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G20 Leaders at the recent G20 leaders forum, Brisbane, Australia. Image credit Wikimedia Commons

By Andrew Reynolds, 24 November, 2014

The recently announced China-Australia Free Trade Agreement (ChAFTA) – due to come into effect in 2015 – marks a significant step forward in the growing integration of Sino-Australian economic interests. Significant, because historically, the increasing economic enmeshment brought about by growing bilateral trading ties precludes – or at least significantly reduces- the likelihood of conflict. As regional littoral states in the South China Sea and more broadly – the Asia-Pacific region – continue to modernise their militaries, largely due to the security dilemma presented by a rising  China, regional instability and the chance of conflict inevitably increases. So more trade and less conflict is a good thing, right? Countries who trade together, rarely fight each other, or so democratic peace theory would have it. The reality is that regional Asia-Pacific states – particularly the small to medium powers and economies – increasingly find themselves on the horns of a shared dilemma – where their major trading partner and primary source of economic security – is also the source of their major security concern.

If the democratic peace theory indeed proves to be true, then ChAFTA ought to be good news for both Australia and China, and indeed it is, economically speaking – especially for Australia’s iron ore and concentrates exporters. However it would be naïve to simply take this most recent – though highly significant – FTA at face value. The ChAFTA is best viewed in the overall long-term Chinese strategic policy framework for regional South China Sea states. There is more at work here than simply China’s desire for Australia’s commodities.

China is well aware that given the regional security dilemma their expanding military (particularly the PLAN) is causing, regional states have little option but to hedge with the US against their rise. The asymmetric nature of the economic and power relationships between China and and other regional states leaves such states with little choice but to hedge with the region’s current hegemonic power. These states are simultaneously threatened by China’s rise and growing power, and ineluctably bound to China with embedded and imperative economic ties, which leads them to pursue a form of politics between the member-state, China and the United States, a three-way process which ANU academic Evelyn Goh has described as “triangular politics“.

China is also aware of attempts by regional states and the United States to enmesh them in regional multilateral institutions such as APEC, ASEAN, ASEAN Plus, the ASEAN Regional Forum (ARF) and the East Asia Summit (EAS) in the hope that such multilateral engagement will have an normative effect on their decision-making, acting as a form of multilateral institutional coercion to compel them to adhere to a raft of international laws and norms. For these reasons amongst others, China continues to resist such attempts and continues to pursue its policy of seeking bilateral engagement with regional states. Moreover, China continues to obfuscate both the precise nature of its territorial claims in the South China Sea and its reasons for not adhering to accepted international norms and laws such as UNCLOS, despite being a signatory.

All of this is intentional by China and is part of a deliberate policy of calculated political obfuscation which serves its long-term security interests. Strategically, it is a continuation of Deng Xiaoping’s “24 Character Strategy” of hiding one’s power and biding one’s time, though arguably China’s recent growing assertiveness signals an end to the power-hiding component of this strategy. For the longer China can prolong the peaceful settlement of territorial disputes, the more time it buys itself to grow in power in the hope that their eventual transition to regional major power status will become a fait accompli, self-evident to all regional states and unable to be resisted by a declining US military.

So where does ChAFTA fit into all of this? As we all know, Australia also finds itself in a well-known dilemma, where its major trading partner (China) is also the source of its major (state) security concern. However, Australia’s hedging with the US is not a consequence of this regional security dilemma, but more an institutional historic tradition. Since federation in 1901, Australia has always relied on major powers to act as external security guarantors. Originally Australia relied on Great Britain to fulfil this role, until it became apparent during the Pacific campaign during World War Two that the UK could no longer fulfil this role, at which point Australia turned to the United States. Australia continues to rely on the US as its security guarantor, with many politicians incorrectly assuming that under the terms of the ANZUS treaty the US is bound to come to Australia’s aid, should Australia’s security be threatened by another state, when in actual fact, as former Australian Prime Minister Malcolm Fraser has correctly pointed out, ANZUS is a treaty to consult only, there being no compulsion for the US to come to Australia’s aid under ANZUS. Nevertheless, Australia’s security ties with the US continue to deepen, as evidenced by the estimated 2,500 US marines who regularly rotate through Darwin, and by Australia’s multi-billion dollar commitment to buy into Lockheed-Martin’s F35 Joint strike-fighter program.

By offering Australia virtually unprecedented access to China’s economy, it is clear China hopes to use ChAFTA to drive an economic wedge between Australia and the United States, potentially compromising future security cooperation between Australia and the US over East and Southeast Asian security concerns – concerns which might be best categorised as peripheral to Australia’s long-term strategic interests –  and territorial disputes in the East and South China Seas in particular.  It may well be that China hopes that the importance of the economic ties which will emerge in coming years as the full suite of ChAFTA’s arrangements come online will become too important for Australia to risk in future by siding with the US against China over regional issues which may threaten this crucial economic partnership. Moreover, if indeed this turns out to be the case – as would seem highly likely – this is actually good for future Australian security policy. In effect, what this means is that ChAFTA will have the long-term effect of forcing Australia to adopt a more independent approach to national security policy, rethinking its traditional and institutionally embedded policy of reliance on external security guarantors.