Commentary | 12 July 2019

Morrison must think hard about our Pacific plays

Originally published in The Australian

Originally published in The Australian

In a major speech ahead of the G20 summit in Osaka, Scott Morrison advised Australians: “We should not just sit back and passively await our fate in the wake of a major power contest. This underestimates … the power of human, state and multilateral agency.”

The latest edition of the Lowy Institute Asia Power Index confirms the Prime Minister’s intuition that Australia can make a difference. Our comparative advantages are becoming only more important to ensuring a favourable balance of power in Asia. The challenges of great power rivalry present an opportunity for Australia, far from being a passive observer of geopolitics, to expand its role in the region. The key to success is to work in concert with like-minded powers.

The Lowy Institute has aggregated 30,000 data points as part of our comprehensive study of the changing distribution of power in our region. The 2019 Asia Power Index ranks 25 countries in terms of what they have, and what they do with what they have. It reaches as far west as Pakistan, as far north as Russia, and across the Pacific to the us.

The relativities of power in Asia are changing, but so is the character of power. The open US-led Asian order is giving way to intense competition between two superpowers: one established, the other emerging. The US remains the dominant player while China netted the highest gains in power.

Yet the regional order is sustained by a much wider spectrum of actors than those two.

Australia is a significant player within the Asia-Pacific, ranked seventh, behind South Korea, for its overall power. We are a notable all-rounder, notching up top-10 performances across all eight of the index’s measures: economic resources and relationships, military capability and defence networks, diplomatic and cultural influence, resilience and future resources. Importantly, Australia’s power has been stable across the past year and we are trending upwards for military capability and economic relationships.

The one setback was a drop by one ranking for our diplomatic influence following more leadership churn last year. The high turnover of prime ministers, five in six years, has undercut our leaders’ ability to form lasting partnerships with their counterparts. Following his re-election, Morrison has an opportunity to stabilise our fluctuating diplomatic influence.

Conventional wisdom holds that third countries will become collateral damage in a Thucydidean struggle between superpowers.

Yet middle powers are proving to be agile actors in managing the ups and downs of US-China competition. The case of Huawei shows that smaller powers already have significant leverage between two gridlocked superpowers over which side will dominate the next generation of technology and globalisation.

The biggest overachievers in the index are middle players with the chutzpah to co-ordinate their shared interests. Japan, in particular, has become a real leader in Asia by finishing second for diplomatic influence, ahead of Washington and behind only Beijing. Maintaining an inclusive multilateral architecture — including via the Trans-Pacific Partnership minus the US — has become the organising principle of Shinzo Abe’s foreign policy.

Similarly, Australia’s second-place ranking for defence networks reflects not only the depth of our US alliance but also our investment in defence diplomacy with non-allied regional partners.

As China’s presence in contested spaces grows, Australia should strengthen its links to like-minded countries such as India, Indonesia, Japan and South Korea.

Given that modern power politics takes place below the threshold of conflict, we also need to do more to prepare for the potential exploitation of economic asymmetries for geopolitical gain.

Australia is the fifth most resilient power in terms of our capacity to deter threats to our stability.

Our 30 per cent trade dependency on China is offset by a lower trade-to-GDP ratio than most Asian tiger economies. Yet we import more refined fuel than any other country in Asia, leaving us vulnerable to disruptions in major sea lines of communication.

It makes good sense for Canberra to establish a national fuel reserve as well as to invest in decarbonisation.

Australia also has a crucial role to play in diversifying the supply of critical minerals used in digital and renewable technologies. Australian rare-earth mining reached 15 per cent of global supply in 2017, second only to China’s 81 per cent.

We should do everything we can to strengthen Australia’s demographic outlook. Thanks to a farsighted immigration program, we are the sixth largest projected economic beneficiary from growth in the working-age population to 2045. That makes us the envy of ageing East Asia. By contrast, China must contend with a workforce projected to decline by 158 million people in less than 30 years.

Finally, we need to believe in ourselves. Certainly, if we don’t, no one else will.

Australia has the economic, military and diplomatic resources to play a significant role in our region. But we need to work with others and we need to think big.