Economic Tools for Statecraft and National Security

Australia faces a new and threatening geopolitical environment that has provoked a rethink of Australia’s international strategies. A more powerful and assertive China and our primary ally, the United States, pre-occupied with divisive domestic conflicts while engaged in tense strategic rivalry in East Asia, have laid bare vulnerabilities in security and diplomatic strategy and in global forces undermining our trade strengths and economic prosperity. Regional and global coalition-building is one hedge against these security uncertainties. The elevation of the Quad to a leaders’ summit and AUKUS strengthen Indo-Pacific security and geopolitical cooperation. These developments elevate the importance of deep economic and political engagement with Southeast Asia. Economic strength is absolutely critical to defence capabilities and alliance maintenance; it underpins national security. The realities that Australia faces: 1) that two-thirds of Australia’s trade is in Asia with China and economies inextricably linked with China and 2) the multilateral economic regime which, despite its inadequacies, protects Australia against economic coercion, is being undermined by our US alliance partner. Decoupling from China, it must be recognised, would have large costs to Australia and its regional neighbours and isolate Australia in regional economic and political architectures. US protectionism is also a direct threat to Australian markets — not least in China. A primary national security objective is therefore to maintain and revamp the multilateral institutions that guard Australia’s policy space, sovereignty and economic strength. Defending and upgrading the multilateral economic system are strategic goals, not narrow, technical economic issues. A multilateral play helps dilute the arbitrary exercise of power. The unpalatable reality is that the United States and China will seek bargains that disregard Australia’s interests in that system. Australia’s diplomacy and leadership in international forums, in its representations in Washington and to Beijing, must give priority to multilateral solutions and global arrangements that support both prosperity and security. To this end Australia also needs proactive engagement with similarly affected partners in the region, such as ASEAN and India, using all the instruments of regional diplomacy that are available. Equally, Australia must strive to enmesh China in markets and new rules, through existing platforms and by engaging proactively with China’s ambition to join the CPTPP. Like active cooperation with the United States and China on climate change, CPTPP offers a chance to work with China and keep the United States involved that should not be passed up. A redoubled effort to engage with ASEAN is of the highest priority. Australia’s frontline economic and security challenges require a strategy of economic engagement with Southeast Asia that strengthens ASEAN and is a critical complement to the political hedge that the Quad provides. That can entrench ASEAN’s multipolar regional order of rules, openness and stability. Areas of priority are health and economic recovery; infrastructure, debt and foreign investment; sustainable finance; crisis prevention; and digital trade. Global rules and the domestic institutions and laws protect open and contestable markets, and limit the adverse effects of attempts by other countries to deploy economic coercion. The economic, defence, intelligence and social dimensions of Australia’s security are inseparable. Absent a policy framework that systematically integrates all dimensions of the national interest, Australia’s future will be poorer and less secure.