So Jane.
Belt and Road has been described by many China watchers as very
much linked to the China Dream.
Do you think China's dream can become Australia's dream?
Look, China's dream is fundamentally
about the rejuvenation of the nation,
and I guess ultimately returning China
to what its leaders see as its rightful place
at the center of the world.
I see that primarily in economic terms,
not necessarily about it wanting to rule the world.
But either way, the idea that Australia and China
can share exactly the same dream seems pretty unlikely to me.
Does that mean-- it raises the question
of whether any country really has
a sort of rightful place in the world.
It tends to-- these things tend to wax and wane.
I would've thought that Belt and Road,
although it's been described as a great big sort
of geopolitical experiment, or a sort of transnational, even
a transnational coalition.
Belt and Road does look in many respects
like a bit of a hodgepodge of different projects,
for sort of different purposes.
And a lot of China watchers I think
find it rather difficult to untangle precisely what Belt
an Road is, and what it's for.
What do you think it's for?
So let's think about the most important thing of the China
Dream.
As I said, it's not about China ruling the world.
It is about the Chinese government providing
economic growth opportunities primarily for its own people,
and what they see is the best way
to do that is a grand or transnational development
strategy that brings its own developmental experience
to countries in neighboring regions,
offering them prospects for economic growth,
but then also trickle down back at home.
So in the first instance I've always thought of it
as an economic strategy.
And it's one that makes really good sense again
from China's perspective.
The whole of the last 40 years since the reform and opening up
commenced under Deng Xiaoping has
been about economic development, and they've always
used regional development strategies
to promote development within China's own borders.
They've also integrated very successfully
into the global economy and the Belt and Road Initiative
has the potential to combine both of those two things,
bringing what they call win-win economic development
both for China's 1.4 billion people,
and essentially for the rest of the world as well.
But of course other people see it in a different light.
You know the most-- the starkest contrast
of it being an economic development strategy
is that it's purely geopolitical.
That is, that China is using this
to gain power and influence in neighboring regions.
And if you take that to extreme, to possibly take
over and control the world, and all the people in it.
I think that's going way too far,
but there are elements of control and influence
that come out of being the largest
economy and the most influential economic actor in the region.
And particularly when you're laying down
infrastructure and telecommunications
networks that are linked to large Chinese enterprises,
state owned or otherwise, that are in turn
linked in ways that we don't fully
understand to the Communist Party of China.
I mean, I think it's really interesting you describe it
as primarily an economic venture.
And I can see from the perspective of an economist
that would be the case.
Unfortunately, I'm one of these nasty people, as you know,
who trained as a sort of geopolitician.
And one thing that strikes me is that there's never really
been the expansion of economic influence
by any type of major power, whether it's the United States,
whether it's Great Britain, whether it's
other European nations or whether it's
China at the moment, that doesn't come with it
a hell of a lot of political influence.
So I think from my perspective at least
Belt and Road is creating the building blocks for a sort of--
not domination of the world, but certainly significant leverage
that China has over a sphere of influence
that's really quite large.
One that spreads from basically Europe through to Central Asia
through to the Middle East.
The big question, I guess, is how much, and to what extent,
China is able to project that within the sort of area
that Australia occupies, which traditionally
has been a bit of a geostrategic backwater,
but suddenly becomes newly important.
Because you have so much hydrocarbons flowing through
from the Middle East.
The Straits of Malacca and the sort of energy transit
states around there.
So the area towards Australia's north
is becoming very interesting.
And that's potentially a sight for Chinese leverage, too.
One of the things we've witnessed, of course,
with the Belt and Road loans is very much
the approach of countries who are
keen to sign up to it initially, and then
worry what happens afterwards.
Will it create narrow development corridors,
or the types of benefits that Belt and Road
is supposed to generate flow on through to the rest
of those societies.
I think the answer on this is quite mixed.
I think sometimes it has.
I think many times, particularly in Africa, it has not done so.
But that doesn't really dampen the enthusiasm for many elites
within, not just the general Eurasian region
to get on board Belt and Road.
Maybe because it looks like investment
that might be simply bilateral, not really multilateral,
but investment that allows them to create jobs,
allows them to build infrastructure.
It allows them to solve many of the problems that they face.
What comes next though is the big issue.
I guess-- I mean my question here
would be to try and link this together,
what should Australia do?
Should Australia sign up to the Belt and Road?
We've seen the Victorian government
say that it was going to and sign an MOU.
Should we be doing the same?
Look, what we need to do is understand
much better than we do right now exactly what the Belt
and Road is about.
So just to be clear, even though I describe it
as an economic strategy to a certain extent,
I see it absolutely as a geoeconomic strategy.
That is, the use of economic tools
to achieve geopolitical outcomes.
It is still really unclear whether
those geopolitical outcomes will be entirely benevolent
as the Chinese government would like us to believe,
or whether it will have some malevolent attributes.
Now a really good example of this
is the discussion around the debt trap diplomacy.
Had a lot of press.
Our own former foreign minister, Julie Bishop picked up on it,
and basically started talking about how
Australia should compete with China
in our sphere of influence.
Already talking in very geoeconomic terms, that
is in the Pacific in order to provide infrastructure,
and she used the specific words "roads
that don't lead to nowhere."
so the implication there, or the insinuation
is that the Belt and Road is deliberately
trying to trap countries into unsustainable debt,
and that Australia should come to the rescue.
Do I think that's the right thing to do?
Not in that particular instance.
If you look at the research, including research that's
come out of the ANU by Matt Dornan and Rowan Fox,
they looked at all of the countries in the Pacific region
to consider where their debt was coming from,
and how much China was to blame.
And they answered emphatically that debt trap diplomacy
was an inaccurate assessment of China's engagement
in the region.
If that's the case, then competing
with China on infrastructure is the completely wrong policy
response.
And that's why we really need to get the facts straight.
If you know that money flowing in, whether it's from China
or anywhere else in the world as these two found,
is problematic because of how the host government responds
and utilizes the funds-- not because of the fact that China
is pouring it in--
then pouring more money in from another country
is going to result in the same problems.
And there's an example of where you'd
be much better off to cooperate with the host country,
and even to cooperate with China to make sure
that any investment that went into the region
found its way into positive, efficient investments that
could deliver positive economic growth
to the region in the future.
But in many respects it's not leading to positive long term
benefits in the Pacific, isn't it?
I mean a lot of the times it's offered to regional elites
to help them politically.
You know, whether it's by building a new Parliament
building, or building a new stadium,
or providing fast 5G Wi-Fi.
Those are semi infrastructure, but they also come with it
the expectation that those countries will tie themselves
very closely to China.
There's no suggestion, for instance,
there's any part of Belt and Road
that Chinese aid, Chinese loans, don't
have the expectations of normal relations
between those countries and China.
So the Australian government by trying
to pump equal amounts of money, or large amounts of money
into the back into the Pacific is
in my view at least fighting with one hand tied
behind its back.
Because of course, as a democracy
we stress things like good governance outcomes.
In places in the Pacific where good governance outcomes
are often not desired by the political leadership.
So in many respects, I think China
has both the economic advantage, in that it has more to spend.
But it also has the political advantage,
in that a lot of the nations in the Pacific region
don't necessarily want the many strings attached
development assistance that comes from Australia.
And that's what puts China in such a powerful position.
And that's why we need to think very carefully
about how best to use very limited funds, our aid
budget declining over the last decade
or so, and use them in the way that's
most effective for aiding development in the Pacific
region.
And so again, if governance is the problem,
we channel our efforts into improving governance.
Trying to stop China when they're the wealthier
country, far more powerful, offering lots of money
to people who really need it, we're
just not going to succeed there, I don't think.
I know, I mean I completely agree with you.
Mainly because regional trade architecture has kind of
declined with the United States effectively
aggregating its leadership of the trading space.
Not just within our region, but frankly globally.
The interesting thing being of course,
like you know people say oh it's Trump's fault,
it's Trump's fault, it's Trump's fault. But let's face it,
had Hillary won, had Bernie Sanders won,
they would have all pulled out of
the trans-pacific partnership.
So effectively the type of open trade governance
that we've been promoting for years and years and years,
since APEC and before, is something
that we have to spearhead ourselves
with the assistance of perhaps Japan.
In many respects there and therefore you know any deals
we come up with a kind of TPP minus one,
with the minus one being the United States.
Still better than no TPP at all.
Still better than none at all, yeah.
There are many who would say that support for the American
Alliance is hardwired into our DNA.
Now that's a phrase I hate, because it
suggests that there is absolutely no time you ever
swap best friends.
And it suggests that Australia will
be wedded to the United States forever and a day,
no matter what the United States might do.
Do you think Australia faces, as Hugh White suggests,
a sort of China choice?
Is it the fact that we are some time,
at some stage going to have to choose
between our major strategic partner and our major trade
partner?
I mean I get the sense that the government--
successive governments for a long time
have tried not to have a choice.
They've tried to make a series of little choices.
But if it really push comes to shove,
do you think that necessarily Australia will be able,
should it even want to, to sign on as a complete enthusiastic
supporter of Belt and Road without a hell
of a lot of pushback from the United States?
And on the other side of the equation,
do you think perhaps Australia can necessarily
chart a path as a firm democratic ally
of the Americans, and not some suffer some kind of punishment
from the Chinese?
How do we get that balance right?
Well that's exactly the question that the foreign policy
makers here in Canberra will be thinking about very
deeply immediately after the election,
and I hope already now.
I don't think Hugh White points to--
or forces Australia into making such a stark choice.
He's really about how we steer that line,
or navigate the line between our number one security ally,
and our number one economic trading partner
as the relationship between those two superpowers
becomes increasingly tense.
It requires flexibility, it requires nuance,
it requires sophistication.
And it requires a deeper knowledge of the complexities
of both of those two countries.
So as we move ahead, that's the question
that they're grappling with.
And I don't think they can make a black or white,
we'll do this all the time.
We need to figure out where we need
to compete with China, where we need to cooperate with them,
where we should stand up and challenge them,
figure out where that puts us vis a vis the United States.
And I would argue through that process,
carve out at least a slightly more independent foreign policy
that enables us, for example, to stand up and defend free trade
when our number one ally is crushing it to pieces.
Well, to be honest I couldn't agree with you more.
Australian foreign and security policy
hasn't been particularly independent
in my view whatsoever.
What we have done, however, is we have in many respects
locked ourselves into a series of preferences for the future.
If you look at things like defense procurement,
for instance, we're effectively locked
in for the next 20 to 25 years.
There's not an awful lot we can do.
What we can-- where we can't change the equation
I think is where we make political choices.
There was a famous story about--
from 2004-- when Alexander Downer was foreign minister.
You probably know this story, when
he was asked by the Chinese press what would Australia
do in the event of a shooting war over Taiwan
between the United States and China.
And Downer said basically the thing
that a newly minted foreign minister probably should say,
which was we would do nothing.
We will be absolutely neutral.
And it was pointed out to him within 24 hours by the United
States that Australians would be expected to fight and die
under those circumstances.
Now interestingly enough, that has been very much the default
setting of Australian foreign security policy community
for a very long time.
The fact that we're even having this discussion now,
and that we're raising the question of,
well, could Australia in fact be more of a sort of swing player.
Because let's face it, under the type of scenarios
that are shaping out within our region, as a middle power
Australia should be able to make out like an absolute bandit.
Middle powers tend to do that when
you have a sort of bipolar configuration
within your region, you can play one major power off
against one another, and therefore
avoid those hard choices.
Whether we have the flexibility, and whether we
have the capacity really to think
outside the square in the way that you're suggesting,
to be really independent in the types of choices we make,
I'm not quite sure.
I tend to think that the alliance will be something
that we'll be expected to uphold,
and possibly expected to do so at the detriment-- financial
detriment and trade detriment of Australians for a while yet.
What I think we need to see, and I think
and we're seeing it already here in Canberra,
is that people across the university.
I mean with China's rise just in the last few years
there's been so many more conversations between security
and foreign policy people like yourself,
and economists like me, coming together and trying
to understand and navigate and provide policy
advice to government about how to operate foreign
economic and security policy in this new area
that we find ourselves in.
What I'm talking about here is geoeconomics, and we both are.
We're understanding the economics
and the security overlap in complex ways that none of us
fully understand.
But we're sitting in exactly the right place
to get that right in the years ahead.