Since March 2020 the world has been in the grip of an intensifying COVID-19 pandemic. This unprecedented event raises a series of pertinent issues about Australia and its relations with Asia that are clouded by its contretemps with the People’s Republic of China. The issues need to be addressed from a global rather than a regional perspective. Are we about to enter a new era in these relations? Has there been a shift in the rules of the game? Do we need to rethink how to respond to Beijing’s attempt to reorganise the global arena?
Here these issues are discussed in terms of geo-logistics, instead of geo-economics, to focus on the state of flux in global supply chains and infrastructural networks beyond China’s borders prior to March 2020. Then an examination is made of the post-March 2020 situation when the prospects for infrastructure development have become less appetising for many countries, in what may be a development-less decade following the decline in world trade.
Pre-March 2020: A world in flux
Before the onset of COVID-19 in March 2020 Beijing actively developed a global vision, undertaking actions that impinged upon Australia and its relations with Asia. Within China great strides had been made since the 1990s in improving the domestic logistics landscape by building infrastructure for air, land and sea transport, energy and telecommunications. When troubled by excess production capacity, it was but a short step in 2013 for Beijing to bundle the skills derived from these logistics activities, especially those within state enterprises, and transfer them to construct economic corridors beyond the country’s national borders as part of China’s Silk Road Economic Belt and the 21st Century Maritime Silk Road (see figure 1). These two components, underpinned by Beijing’s notional budget of up to US$1 trillion, are designed to accommodate goods, people and information flows by land and sea, and are best considered separately.
Across the Economic Belt three corridors have been developed or planned to underpin the investment deal between China and the European Union, and three more secondary corridors linking locations in the country’s western region to ports on the coasts of Pakistan, the Indo-China Peninsula and the Bay of Bengal. While these developments mostly affect India’s position, they do influence Australia’s economic interests, particularly in the Indo-China Peninsula encompassed by the Association of Southeast Asian Nations (ASEAN).
These interests have been affected by the United States’ adoption of an over-militarised approach to foreign policy and unwillingness to prioritise overseas infrastructure development. This situation has allowed China to strengthen its connections through its Belt and Road Initiative among poorly articulated mainland countries, notably Cambodia, Laos, Myanmar and Thailand and, with reservations, Brunei, Indonesia, Malaysia and the Philippines. Nevertheless, Vietnam has been offput by China’s aggression and ruthlessness in pursuing its policy ends that trample over the legal rights of countries bordering the South China Sea. Support has been sought from Australia, Japan, India and the United States that, in turn, have issues not only with China, but also, like South Korea, with North Korea’s military aggrandisement.
The gateway ports at the end of the Eurasian corridors, underpinning China’s emergence as a naval power, are linked into the Maritime Silk Road’s four blue economic passages from China: the western line via Suez to the Mediterranean; the southern line to Australasia; the northern line to the Arctic; and the eastern line to Latin America and the Caribbean.
Australia’s Indo-Pacific policy has been conscious of China’s rivalry with India in the western line. However, Australia’s immediate concern has been with the southern line encompassing the South China Sea, the Pacific archipelago and its extension to Antarctica.
This line cuts across the United States’ three island security chains ‘containing’ China, abuts Japanese strategic interests and its potential naval port developments concern Australia. Paradoxically, Canberra has eschewed any involvement in the Belt and Road Initiative, but Darwin, Newcastle and Melbourne appear among its list of 42 ports in 34 countries, and since 2018 the State of Victoria has a Memorandum of Understanding (MoU) on the Initiative with Beijing. While considering how to react retrospectively to this involvement, Australia has been swept into the global pandemic and Canberra may need to reconsider its position while seeking a better economic destiny.
Post-March 2020: A world in decline
By the end of 2020 China’s economy had already recovered from the pandemic. Despite the country’s trade war with the United States, its gross domestic product exceeded 2019 levels supported by government-led investment and increased demand for its industrial goods. During 2021 the decline in world trade is expected to continue and even big economies will struggle to recover from the pandemic. Despite cushioning by monetary policy and a fiscal stimulus, these countries will experience job losses and business closures.
A development-less decade may be anticipated. How will this affect Beijing’s Belt and Road Initiative?
Given the adverse economic prospects, will Beijing still want to incur the debt involved in foreign infrastructure development, and will host governments still want new airports, fibre-optic cable networks, high-speed railways and seaports? Any downturn in demand for cruise ships, oil tankers and container shipping will put the demand for port facilities back a decade. Is this likely pause an opportunity for Australia to reconsider its relations with Asia before the dawn of the next normal? Should Canberra hold off on reconsidering Beijing’s MoU with Victoria? While Canberra may baulk at participating along with New Zealand and South Korea in Beijing’s Belt and Road project, should it consider how to deepen its participation in the region’s infrastructure development?
Australia’s position in the world has been advantageous during the pandemic. But as one of the world economy’s three cul-de-sacs off ‘Main Street’ linking Asia-Europe-North America, Australia is at a disadvantage, like Africa and South America, in interacting with world markets. Over time this disadvantage has diminished for Australia because the world economy’s centre has tilted from a transatlantic Euro-American one towards an Indo-Pacific one with China forecast to be the world’s largest economy by 2028 and India the third largest by 2030.
Nevertheless, this handicap still persists for Australia, which will be aggravated if there is any conscious retreat from globalisation and the world is decoupled into separate orbits.
In addressing this issue much will hinge upon streamlining air, sea and telecommunications with Asia and the quality of Australia’s governance system, particularly in response to any détente between Beijing and Washington at its expense.
Meanwhile, there is an opportunity to follow China’s lead in paying more attention to Australia’s domestic logistics system. This is marked by cities straggled along a narrow east/southeast coast corridor and a slow-speed railway system connecting south-north with only one east-west rail link.
Can Australia do better with its supply chain to Asia?
Peter J Rimmer AM is Emeritus Professor in the School of Culture, History and Language, ANU College of Asia and the Pacific, Australian National University, Canberra. He is the author of China’s Global Vision and Actions: Reactions to Belt, Road and Beyond. Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing: 2020.