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23 September 2020

With Greg Earl

Taiwan tensions

Last Friday, China stepped up tensions in the Taiwan Strait, sending air force jets into Taiwanese airspace in three locations. This occurred as Taiwan’s president, Tsai Ing-wen, was due to meet US undersecretary of state, Keith Krach. The undersecretary is the most senior State Department official to visit Taiwan since the United States switched diplomatic recognition from Taipei to Beijing in 1979.

China’s actions have added to concerns that Taiwan is becoming the new flashpoint for intensifying US–China rivalry and could be the site of future military conflict. A debate is underway in the United States about whether to clarify its “strategic ambiguity” about its security obligations to Taiwan, which would send a clear warning to China. Meanwhile some Chinese commentators have described the aerial drill as a rehearsal for taking over Taiwan.

These tensions pose significant challenges for Australia. Taiwan is Australia’s ninth-largest export market and crucial to East Asia’s electronics supply chain. Furthermore, the likelihood of Australia being drawn into a US–China conflict may be higher these days, due to the breakdown of its communications with Beijing.

There has been long-running debate in Australia about how Canberra would respond if the United States invoked the ANZUS Treaty and asked for its cooperation in a conflict over Taiwan. The Australian government has worked hard to maintain relations with the Trump administration, in part to ensure it can have some influence in such a situation.

But this is not enough. Australia also needs to form an independent understanding with other large regional countries about how to collectively respond to – and help resolve – a potential conflict. 


New trade routes

Three weeks ago, the Australian government announced it would be cooperating with Japan and India in efforts to build more resilient trade supply chains. In a joint statement, the countries’ trade ministers said that officials would aim to keep markets open and deliver a “free, fair, inclusive, non-discriminatory, transparent, predictable and stable trade and investment environment”.

This move is consistent with the Australian government’s broad policy of boosting economic sovereignty in response to the trade disruption caused by COVID-19.

Nevertheless, the task of diversifying trade markets and “reshoring” some manufacturing to Australia will be a major challenge for Canberra. Much of the country’s prosperity has been built by using imported capital to extract resources, which are then exported overseas in relatively open global markets. Shaking up this system will be more difficult for business than many politicians are prepared to acknowledge.

The short-term challenges were underlined last week when manufacturing adviser Andrew Liveris said Canberra should tone down its criticism of Beijing until it has reduced its trade dependence on China. Meanwhile, Australian trade minister Simon Birmingham told farmers they should not expect government subsidies to make up for lost trade to China, as such support would only worsen tensions over anti-dumping tariffs.

There are other avenues that Australia, India and Japan could explore to protect their economies against the impact of future crises – avenues that may prove less challenging to business but just as useful. Japan has suggested greater digitisation of trade procedures, for example. And India could make raw materials available to Japan and Australia for manufacturing pharmaceuticals.

Such objectives can also be achieved by well-structured open trading arrangements – a new patchwork quilt of special deals may be unnecessary. Unfortunately, India undermined a significant new trade framework last year by refusing to join the planned Regional Comprehensive Economic Partnership.

Canberra should look at new ways of securing trade supply chains, but it should think twice before taking any steps that could erode the trade agreements that have served Australia and most of the region well.


WeChat and TikTok 

The Trump administration’s plan to ban Chinese social-media apps WeChat and TikTok, on the basis that they pose a national-security risk, is now under a cloud.

The WeChat ban faces a court challenge and the government’s decision on TikTok hangs on a debate about whether a deal with Oracle and Walmart would shift ownership from China to the United States. 

But the integrity of the United States’ stance had already been tarnished by its support for a partial-takeover bid by Oracle, a company co-founded by Trump supporter Larry Ellison. 

Australia has been more circumspect about embracing this emerging geopolitical division of the internet. Last month, Scott Morrison said that the government had no plans to ban the app, as intelligence does not suggest it is misusing Australian citizens’ data. However, both TikTok and WeChat are reportedly still under scrutiny.

The government should be vigilant about potential cybersecurity breaches. But TikTok is largely an entertainment app and WeChat is used for communications and financial services by about one billion people in China and other parts of the world, including Australia.

As the confused situation in the United States shows, Canberra is right to be cautious about following Washington’s lead on this issue, particularly as doing so could isolate Australia from its regional neighbours, where these apps are a part of the ecommerce landscape.


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