Australia’s ability to stand up on the international stage and hold the powerful to account is at risk. It doesn’t have to be that way.
By Calvin Stead
In the world of foreign affairs, Australia has rarely hesitated to punch above our weight.
Under the former Minister for Foreign Affairs, the Hon. Julie Bishop, Australia and the Netherlands formally confronted Russia in May 2018 over their role in the downing of flight MH17. In June 2019 our Prime Minister fought for, and secured, a statement from the G20 nations calling on the digital titans to step up the fight against terrorist content on their platforms. More recently, we have led the international charge for a transparent investigation into the origins of the coronavirus outbreak.
However, this pluckiness has not been without risk.
In a recent interview with the Australian Financial Review, the Chinese Ambassador to Australia, Cheng Jingye, suggested that the Chinese people might be discouraged from purchasing Australian products as a result of the Morrison Government’s international campaign for a transparent investigation into the source of the coronavirus outbreak:
“It is up to the people to decide. Maybe the ordinary people will say 'Why should we drink Australian wine? Eat Australian beef?”[1]
These are no idle threats. According to Department of Foreign Affairs and Trade data, China was our number one trading partner in 2018-19, accounting for more than a quarter of all trade and nearly a third of our exports alone[2]. If China were to follow through on their implied threats, our economy would take a serious hit – and we have seen recent examples of the control that China has over our economic success.
In February 2019 several Chinese ports abruptly banned the import of Australian thermal coal, and our dollar fell almost immediately by 1 per cent[3]. This event happened in the context of Australia’s decision to ban Huawei from operating our 5G network on security grounds. While Chinese authorities did not publicly link the two events, this was not seen as a simple coincidence by policy experts at the time[4]. What it did show is that Beijing is not scared of pulling economic levers to attempt to interfere with Australian policy decisions.
Australia has a strong desire as a nation to hold powerful countries and corporations to account; this is something we should be proud of and should not change. However, our economic success is closely tied to Beijing’s good graces. This presents a serious national security risk, and it needs to change.
We must reduce our dependence on the Chinese economy, otherwise any substantial policy decision Australia makes against Beijing’s interests risks our economic success, at a time when it has already taken a once-in-a-generation hit from the coronavirus outbreak. In addition to the national security implications of significant dependence on one trading partner, a nation also becomes much more vulnerable to global economic shocks without a complex economy.
Obviously, this is no easy task, nor am I seeking to argue that it can be done overnight. But it is not impossible; many countries have been steadily diversifying their economy for decades – including China.
Harvard’s Atlas of Economic Complexity analyses the economic diversity of 133 countries, ranking them on an Economic Complexity Index (ECI)[5]. In 1995, Australia ranked 57 out of 133 countries, while China was only marginally better, coming in at 51. However, 12 years later and the results present a stark contrast. In 2017, Australia ranked 93 out of 133, whereas China has risen to 19.
To quote the researchers from Harvard:
“Compared to a decade prior, Australia's economy has become less complex, worsening 22 positions in the ECI ranking. Australia's worsening complexity has been driven by a lack of diversification of exports”.[6]
So, what can we as a nation do about this?
Pleasingly, in March 2019 the Morrison Government released Australia’s Critical Minerals Strategy[7], a high-level roadmap of how Australia can create new refinement and export opportunities for critical minerals, not only diversifying our economy but also positioning Australia to be a world leader in the provision of materials vital to a large number of global markets.
The Morrison Government has laid out the start of a good roadmap for Australia to chart our own economic course. For the sake of our ability to be world leaders in foreign affairs, this vital work needs to continue.
[1]https://www.afr.com/politics/federal/china-consumer-backlash-looms-over-morrison-s-coronavirus-probe-20200423-p54mpl
[2]https://www.dfat.gov.au/sites/default/files/australias-goods-services-by-top-15-partners-2018-19.pdf
[3]https://www.smh.com.au/world/asia/a-big-chinese-port-bans-australian-coal-and-the-dollar-falls-20190221-p50zfu.html
[4] https://www.aspistrategist.org.au/detuning-our-china-violin-and-dealing-with-the-dragon/
[5] https://atlas.cid.harvard.edu/countries/
[6] https://atlas.cid.harvard.edu/countries/14
[7] https://www.industry.gov.au/data-and-publications/australias-critical-minerals-strategy
Photo credit: The Conversation