Perennially the lucky country, Australia has enjoyed decades of economic growth, diplomatic good-standing, and institutional stability many can only dream of. As a status-quo and free-trading nation, Australia has prospered under the umbrella of US hegemonic power. If 2020 has done anything, it has sharpened doubts on the future of this worldview. Like many countries, Australia’s risk is heightened by a disproportionate economic reliance on a single trading partner, China. Given Australia’s strategic reliance on the United States, Australia’s economic reliance on China is increasingly under scrutiny. Australia must work to converge economic and strategic interest in the age of 21st-century power-politics, this means diversification in the resources industry.
It is self-evident that global tensions are heightened in 2020, however, the events of 2020 have likely served to accelerate the creation of a multi-polar geopolitical landscape, as opposed to being the cause. There is deep economic inertia that has been fostering this tension for decades, incumbent powers resent rising powers to the point of conflict; the Thucydides trap.
Within this changing environment, Australia is interrogating its own international standing but has made the decision it was always going to make, siding with its strategic interests in the United States. Again, while this choice is nothing new, the events of 2020 have further accelerated the division of views between Canberra and Beijing. State-run media has been directly criticising Australian decisions, pointing out the reliance of Australia on the Chinese economy. Economic coercion reached new heights this year, with tariffs being placed on barley and beef.
Beyond the attacks on Australian agricultural produce, there have been extensive attacks on other Australian exports, such as tertiary education, Australia’s 4th largest export which brings with it significant satellite spending. Chinese students are listening to their government’s advice, with significant numbers avoiding returning to studies in Australia. Moreover, financially dependent institutions employ strategies of appeasement, creating a culture of censorship on campus by means of suspension and expulsion. The initial unwinding of rules-based international trade is, at least in part, targeted at Australia, with thin veneers of plausible deniability; power-politics is back in vogue.
All of this power-politics is occurring concurrently with relentless cyber-espionage, well-timed death-sentences, public intimidation of high-ranking critics in Australia, previous and ongoing corruption of Australian parliamentarians, attempting to install foreign agents in the Australian parliament, the theft of intellectual property, just to name a few. This is not the behaviour of friendship and good-will, this is overt aggression on all fronts but physical.
While the volume might be overwhelming, the federal Australian government has been steadfast in principle. This is the cost of democracy. However, the same cannot be said for those with a strong commercial interest in the Chinese market. Continuing with the example of the education sector, earlier criticism of the economic reliance on their students was rebuffed by academic institutions with commercial double-speak. In any event, whether it be sincere good-will or commercial self-interest, tertiary education in Australia — and the satellite spending that follows — is set to be impaled by the modern reality of power-politics in the 21st century.
This risk was not unknown, there are many historical precedents for this behaviour. The pacific island of Palau was dealt a near-fatal economic blow when it refused to cut ties with Taiwan. China’s belt-and-road initiative has received criticism that it can be a debt-trap, with examples like the ownership Hambantota port in Sri Lanka changing to China after the Sri Lankan government was unable to repay the debt. While Australia watches its 4th largest export be targeted by the CCP, other China-trade-exposed industries watch with existential angst.
National expectations of the resources sector will be similar to the 2008 financial crisis, where the Australian economy was held afloat by China’s fiscal stimulus. It is said that without the additional stimulus, Australia would have experienced three-quarters of negative growth. Through this process, China became Australia’s largest export partner in 2009. Today, the Australian resources sector sell 82% of all merchandise exports and 47% of total exports to China.
Former Prime Minister Kevin Rudd stated that the reality of Australian politics is that to run the country, a leader must have the favour of Parliament, the resource lobby, and Rupert Murdoch. While the context of Rudd’s statement is one of resentment, it nevertheless highlights the importance of the resource industry to Australian politics. An expert on China-Australia relations, and the prime minister who navigated the 2008 global financial crisis and rise of China to Australia’s largest trading partner, Rudd now states that “[Australia is] too China-dependent. We need to diversify further to Japan, India, Indonesia, Europe and Africa”. In other words, Australia’s economic interests must better align with Australia’s strategic interests.
The weight and sway of the resources sector on Australian politics is never understated. However, on this issue of ultimate national importance, the resources sector is both exacerbating and the potential solution to this economic quagmire. Similar to tertiary education, the immense commercial interest in the Chinese market leads to the sole focus on economic interest at the cost of national strategic interests. Such neglect was on full display when mining magnate, Andrew Forrest, ambushed trade minister Greg Hunt with the Chinese consul-general for Victoria in a press briefing that was supposed to be on his Minderoo Foundation. With no warning to the government, a serious overreach which highlights the distortion of interest possible when economic interest triumphantly overrides strategic interest.
Such pre-emptive advocacy for China is conditioned into China-trade-exposed industries, avoiding insult at all costs. Industry expectations of deepening economic ties with China carry with it ever-increasing strategic risk. If realised, the gap between Australia’s economic and strategic interests will only widen. This perversion of interests will manifest itself in greater economic risk, deepening the damage actions like the Chinese student boycott will have.
Unlike education, however, the Australian resources sector possess a different and more mutual quality of trade. Products such as iron ore and coal are of immediate importance to the Chinese economy. Sustained economic attacks through tariffs or outright banning would be immediately damaging to China’s own economic growth; The Chinese Dream, something which is of paramount importance. As it is of immediate importance, and Brazil’s economy (the second-largest iron ore exporter) is experiencing a much deeper Covid-19 spiral, any immediate and substantial economic limits on resource trade seem unlikely.
In addition to the inertia of resource trade between China and Australia, Australia can also work to limit the economic monopoly of rare-earth minerals. In another example of the risk in relying on Chinese trade, a dispute between China and Japan in 2010 over a fishing trawler, resulted in the blocking of vitally important rare-earth minerals headed for Japan. Targeted expansion of rare-earth mineral production in Australia is an example of aligning economic and strategic interests, something which has expanded with US involvement in recent years. In this example of convergence, the strategic partners of Japan and the United States would benefit from the mitigation of trade risk, and so would Australia.
Australia is on the gravy train. It is easy for Australia to rely on the leverage of inertia in resource trade, but this is precarious at best. In the spirit continuing to free itself from foreign dependence, China is heavily investing in resource-rich Africa to align it’s own economic and strategic interests. This is more presciently true with the investment in West Africa, rich in iron ore. With this, the risk of economic sanctions on the resource sector in Australia would all but evaporate. However, as stated, this sector has immense inertia and will take several years to develop. Because of this, Australia is — yet again — lucky enough to have some time to economically diversify before these economic sanctions truly become existential.
The alignment of Australian economic and strategic interests should be of vital importance for industry, government, and society. Failure to do so will leave the Australian economy and polity open to potentially fatal coercion. While Australia weaponizes the TV soap, Neighbours, in the Pacific to counter Chinese influence, Australian society should truly awaken to the modern reality of power-politics in the 21st century. When push comes to shove, strategic interests will ultimately be forced above economic interests.
 Taken as iron ore, natural gas, coal, gold, copper, misc. minerals, aluminium, petroleum, and other ores. Calculated from data from the ABS.