Western allies, divided loyalties

Australia and New Zealand are targets of Beijing’s strategic game, writes Cleo Paskal

The Taniwha and Dragon Festival in Auckland, New Zealand

As tensions rise in the Indo-Pacific region, western allies are keeping a careful eye on each other to see how each reacts to China’s growing strength.

Which allies will bar Huawei from their 5G superfast broadband network? Who will buy arms from whom? And which countries will devote the time, money and political will to engage in large-scale military training together?

At the same time, China is prodding at the weak spots in the bonds that unite the western allies, seeing where it has the political and economic leverage to pry them apart and undermine trust.

As a result, while the United States and China drift further apart, more countries, especially in the Indo-Pacific region, are finding it harder to balance their interests. That is especially true for longstanding western allies such as Australia and New Zealand.

The two countries have a lot in common. Both are former British colonies, with Queen Elizabeth as their head of state. Both have parliamentary forms of government and economies that include large resource and commodity exporting sectors. They have fought side by side in wars and are both members of the Five Eyes intelligence- sharing network, together with the US, Britain and Canada. Both also have strong economic links to China and strong security ties to the US.

From afar, it is easy to think of them strategically as almost one entity. However, there are significant differences between the two in strategic positioning and capacity, differences that will become more pronounced as tensions in the Indo-Pacific region mount. As is often the case with China, the leverage points begin with economics.

New Zealand does more two-way trade with China than with any other country, including Australia. China accounts for about 20 per cent of New Zealand’s exports, including more than $4 billion in dairy goods. In addition, Chinese tourists and students bring well over a $1 billion each to the New Zealand economy. These are large numbers for a country with a population below five million.

Australia, too, does more two-way trade with China than with any other country. In 2018, more than 30 per cent of Australia’s exports went to China, more than double the exports to Japan, its second largest market. In 2018, there were more than 150,000 Chinese students in Australia, contributing about $11 billion to the economy.

In both countries there was a shared hope that economic engagement with China would not compromise political and strategic independence. Sector by sector that hope has faded. Student organizations report back to Beijing on the activities of Chinese students abroad and try to change curricula on campus. Chinese Communist Party-funded media outlets work to shape narratives around sensitive issues and stifle dissent. China-linked political contributions have become a cause for serious security concerns.

In a watershed case, in 2015, the strategic Australian port of Darwin was unexpectedly leased to a Chinese company. It is right next to where a contingent of US Marines, sent by President Barack Obama to signal the US ‘pivot to Asia’, is training.

In New Zealand, it emerged that a China-born New Zealand MP had been a civilian officer in the People’s Liberation Army and taught at an elite language school for Chinese spies. He was known as an effective fundraiser.

In 2017, without naming China, Duncan Lewis, the head of the Australian Security Intelligence Organization, the ASIO, said foreign interference and spying was happening on an ‘unprecedented scale’ and ‘has the potential to cause serious harm to the nation’s sovereignty, the integrity of our political system, our national security capabilities, our economy and other interests’.

At a 2018 US Congressional hearing, Peter Mattis, a former CIA analyst, said: ‘Australia and New Zealand both face substantial problems with interference by the Chinese Communist Party. In both cases, the CCP has gotten very close to, or inside, the political core.’ He added: ‘The primary difference between the two has simply been their reaction.’

In the past two years, Australia has been vocal and active in trying to counter Chinese influence. It is blocking Huawei, reassessing political financing legislation, making major defence procurements, engaging in large-scale military exercises with the US and Japan, working on interoperability with the US, and even talking about building another port, a bit down the coast from Darwin, where the US Marines – and Australians and other allies – can train. And more. The US acknowledged these efforts and in its June 2019 Indo-Pacific Strategy Report the Department of Defence noted that it was in partnership with Australia in ‘cyber, space, and defence science and technology domains’.

Meanwhile, according to Mattis, New Zealand has been more problematic. ‘With respect to the reactions in New Zealand,’ he said, ‘both the last prime minister, Bill English, and Jacinda Ardern, have denied that there is a problem at all.’

He added: ‘At some level the Five Eyes or the Four Eyes need to have a discussion about whether or not New Zealand can remain given this problem with the political core, and it needs to be put in those terms so that New Zealand’s government understands that the consequences are substantial for not thinking through and addressing some of the problems that they face.’

The message from Washington seems to have been received, at least partially. A New Zealand parliamentary committee is looking into foreign interference in elections and Huawei may be blocked.

However, New Zealand still wants to work with China in ways it may think are benign but that could have security implications. For example, at the same time as there is growing concern over Chinese influence in the Pacific Islands, New Zealand says it wants to partner with China on development projects in the region. It may believe it can mitigate any negative aspects of Chinese engagement, but it is likely to be the junior policy partner.

As in many countries, in Australia and New Zealand the economic and political communities, linked as they are through funding, financing and relatively shortterm goals, tend to be easy targets for Chinese influence. Meanwhile, the defence and security communities, with longer-term time horizons, tend to be much more concerned about China.

In Australia, the defence and security sectors are becoming much more influential, though they are still losing out to business and political lobbies on issues such as the PACER Plus free trade deal, which might make a few Australian businesses some profit in the short-term, but will open wide a backdoor for China into Pacific Island economies. That can only mean that both Australia and the islands will be losers in the long run.

In New Zealand, the defence and security sectors, while vocal and active, are thinner on the ground, and the stakes for allies are smaller. Compared with Australia, New Zealand’s military capacity is limited. Fundamentally, New Zealand is in a convenient location for intelligence gathering and is supposed to ‘help’ allies with the Pacific Islands.

Concern was voiced recently at a Canadian Security Intelligence Service academic workshop that New Zealand was valuable to China ‘as a soft underbelly through which to access Five Eyes intelligence’. As long as New Zealand deals with those concerns and respects red lines, it seems that it won’t attract much attention.

In the Australian strategic community, New Zealand is sometimes described as a ‘naive do-gooder’. In the New Zealand strategic community, Australia is sometimes described as a ‘bully’.

Strategically, they are very different. But, wobble as they might, it would take something cataclysmic for either to deliberately themselves cut off from their western allies.

AUTHOR: Cleo Paskal Associate Fellow, Energy, Environment and Resources Department and Asia-Pacific Programme

SOURCE: https://www.chathamhouse.org/publications/twt/western-allies-divided-loyalties