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Australia’s Foreign Economic Relations in 21st Century

06.02.2017 | World Affairs

Australia is a medium-large country, with a population of twenty-three million. Canberra is an actively participant in the Group-20 and is seeking to obtain a permanent seat on the Security Council in the United Nations. She is also one of the safest countries in the world, among the highest defence spenders in the region and in possession of highly professional military capabilities. In addition, Australia is a global champion of non-nuclear proliferation and works towards reducing the availability of chemical weapons, and has helped to transform the G20 and create the Asian-Pacific Economic Cooperation Forum, which has provided more trade liberalisation in Asia.

Australia is one of the largest state exporters of ore and uranium to Asian states. In response to China’s rapidly rising economic status, Australia has adjusted its priorities towards to Asia; in 2005, East Asia accounted for more than 56% of all Australian merchandise exports. Moreover, Australia is the 12th largest economy in the world, and the 5th largest in Asia. In addition, Australia has also become important with regard to its exports of raw materials to Asian countries, in a similar way to how the Middle East became important to Western countries because of its oil. The top export markets for Australia are: China, Japan, the Republic of Korea, the United States and India. Meanwhile, its top five import markets are China, United States, Japan, Singapore and Thailand. Australia exports mainly iron ores, coal, education travel services, natural gas and gold. Its imports principally include personal travel, crude petroleum, motor vehicles, refined petroleum and freight transport.

Australia is in favour of building strong military coalitions with the U.S. and participating in a counter-terrorist group against Islamist terrorism, while also working to contain the proliferation of the threat from North Korea. Since the time in office of former U.S. Secretary of State Colin Powell, Australia has been actively engaged in a strategy of partnerships with the United States of America. In addition, Canberra has two-thirds of its development partners in the Indian Ocean and Asia Pacific region and will seek to focus on partnerships, personnel exchanges and development of innovation in the future; this is the New Colombo Plan, which seeks to bring new ideas and students to Australia in the future.

Australia has to open norms of regionalism by discussing, reducing and demolishing its barriers which is the basic means of Asia, but at the same time, presents a threat to the non-proliferation which Australia has been building for the past fifty years. Canberra’s next friend in the democratic camp will be Indonesia, which is a newly prosperous nation of more than 220 million people by that is set to be one of the key players in the Asia of the future.

Canberra is aware of the fact that they are a middle power and accordingly seeks to create better ground for U.S.-Chinese relations while also actively participating in ASEAN, APEC, the Asian regional forum and East Asia Summit.

I. II. Economic Diplomacy and Foreign Policy of 21st Century

Australia is the 21st largest export economy in the world. Canberra’s top exports are: iron ore ($60 Bn) – 25%, coal briquettes ($37.2 Bn) – 15%, and petroleum gas ($16.3) – 6.7%. Meanwhile top imports are: refined petroleum ($16.6 Bn) – 7.6%, crude petroleum ($16.2 Bn) – 7.4%, and cars ($15.7 Bn) – 7.2% in 2014. Australia’s market are focusing mostly on China ($82.9 Bn) – 34%, Japan ($43.1Bn) – 18% and South Korea ($19 Bn) – 7.8%, India ($11. 1Bn) – 4.5% and the United States ($10 Bn) – 4.1% in export. Top import origins are then China ($45.7 Bn) – 21%, the United States of America ($24. 5 Bn) – 11%, Japan ($15.4 Bn) – 7%, Singapore ($11.8 Bn) – 5.4% or Germany ($10. 6 Bn) – 4.8% in 2014. In additional, Australia shares its borders with Indonesia, the Solomon Islands, New Zealand, Papua New Guinea, New Caledonia and Timor-Leste.

From these datas we can see, that nowadays Australia is fully integrated on Asian market and less dependent on Western countries. As we will mention in this essay, the current diplomatic policy of “fear and greek” Canberra is truly implementing it toward China’s rise, which is creating import about 21% and in export 34%. In low-politics Canberra is becoming fully integrated in Asia as we can also see in relations with ASEAN member states. However, still in high politics Australia dependents highly on Western countries, mainly on the United states and its security priorities in this region. Canberra is necessary part of the diamond league in Asia-Pacific and will be a key factor during the next decade not only from U.S. perspective but also from Japan’s point of view, where can be use as a  strategical counter-weight against China’s rise.

At present, Asian policy is trying to achieve bilateral agreements with Australia. Australia is an active member along with New Zealand and India in ASEAN. One of the most important agreements is the ASEAN-Australia-New Zealand Free Trade Agreement, which has GDP $3. 9 Trillion, a population of 658.2 million and trade with Australia amounting to $120 Bn in 2015 (it became operational in 2010). Main importance countries are Singapore ($133.3 Bn), Malaysia ($52.3 Bn) and Indonesia ($40.9 Bn). The ASEAN Community is very important for Australia and have more its import value as we can see in Appendix 1, with 3622 AUD million. Meanwhile (see Appendix 2 and 3), in comparison between China (550 000  AUD) 000 U.S. (250 000 000 AUD), we can see, that Australia is highly benefit from China and ASEAN community. In the future this relationship will be increase, because of diminished TPP from the U.S.’s side.

Canberra is open to any FTA opportunities to increase its economic diplomacy in goods, services and investment. Up to now, Canberra has concluded FTA with New Zealand, Singapore, Thailand, the U.S., Chile, the Association of South East Asian Nations, South Korea, Japan, China and Malaysia. This adds up to a total of 67% of Australia trade.

Moreover, Canberra has to provide change in Australia’s aid programme, as there has not been a surplus in the budget since 2008, while government debt stands at around $667 Bn. In addition, Australia is trying to become a top ten donor in the OECD, as a main goal of Economic Diplomacy to promote prosperity. It is further seeking to strengthen poverty reduction and regional economical growth.

The main priority of the Australian plan for these years is, firstly, the infrastructure in the Asian region through increasing economic growth and aid-for-trade projects and secondly, agriculture and fisheries, along with water management projects. Thirdly, we may note education and health to work towards poverty reduction and maximising exports (education and protection of human health). Finally, we may note increasing the humanitarian assistance as with last year, in which Australia increased its support to $340 million.

We can see that Australia is keen to conclude more preferential trade agreements in the future, thus securing its critical resources; it sees preferential trade also as a strategic weapon, enabling it to establish beneficial relationships with other states which would otherwise be impossible. There are many examples of this. The four year ‘Plan of Action’ between Vietnam and Australia under Prime Minister Kevin Rudd was created in 2009. This will bring in new priorities of  dialogue and cooperation in security and safety in the region, along with law enforcement and transnational crime. From the field of economic diplomacy, there is environmental protection, climate change and finance, information and communication, natural resources and environmental and consular matters. Furthermore, Australia signed up in 2015 to a Comprehensive Strategic Partnership with Singapore, focused on defence. Through this, Singapore will increase its military presence to 14, 000 troops based in Queensland, with a $1.66 Bn deal.

The current Prime Minister of Australia Malcolm Turnbull tends to accord with Japanese Prime Minister Abe’s policy in Asia and looks to create a coalition which will be in favour of Australia’s goals. Turnbull wants to cut carbon emissions and has announced a climate change strategy. Furthermore, the Prime Minister wants to establish closer ties with Indonesia and India.

In the future, Australia wants to increase more people-to-people diplomacy and engage more in world affairs, mainly in the northern hemisphere.

II. Canberra’s interactions

II. I. Canberra and Beijing

President Xi Jinping wants to tie Australia into its own ‘One Belt, One Road Initiative’ plan.  Turnbull is very pro-active in this engagement. The Prime Minister is also trying to establish an innovation, research and development programme with China. However, this two-speed engagement with China cannot be maintained forever and Australia must decide on which side they will play regarding their future foreign. China is at present trying to create its own rules to suit them; thus, they are disturbing the current international order as we see with South China Sea.

Australia’s China policy can be summed up as “fear and greed” diplomacy. This means that Australia wants to conclude a partnership with the opponent before he becomes too strong. In the coming year, the FTA between China and Australia will be concluded by both states, and there will be an opportunity to observe which kind of relationship they want to achieve. Today’s Australian foreign policy is pragmatic, realistic and based on mutual gain.

Australia is an important supplier of energy, raw materials and food to China; through these means, the U.S. is able to shape through Australia China’s economic and political choices. The Turnbull priority for now is to focus on China’s rise, along with that of India and other emerging countries in Asia.

II. II. Canberra and Washington, D.C.

Middle powers are focused on the outcomes, rather than the intentions, of their actions. We may note that Australia supported the U.S. in the Vietnam war and Afghanistan war and made large commitments to support peacekeeping missions of the United Nations. Australia and the United States are focused on “supporting defending the base rule order”. But, how can we maintain the order without any primacy? This question speaks to why the United State has to be involved in Asia and maintaining the current international order for results which are beneficial to all.

There is and always has been a diplomatic, security and economic link between the U.S. and Australia. In 2011, President Barack Obama restated its position in the Australian parliament: “the United States will play a larger and long-term role in shaping this region and its future.” Moreover, by 2017 there will be about 2, 500 U.S. troops in Darwin, Australia. Through this, the two countries will depend on each other once again, as has been the case since the Vietnam war in the Asia region, which saw intelligence, military and joint planning exercises and strategic planning from both countries.

Australia is the largest non-NATO contributor. Australia is trying to assert itself as an ambitious country, as is befitting of its position in 12th place of the world’s economies. Moreover, Australia is participating in ASEAN and APEC, of which the U.S. is not a member and has reaffirmed its intention to apply its capabilities to the management of political matters in Cambodia and East Timor, and to tackle terrorism in Asia. In these regards, it is an important ally for the U.S. and Australia will be a key player in Asia, because smaller countries with less overall negotiating power have to be coordinated by powerful states which can teach them how to effectively utilise their operational resources.

We can discover that U.S with its ‘pivot’ towards Asia has not increased its credibility in the region, and they will have to forge a new policy in the current decade. However, it will be always difficult to pursue peace-making with allies in Asia while also at the same time having a strong relationship with China. Australia is involved in TTP and maintenance of the presence of the U.S. and its leadership in the Asia region. Furthermore, Turnbull is in favour of Japan in the South China Sea: “… then we would hope that China’s actions would be carefully calculated to make conflict less likely, not more, and would seek to reassure neighbours of and build their confidence in China’s intentions.”

Australia is the 6th largest state in terms of soft power and wants to strengthen this further, to enhance their image principally in the Asia region, because this is the important region for the future.

Moreover, Washington will put more pressure on Canberra in the coming years, because Australia has become a member of ASEAN and thus has a strategical advantage that the U.S. lacks. Furthermore, Australia will welcome such steps if the United States increases its military presence and through those means, becomes a more active player in the region.

III. Japan

III. I. Japan’s Foreign Policy in Asia-Pacific

For Japan, the main threat is the growing Chinese influence through soft power, and the only way to provide a counter-weight to this is through universal values in the democratic camp (South Korea, Australia, New Zealand and India) in Asia. Tokyo is trying to achieve an East Asian Community (EAC), to create a community based on deepened and more transparent regionalism in Asia, mainly in the ASEAN countries, and to pursue its trade, finance, energy and human security. Japan is focused on the southern part of the region (ASEAN, Australia and India) more than on the North (China and South Korea).

Before Japan is to become a truly independent state, it will continue to depend on the United States and its military presence as the only counter-weight against China’s rise.

Japan is actively concluding preferential trade agreements and official development assistance as never before, and is seeking to create new opportunities for low and high politics in the region, which has proximity to the Russian Federation and Peoples Republic of China. In addition, Japan is also actively participating in Africa.

III. II. Japan & China

China and Japan have clashed over the Senkaku/Diaoyu Islands, and for this reason, Japan is seeking to build more alliances against China. We can see,that Canberra has to balance these two countries in economic terms, and in military terms with the United States. Japan, along with China, is fully aware of its high dependence on imported energy and resources, which is why it has concluded PTAs with ASEAN, Australia, Brunei, Malaysia, the Philippines, Singapore and Thailand.

While China is trying to become more flexible toward global issues and preparing for its hegemony in the Asia region, Japan is trying to become a normal state by revision of its constitution and creating the most developed army in the World.

IV. Australia & Japan

Japan is trading with Australia where, in auto exports, each year can see losses of around $297 million; meanwhile it is gaining in auto exports to the United States to the tune of $100 million. Moreover, China could lose $104 annually in exports to Australia and gain $24 million in exports to the US. Thus, we can see that these export trade agreements are primarily strategical steps toward Australia from Japan and China.

The current Prime Minister Shinzo Abe is trying to pursue more diplomatic bilateral relations with India and Australia to counter Chinese influence in the region. Australia also concluded the Joint Declaration on Security Cooperation with Japan in 2007, on regional issues such as counter-terrorism, maritime security or border protection. This has strengthened the Australia-Japan-U.S triangle.

There is a danger that the growing Sino-Australian economic relations will present a strong threat to Japan’s position. We can see that Australia has all the time been playing a ‘hot game card’. However, Australia has to sustain its PTA with Japan because this is the driving force for good relations with the United States. In addition, while the U.S. is focused on the containment of China, Australia is focused on engagement with and accommodation of China’s growing role as the future global power.

Australia is a welcome close ally with Japan, because this paves the way for better relations with the U.S. and vice versa. JAEPA is most important for relations between Australia and Japan, because Australia is the major exporter of agricultural products to Japan; despite widespread opposition in the form of domestic riots in both countries, JAEPA came into force in 2006. It provides for security of energy and natural resources as well as preventing disadvantageous business practices.

The switch from multilateral trade to preferential trade agreements, known as free trade agreements, is a risk for the whole Asia Pacific region, because of its pro-discriminatory approaches; these are focused primarily on domestic politics and economics, rather than global ones. Thus states are using FTAs in order to secure their most urgent national objectives as well as as strategical tools to conclude important relationships with different countries.

Australia’s health is highly dependent on its export markets. Trade between Australia and Japan is important for Australian provision of minerals and energy to Japan, as well as agricultural products. Furthermore, Japan is the biggest export market for beef and the best consumer for agriculture products overall. However, in light of Japan’s strong protectionism of their own products, it is difficult to achieve a prosperous FTA.

V. Relations of Washington D.C., Tokyo, Beijing & Canberra

There are three main triangles in the future of Australia’s foreign policy. The first is that of Australia, China and U.S., where Australia benefits from selling iron ore, bauxite and uranium to China. Here, Australia can attain an independent position which will be highly beneficial to it, and can also act as a mediator, in becoming friends with two mutual ‘enemies’. In the second triangle of Australia, China and Japan, owing to Abe’s decreasing trading partnership with China, tensions are increasing and Australia will seek to become a mediator to forestall future conflicts. The final triangle of Australia, Japan and the U.S. will want to assist in decreasing tensions in the second triangle, while also deepening its presence in Asia.

Conclusion

We discovered, that Australia is using hot cards very carefully but in the same time is benefit ing from the both sides. We can see, that Canberra has been actively participated in the United Nations Peace Keeping Missions, established Group of 20 or the creation of Asian-Pacific Economic Cooperation Forum, a member of ASEAN+6 or APEC. Moreover, Australia is using its preferential trade agreements as strategical as other states in their region, by increasing its soft power. Moreover, Australia’s main exports are to China, Japan, Republic of Korea, United States and India. They are receiving mainly iron ores, coal and natural gas materials where. Australia is one of the most obtained country of these resources. Moreover, Canberra is trying to keep good relations with the ASEAN countries, because she benefit annually more than $120 Bn.

In the future, Australia wants to increase more people-to-people diplomacy and more actively engage in the World Affairs with supporting the United States and become closer ally with China. By this, it will increase chance to get a permanent seat in the Security of Council in the United Nations. The main goal of Australia nowadays is environmental protection, climate change, finance, information and communication and change Australia to innovative green country in nearly future. Moreover, Australia wants more conclude relations with other states in military or economic means, as we see, its increasing maritime troops on lands of Australia by Singapore or the United States.

The current Prime minister Turnbull is trying to increase a relationship with China, but at the same time, it is a nightmare for Japan. As we can see in last days, they concluded its historical largest submarines navy construction for Australia with France, rather than with Japan, after the meeting between the President Xi Jinping and Prime Minister Turnbull and provide its “fear and greed” diplomacy, which means concluding partnership and its benefits with the opponent before he come too strong. However, Turnbull clearly knows, that he has to stand with the United States, by that, we can assume that Australia is playing diplomacy, which has to get good relations with Asian countries, by that increase negotiations with them and at the same time, provide a ground for the United States. In additional, Australia is the largest non-NATO contributor and they are assure, that without primacy of U.S. in Asian region, there will be no peaceful development of order, by that, Australia needs help of the U.S. to tackle region issues.

Japan is focusing on ASEAN, Australia and India because these states are in democratic camp together with the Japan and it is the only way, how to counter-weight China. Mainly, Japan has got and will have a worsen relations with the China, because both ‘states’ are sharing tendencies to lead Asian region. Thus, relations between Australia and Japan is about strategical means, because the trade does not have beneficial deficits. Both states have agreed on ‘Joint Declaration on Security Cooperation’ in 2007 together with the U.S. Moreover, they have also agreed on JAEPA in 2006 for the security of energy and natural resources as well as avoiding business disadvantages operations. The trading with Australia is live important for Japan over of Australia’s minerals and energy to Japan.

In the future, we can see, that U.S. will be more active in high and low politics means and if they will not completely remove the TPP, then to be more active in bilateral agreements and its military presence in Asia-Pacific region. Furthermore, Australia will become a independent state which can benefit in the short term of the current situation in the Asian region, however, in the long-term she will fully join to alongside with the United States and help to decrease political tensions in that region.

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Appendixes

Appendix I.

Appendix II. 

Appendix III.