For all of this century, China has been Australia’s most important trading partner. By 2019 it took more than one third of all Australian exports. This percentage had grown steadily each year. It was not alone in representing the importance of the Chinese market to the Australian economy.
In 2019 China also became the largest source of foreign tourists to Australia, an increasingly important source of foreign exchange. Its joined the position of China as the largest source of foreign students, another critically important source of foreign exchange earnings, not to mention international reputation.
The other area where China remained important was in foreign investment. In 2019 it was the third largest source of foreign investment in Australia. In 2020 all that came crashing down. There is a clear and unmistakable relationship between the statistics reflected in the predominant Chinese position in the Australian economy, and the political relationship between the two countries.
The cause of the freeze is geopolitical. Australia has long subscribed to the United States view of the world. Some would go further and suggest that Australia is little more than a colony of the United States, so closely does its foreign policy relationship with the rest of the world reflect an American viewpoint.
What changed in 2020 to persuade the Chinese that they no longer needed Australian exports to fuel their steadily growing economy? It is difficult to point to any single indicator and there are probably many. One foreign policy blunder by Australia stood out however, and may be seen as the proverbial straw that broke the camel’s back.
In early 2020 Prime Minister Morrison publicly questioned China’s alleged role as the source of the pandemic that is currently waging through much of the world. The question was unnecessary and ill-conceived. It was not helped by the fact that Morrison was clearly acting as a mouthpiece of the United States government whose President had made similar allegations.
The Chinese understandably were furious. The evidence is now very clear that although the virus was first detected in China in the city of Wuhan, its appearance coincided with the holding in that city of the World Military Games. And early epicentre of the outbreak was the hotel occupied by the American contingent, who among other features failed, for the first time, to win a gold medal. The evidence is now clear that the virus started in the United States, but that is relatively unimportant for present purposes. The point is the Chinese were blamed by Australia on what was then the flimsiest of excuses.
The Chinese trade retaliation began soon afterwards. No week passed without a fresh item being placed on the banned list. If this continues, as seems highly likely, then the Australian export industry will be in dire straits.
The political reaction has been muted, ranging from an almost complete silence (the prime minister) to vague reassurances that the problem is “temporary”. Those politicians need to look at the figures. They also need to look at the recent history between the two countries for insights into what has happened, and why.
The problem in the relationship actually began in the Prime Ministership of Malcolm Turnbull. This singularly inept man made the extraordinary statement that Australia had “stood up” to China by introducing anti-foreign interference laws. Any clear evaluation of the role of foreign interference in Australia would look elsewhere, including the United States, before it began criticism of China. That particular blunder was matched by then Minister for Home Affairs, Scott Morrison (now prime minister) blocking Huawei from participating in Australia’s 5G network of telecommunications.
That decision alone has been a major factor in Australia’s plummeting standing in the world rankings of countries with advanced telecommunications options.
Similarly responding to United States pressure, Australia has declined to join the Chinese initiated Belt and Road Initiative. That was a colossal error of judgement as the BRI now embraces more than 150 countries around the world. It is absolutely no surprise that Australia followed the United States in that particular misjudgement. The consequences for Australian trade are likely to be profound.
Former Australian ambassador to China Geoff Raby, in a speech made in October 2019, pointed out that the anti-China stance so clearly embraced by the Australian government was not one that was widely shared outside of Canberra. He made the important point that Australia’s response to the profound changes occurring in the world international order has largely been one of denial.
Raby is among a very small number of Australian thinkers who is able to look beyond the American embrace that grips foreign policy formulation in Australia. Another is the academic Hugh White. As far back as 2013 White argued in his book China Choice that China’s rise was not going to end and neither should it be contained. The preferable choice, he argued, was to adopt a strategy of accommodating China in advance of potential conflict.
The South China Sea is also cited by Raby as an illustration of how Australia has made bad policy choices. It is not, he argues, “a Manichean struggle between good and evil… It is instead an immensely complex problem that requires subtlety and diplomacy to navigate.”
It is a great pity that neither White nor Raby’s views were adopted. Australia is beginning to pay a price for their stubborn ignorance and complicity with the United States “containment” of China, as is now increasingly evident.
Australia faces some difficult years. The Covid crisis will pass but the problems left in its wake will take longer to heal. It is all very well for commentators to point out (where they confront the issue) that comfortable and profitable reliance upon the Chinese market was a mistake. It may well have been, although there were few takers for that position when times were good.
China’s loss of patience carries with it severe problems for Australia. The position is unlikely to be recovered in the foreseeable future. For that, it is only itself to blame. No country can repeatedly insult its major economic partner and remain unscathed. Australia is now learning that lesson.
James O’Neill, an Australian-based former Barrister at Law, exclusively for the online magazine “New Eastern Outlook”.