Obama return has Chinese flavour

By Professor John Kane, School of Government and International Relations

While Obama wabeing re-elected in the United States, the Chinese were installing a new leadership team in a manner that was, for all its visible pageantry, much more mysterious and secretive. It is worth asking what these events mean for Australia in its relations with both countries.

America’s so-called ‘pivot to Asia’ will no doubt continue

The Obama administration has identified the Asia-Pacific region as the principal arena for dynamic development in the twenty-first centuryand the Gillard government has echoed this view in its recent ‘Asian Century’ white paper. Australia is, of course,very strategically situated in the region. 

We may recall that General Douglas MacArthur chose Brisbane as his headquarters in 1942 to plan the allied fight-back against Japan, a period that marked the decisive shift of Australian security dependency from Great Britain to the United States eventually formalised in the ANZUS treaty of 1951.

The pivot may be about more than security, but it is certainly about that too

Military senditivities

This is asensitive matteras shown by certain regional reactions to this year’s announcement of US marine rotations in Darwin.

Obama’s Ambassador to AustraliaJeffrey Bleich, was on ABC television the morning after the election defending the enhanced relationship in terms of food security, disaster management, regional transit security – anything but containing China. China thinks otherwise. 

Such sensitivities point to the peculiar nature of the challenges, both economic and strategic, that face Australiafollowing Obama’s victory and China’s change of leadership.

Australia has always regarded itself as a vulnerable, under-populated outpost of western civilization in a heavily populated, potentially hostile part of the world, thus its insistence on the centrality of the American alliance. 

The announcement of marine rotations was comforting to the Australian establishment because China’s rise,combined with America’s recent economic woes, had caused anxiety about the continuing capacity of the United States to play its accustomed role. 

Witness Gillard’s emotional address to the US Congress on March 9, 2011, in which she spoke of an “indispensable alliance” and historical partnership of shared values and shared goalsbut also tellingly inserted a pep talk to the faltering hegemon to continue believing in itself and its historic role.

This implied uncertainty about American political will was coupled with implied uncertainty about Chinese intentions. Gillard noted that Australia’s relationship with China was, like America’s, “important and complex,” as indeed it is.

Chinese investment

China is now Australia’s main trading partner. If we have weathered the economic downturn better than most it was because we had become essentially a vast mine feeding theseemingly (until recently) insatiable Chinese appetite for raw materials, especially iron and coal.

We have received billions of dollars in Chinese investment, accepted70,000 Chinese students a year into our education system, and welcomed half-a-million Chinese tourists annually. Chinese investment has significantly altered the economic power balance within Australia from the south-east to the west and north. Chinese businessmen now sit on the boards of Australia’s largest corporations.

And yet underlying Australian indebtedness is a deep sense of unease about Chinese influence, evident most recently in the arguments over Chinese investments in arable land and Cubby Station.

The same unease is manifest at governmental level in quiet and not-so-quiet hedging moves accompanying increasing trade ties, each of whichhas drawn Australia ever closer to the United States in matters of security and shared intelligence.

In March 2007, we signed a security pact with Japan and, a few months later, attended the first (secret) meeting of the Quadrilateral Initiative between Australia, the US, Japan and IndiaThe 2009 Australian defence planning document,Defending Australia in the Asia-Pacific Century, foreshadowed huge expenditure (which may or may not ever occur) on jet fighters and submarines while making itclear that the principal potential adversary was China.

A similar ambivalence affects many other countries as China extends and deepens its aid, trade and investment reach around the globe.

A combination of rising economic dependence on China and continuing or growing reliance on the US for security guarantees seems to be a recurring pattern, especially in the Asian region.

Long range ambitions

The ambivalence many countries feel toward the American big brother is generally less than that felt toward a China whose long-range attitudes and ambitions, and the values underpinning them, are yet to become quite clear. We can guess, but we do not really know what China’s new leaders have in mind for their country, whether greater liberalisation or not, but it is unlikely that the final shape of modern China’s soul will be discernible any time soon.

But if uncertainty and security dependency inevitably casts the US in a continuing world leadership role, it is a role complicated by straitened circumstances and by America’s own deep economic entanglement with, and ambivalence toward, China.

The main task Obama faces, as American voters affirmed during the election, was the same one he faced four years earlier − to revive the US economy. Yet it is not clear that his administration really knows how to do that. Federal Reserve Board chairman, Ben Bernanke, is presently conducting an undeclared currency war against the Chinese yuan, hoping to devalue the dollar to improve US exports, lower the huge trading deficit with China, and kick-start US growth. 

But currency wars, as history shows, are a very last ditch and dangerous means.

Meanwhile China is itself experiencing a possible asset-bubble implosion and aslowing of growth, with an already noticeable impact on Australian mining prospects.

The European Union can offer no help in recovery as it remains mired in its owncrippling debt problems. (The morning after Obama’s election stock markets plummeted on bad news from Europe.)

The global economy thus remains intensely fragile, and the US economy, for all its travails, still lies at the heart of it. This makes Obama’s task large one. If he fails we here in the Lucky Country, with most of our eggs in one basket, will need to show we are more than just lucky, and have our own reservoirs of resilience to draw upon.