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“Sustainable rivalry’ between China and the US the healthy way forward

The Australia-China Free Trade Agreement is ready to be ratified by the Australian Parliament. The Labor leadership has bowed to pressure and backed off their stubborn and misguided insistence that, unless amended, it would cost local jobs. A compromise of sorts was reached with the Turnbull government, which agreed to consider a diluted list of demands; they fall far short of those sought by Opposition leader Bill Shorten and his masters In the trade union movement.

The FTA will bring immediate benefits to Australian agriculture and the services sector, particularly health, education, tourism, and financial services. Investment in both directions will increase. The Chinese will be looking to acquire more large rural properties; Australian universities will be keen to build and run undergraduate and graduate programs in China’s main cities.

A closer relationship between Australia and China is the inevitable outcome. China will become more than just Australia’s leading trading partner, despite a number of issues that periodically create tensions.

Among the most pressing of these issues is Chinese military expansion in the South and East China seas, resulting in disputes with Japan and other Asian countries. Australia this week joined the United States in condemning Chinese activity, but it has stopped short of joining American naval patrols that will venture into contested waters.

The territorial disputes in the South and East China seas bring back into sharp focus a lively debate that preoccupied Australian foreign policy discussion in 2014:  the view most vocally expressed by the Canberra academic, Professor Hugh White that Australians may soon have to choose between their strategic ally, the United States, and their biggest trading partner, China. It was often asserted that China would soon overtake the US as an economic force, or, more crudely, that China was on the way up and the US on the way down.

Now, as 2015 draws to a close, White’s argument looks less persuasive. As the debates at the IMF annual meeting in Peru showed, the world is looking to the United States, not China, for revival of the flagging world economy.  At a recent round table on China-US relations at the US Studies Centre in Sydney, the professor of foreign affairs at the University of Virginia Brantly Womack held that now that China’s GDP is no longer surging ahead at double-digit percentages, there is a new norm.  American growth is 3 per cent and rising, China’s is below 7pc and falling.

Womack’s thesis is that the relationship between the two leadingworld powers is becoming assymetric, and that both countries have much more to gain by cooperating with each other than engaging in conflict. He sees China and the US as being the world’s primary nodes, with the expansion of either being no threat to the other. “They are not running the same race,”  he says. Neither gains anything by imposing its will on the other, and in an armed conflict both sides would be substantial losers.

The problem, of course, is to get both Americans and Chinese to recognise this reality. We don’t know who will be the next incumbent in the White House. Many Chinese nationalists still have fond memories of treasured past glories. While present leaders mostly speak rationally of the positives of the China-US relationship, both make mistakes. One of the big recent US mistakes was the Obama administration’s attempt to persuade Australia and other countries not to join the Chinese-led Asia Infrastructure Investment Bank. Both Abbott and foreign minister Julie Bishop were inclined to accept the argument before the wiser counsel of Joe Hockey and trade minister Andrew Robb prevailed.

The reality that is evolving now, says Professor Womack, is ‘sustainable rivalry’ between the two major powers. It is a state of affairs that is welcome in an increasingly globalised world, where many ‘players’ prefer the idea of a multimodal world order over the return of Cold War antipathies. The era of naïve confidence in a US-centric global system ended some years ago. Whether this came about through muddled Middle East policy or a crisis in Wall Street (or both) does not matter; the fact is that in our globalised world the two main actors must get on with each other.

So what does it mean for Australia? Professor Womack tells us that Australia has already played a useful role in educating Americans on the new realities of the Asia Pacific and, in so doing has made it clear, at official level at least, that it rejects the White thesis of the need for choice. We have a free trade agreement with China, and have signed up to the Asia Infrastructure Investment Bank, even if Washington does not like it.  We will remain in the ANZUS alliance, work closely with the US military, buy US fighters, allow US marines to train in Northern Australia, but also invite members of the Chinese PLA to join in from time to time.

The renminbi (RMB) is now the second largest traded currency after the dollar, and China is keen for it to be officially recognised by the IMF as a reserve currency, like the euro. Australia is broadly in favour and generally supports Chinese moves to become more involved in the global community. While strongly supporting the US-inspired Trans Pacific Partnership (trade minister Andrew Robb played a major role in negotiations), Australia will use diplomatic channels to pave the way for China to join if it wishes too. It is significant that Beijing has not publicly raised objections to the conclusion of the TPP, despite early indications that China viewed the TPP as an instrument for containment.

In the end, Professor Womack’s thesis of asymmetry may prove to be over-optimistic.  Nevertheless, it is a status that would be welcomed by Australia as it seeks to embed itself in the Asia Pacific region.