[The Acton Forum] What are the strategic and economic implications of Australia’s relation with China, and to what extent might this be changing?

Joseph Jongeun Seong
Bachelor of Arts student, University of Sydney
6 June 2021

I. Introduction

There are many strategic and economic implications of Australia’s relation with China, which can be analyzed by the theories under the paradigm of liberalism and realism. To be specific, such strategic and economic implications can be explored by the complex interdependence theory (Rana, 2015, p. 292), the defensive realism theory (Waltz, 1979, p. 103), and the balance of threat theory (Walt 1985, p. 4). Australia’s strategic and economic policies towards China cannot be explained with one theory because they all show the characteristics of the aforementioned theories. An example of strategic implication based on the balance of threat theory would be Australia’s cooperation with the U.S. and other nations regarding cybersecurity against China; an example of economic implication based on complex interdependence theory would be the China-Australia Free Trade Agreement (ChAFTA). Before 2014, it was anticipated that Australia and China would have a positive economic and strategic relationship. However, due to the significant rise of China in the Indo-Pacific, the strategic implications of Australia’s relations with China will remain defensive to safeguard Australia’s national security (Lee, 2020, p. 21), which shows that Australia will be pursuing “interest-based middle power diplomacy” (Shin, 2020, p. 4). On the other hand, the economic implications of Australia’s relations with China are expected to change due to economic disputes between the two countries.

II. Literature Review

The strategic implications of Australia’s relationship with China can be defined by the defensive realism theory and the balance of threat theory. Waltz’s defensive realism theory asserts that the states are strategically aiming for their survival, and the anarchical structure of the contemporary international system forces states to maintain moderate, restrained status while having the military capability to protect themselves (Waltz, 1979, p. 103). Walt’s balance of threat theory argues that “states either balance against strong or threatening states or that they “bandwagon” with them” (Walt, 1985, p. 4). The strategic implications of Australia’s relationship with China have shaped Australia to have a more defensive stance. For an example of the defensive realism theory, Australia strongly criticized China’s cyberattacks; Australia strategically responded by implementing specific policies to protect Australia’s national interests, such as using its offensive cyber capability (Shin, 2020, p. 14). The defensive realism theory can analyze such measures because it shows how Australia strived to survive from Chinese threats in the Indo-Pacific. For an example of the balance of threat theory, Australia has been cooperating with the U.S., the U.K., Canada, and New Zealand, by forming an intelligence alliance called the Five Eyes (FVEY) (O’Neil, 2017, p. 529). The balance of threat theory can analyze such an alliance because many states balance against a threatening state, China, by sharing each other’s intelligence units.

Second, the economic implications of Australia’s relationship with China can be viewed via the so-called complex interdependence theory. Joseph Nye and Robert Keohane, who co-developed the complex interdependence theory, introduced it in three distinct points. The first point is that in “international politics, there are multiple channels connecting the societies, including all the interstate, transgovernmental, and transnational transactions” (Rana, 2015, p. 292). The second point is an “absence of hierarchy among issues” (Rana, 2015, p. 292). The last point is the “minor role of military force” (Rana, 2015, p. 292) in interstate issues. Australia and China have maintained strong economic ties, as shown in the signing of the ChAFTA in 2015. In addition, the government of Victoria joined China’s so-called Belt and Road Initiative (BRI). The aforementioned economic ties between the two countries can be analyzed by the complex interdependence theory since there were no military forces involved in signing the treaty, nor had a hierarchy between the two countries.

III. Strategic Implications of Australia’s Relationship with China

The strategic implications of Australia’s relationship with China played a crucial role in Australia’s recognition of the rise of China, as shown in Australia’s usage of the word “Indo-Pacific” instead of “Asia-Pacific” in every governmental document (Kamradt, 2018, p. 501). The change was initiated under former Prime Minister Julia Gillard, and Australia’s region of influence is now described as the “Indo-Pacific” (Kamradt, 2018, p. 501). Until 2014, Australia and China had a positive strategic relationship. For example, President Xi visited Canberra and delivered an address to the Parliament of Australia (Lee, 2020, p. 27). Since former President Hu’s visit to Canberra in 2003, no leader of China has visited Canberra for 11 years, but President Xi gave a speech at the Australian Parliament (Lee, 2020, p. 27). During this meeting, the two nations discussed whether they could be in a comprehensive strategic partnership (Lee, 2020, p. 28). Several scholars even anticipated that Australia would be able to be in a favorable strategic relationship with China and maintain a strong alliance with the U.S. (Lee, 2020, p. 28).

However, the anticipation was not necessarily accurate; the strategic implications of Australia’s relationship with China, such as China’s cybersecurity attacks, have shaped Australian foreign policies to be more defensive towards China. Another critical strategic aspect to discuss is cybersecurity. With the support of the U.S., Australia strongly condemned China’s international cyberattacks (Shin, 2020, p.1) and even banned Chinese corporations from investing in the fifth-generation network business in Australia (Shin, 2020, p.1). Waltz’s defensive realism theory can analyze such strategic measures of Australia towards China. Currently, the international system is anarchic; thus, states are strategically aiming for their survival to protect themselves from potential dangers (Waltz, 1979, p. 103). In this case, China’s cyberattacks constitute a significant threat to Australia’s national security, showing why Australia implemented specific policies against China’s threats for its survival in the Indo-Pacific in an attempt to mitigate possible future attacks. Another example of a strategic implication of Australia’s relation with China would be Australia’s strategic cooperation with the U.S., New Zealand, the U.K., and Canada by joining an intelligence alliance named the “Five Eyes” (O’Neil, 2017, p. 529). The Australian 2016 Foreign Policy White Paper stated that “Australia’s membership with the FVEY community provides Australia with information superiority and intelligence cooperation that is a vital input into our defense planning” (O’Neil, 2017, p. 530). Such an intelligence alliance can be analyzed by Walt’s balance of threat theory, as “alliances are most commonly viewed as a response to threats” (Walt, 1985, p. 4). Walt also mentions the impact of “aggregate power” (Walt, 1985, p. 9); the greater a state’s resources (i.e., population, industrial and military capability, technological prowess, etc.), the greater a potential threat it can pose to others (Walt, 1985, p. 9). In the strategic implications of Australia’s relation with China, China is an “aggregate power” due to its huge population, massive industrial and military capability, and advanced technological prowess. Since China is deemed a significant threat to Australia, the Australian government strives to “balance against a threatening state” (Walt, 1985, p. 4) by forming allies with other nations. Hence, it is evident that Walt’s balance of threat theory can analyze the strategic implications of Australia’s relation with China.

IV. Economic Implications of Australia’s Relation with China

The economic implications of Australia’s relation with China can be analyzed by Joseph S. Nye and Robert O. Keohane’s complex interdependence theory. The first example of an economic implication would be the ChAFTA. According to the former Prime Minister of Australia, Tony Abbott, the ChAFTA “will lock in existing trade and provide the catalyst for future growth across a range of areas including goods, services and investment” (“Australia Signs Landmark Trade Agreement With China” 2015). The ChAFTA “secures better market access for Australia to the world’s second-largest economy, improves Australia’s competitive position in a rapidly growing market, promotes increased two-way investment and reduces import costs.” (Australia Signs Landmark Trade Agreement With China, 2015). Another example of an economic implication would be the Victorian government’s “embracement of the Belt and Road Initiative (BRI) and research institutions allowing collaboration through China’s Thousand Talents Program” (Feely and Jennings, 2020, p. 21). Australia’s openness to the Belt and Road Initiative is shown in former Prime Minister, Malcolm Turnbull’s remarks; “We welcome Chinese investment that meets our foreign investment guidelines, but we’d prefer to focus on specific projects and investments” (Lee, 2020, p. 29). The ChAFTA and Victoria’s joining of the BRI can be analyzed by the complex interdependence theory because both treaties had no “hierarchy among issues” (Rana, 2015, p. 292). Australia and China negotiated with each other for their national interest without any coercion, which led to a successful result. Second, there was a “minor role of military force” (Rana, 2015, p. 292) in interstate issues between Australia and China. Although Australia and China are strategically and militarily hostile, their military force did not play a key role in signing the treaties. Therefore, it is evident that the complex interdependence theory is applicable for analyzing the economic implications of Australia’s relation with China.

V. To What Extent Might the Strategic and Economic Implications of Australia’s Relations with China be Changing?

In terms of strategic implications of Australia’s relations with China, Australia will remain defensive due to the threats of China in terms of military and cybersecurity. For example, Australia’s recent activity in the Quadrilateral Security Dialogue (QUAD) was noticeably defensive due to potential Chinese threats. The QUAD leaders’ joint statement states that Australia, Japan, India, and the U.S. will “commit to promoting a free, open rules-based order,…to advance security and prosperity and counter threats to both in the Indo-Pacific and beyond” (The White House, 2021). Due to Australia’s active cooperation with the U.S. to strategically combat against China, Australia was even named the “America’s deputy sheriff in Asia” (Shin, 2020, 14). The alliance like the QUAD, and the nickname, “America’s deputy sheriff in Asia,” clearly shows that the strategic implications of Australia will remain defensive due to the threats of China.

On the contrary, the economic implications of Australia’s relation with China are expected to change negatively due to great and small economic disputes between Australia and China. Australia and China were in a positive relationship economically as they signed the ChAFTA, however, the economic implications are changing due to two major incidents. For instance, Australia “initiated a World Trade Organization (WTO) dispute complaint against Chinese barley duties” in 2020 (World Trade Organization, 2020). Moreover, China “indefinitely suspended key economic dialogue with Australia” (BBC, 2021) due to escalating diplomatic tensions; a Chinese government official even “accused Australia of having a Cold War mindset” (BBC, 2021). Such economic tensions between Australia and China clearly prove that the economic implications will change negatively despite all the previous efforts.

VI. Conclusion

In conclusion, this essay’s aims are to identify the strategic and economic implications of Australia’s relation with China, and to what extent they might change. The findings of this essay is that the strategic and economic implications can be analyzed by the theories that are under the paradigm of liberalism, realism, and others. Specifically, the complex interdependence theory (Rana, 2015, p. 292), the defensive realism theory (Waltz, 1979, p. 103), and the balance of threat theory (Walt, 1985, p. 4) are applicable for the findings of this essay. An example of strategic implication based on the balance of threat theory would be Australia’s cybersecurity policies against China; an example of economic implication based on complex interdependence theory would be the ChAFTA and Victoria’s support of the BRI. Due to the noticeable rise of China, the strategic implications of Australia’s relation with China is expected to remain defensive to protect Australia’s national security (Lee, 2020, p. 21), which shows that Australia will pursue “interest-based middle power diplomacy” (Shin, 2020, p. 4). On the contrary, the economic implications of Australia’s relations with China will change due to economic disputes between Australia and China. The limitations of this essay is that it did not cover every single Australian strategic and economic policy towards China, so there might be a few policies unmentioned, however, this essay still remains a solid writing since it covers the crucial policies.

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