China’s economic importance cannot be allowed to supersede all other Australian interests.
For the past couple of decades, trade has dominated Australia’s relations with China. This cannot continue. Australia needs to prioritise its security interests when dealing with Beijing, and it shouldn’t overestimate or overstate its vulnerability to China’s coercive trade practices.
Prioritising security is particularly important as we confront escalating global competition and China’s increasingly assertive behaviour. China’s live-fire exercises in the Tasman Sea have once again brought attention to the growing threat of aggressive Chinese military actions in the Indo-Pacific.
The exercises were conducted in international waters and violated no international law. But the behaviour broke norms and was less than ideal: usually, such exercises are preceded by adequate early warning to affected countries. In this case, neither Australia nor New Zealand was informed, and early reports suggest that passenger aircraft that were already enroute were forced to reroute because of the exercises. This is unacceptable international behaviour, and the Australian government should not be shy in saying so.
Australia has been more than accommodating of China. In response to press questions on live-fire exercises, Prime Minister Anthony Albanese said China ‘could have given notice but Australia has a presence from time to time in the South China Sea’. This framing was unwise, to say the least. Albanese no doubt wishes to avoid escalation, but it is unnecessary to provide such false equivalence, which Beijing could exploit. The comment offers China a free pass.
Economic issues are important for political leaders, especially in democracies, where everyday issues take precedence even over discussions about national security. This is probably why Albanese highlighted the government’s success in boosting trade and addressing disputes with Beijing—even though many of these disputes were of China’s doing, rather than Australia’s.
But Australian leaders should also recognise that China is not simply doing us a favour by trading with us. It benefits from the goods and services that Australia offers and the revenue from what it sells. This is a mutually beneficial relationship, and disruptions will affect China too.
While China may be able to source its mineral and other resources from other parts of the world, Australia can similarly find other markets for its resources, as it has in response to previous Chinese trade obstruction. China buys from Australia for a variety of reasons, including price, quality and the predictability of supply. These are not values it can get from anywhere. In many countries, resources are in conflict zones that are difficult to access.
Any trade disruption would likely hurt Australia more than it would hurt China, but it would still damage China’s economy. There is a reason why previous trade punishments have targeted a few niche products, such as wine. China has not targeted critical items, such as mineral resources, precisely because it knows that its own economy would face difficulties if it did so. As China’s economy slows, the cost of transitioning away from Australian goods and services rises.
China has repeatedly used trade sanctions against smaller economies—such as Norway, Canada, Sweden and Mongolia—for perceived slights and other political reasons. But it has never really benefited from doing so, instead gaining a reputation as a bad and unreliable actor. Its trade threats in the past few years have been more bark than bite, with most targeted countries, including Australia, standing their ground and China eventually backing off.
While Australia should not pursue trade confrontation, it may be similarly unwise to emphasise or exaggerate its vulnerability, as this will only invite pressure. Rather, Australia should initiate talks with its European and Indo-Pacific partners, as well as the US, to present a united front against such threats.
China can make threats and apply sanctions only against countries with smaller economies, and only because it thinks they will have to face such sanctions alone. Even if sanctions are ineffective—as indeed they have been—we cannot let China assume that it can get away with such behaviour without consequences. A united response to China’s trade bullying is needed to deter and, if deterrence fails, punish China for such aggressive actions.
Political leaders in democracies no doubt have a hard time balancing economic and security requirements in foreign policy. But they should avoid over-emphasising trade and economic factors—Beijing will assume these are pressure points when leaders talk as if they are. Australia must instead emphasise that it will not bend to such tactics.
