Can Australia reconcile the divergent logics of geopolitics and geoeconomics? The current ‘twin track diplomacy’ is certain to be tested by Australia’s very different relationships with China and the US.

It has become commonplace to observe that Australian policymakers face a major challenge trying to reconcile the strategic and economic aspects of foreign policy. But while we might have become used to the idea that doesn’t make it any less difficult to resolve.

The dominant policy discourse in Australia is that it doesn’t have to choose between its economic relationship with China and its enduring strategic relationship with the US. While this is a comforting idea, and one no doubt directed as much at an external audience as a domestic one, things look rather different in practice. Indeed, the preferred approach at present seems to be the development of discrete diplomatic tracks that reflect quite different logics and implicit choices.

Evidence of this growing dichotomy is not hard to find. On the same day that Joe Hockey attended the launch of the Asian Infrastructure Investment Bank (AIIB), which was developed by China as an alternative to the extant institutional architecture historically dominated by the United States, Tony Abbott was assuring Australia’s principal strategic ally that it could have no more dependable friend.

Given the difficulty of reconciling such divergent goals and interests, this is an understandable approach, perhaps. After all, Australia can’t really afford to get offside with either the US or China, no matter how difficult their bilateral relationship may be at times. Yet the inherent vulnerability of this strategy to events the Australian government cannot influence, much less control, is painfully clear at times.

The twin tracks in Australian diplomacy reflect wider changes in the international system and the increasing importance of geoeconomics rather than geopolitics. Geoeconomics was described by Edward Luttwak as the “grammar of commerce but the logic of war’.[i] In other words, economic leverage and influence can be – and ought to be - used in pursuit of perceived national interests.

The AIIB is the quintessential exemplar of this possibility. Frustrated by its inability to exert an influence in keeping with its economic status in the existing so-called  ‘Bretton Woods’ institutions – especially the International Monetary Fund and the World Bank – China has decided to develop its own. With the noteworthy exception of the US and Japan, countries have been queuing up to join.

This is not quite the reemergence of the old East Asian Tribute system in which other states acknowledged Chinese hegemony, but it is significant nevertheless. Importantly, it is not simply an expression of China’s growing soft power or ideational influence. On the contrary, if successfully realized the provision of much-need infrastructure funding in Asia promises to quite literally cement China’s place at the center of an expanding, interconnected regional production networks.

If China’s expanding geoeconomic influence were occurring in isolation, Australian policymakers might be able to live with it. After all, this has been the big story about Australia’s historical economic engagement with the world. Australia has been a rule taker rather than a rule maker, and one that has been shaped by powerful external economic forces. What makes this difficult, and what accounts for all the ambivalence and mixed messages, of course, is the fact that China’s rise is also undermining the strategic environment that many Australian policymakers thought was set in stone.

The flipside of China’s rise has been America’s relative decline.  Because Australia is so closely aligned to the US militarily, American policy goals and its capacity to pursue them necessarily have greater implications for Australia than for most countries. True, other states in the region are also concerned about the strategic implications of China’s rise and its increasingly aggressive pursuit of territorial claims in the South China Sea, but few other countries offer the US the sort of blank strategic cheque that Australia traditionally does.

The great dilemma for Australia is what happens when twin tracks collide. Will it be possible to walk both sides of the policy street, or will Australian policymakers have to wrestle with fundamentally incompatible policy choices? The proverbial nightmare scenario is a direct clash between the US and China – something America’s strategic thinkers are increasingly discussing and war-gaming.[ii]

At one level, such exercises are futile. In the event of even a minor conflict, much less an all-out war, debates about the finer points of strategy and policy options would rapidly be rendered meaningless - not least by the probable meltdown of the global economy. At another level, however, where Australia’s policy choices only have relevance or significance in a stable, peaceful environment, actions may well speak louder than words.

The implication of all this is that – in the absence of war – geoeconomics is simply more important for a modestly credentialed middle power like Australia. In an environment where Australia can make absolutely no difference to major strategic outcomes in the region, prioritizing ‘Australian interests’ makes intuitive sense.

While there may be a debate to be had about what precisely Australian interests actually are, at least this is something that can be discussed and possibly even defined within the boundaries of the nation. Who knows, we might even develop a more coherent one track policy as a consequence.

References

[i] Luttwak, E., From geopolitics to geo-economics. The National Interest, 1990(Summer): p. 17-23.

[ii] Dion Nissenbaum (2015) Author Warns U.S. Military to Focus on China, Wall Street Journal, June 28, http://www.wsj.com/articles/author-warns-u-s-military-to-focus-on-china-1435539010?tesla=y