Fortnight of 25 April to 8 May 2022

Pacific dialoguing

From China’s Ministry of Foreign Affairs’ (MFA) readout of the virtual meeting between Australian and Chinese officials discussing the Pacific on 6 May:

“Solomon Islands and South Pacific islands are not the ‘backyard’ of any country. China is a direct stakeholder in the security of the South Pacific region. China has no selfish interests in the South Pacific, does not seek ‘spheres of influence’ or engage in bullying and coercion, and will unswervingly advance practical cooperation with South Pacific island countries in various fields.”

Quick take:

Australian ministers and Chinese government representatives have been publicly criticising—either explicitly or implicitly—each other’s countries for weeks now in the media and official statements. Following news of the security cooperation agreement between Beijing and Honiara, Canberra has raised a steady stream of concerns about the security implications of the agreement and the way in which China apparently conducts itself in international affairs. Meanwhile, Chinese MFA and Ministry of National Defense spokespeople have repeatedly hit back, accusing Australia of interfering in the affairs of a sovereign state and stoking regional tensions.

Against this backdrop of a prolonged war of words, news of direct talks between Canberra and Beijing is encouraging. To be sure, it seems likely that the Australian and Chinese governments would have already engaged repeatedly on the security agreement via their respective embassies. (The Australian Embassy in Beijing has presumably already made private representations to MFA regarding Canberra’s concerns and the Chinese Embassy in Canberra has presumably done the same to the Department of Foreign Affairs and Trade [DFAT] in response to the Australian government’s publicly expressed worries.) But the fact these recent talks have been publicly advertised by both MFA and DFAT might mean they occurred at a higher level of seniority or in a more prolonged and/or formalised structure than typical embassy representations.

Regardless of the cautiously positive sign of extra official engagement on the security agreement, the talks seemed to yield little in the way of common ground. The bulk of the respective press releases issued by MFA and DFAT detailed the starkly different ways in which Canberra and Beijing view the security agreement. Indeed, beyond some of the particulars of the meeting’s time and place, the only point of overlap between the two press releases was the perfunctory final sentence detailing other Pacific-related issues that the two sides discussed.

Is this difference of views surprising? Not particularly. Canberra’s and Beijing’s strongly diverging positions on this issue are well established and it was always unlikely that one round of official talks would produce common understanding, especially considering the different visions for the Pacific that the Australian and Chinese governments have advocated in recent weeks. Compare Canberra’s view that “the Pacific family remains best placed to meet the security needs of Pacific island countries comprehensively” with Beijing’s position that “China is a direct stakeholder in the security of the South Pacific region.” So, notwithstanding exchanges like this, expect the Beijing-Honiara security agreement to emerge as yet another long-term source of tension in the Australia-China relationship.

1930s redux?

Minister for Defence Peter Dutton speaking at the National Press Club defence debate on 5 May:

“China’s intimidatory use of grey zone warfare tactics, like hacking and like economic coercion, is threatening the sovereignty and prosperity of every Indo-Pacific nation. We live in times echoing the 1930s with belligerent autocrats seeking to once again use force to achieve political outcomes.

If history has taught us anything, it is that when dictators are on the march, you can only preserve peace by preparing for war. You can only deter aggression from a position of strength.”

Quick take:

There’s long been a conspicuous contrast between how Minister Dutton and minsters in the foreign affairs and trade portfolios speak about China. At times, this even takes the form of what could plausibly be interpreted as substantively different assessments of the threat posed by People’s Liberation Army modernisation. This difference is now also apparent when it comes to commonly used historical baselines. In a speech to the United States Studies Centre on 28 April, Minister for Foreign Affairs Marise Payne raised concerns about China’s behaviour that were not dissimilar to those regularly highlighted by Minister Dutton. Minister Payne stressed the need for Australia to clearly and consistently respond to the “changing circumstances, particularly China’s growing assertiveness in the Indo-Pacific.” But while both ministers seek to stand “firm on our values and principles even in the face of pressure,” the historical reference points with which they frame current circumstances are sometimes vastly different.

While criticising China’s current behaviour, the Minister for Defence has made repeated recent references to the turbulent pre-war years of the 1930s when fascism was ascendant. As Minister Dutton said on 25 April: “We’re in a period very similar to the 1930s now, and I think there were a lot of people in the 1930s that wish they had spoken up much earlier in the decade than they had to at the end of the decade. I think that’s the sobering reality of where we are.” By contrast, the Minister for Foreign Affairs seems to prefer much more contemporary and less historically striking reference points to contextualise current circumstances. On 28 April, Minister Payne said: “The pace at which China has sought to exercise influence and raw power in the Indo-Pacific has been rapid, more so than many were predicting only a decade ago.”

How much significance should be attributed to these contrasting historical reference points? Any tentative conclusions should be caveated by the context of the heat of the ongoing election campaign, which is liable to prompt stronger and more varied rhetoric from ministers and their shadow counterparts alike. This is perhaps especially likely to be the case when the ministers are up for re-election in different houses and different states. (Minister Payne is safely placed first on the Coalition Senate ticket for New South Wales, while Minister Dutton is campaigning for a Queensland seat that he holds by a not-entirely-comfortable 4.6%.) Moreover, each of these ministers speak on behalf of different portfolios with different equities and they each have different communication and rhetorical styles.

Those considerations notwithstanding, it seems likely that such historical comparisons are liable to further strain ties between Canberra and Beijing. Especially in light of the frosty reception from Beijing when similar allusions to World War II have previously been made in relation to China. When Coalition Member of Parliament and now Assistant Minister for Defence Andrew Hastie penned an op-ed in August 2019 drawing parallels between Australia today and the poor preparedness of France in 1940, the Chinese Embassy shot back by decrying “Cold War mentality and ideological bias” and stressing that it was “detrimental to China-Australian relations.” This is not to say that all ministers should frame the same issues in precisely the same way or that there aren’t pragmatic political grounds for making such historical comparisons. Such references may galvanise domestic public opinion and may rally like-minded nations. (Although the ledger on both counts is unclear.) But even if we ignore the historical aptness or lack thereof of refences to the 1930s, such comparisons will seemingly do Canberra few favours in its efforts to thaw its frozen political ties with Beijing at the ministerial level and above.

Minister and Shadow Minister for Defence at the National Press Club’s 2022 Defence Debate on 5 May 2022 []

Market access measures

Based on the latest trade data, the combined monthly value of Australia’s nine exports targeted by China’s trade restrictions (to China, the rest of the world, and total, May 2020 to March 2022):

Quick take:

Despite the value of these nine exports to China now sitting at approximately 8% of their value in May 2020 when trade restrictions were first introduced, their value to the rest of the world is now roughly 276% of their value two years ago. These numbers no doubt reflect factors such as persistently high coal prices, favourable growing conditions for a range of Australian agricultural exporters, and high food prices globally. They are also a product of the disproportionate value of coal exports in this basket of nine exports—roughly 80% of the overall value of these exports.

At the same time though, these numbers also reflect the ongoing and generally successful redirection of the Australian exports that have been shut out of the Chinese market. To take just one example: the value of Australia’s exports of barley to Saudi Arabia was zero in May 2020; those same exports have averaged roughly $71 million a month in the last 12 months. To put that in perspective, that’s approximately 150% of the average monthly value of barley exports to China before Beijing introduced anti-dumping and countervailing duties and the value of these exports to the Chinese market fell to zero.

What does the future hold? As I’ve argued before: Although the monthly value of targeted Australian exports has surged despite China’s trade restrictions, these industries may yet face tougher times if Beijing’s ongoing economic coercion is combined with less favourable weather and global market conditions. The impact on Australia’s exports would also probably be much more prolonged and severe if China decided to extend it trade restrictions to Australian education. Redirecting to alternative markets is likely to be much slower and harder for education providers given the relatively long process of finding new prospective students and China’s unrivalled status as the largest source country for international students. Despite these potential headwinds, Australian government initiatives in a range of markets, including TaiwanSouth Korea, and Peru, point to steadily expanding opportunities for Australian exporters in alternative markets. Although none of these measures or markets could offset the loss of the Chinese market, additional market access and promotion initiatives will incrementally assist impacted Australian exporters redirect to alternative markets.

As always, thank you for reading and please excuse any errors (typographical or otherwise). Any and all objections, criticisms, and corrections are very much appreciated.