strategic asia 2011 12 asia responds to its rising powers China and India Edited by Ashley J. Tellis, Travis Tanner, and Jessica Keough Australia Grand Stakes: Australia s Future between China and India Rory Medcalf restrictions on use: This PDF is provided for the use of authorized recipients only. For specific terms of use, please contact <publications@nbr.org>. To purchase the print volume Strategic Asia 2011 12: Asia Responds to Its Rising Powers China and India, in which this chapter appears, please visit <http://www.nbr.org> or contact <orders@nbr.org>. 2011 The National Bureau of Asian Research
executive summary This chapter examines Australia s response to the rise of China and India, including tensions among economics, security, and values, as well as implications for U.S. strategy in Asia. main argument: For Australia, the rise of China and India combines vast economic gain with challenges in security and values. The Asian giants have become principal markets for Australia s resources, major sources of human capital, and critical strategic players in the region. China brings Australia greater economic benefits than does India, but its growing military power, combined with differences over values, poses fundamental security anxieties. India, meanwhile, is seen as a potential albeit frustrating strategic partner. Thus, Canberra has tried to intensify diplomatic engagement and economic enmeshment with both powers, yet is also revealing a hedging strategy against Chinese power. This involves strengthening Australia s navy, as well as enhancing the U.S. alliance and forging links with Asian partners. policy implications: The Australia-U.S. alliance will need to adapt to an Indo-Pacific era of Chinese and Indian power. The U.S. will benefit from further coordinating its strategies toward China and India with those of Australia. Beyond candid bilateral dialogue and possible trilateral talks or activities with Australia and India, this could mean placing U.S. equipment or even forces in Australia. Above all, Canberra will be sensitive to any change in Washington s Asia strategy that leaves allies vulnerable to Chinese coercion. Yet Australia will also be wary of being drawn into an unnecessary confrontation with China as well as of seeing its interests sidestepped in a U.S.-India partnership. Either way, it will be important for the U.S. to engage Australian society beyond traditional policy elites when addressing the rise of China and India.
Australia Grand Stakes: Australia s Future between China and India Rory Medcalf Australia is at a difficult juncture. For the first time in its history, this mid-sized democracy at the southern edge of maritime Asia is confronted by the simultaneous rise of two Asian great powers, China and India. In 2009, China overtook Japan to become Australia s top trading partner, the first time this status has been held by a state that is not also Canberra s security guarantor, or that ally s ally, and that does not share Australia s democratic values. The potential for a contested Asia, in which China and India loom large, poses critical new challenges to Australia s security, long-reliant on an open and stable regional order underwritten by U.S. dominance. 1 For now, Australia is enjoying the best of both worlds. The rapid economic growth of China and India provides massive markets for the country s abundant mineral and energy reserves, while U.S. preeminence underwrites Australian security. But questions are emerging about how long these good times can last and whether the nation has a strategy for an Indo-Pacific era of Chinese and Indian strength. In this context, Australia is beginning to face uncomfortable strategic challenges and decisions. These primarily involve potential choices between Rory Medcalf is Director of the International Security Program at the Lowy Institute for International Policy. He can be reached at <rmedcalf@lowyinstitute.org>. 1 This chapter defines Australia s region as the Indo-Pacific, rather than adopting a more traditional Asia-Pacific formulation, in recognition of Australia s two-ocean geography and of the growing integration of the Western Pacific and Indian Ocean regions into one strategic system. The 2009 Australian defense white paper suggested that over the period to 2030, the Indian Ocean will join the Pacific Ocean in terms of its centrality to our maritime strategy and defence planning. Australian Department of Defence, Defending Australia in the Asia Pacific Century: Force 2030 (Canberra, 2009), 41 45, http://www.defence.gov.au/whitepaper/docs/defence_white_paper_2009.pdf.
196 Strategic Asia 2011 12 its security ally, the United States, and its premier economic partner, China, a nation that buys almost a quarter of Australian exports and has deepening links through business, migration, education, and tourism. 2 The starkest questions revolve around whether and how the alliance with the United States might one day be invoked in a possible military confrontation with Beijing. More broadly, there is the question of whether Australia might differ with the United States or others in how far it would be willing to see Chinese interests accommodated in the regional order. Canberra s recent reaffirmation of the alliance suggests that a near-term divergence between Australia and the United States on this front remains unlikely, even if some analysts argue that it is a serious risk in the longer term. 3 The rise of India makes Asia s power dynamics more complicated but also potentially more beneficial for Australia. India has become Australia s fourth-largest export market and one of its fastest-growing, at an average of 20% a year. 4 India buys about 7% of Australian exports, and Canberra is eager to complement this with a serious strategic partnership. But Australia is encountering frustrations here, including in establishing political trust and strategic relevance, despite common democratic values and shared security interests. Progress will probably require awkward policy choices in Canberra, including ending its ban on uranium sales to India. Looking ahead, Australia faces challenges in simultaneously engaging China and India while adapting its U.S. alliance. The time may come when Canberra must choose not only between Beijing and Washington but also between Beijing and New Delhi. Thus, there are both parallels and great contrasts between Australia s relations with China and India. Relations with both involve economic enmeshment. Societal links are also growing rapidly through migration, business, tourism, and education. Yet qualitative differences between Australia s relations with China and India are emerging on security and values-based issues. This chapter is divided into four sections. The first provides an overview of how Australia perceives its national interests with reference to economics, security, and values and how these interests are likely to be affected by the rise of China and India. The second and central part of the chapter 2 Speech to the Australia-China Economic and Cooperation Trade Forum, Prime Minister of Australia, Press Office, April 26, 2011, http://www.pm.gov.au/press-office/speech-australia-chinaeconomic-and-co-operation-trade-forum-beijing. 3 See, for example, Hugh White, Power Shift: Australia s Future between Washington and Beijing, Quarterly Essay 39 (Collingwood: Black Inc., 2010). 4 Department of Foreign Affairs and Trade of the Australian Government, Composition of Trade Australia 2010 (Canberra, 2011), 29, 31, http://www.dfat.gov.au/publications/stats-pubs/ composition_trade.html.
Medcalf Australia 197 surveys Australia s historical interactions with China and India in terms of geopolitics, economics, society, and security, including military and nuclear issues. This is followed by an assessment of whether Australia s efforts to protect national interests in response to the rise of China and India amount to a coherent strategy. It will be argued that the rudiments of a strategy are becoming clear, but that questions remain over how coherent, sustained, and effective this approach will be. These responses are influenced by a mix of economic, security, and values-based drivers, which sometimes reinforce and sometimes cut across one another. Australia s resulting approach is a hybrid one: economic and diplomatic enmeshment combined with a hedging strategy against the unknown ways China might use its future power. This hedging strategy involves increasing Australia s own military weight, intensifying the U.S. alliance, and building security links with large democratic Asian partners, including India. The chapter concludes by considering the policy implications for Washington of Canberra s response to the rise of China and India and presenting ways in which the United States might further coordinate its strategies toward China and India with those of its antipodean ally. Australia s Strategic Interests: Why China and India Matter So Much To grasp the profound impact of the rise of China and India on Australia s interests, it is necessary to appreciate how Canberra perceives those interests. Australia has singular geopolitical circumstances. It is the only nation in the world to possess an island continent, which bestows strategic depth, vast maritime jurisdiction, and globally important natural resource deposits. Australia is the world s largest exporter of iron ore and coal, has the largest uranium deposits, and is also a major supplier of natural gas, gold, and other commodities. 5 This is combined with high per capita wealth, a stable democratic system, a resilient and multicultural society, a small but advanced defense force, and a diplomatic record of strong global 5 Besides being the largest exporter of iron ore, Australia is the world s number one coal exporter, shipping 28% of world exports in 2008 9. In that year, Australia was also the third-largest producer of uranium, with 15.7% of the global market. In addition, it has the world s fifteenth-largest reserves of natural gas and is the seventh-largest exporter of liquefied natural gas (LNG). The Australian Coal Industry - Coal Exports, Australian Coal Association, http://www.australiancoal.com.au/ the-australian-coal-industry_coal-exports.aspx; Statistics and Balances, International Energy Agency, http://www.iea.org/stats/index.asp; Iron Ore, Geoscience Australia, http://www.ga.gov. au/minerals/mineral-resources/iron-ore.html; Uranium Production Figures, 2000 2010, World Nuclear Association, April 2011, http://www.world-nuclear.org/info/uprod.html; Australian Uranium Industry, Australian Uranium Association, http://www.aua.org.au/content/resources.aspx; and Oil and Gas Overview, Austrade, http://www.austrade.gov.au/oil-gas-overview/default.aspx.