The Puppeteer of International Trade: How do China and the US Influence Australian Decision Making?
Illustration credit: Nicola March

The open and globally intergraded economy of Australia creates a benchmark for political decision making. Australia’s economic history relied on allies, but its geographical positioning is a significant asset. International companies use Australia’s deep ties with Asia to reach global value chains. This attraction goes both ways as Asia sees Australia as the western connector. It may sound like a dominant position for Australia to be in, but what happens when two of Australia’s biggest trade partners begin a trade war?

40% of nominal GDP is contributed to by a two-way trade of goods and service. These are free-trade agreements that promote international trade, create trade consistencies and are often symbolic countries’ relationship. Asia makes up two-thirds of Australia’s GDP, meaning Asia brings more economic value to Australia than all other contents combined.

China itself brings three times the amount of trade as the United States. However, trade isn’t the only thing bought to Australia from China. Chinese is the second most spoken language in Australia and is taught in more schools than ever before. It’s undeniable that China’s impact on Australia’s society has grown.

Traditional alliances and connections struggle to prevail as Chinese wealth infiltrates the Australian economy. In recent years China has been seen as a gateway to the wealth of many Australian corporations. This powerful connection is positive and a great asset out the economy.

On the other hand, the United States is also a trusted ally of Australia. In 2001 Australia’s Prime Minister, John Howard, was the first leader to support the US after 9/11 and was in the US at the time of the tragedy. Depending on the party in power, traditional allegiance can often override smart and strategic decision making. In the past, Australia was able to be in the middle and stake a passive stance, usually stepping toward the US.

However, due to the Trump administration’s isolationistic approach and anti-China stance, Australia now needs to decide which side they are on. Either endorse China for its considerable impact on Australia’s wealth or to stay with the US which is a traditional ally. Every move Australia takes in the US’s direction comes with more than just economic consequences.

In recent times China’s new power is now being politically activated, and consequently, Australia’s allegiance with the US magnified. Australia isn’t the only country receiving political backlash from the Chinese Communist Party. However, Australia is far more drastically reliant on China than other countries. It is after all how Australia’s “economic bread is buttered.”

One must not bite the hand that feeds them, but what happens if you were to? Current Prime Minister, Scott Morrison, after endorsing an inquiry into the coronavirus investigation instigated such a bite.

Since that endorsement, China imposed an 80% tariff on barley, suspended major Australian beef imports, sentenced an Australian man to death for drug smuggling, and warned Chinese students of returning to Australia for study due it the country’s ‘racism.’

Tertiary education is one of Australia’s biggest exports. China holds influence at many Australian top universities due to the large proportion of funding it provides. One university, The University of Queensland’s, is one-third Chinese. However, Chinese student tuition and donations from Chinese organisations make up two-thirds of total revenue. A student questioning and protesting these figures faced suspension, and now the Queensland Supreme Court holds his academic future in their hands. This brings up the question of whether China can even influence Australian universities by monetary influence.

China has shown it is not afraid of turning these economic dependencies into political power. They show that there will be consequences if Australia doesn’t ‘choose China.’ However, this doesn’t seem to be swaying Prime Minister Scott Morrison‘s views.

After a cybersecurity breach, Morrison publicly accused China of providing government funding for the breach. This is after Australia refused to give a 5G network contract to Huawei over similar concerns about the sovereignty of domestic data. A decision that was made after the US government directly blocked the deal going through to stop the tech company becoming mainstream.

The United States isn’t innocent in using its economic power either, after attempting to increase domestic production by raising their tariff by 20% on all goods and services. Although the tariff increase is adversarial for many global economies, China is the hardest hit. But where does Australia fit into this?

In August 2019, at its most hostile point, the Australian Securities Exchange (ASX) lost 50 billion dollars in a single week. Fast forward only three months later where the Australian dollar was only buying 68 US cents. Australia’s globally integrated economy comes with equally integrated economic volatility. How does Australia stop this volatility and choose between these economic powerhouses?

China is the next great emerging economy of the world, but there are other Asian countries seeing growth. Attempts have been made for Australia to use its Asian influence starting with India. India and Australia share many common values in terms of democracy and the rule of law. Unlike China, India a more ‘likeable’ candidate for higher amounts of trade—allowing Australia to keep a strong military and trade relationship with the US.

Australia is slowly transitioning away from its dependency on China, but it will come with a cost. The Chinese government have proven this. However, Australian leaders continue to voice their concerns about data privacy, overreliance on China’s economy and the risks involved in a close relationship with China. Australia is finding the balance between maintaining the wealth brought by China, while diversifying away from the country’s economic risk.