Source: Australian War Memorial

This seminar was held on 2 November 2011 and featured prominent analysts Professor Geoffrey Garrett and Professor Hugh White. Both speakers marked the 60th anniversary of the ANZUS alliance by examining current and future challenges for the ANZUS alliance in the context of United States–Australia relations and the Asia-Pacific.

The seminar was chaired by Mr Michael Danby MP.

Professor Hugh White
Professor White began by noting that the US alliance has been good for Australia in that it has underpinned stability in the Asia-Pacific region over the last 40 years. He argued that US primacy in the region has not been contested during this period and the presence of the US in the region has been ‘hard-wired’ into how Asia works. As a consequence, Australia has not had to choose between Asia and the US.

Professor White also stated that the cost to Australia for being a US ally has been remarkably low. Australia has fought no war in the region since Vietnam nor has it had to play host to American troops. This is in contrast to other major US allies such as Japan and South Korea, both of whom pay a higher cost for the closeness of their relationship to the US.

Having made these opening remarks, Professor White asked, ‘will this last’? Certainly, continuing uncontested US primacy in the region is still the best outcome for Australia but as Professor White has written elsewhere, ‘hope is not a policy’. The rise of China represents the most fundamental challenge to US dominance and Australia will be forced to come to grips with this in the coming decades. Professor White made the point that China’s rise does not necessarily mean US decline. He also pointed out that there are no certainties in this; China’s successful rise is likely but not necessarily guaranteed and likewise is the continued resilience of the US. Regardless of continuing US power, it is unlikely that a markedly more powerful China will accept US primacy. He pointed out that this is a clash, not just of interests, but also of identity.

Professor White noted that the implications of China’s growing power could lead to four scenarios: 1. China’s acceptance of US leadership; 2. The US acceding to China’s leadership and abandoning its role in Asia; 3. The US and China could agree to share leadership; or 4. Escalating competition between the US and China for leadership. Professor White discounted the first two scenarios. He does not believe China would accept US leadership and while it is not impossible that the US might abandon its role in Asia, this scenario is unlikely to eventuate. The real choice is sharing power; however the current strategic direction seems to be heading down the path of competition for leadership. This could amount, on the part of the US, to a policy of ‘containment’.

China has made some very clear assertions about expanding its presence in Asia while the US continues to enjoy the same position of strength in Asia. The current US policy in Asia could almost be considered one of ‘containment’, which is incompatible with China’s policy goals. While the term ‘containment’ could be considered controversial, and therefore not widely acknowledged, it does not mean that this kind of policy approach might not be used. As the strategic competition escalates, there is a small but real risk of war between the US and China. Should this eventuate, it would potentially be the worst war in history and would place Australia in a devastating dilemma. As such, we should do all we can to prevent this eventuality.

Professor White argued that the two countries need to move towards the shared leadership option. Despite his prediction that this won’t occur, as neither party is likely to accept it, it would be a disaster for both if they don’t. The main issue with this scenario is that the US underestimates China and does not understand what sharing leadership would mean. Such sharing would not necessarily mean conceding leadership but avoiding (an attempt at ongoing) hegemony. An additional factor is that no country in Asia wants to be ruled by China. Asian countries want to constrain China without escalating strategic tensions as this would be a very costly endeavour. Professor White pointed out that ‘peace is a value too!’

We can’t expect a continuation of the situation which has prevailed in the past 40 years (of clear US predominance). So what role does Australia want the US to play? We can continue the current approach, which, while unstated, is to assist a policy approach of containment. Alternatively, Australia should advocate the power sharing model and do what it can to assist the US move towards this. Australia should review its alliance with the US and recognise that the future role of the US in Asia is going to be very different from the recent past.

Professor Geoffrey Garrett
Professor Garrett agreed with Professor White’s assessment about the benefits of US power to Australia, especially over the past 30 years. However, he contests Professor White’s views about the notion of US decline being substantially overstated and the future becoming more like the past than the ‘declinists’ believe. It follows that Australian policy is serving Australia well and will continue to do so into the future. Professor Garrett feels that economics is the main factor that will influence the behaviour of China and alter strategic policy.

Professor Garrett told the audience that in one of the classes he teaches on US policy at the University of Sydney, he asked students what the defining, dominant theme has been over the last ten years. The majority of students cited the decline of the US. Professor Garrett feels this is wrong. He agrees that the last decade has been far from the best the US has experienced, but pointed out that Europe’s economic problems are much worse than the US’s. For example, the US borrows money on the bond market at a rate of two per cent whereas a country like Italy borrows at 6.4 per cent and the American public debt (as a proportion of GDP) is lower than French public debt. He feels that America’s worst problem is not the state of its economy; it is the state of its politics. He cited US domestic political conflict over debt reduction as a prime example. The main issue with the US economy is that it is in a stand-off: corporations have funds available but do not want to invest, while low consumer confidence has seen a decline in consumer spending. Despite this, the US economy remains the most innovative economy in the world; ‘declinism is way overstated’.

Professor Garrett does not underestimate the rise of China but he considers that the emerging world order is more likely to be a ‘G-2 world’, rather than a situation of ‘cold war’. Economics is the key to managing interaction as the risks of economic disruption through conflict are very high. China is integral to the world economy and this, he notes, is markedly different to the cold war in which the former USSR never achieved any sort of economic dominance.

Professor Garrett discussed the imbalance of the Chinese and US economies – for example, China holds over $1 trillion in US treasury bonds – but he asserted that the two countries are also heavily co-dependent and this would make any real conflict catastrophic for both sides. To illustrate this co-dependency he cited what he described as the Apple Strategy (Apple designed in the US but assembled in China) and the General Motors strategy, where GM’s recovery after the global financial crisis was based heavily on its success in producing cars in China for the Chinese market. Further to this theme, Professor Garrett noted that sixty per cent of China’s exports are made from imported parts and sixty per cent of this manufacturing is done by multinational firms based in China.

Professor Garrett considered Professor White’s ‘cataclysmic’ scenario of rising tensions between the US and China to be unlikely given the costs of war. The dependence of China on the world economy is such that tensions are managed down. He cited the recent Bill passed in the US Senate naming China as a currency manipulator. This, among other similar issues, might be used as a trigger to escalate tensions but in most cases between China and the US, these pressures are managed, metaphorically speaking, by letting air out of the balloon before it bursts. China is a rising power but it is also interdependent.

Professor Garrett predicts that President Obama will roll out a new US strategy in Asia which he (Garrett) calls a ‘socialisation strategy’ in relation to China. Noting the recent Free Trade Agreement between the US and the Republic of Korea (KORUS), Professor Garrett pointed out that there is no immediate domestic political benefit for the US in these arrangements, however, President Obama pushed through domestic laws to implement them. Professor Garrett believes that this is part of a strategy for the upcoming APEC meetings in Hawaii where, he considers, the US President will advance his strategy of promoting the Trans-Pacific Partnership (TPP). Australia is, so far, the second largest participant in the TPP and therefore can greatly benefit from a high quality Free Trade Agreement for the Asia-Pacific (which can emerge through the TPP). Should Japan and the ROK agree to join the TPP at the next Asia-Pacific Economic Cooperation (APEC) meeting (in Hawaii, 8-13 November) China will come under longer term pressure to join. Professor Garrett predicts that China will initially object but might eventually join as they would recognise the benefits of economic integration through greater market access. President Obama may also want to push the TPP proposal at the forthcoming East Asia Summit (Bali, 19 November 2011).

Professor Garrett concluded by stating that he doesn’t believe we are entering into a replay of the cold war as the evolving strategic relationships are about economics as well as strategic/military considerations.

For further details about the Parliamentary Library’s Vital Issues Seminars and Lectures, or to listen to this seminar in its entirety (including the question and answer session), go to the Parliamentary Library’s website.

Further reading:

Hugh White, ‘Power shift: rethinking Australia’s place in the Asian century’, Australian Journal of International Affairs, vol 65, no 1, February 2011, pp 81-93.

Geoffrey Garrett, ‘Strategic choices: Australia, China and the US in Asia’, The Asialink Essays, vol 2, no 5, 2010.

Compiled by the following staff of the Foreign Affairs, Defence and Security Section—Nic Brangwin, Frank Frost and David Watt.