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The new Australian government got off to a rocky start in its relations with China. Foreign Minister Julie Bishop drew China’s ire just 16 days after the new coalition government headed by Tony Abbott was sworn in on September 18, 2013. In a joint statement following a Trilateral Strategic Dialogue with the foreign ministers of the United States and Japan, Bishop “opposed any coercive or unilateral actions that could change the status quo in the East China Sea.”¹ Considering that Japan is one of the parties engaged in a territorial dispute in the East China Sea, and more importantly, the definition of the status quo is precisely what China and Japan are at loggerheads over, no one should be surprised that the statement’s wording upset Beijing. From Beijing’s perspective, Canberra and Washington were taking Japan’s side in the sovereignty dispute, a vital concern for China. Its foreign ministry was swift to respond, telling the three countries to stop undermining regional stability.²

A week later Abbott made clear his preferences when he called Japan Australia’s “best friend in Asia.”³ There was no public criticism of the statement by officials of any country. But, in private, not only Chinese officials but also several Australian, American, Indonesian, and South Korean officials expressed puzzlement.⁴ South Korean officials in particular did not conceal their indignation. And despite this public profession of endearment, Japan did not return the compliment. A new cloud descended on Australia-China relations following the November 23 announcement by Beijing that China had established an ADIZ in the East China Sea. The zone overlaps with Japan’s (and South Korea’s) existing ADIZ and includes the disputed Senkaku/Diaoyu islands.

An ADIZ is a zone that helps a country manage possible incursions into its sovereign airspace. It stretches beyond the boundary of a country’s national airspace. When an aircraft enters an ADIZ without warning, a country may scramble fighter jets to visually identify the aircraft and determine whether it poses a threat. According to the official Chinese explanation, an ADIZ is “established by a maritime nation to guard against potential air threats. This airspace, demarcated outside the territorial airspace, allows a country to identify, monitor, control and dispose of entering aircraft.”⁵ Per se, an ADIZ is not necessarily a provocation. But, in this case, because China’s ADIZ includes the Senkaku/Diaoyu Islands, it is perceived as an attempt to assert China’s claim to authority over disputed maritime territory.⁶

Prime Minister Abe Shinzo said China’s ADIZ was a dangerous attempt to change the status quo. Secretary of State John Kerry called China’s move “an attempt to change the status quo in the East China Sea” and warned that its “escalatory action will only increase tensions in the region and create risks of an incident.”⁷ Australia’s Department of Foreign Affairs summoned the Chinese ambassador to convey Canberra’s concerns with Beijing’s decision. In a November 26 statement Bishop notes that “the timing and the manner of China’s announcement are unhelpful in light of current regional tensions.”⁸ The statement repeated the wording of the Trilateral Strategic Dialogue statement opposing the use of coercion to change the status quo in the East China Sea. The next day, Ambassador Ma Zhaoxu lodged solemn representations at the Department of Foreign Affairs over Australia’s ADIZ statement, expressing strong dissatisfaction with its “finger-pointing” and “groundless accusations.”⁹

It is possible that China decided it needed an ADIZ for the Senkaku/Diaoyu Islands because Japan was publicizing Chinese incursions into its ADIZ in an effort to rally public opinion to its side.¹⁰ It is also possible that China had prepared this ADIZ for some time. According to Mainichi shimbun, as early as in 2010 a Japanese government delegation was briefed by senior members of the Chinese military about China’s decision to establish an ADIZ in the East China Sea.¹¹ From Tokyo’s perspective, by establishing the ADIZ, Beijing ratcheted up pressure on Japan to agree to negotiate a way forward. Japan denies that a dispute even exists over the sovereignty of the islands and hence refuses to talk about this issue.

Tony Abbott defended Australia’s public criticism of Beijing’s ADIZ by saying: ‘‘Where we think Australia’s values and interests have been compromised, I think it is important to speak our mind.’’¹² In another statement explaining his stance Abbott also said: “We are a strong ally of the United States, we are a strong ally of Japan, we have a very strong view that international disputes should be settled peacefully…”¹³ This reference to Japan as an Australian ally (which it is not) was puzzling, as was also the use of an identical expression—”strong ally” —to describe Australia’s ties to both Japan and the United States. Australia and the United States have been allies since 1951. They are indeed “strong” allies, and the US alliance enjoys widespread support among the Australian public. Australia is the only American ally that has fought along side the United States in every war since World War II. It is reasonable to ask whether Abbott was insinuating that Australia is willing to fight alongside Japan in defense of the two countries’ mutual values—and would it be in Australia’s national interests to do so.

From Beijing’s perspective, Canberra is taking sides over the disputed sovereignty of the islands. Chinese officials made this abundantly clear to Bishop when she made her first visit as foreign minister to Beijing a week after the ADIZ announcement. Bishop was equally adamant that Australia is not taking sides on the issue of sovereignty but rather is concerned about any move that could add to tensions or add to the risk of a miscalculation in disputed territorial zones in the region. As a nation heavily reliant on trade, Australia’s prosperity is dependent on regional stability and freedom of navigation.

China’s Rebuke Probable

What should we make of the recent spike in tensions between Australia and China? Foreign Minister Wang Yi articulated China’s official position during Bishop’s visit to Beijing. He said: “I have to point out that what Australia has said and done with regard to China’s establishment of the air defense identification zone in the East China Sea has jeopardized bilateral mutual trust and affected the sound growth of bilateral relations.” Wang added, “this is not what we desire to see.”¹⁴ Australia’s official position reflected a contrarian view. After four hours of talks with Wang and other senior Chinese officials, Bishop said that “I came away convinced that our relationship is strong, it is robust, and, as friends, we can speak our minds to each other.”¹⁵

The true state of the relationship is probably somewhere in-between these two statements: not quite as dismal as Wang let on nor quite as positive as Bishop described. There have been numerous diplomatic spats between the two countries in the past, and the relationship has developed in fits and starts. Australia, as most countries in the region, is economically dependent on China but relies on the United States for its security. However, Australia’s dependency on China is one of the world’s highest. More than one-fifth of its exports go to China. The value of two-way trade with China is double the value of two-way trade with Japan, Australia’s second largest trading partner.¹⁶ Importantly for any assessment of the impact of souring political ties between Canberra and Beijing, Australia has become more reliant on China as a buyer of its exports than any other trading partner in the past 63 years, surpassing even Australia’s dependence on Britain after World War II.¹⁷ A whopping 35.4 percent of Australian exports went to China in the second quarter of 2013.¹⁸ Despite efforts to diversify, over two-thirds of Australian exports to China comprise of coal and iron ore. Moreover, Australia is dependent on China for more than resource exports. Chinese tourists are the biggest spenders among foreign visitors. There are also more Chinese students in Australian universities than from any other country, contributing about A$4 billion annually to the Australian economy.¹⁹

Abbott said that he does not think differences between Canberra and Beijing over China’s ADIZ will affect the dynamic economic relationship. He expects “China to be a strong and valuable economic partner… because it is in China’s interest.” This could prove to be accurate. Australia is indeed important to China as a supplier of much-needed resources: China’s top source for mineral ores and coal, its second-largest source of liquid natural gas, and sixth largest source of fuel overall.²⁰ However, in the past China has not shied away from causing discomfort to any government that it perceives as threatening its core interests. Its punitive measures have included cancellation of planned visits and meetings, harshly worded statements, and the freezing of diplomatic contacts.

Two such recent actions come to mind. The first is China’s fury over the Nobel Peace Prize being awarded to dissident Liu Xiaobo. Upholding the socialist system is one of the foremost objectives of China’s foreign policy and according to Beijing, Liu is a “criminal trying to sabotage the socialist system”.²¹ Only two months after warmly hosting Norway’s foreign minister and enthusiastically praising the prospects of Chinese-Norwegian Arctic cooperation, in 2010 Beijing cancelled bilateral free trade negotiations and the annual bilateral human rights dialogue. For three years Norway was shunned diplomatically; among others, the Norwegian ambassador in Beijing was not granted a meeting at the Ministry of Foreign Affairs and Norwegian ministers were not able to meet bilaterally with their Chinese counterparts. Norwegian salmon exports to China plummeted.²² Norway was excluded when China granted a 72-hour visa waiver to most countries. Norway is an Arctic Council member and a world leader in deep-sea and cold-climate drilling technology, but China’s Arctic aspirations were secondary when the government felt the imperative to drive home the message, both domestically and internationally, that China will not tolerate what it perceives as meddling in its internal affairs.²³ The second example is Beijing’s anger following Prime Minister David Cameron’s meeting with the Dalai Lama in May 2012. China froze high-level diplomatic relations with the United Kingdom for 15 months, suspending ministerial-level meetings. Norway and the UK were penalized because from Beijing’s perspective they crossed a “red policy line” related to a core interest.²⁴

Australia’s public criticism of China’s actions in the East China Sea, which China perceives as taking Japan’s side, also touches on a core interest of China—safeguarding sovereignty. Some form of retribution is likely forthcoming. It is probable that Beijing’s reprimand will not be directed at the resource sector, which is where China’s foremost interests in Australia lie. As James Reilly argues, the likelihood of Australia being the successful target of China’s economic coercion is minimal.²⁵ The reasons are straightforward: Australia wields economic leverage over China as a major supplier of necessary resources. Moreover, China’s economic statecraft, though increasingly dynamic, is not coherent.

China could show its displeasure by informing the Abbott government that Beijing will hold off on meaningful free trade agreement (FTA) negotiations until after the next elections. Abbott has put his personal prestige on the line by publicly stating that he wishes to conclude an FTA with China within a year of taking office. The economic benefits of a bilateral FTA are regarded as greater for Australia than for China. This is because Australia currently has lower trade barriers than China; hence, potential new opportunities under an FTA will not be as great for Chinese traders. Yet, there is political value for China in signing an FTA with a middle-sized Western country. Xi Jinping, when meeting Governor-General Quentin Bryce in October 2013, supported an FTA with Australia “at an early date.”²⁶

Australia will no doubt be faced with other instances during Abbott’s term when in the name of safeguarding values Australia will have to push back in its dealings with Beijing. Australian citizens, most probably those of Chinese descent, will need to be defended from the arbitrary nature of China’s legal system. Pressure from the Beijing government on a range of issues contrary to Australia’s values will need to be fended off. Canberra will need to draw a red line in the event that Beijing tries to meddle in Australia’s internal affairs, as it did when Uighur leader Rebeya Kadeer visited Melbourne in 2009. It is questionable whether jumping on the bandwagon with the United States and Japan to criticize China about a contested issue between China and Japan was the most effective way for the new government to start defending Australia’s values.

How Independent Is Australia’s Foreign Policy?

Curiously, criticism in Australia of Abbott’s handling of relations with Beijing has been muted, especially compared to criticism of Prime Minister Julia Gillard by a diverse set of prominent Australians, including former foreign ministers and prime ministers, following the strengthening of Australia-US defense cooperation and President Barack Obama’s visit to Australia in November 2011. Though the security decisions taken by Canberra in 2011 go far beyond recent criticism of China’s actions, how Australia manages its relations with both China and Japan will be the most consequential foreign policy challenge the Abbott government faces.

The Obama visit in 2011 had several objectives. First and foremost, from the perspective of the United States, was his announcement in the Australian Parliament that the United States, as a Pacific power, will play a larger role in shaping the region by strengthening its capabilities and modernizing America’s defense posture across the Asia-Pacific. Second, the visit was used to publicize enhanced Australian-US military cooperation. Already six weeks prior to Obama’s visit at the annual Australia-US ministerial meeting in San Francisco, defense and foreign ministers used exceptionally strong language to spell out the countries’ unwavering commitment to the alliance and agreed to strengthen military cooperation. US marines will be based in Darwin for parts of the year; Australia will allow the United States greater access to its bases, particularly airfields (for fighter, aerial refueling, reconnaissance and transport aircraft) and will allow the US to pre-position materiel—fuel, ammunition, and spare parts—in Australia.²⁷

The challenge any Australian prime minister faces in trying to advance Australia’s national interests at the same time as the United States is asserting its own national interests was aptly reflected in an Australian journalist’s comments about the Obama visit spin: “The Americans were happy to let their press believe the stationing of extra troops in Australia was about China, while Australian officials were desperate to say the opposite.”²⁸ Few envisioned a Labor prime minister and Democratic president solidifying the 60-year old alliance. Veteran Australian commentator Paul Kelly described Gillard and Obama’s feat as a “historic recasting of the alliance” – to manage the dynamic changes in the Asian power balance, essentially the rise of China.²⁹ Obama’s use of Darwin as a pivot point enjoys strong bipartisan support, as does the Australia-US alliance.

However, influential figures from both sides of the political spectrum voiced concern at Gillard’s unconditional embrace of Obama’s “pivot” or rebalancing strategy. Criticism was not only directed at Gillard’s demur manner in Obama’s presence, described by political editor Michelle Grattan as “a little over the top” and by former opposition leader Malcolm Turnbull (presently Minister for Communications) as “doe-eyed fascination.”³⁰ The very essence of decisions announced during the Obama visit was questioned by former prime ministers, former cabinet ministers, former diplomats, retired military officers and respected commentators of Australian foreign policy.

One of the first attacks came from former Labor Prime Minister Paul Keating who said that Canberra was “verballed” by Obama in his speech reorienting US foreign policy towards the Asia-Pacific in a bid by Washington to pull Australia into its “ruthless” strategy to contain Beijing.³¹ Keating said Obama’s speech should not have been made in the Australian Parliament. Former Labor leader Mark Latham’s criticism was equally biting, claiming that Australians’ “subservience to the Americans” had been confirmed.³² The Greens leader Bob Brown questioned whether Australia’s interests are the same as those of the United States.³³ The absence of debate before the decision to strengthen Australia-US defense cooperation was a subject of recurring complaint. Somewhat ironically, some of the most scornful remarks were made by Bob Carr, who Gillard in March 2012 appointed foreign minister, but who in late 2011 was a private citizen and former premier of New South Wales: “When did we decide to favour America’s most mistaken instincts? …Do we have as our goal a peaceful accommodation between the aspirations of China and the national interests of the US? Why did we allow the announcement about marines rotating in the Northern Territory to be made in association with the US President’s strange speech attacking China? Who makes these foreign policy decisions and what discussion is there?”³⁴

Former senior officers of the Australian Defence Forces avoided direct criticism of the government’s handling of the Obama visit and concentrated on future developments. They too warned of the risks of becoming too close to the United States. Peter Leahy, who served as chief of the army 2002-2008, wrote that Australia should maintain the ability to say no to the United States.³⁵ Another former military officer, Lieutenant General John Sanderson opined that Australia’s future lay in building a proper strategic relationship with its Asian neighbors. He continued: “And if there is anything about this relationship with the Americans that impairs our ability to build on that relationship then we should have a much deeper strategic debate.”³⁶

After the Obama visit Prime Minister Gillard continued to repeat her stance that it is possible for Australia to have an ally in Washington and a friend in Beijing. Time and again, referring to the stationing of US marines for parts of the year in Darwin, Gillard said that increased US military training on Australian territory poses no threat to China.³⁷ Another recurring statement by the Gillard government was that China is not the target of Washington’s rebalancing policy. Despite the criticism, Gillard left office having succeeded in upgrading Australia’s China relationship and incorporating an annual, senior-level leader’s meeting into the bilateral framework. In April 2013 the two countries agreed to hold an annual meeting between the respective prime ministers as well as annual cabinet-level dialogues focusing on foreign policy, strategic, and economic issues. It was no easy feat to get this decision through the Chinese bureaucracy so soon after the new Chinese government was announced in March 2013.

Australia’s political relationship with China is far less developed than its economic relationship. Hence, the importance of the senior-level dialogue mechanism. China is not merely an economic power but also a crucial political and security actor in the region. Underdeveloped political and strategic relations between Canberra and Beijing weaken Australia’s ability to exert influence regionally. Australia risks being viewed by China’s leaders merely as a provider of resources and a subordinate member in the alliance with the United States. Moreover, there is a danger that problems in the bilateral relationship, which inevitably arise, will escalate into a crisis due to the lack of familiarity and political trust between key Australian and Chinese decision-makers. Ideally, and possibly after several years of annual meetings, Australian and Chinese leaders would know each other well enough to pick up the phone when a crisis looms or when one side behaves in a manner which the other side finds objectionable. Direct contact is a far more effective way of getting one’s views across than the megaphone diplomacy the Abbott government has used in the first months of office. Several Australian observers have in private said that Abbott needs time. His foreign policy experience—not to speak of his dealings with Chinese leaders—is limited.

Inconsistency in Defending Australia’s Values

Upon taking office Abbott was not expected to change Australia’s basic approach to China; by and large, Australia’s China policies have enjoyed bipartisan support. Nevertheless, when visiting China in 2012 as opposition Leader, Abbott made it clear that as government leader he would hold China to account on (lack of) democracy and (abuse of) human rights.³⁸ Furthermore, Abbott, Bishop and Defense Minister David Johnston are well-known supporters of closer collaboration with Japan; so some changes in nuance were to be expected.

The language chosen for the statement issued at the end of the Trilateral Strategic Dialogue certainly differed from previous trilateral dialogue statements.³⁹ Neither the United States nor Australia opposed Japan taking the initiative when its wording of the statement was formulated. In fact, two senior State Department officials in Washington, DC concede that in the whirlwind atmosphere of juggling bilateral and trilateral meetings on the sidelines of APEC in Bali, some wording issues “probably” slipped through the cracks.⁴⁰

Few Australian commentators have questioned Abbott on his China statements. Hugh White, author of The China Choice, is one exception. In a scathing attack on Abbott’s handling of Australia’s relationship with China, he writes, “Abbott seems not yet to understand how much pain [Beijing] can inflict, on him and on Australia.”⁴¹ Another exception is Robert Ayson, a defense strategist from New Zealand and a visiting fellow at Australian National University. Ayson points out that “particularly when almost all of Japan’s foreign policy is directed through the prism of its concerns about China, Australia has to be especially careful not to get itself caught in a tussle between these two important partners.”⁴²

Abbott is known for emphasizing the importance of defending values. His remark about ”when we feel our interests and values are being compromised” should not have been a surprise. What is a surprise was Australia’s silence after Abe visited the controversial Yasukuni Shrine, the first prime minister to do so since 2006. Across Asia this shrine, at which Class-A war criminals are honored, symbolizes “Imperial Japan’s aggressive cruelty”.⁴³ Considering Abbott’s insistence that Australia should not be afraid to defend its interests and values, would it not have been consistent to publicly criticize Japan for the Yasukuni visit? Not just China and South Korea issued critical statements. Even the United States, which in public rarely rebukes Japan, expressed its disappointment.⁴⁴ The Obama administration went as far as publishing a statement regarding a follow-up call by Secretary of Defense Chuck Hagel to his counterpart Onodera Itsunori, underscoring the importance of Japan taking steps to improve its ties with its neighbors.⁴⁵

The public debate in Australia on Canberra’s China policies and future geopolitical challenges has tended to revolve around how Australia should avoid one day having to choose between China and the United States. Now it would appear that Australia needs to avoid being seen as choosing Japan over China.