australia said no.

Several big-picture factors have been in play over this period. On the positive side, Australia and China are in no sense economic competitors, and their complementary economies favor maintenance of healthy bilateral relations. Canberra and Beijing have dealt with countless thorny issues since relations were established in 1972, including disputes around Australian government relations with Taiwan and meetings with the Dalai Lama, the hosting of dissidents in Australia, the arrest and detention of Australian business-people, scholars, and journalists in China, and Australian domestic media reporting on China. Some of these incidents and concerns have led to awkward moments, but none had an appreciable bearing on the underlying relationship until very recent times.

On the negative side, the big-picture challenge for Australia is maintaining a stable regional and international order for negotiating trade and investment, security, and international relations during a period of dynamic change. Big powers can do as they please, but smaller ones have less room to maneuver in the absence of common norms and predictable rules. It is often pointed out that Australia faces a difficult balancing act in maintaining constructive relations with China while retaining deep alliance ties with the US. A more worrying scenario for many Australians is to find China hostile and the US ambivalent toward a regional order long underpinned by US security guarantees. China’s hostility is clear enough, but the US appears hostage to enduring nativist sentiments that diminish confidence in its capacity to uphold its commitments. Put simply, Australia is more dependent than either China or the US on healthy respect for the norms and institutions of the established postwar order, and neither China under Xi Jinping nor the US in its post-Trump moment can be relied upon to uphold that order. The Biden administration’s leadership in the AUKUS deal and in summits to advance the Quad, inclusive of Japan and India, signal it is moving to reassure allies and partners in the region.

For Australia, dependence on prevailing norms and procedures for conducting everyday relations requires speaking out in their defense in the face of China’s efforts to destabilize them. It also means building closer security relations with neighboring states that have comparable stakes in the postwar order, including Japan, South Korea, and Taiwan in East Asia along with Singapore, Indonesia, and other countries in Southeast Asia, and states further afield such as India. And it means working to ensure America’s people and government remain committed to the region. The US features prominently in Australia security thinking, in the sense of seeking to ensure its continuing commitment to the region.

Given the importance of the US alliance to Australia’s foreign policy thinking, it is not surprising that Beijing should interpret Australian conduct in light of US policy objectives and make sense of Australian actions through the lens of its own relations with Washington. But it is mistaken to regard Australia as a cypher for US interests rather than an actor with interests of its own. This appears to be Beijing’s default position on Australia. When China-US relations are at a low ebb, Australia is typically derided as a “loyal US attack dog,” in the colorful language of Global Times¹¹, or as a subservient partner “dancing to the tune of a certain country” in the more diplomatic phrasing of China’s Foreign Ministry.¹² Either way, Australia is regarded as an ignorant and ill-informed actor that consistently fails to understand China and follows blindly in America’s trail. Here China gets Australia wrong.

Australia’s record of independent foreign policy thinking makes little impression in Xi Jinping’s inner circle of advisers because he held higher expectations, and Australia disappointed him.  Xi visited Australia for the fifth time in November 2014—his first visit as head of state—and addressed the national parliament confident that  his government had Australia’s measure. At that time, China scored very highly in Australian popular opinion ratings, and trade and investment relations were flourishing. During the visit, bilateral relations were elevated to a comprehensive strategic economic dialogue, while significant progress was made toward a bilateral free trade agreement, which was cemented in the following year. Xi himself said he “personally experienced the goodwill of the Australian people towards the Chinese people.” His speeches at that time expressed confidence that bilateral ties were secure whatever he chose to do in the region.

In fact, formal relations deteriorated rapidly over the years following Xi Jinping’s visit to Australia as president, particularly after his government started extending and fortifying contested features in the South China Sea and forcefully asserting China’s claim to waters within its self-proclaimed Nine-Dash Line. Initially, the confidence with which he spoke in Australia of defending China’s maritime sovereignty appeared justified as leading Australian business figures stepped forward to urge government silence on the South China Sea dispute¹³, and when the national taxpayer funded Australian Broadcasting Corporation censored its own news reporting on the matter.¹⁴ At the same time, the communist party’s United Front agencies in Australia mobilized community media and scores of community organizations to take Xi Jinping’s case to government, and parade in the streets of Australian cities in support of China’s occupation and militarization of features in the South China Sea. The Turnbull government responded with new legislation countering covert foreign interference in Australian political life.¹⁵

 Beijing’s increasingly acerbic responses to Australia’s objections to its international conduct and its domestic interference activities heightened awareness in Canberra of the risks of handing over ports, energy, telecommunications, and transport infrastructure to China-based firms. Some deals were already on the table. Federal decisions overriding state and territory decisions to lease ports or sell-off critical infrastructure aroused public debate in the media and led to a critical further decision to ban Huawei and ZTE from providing core components to the national telecommunications grid, and in time, to legislation protecting critical infrastructure, and managing Commonwealth government relations with states and territories over their conduct of sub-national foreign relations. These decisions were supported by a public that was rapidly losing trust in China as a dependable international actor.

Punishments and demands

Tensions came to a head in mid-2020 when Beijing launched a campaign of punishing trade retributions for the Australian government’s call for an international inquiry into the origins of the global coronavirus pandemic. For Beijing, this was one foul too many. The red card followed a series of warnings from Beijing that trading relations would suffer if Australian media criticized China’s conduct in the region or if the government failed to fall into line behind it. The full suite of China’s complaints was laid out in November 2020 when a Chinese state employee passed a list of 14 political grievances to Canberra-based journalists.

The list of grievances was remarkable on several counts. Some fell outside the federal government’s remit, displaying ignorance on the part of the drafters of how Australia works as a liberal democracy under a federal system of government. These included complaints about speeches by members of parliament and about media reports and public commentary on Hong Kong, Xinjiang, and Tibet, over which the government exercised little or no control. Others included claims that the government subsidized critical think-tank analyses on sensitive issues in the relationship, presumably those of the independent Australian Strategic Policy Institute (ASPI), for which the Australian government made no apology. Of particular note, a number of grievances touched on Canberra’s attempts to manage Australian states and territories in their relations with China, as if Beijing had a right to intervene in the in-house domestic management of Australia’s international relations.

The list of grievances pressed Australia to compromise on its national interests as a condition for resuming normal trading relations. As Secretary of the Department of Foreign Affairs and Trade Frances Adamson explained in a public lecture in April, 2021, “China expects compromise on key national interests in exchange for dialogue and cooperation.”¹⁶ By applying economic coercion to punish Australia for defending its national interests, Beijing reinforced the federal government’s commitment to limiting PRC investment in critical infrastructure, to banning Huawei and ZTE from 5G networks, to calling out cyberattacks and other forms of domestic interference, and to legislating against coercive, corrupt, and covert foreign interference operations. Coercive demands from Beijing backfired, confirming an emerging view in Canberra that handing over the keys to national communications networks and power infrastructure would render Australian governments hostage to Beijing, not just on trade, but on domestic power supplies, telecommunications, and other core national infrastructure.

AUKUS

In this deteriorating environment, Australia has reconsidered security as well as economic vulnerabilities and the values it must affirm to resist China. All have a multilateral component. The most dramatic defense initiative was the trilateral security pact with the United States and Great Britain announced in September 2021.¹⁷ Under the AUKUS agreement, Australia is to acquire conventionally-armed nuclear-powered submarines and to share personnel among nuclear-powered vessels among the three partners, along with other undersea capabilities. The agreement also extends to cooperation in several other defense-related technologies, including artificial intelligence, quantum technologies, and improved cyber capabilities.  This put China on notice that aggression in the South China Sea would be met by united resistance, and that Australia would be building its defense capabilities as well as coordinating closely to ensure its position was not empty rhetoric.

On Taiwan, in November 2021 Defense Minister Peter Dutton went so far as to say the cost of joining the United States in a potential war to defend Taiwan must be weighed against the cost of inaction.  In his speech, he pointed to “dark clouds” forming and warned against repeating the “mistakes of the 1930s.”¹⁸ The Biden administration as well as the government on Taiwan welcomed such resolve, but it was far from welcomed in Beijing. Security analysts based in China said the AUKUS commitment to providing nuclear-propelled submarines could make Australia a target of nuclear attack in the event of war.¹⁹

Lessons for Australia—and others?

Seen from Australia, the country’s experience of political and economic coercion at the hands of Beijing offers an example to the world of the Faustian bargain China demands in return for access to markets and capital in the “New Era” of Xi Jinping. But from Beijing’s perspective, the punishment meted out to Australia stands as a warning to the world of the harm likely to flow to countries unwilling to comply with China’s geopolitical demands or defiant in its language about China and its “core interests.” Which of these lessons will Australia and the world take to heart?

For Australia, the problem turns on China’s disrespect for the regional order in place since WWII. Australia continues to welcome China’s rise as a major economic power in the region, Dutton also reminded the National Press Club in Canberra in November: “We want China to continue to do well economically. We want to see the Chinese people continue to prosper.” Canberra, he said, remains eager to engage with Beijing in building mutually beneficial relations. China’s rapid military expansion and coercive behavior in the region was however fueling concerns in Australia and elsewhere. “How can the region be assured China seeks reunification [with Taiwan] by peaceful means, or that there is a limit to its territorial ambitions?” Dutton concluded with an appeal for China’s leaders to “take the road of diplomacy and negotiation, consistent with international law.”

This is the issue. To many Australians, the respect for rule of law and international norms on which the country’s prosperity and security have been founded since WWII is at risk of collapse. Few are convinced that China is willing to work within the norms and rules that delivered peace and prosperity to Australia for 75 years (and to China since opening to the world four decades ago). Many would like to see further and deeper engagement with China, but the terms Beijing now lays down for engagement are not tenable.

Australian governments have no desire to be party to a bargain that would exchange sovereignty and security for prosperity. According to the list of grievances, this would involve surrendering control over the management of sub-national affairs, silencing elected representatives and independent civil society organizations, and limiting media freedoms at Beijing’s request, while allowing authorities in China to switch national infrastructure supporting energy, telecommunications, water, ports, and harbors on and off, as it did with trade. These are the conditions China has set for Australia to restore normal diplomatic, trading, and investment relations with the People’s Republic. International trade and investment matter a great deal to Australians but not that much.

Community support for the Australian government’s stance remains strong.  Lowy Institute  polling in 2021 showed that popular perceptions of China as primarily a trading partner fell from 82% to 34% over the three years to 2021, while perceptions of China as chiefly a security threat grew from 11% to 63% over the same three-year period.  For business, the effects of the trade restrictions have not been as dire as predicted. ‘The impacts on Australia have so far been surprisingly minimal,” concludes Jeff Wilson, research director of the Perth USAsia Centre.²⁰ “If this is what decoupling from China looks like, Australia’s resilience suggests the costs are far lower than many have assumed. That fact will not be lost on other countries that have differences with China.” At the same time, since the start of trade restrictions Canberra has doubled down on actions China regards as hostile, including over-ruling a sub-national state government agreement with Beijing on joining the BRI.

Whatever the short-term consequences of China’s trade penalties, the lessons of its conduct are likely to be enduring in Australia. The unspoken “grand bargain” separating economic relations from geopolitics, which underpinned mutually beneficial trade and investment ties for close to four decades, has turned to dust.²¹ Trade may well resume across a range of restricted commodities, but China’s action in coupling normal trading ties with abnormal geopolitical demands has blocked any road back to more innocent times. Going forward, all trade with China must now be regarded as part of a political and security bargain, of a kind.

Another lesson Australia has taken away from China’s politicization of trade is that threats of trade punishment are more effective deterrents than actual punishment.  When Beijing blew the whistle, it also blew its powder, as the saying goes. The federal government now appears at greater liberty to speak and to act in the national interest more boldly than in the past. To be sure, past Australian governments have consistently spoken out in defense of national interests, particularly over the East and South China sea, but they have generally refrained from commenting publicly on sensitive human rights issues or making official comments critiquing PRC government conduct toward Tibet, Taiwan, Xinjiang, and Hong Kong. That has changed. Canberra is emboldened to speak out on issues once confined to closed-door “dialogues.” Further, Canberra has worked to strengthen its partnerships and alliances by reinvigorating existing regional ties with India and Japan through the Quad, and accelerating discussions on new regional defense relationships, including a reciprocal access agreement with Tokyo to enable each country’s military forces to enter the other’s territory for joint exercises.²² Defense relations with Singapore are very close, and in November 2021 Defense Minister Dutton referred to building a “robust defense relationship” with Indonesia.²³ In punishing Australia, China signaled the uncompromising nature of its ambitions in the Indo-Pacific. In this respect, the most striking Australia government response was the announcement in September 2021 of the AUKUS trilateral security agreement with the US and Britain.²⁴

The Australian experience possibly offers lessons for other countries facing similar choices in their relations with China. Some may heed China’s warnings and comply with its geopolitical demands for fear of similar retribution, others not. There may be lessons for China too. As John Lee of the Hudson Institute observed in The National Interest: “Australia is showing that smaller nations still have agency and options and that it’s no easy matter for China to cow liberal democracies into subservience.”²⁵