What is Australia up to?

Cleo Paskal outlines the West’s fears as a key ally develops closer links with China

Celebrations to mark China’s 60th National Day are held outside Sydney Opera House

Something is going on Down Under. In the past few months, a constant stream of serious Washington players have passed through Australia, including Vice-President Mike Pence, Defense Secretary James Mattis, Secretary of State Rex Tillerson, Senator John McCain, former CIA Director David Petraeus and former US Director of National Intelligence James Clapper.

This many high-level visits in such a short period of time is highly unusual. The reason was summed up by the oft-repeated message: watch out for China and don’t forget who your real friends are.

McCain, chairman of the Senate Armed Services Committee, said: ‘The challenge is that as China has grown wealthier and stronger, it seems to be acting more and more like a bully ... the real question is whether Australia and America are better off dealing with China’s strategic and economic challenges together, or by ourselves.’

Petraeus said the US understood the Australian position was complex because its main trading partner, China, was also its main security concern. However, Australia should still participate in ‘hugely important’ freedom of navigation exercises in the region.

Clapper, who took up a post with the Australian National University’s National Security College, raised questions about Chinese money in Australian politics.

This overlapped with growing Australian concerns about Chinese influence. The Australian Broadcasting Corporation and Fairfax Media published an in-depth investigation into Chinese state-linked interference in Australia. Using data from the Australian Security Intelligence Organization, or ASIO, they highlighted cases of ‘naked influence-buying’.

ASIO’s director-general told the Australian parliament that the scale of foreign interference in Australia was ‘unprecedented’ and had ‘the potential to cause serious harm to the nation’s sovereignty, the integrity of our political system, our national security capabilities, our economy and other interests’. Australia’s Attorney General travelled to Washington where he received intelligence briefings on the degree of Chinese state-linked interference in Australia’s political, business and academic sectors before returning to Australia and announcing he would propose major changes to the laws on foreign influence buying.

Members of the defence and intelligence communities do not like making public statements. They must have felt the situation was so dire they needed to go public. It seems as if there is a civil war at the heart of the Australian policy community and it all boils down to one core question: strategically, what is Australia?

For at least a decade there has been growing concern in the strategic community inside Australia, and among its allies, that Australia’s economic ties to China could affect it national security and strategic positioning. However, with some exceptions, the Australian political, business and academic communities continue to deepen engagement, seemingly fuelled by the assumption that the West is in decline and China’s economy will grow indefinitely.

‘Others in Australia don’t have a problem with the country trying to play a balancing role between Beijing and Washington’

An event that captured this tension involved the commercially and strategically important northern Australian city of Darwin. There had been substantial political resistance in Australia to a request to allow US Marines to train and be stationed in Darwin. Eventually, in 2011, Canberra agreed  to let 2,500 American Marines rotate through. However, four years later, the Northern Territory government suddenly announced that the lease to the critically important port of Darwin itself was going to a Chinese military-linked company, Landbridge, for 99 years. US officials were reportedly ‘stunned’.

It didn’t help matters that the former Australian trade minister, Andrew Robb, a key player in the Australia-China free trade agreement, soon joined Landbridge as a consultant, on a reported salary of £43,000 a month, plus expenses.

While many in the Australian intelligence and defence communities are deeply concerned by such things, others in Australia don’t have a problem with the country trying to play a ‘balancing’ role between Beijing and Washington. One of the best-known books on the topic is The China Choice: Why we should share power, by Hugh White, a former Australian defence official.

In it, he calls for a ‘concert of Asia’ in which China and the US work together in the region. How countries such as Vietnam, Japan, Taiwan and others would feel about this ‘sharing’ isn’t greatly explained. This wasn’t a marginal book. It was launched by the former Australian prime minister Paul Keating who said: ‘I have long held the view that the future of Asian stability cannot be cast by a non-Asian power – especially by the application of US military force.’ By using the term Asia instead of Pacific, Keating implies the US is external to the region.

Which points to another increasingly discussed aspect of the ‘what is Australia’ question. Is Australia a western outpost in Asia, or an Asian country that has a lot of people with genetic roots from Europe?

Strategically and structurally, the answer is clear. Australia is part of the core western Five Eyes intelligence sharing partnership, along with the US, the UK, New Zealand and Canada. The five countries collaborate closely on intelligence issues, which is why an Australian ‘drift’ is of such concern to Washington and London.

Under Five Eyes, different countries effectively lead in different geographic areas. Australia, and to a degree New Zealand, are considered the strategic leaders within Five Eyes for much of the vast area of Oceania.

Oceania, consisting of more than a dozen Pacific island countries, covers close to a sixth of the planet’s surface, and is the front line between Asia and the Americas. Many Pacific island countries don’t have a US embassy, but they have an Australian and a New Zealand one, and Canberra and Wellington are heavily consulted during US diplomatic and military visits to the region.

In this context, it is worth noting that many of the concerns about Chinese influence in Australian politics are replicated in New Zealand, as was made clear in Anne-Marie Brady’s study Magic Weapons: China’s Political Influence Activities Under Xi Jinping. One recent example revealed that Jian Yang, a sitting New Zealand MP and former member of the select committee for foreign affairs, defence and trade, used to teach in China at an elite Chinese intelligence-training institution. When asked about it, he replied: ‘If you define those cadets or students as spies, yes, then I was teaching spies. I don’t think so. I just think they are collecting information through communication in China.’ New Zealand is also overtly collaborating with China on development projects in Oceania.

The delegation of strategic ‘management’ of Oceania to Canberra and Wellington by Washington may make sense to the defence and intelligence communities if one assumes that Australian and New Zealand interests in the region dovetail with American ones. But that is open to question, even by Australians themselves. As Mathew Davies, the head of the international relations department at the Australian National University put it: ‘What is Australia’s role in the Asia Pacific? Should we continue to see ourselves as a close ally of the US or should we look at what Australia wants?’

As a result, the concerns about Chinese influence over domestic affairs in Australia and New Zealand are seeping into the way Washington and others are looking at the advice they are getting from Canberra and Wellington on Oceania. There have been several cases in which it seems Australia and New Zealand were doing what they want, even if it might not help regional stability or greater western interests.

‘Concern is spreading as more realize how weakness in one part of the West’s interlinked system can cascade exponentially’

For example, it has been reported that Australia pressured Nauru to transfer recognition from Taiwan to China. Also, the advice out of Canberra and Wellington on how to deal with Fiji after its coup was supposed to force Fiji into democratic concessions. Instead, Fiji turned to China, with which it has since developed close ties.

Which is not to say the outcomes favourable to China are desired. Often Australia and New Zealand’s action in Oceania seems to be driven by domestic economic factors. But, even then, given how entrenched China is becoming, what looks like trade actually has larger strategic implications.

The current example is the Pacific Agreement on Closer Economic Relations Plus, or PACER Plus, a trade deal involving Australia, New Zealand and the Pacific island countries. Canberra and Wellington have been pushing for PACER Plus for more than a decade. It is designed to have the island countries drop tariffs on most goods coming from Australia and New Zealand, have them rewrite their regulations, get rid of policies that protect domestic innovation, make it easier to pressure the islands into privatizing state-owned enterprises, and undermine the islands’ ability to sign bilateral trade deals with countries outside the zone. A particular concern of Australia and New Zealand was a potential UK or European Union trade deal with the islands.

As most of the Pacific island countries enjoy duty-free and quota-free access for exports to Australia and New Zealand, and many national budgets rely on import tariffs that will disappear with PACER Plus, it is hard to see the advantage for the islands.

However, Australia and New Zealand had large dedicated teams, including members from their own business sectors, negotiating PACER Plus, while most of the island countries have few trade negotiators. As a result Canberra and Wellington funded an organization to negotiate on behalf of the island countries, with a team led by an Australian-educated Ghanaian with little knowledge of the complexities of the island economies. This combined with intense lobbying from Australia and New Zealand that was described as ‘bullying and cheque-book diplomacy’ and resulted in recalcitrant civil servants in at least one island country being fired.

In June, Australia, the Cook Islands, Nauru, Kiribati, New Zealand, Niue, Samoa, Solomon Islands, Tonga and Tuvalu signed PACER Plus. The deal, which Australia and New Zealand were touting as promoting regional economic integration, is already creating fractures in the region.

One of the largest island economies, Papua New Guinea, failed to sign saying the deal was completely in Australia and New Zealand’s favour. Neither did Fiji, because of the ‘very restrictive’ third party most-favoured-nation clause. The King of Tonga dissolved his parliament and called a new election in part because of the lack of consultation on PACER Plus. It seems as if Washington wasn’t thrilled with the deal either. The three island countries in Free Association with the US, the Federated States of Micronesia, Palau and the Marshall Islands, somehow managed to miss the signing because of ‘transportation issues’. The possibility of them joining later, as Vanuatu has, has not been mentioned.

On the face of it, PACER Plus is also problematic for regional security on strictly economic grounds. It is likely to increase food insecurity as pressure is put on island countries to privatize customary land currently being used as family allotments. It is likely to bring cheaper, lower quality food into the islands, increasing obesity and diabetes, already a serious issue in the region, and making domestic food production less profitable. It will also deprive already struggling governments of critical tariff income − forcing them to look for more Chinese loans. All this can combine to create internal dislocation and increasing urbanization and poverty and all for very minimal benefit to a very narrow range of Australian and New Zealand businesses.

The projections get even more serious when one overlays the ‘China factor’. For example, one of the priorities for Australia and New Zealand is the privatization of state-owned enterprises in the islands. This means ports, airports, telecoms and other pieces of critical infrastructure.

Chinese-linked companies have been trying to gain access to these for years given the critical strategic positioning of the island countries. It is not a great leap to think it possible that Australian or New Zealand companies, backed by Chinese government-linked money, will wait for Canberra and Wellington to force the privatization of, say, ports in the island countries, and then come in with the best bids, as they did in Darwin.

Many in the Australian defence and intelligence communities are worried about the way things are going. And that concern is spreading, as more realize how weakness in one part of the West’s interlinked systems can cascade exponentially. It’s not just Washington that wants to know the answer to the question ‘what is Australia?’.