That’s exactly what the United States is doing with tariffs on Chinese imports, increased barriers to investment and bilateral economic coercion in the name of national security. China is the main target but other countries, the WTO system and multilateral institutions are also under threat. These policies will make the United States poorer and weaker, and damage its status as a global leader. If other countries follow suit, they will make themselves and the world poorer, weaker and less secure.
How should a country like Australia navigate a world in which its primary security ally and its largest economic partner are descending into destructive rivalry, while still themselves being deeply economically integrated?
For some, the answer is to follow the United States further down this track and reframe foreign policy in security terms.
In this view, the only option is total alignment with US decoupling strategy, with every economic exposure to China cast as an all-or-nothing risk to national security. No understanding of the economic costs or the security options enters this calculus. Nor are third countries assumed to be an effective object of policy engagement on an alternative, multilateral course with or without the United States.
Peter Navarro, President Trump’s trade adviser, sees international commerce as an instrument of warfare. Andrew Harnik
For others, the answer is to add a geo-economic approach to foreign policy. That might sound like a good idea but what exactly does that entail?
The intellectual origins of ideas about geo-economics are two-fold. The first is simply about the analysis of spatial, temporal and political aspects of economies and resources.
The second is a branch of geopolitics that encompasses international politics, security and economics and commonly insists that the same logic that underlies military conflict also applies to international commerce.
The first idea is of interest, though marginal, to the big issues today. The second is the way of thinking about international commerce as an instrument of warfare, exemplified by Peter Navarro, President Trump’s trade adviser. This idea has been hijacked by those focused on security issues – but without much hard economic calculation, or consideration of economic as well as political security that is supposedly its purpose. Especially for small and middle powers such as Australia, it’s a strategy that will sap economic strength and national security.
Turning all national interests into a matter of security reduces the policy choices to enhance economic and national security. Soundly framed international economic policies are central to reducing the costs of broader economic and political engagement, both in dollar and in policy terms.
Bereft of judgment
Economic policy and engagement reinforces a rules-based international order. And they create a bigger, broader plurality of interests among countries, that reduces the costs of national security.
If geo-economics is the answer, it had better be informed by hard economic analysis, not left to the agencies of diplomacy or security, otherwise it too will be a security strategy bereft of judgment about national economic interest.
Take the large economic relationship that Australia has with China. A third of Australia’s exports go to China, led by education, natural resources and tourism. No economist would sensibly advocate deliberately reducing trade dependence on China, even if they consistently argue for broadening Australia’s range of economic relationships. Many in the political and security community do. It may be doable, but the question is at what cost and whether there are better options.
It’s not a matter of just the profits of businesses at the high end of town but people’s livelihoods that are put at risk. If Australia made the choice to cut back dependence on China, it would be withdrawing from trade with the world’s largest trading nation, a country that’s playing by rules to which we’ve all agreed. We certainly need more rules in some areas. But only Mr Navarro (and perhaps Mr Trump) would suggest that that’s a reason for tearing down the rules we have and that have worked quite well.
The right strategy is to manage economic interdependence within the multilateral trade regime and continue to build rules and markets that reinforce the global plurality of interests on which security within the global economic system is more soundly built. That system protects Australia effectively. It’s Australia’s primary national economic and security priority. It would be most unwise to acquiesce in tearing it down.
Shiro Armstrong is director of the Australia-Japan Research Centre and director of the Asian Bureau of Economic Research, The Australian National University. Peter Drysdale is Professor of Economics and head of the Asian Bureau of Economic Research, The Australian National University.
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