Britain’s Prime Minister Boris Johnson, Australia’s Prime Minister Scott Morrison and US President Joe Biden at a joint press conference via AVL from The Blue Room at Parliament House in Canberra, Thursday, September 16, 2021. (AAP Image/Mick Tsikas)
Britain’s Prime Minister Boris Johnson, Australia’s Prime Minister Scott Morrison and US President Joe Biden at a joint press conference via AVL from The Blue Room at Parliament House in Canberra, Thursday, September 16, 2021. (AAP Image/Mick Tsikas)

Geopolitics Returns

After 18 months of Covid-19 being the dominant story it has now become the backdrop to geopolitics which has returned to center stage during September.  The chaotic US withdrawal from Afghanistan will give historians plenty to chew over and was hailed as not just a physical military retreat but yet another nail in the coffin of America’s declining power and commitment to the world.  But only a fool should ever think that America is finished, it has an ability to reinvent itself and move on, everyone gets a second chance in America.  Biden was not ending America’s commitment in the world, but instead redefining it and moving beyond the battle cries of twenty years ago.  The announcement of the AUKUS alliance seems to have taken everyone by surprise, especially France, yet it is perhaps the most obvious move in a century which is going to be defined not by countries in Europe, not by terrorist attacks (one hopes) but by the rise of China and its territorial claims around Asia, it economic clout and its demands that it be the sole authority anywhere in the world on anything it considers under it purview.

The AUKUS deal brings together the US, the UK and Australia in a long-term alliance in which the US will share extremely sensitive nuclear-powered submarine technology with Australia.  This isn’t something the US does lightly, only a handful of countries have such technology and all of them are nuclear weapons enabled powers as well.  Australia claims it will not seek nuclear weapons.  The deal will take decades to fully work out and have Australia equipped with their own nuclear-powered submarines but in the more immediate future it is to be expected that the UK and US will both base a degree of submarine capacity in Australia.  Australia was already some years into a deal with France to upgrade its submarine fleet and that deal was scrapped with no early warning to the French which left them fuming at “the stab in the back” as one French politician called it.  France recalled their ambassadors to both the US and Australia and while they were treated needlessly badly by not having been given early warning of the deal, not that could have ever expected any veto power over it, their anger is in part driven by domestic politics and President Macron’s demand that France, and the EU find strategic autonomy in today’s world.  What that phrase “strategic autonomy” even means is open to doubt.  France certainly doesn’t want to be seen simply as a satellite or follower of the US and sees itself as providing a different sort of approach from the Anglo-Saxon world (however outdated that term is in these multicultural societies) but the AUKUS announcement isn’t a France story, it’s a China one.

The deal ties together three already longstanding allies, 3 members of the Five Eyes intelligence network, and three countries which to varying degrees are at last understanding the dangers posed by an unchecked China.  To that extent this is an obvious alignment of allies, and an example of how common minded allies can form new alliances to meet new challenges.  It can easily be seen a parallel yet distinct sort of alliance to the Quad grouping of the US, Japan, Australia and India.  That group came together around a common concern, China, and so it is with AUKUS.  So having being surprised by AUKUS the next question is what comes next and with whom?

For Britain the deal is a chance to show that it can still play a global role now that it has left the EU.  Indeed, Boris Johnson’s government talks of Global Britain and it has already indicted that it will take a more active role within Asia and in June applied to join the Japan driven CPTPP trade framework.  The AUKUS deal ties Britain even closer with America and places it front and centre in the global realignment in response to China.  Britain has yet to fully formulate and announcement a larger policy for dealing with China but via AUKUS their intent is clear, and while trade and investment with China will continue and likely grow, they will be seen by the Chinese at least as being opposed to its rise.

China’s official response has been relatively muted, they have come out against what they call the “cold-war mentality” of the deal and how it will harm relations in the future but China finds itself is a bind.  Much of South East Asia is broadly supportive of the deal because they fundamentally don’t trust China and its intentions in the region.  Others in China have been much more aggressive in response, Victor Gao of the Beijing based think tank Center for China and Globalization and an ex-translator for the late Deng Xiaoping gave a remarkable performance on an Australian ABC TV program claiming that Australia would lose the privilege of not be targeted by nuclear weapons because of this deal.  He failed to make any distinction between nuclear-powered submarines and craft armed with nuclear weapons nor would he state which country would now target Australia with such weapons.  If there are shrill voices coming out of Beijing then it is partly because China is waking up to the reality that Xi Jinping’s aggressive foreign posturing has totally backfired.  That it’s wolf warrior diplomats have won no respect nor friends and that China’s geopolitical calculus has become significantly more complicated than even just a few months ago.  Geopolitically China is now having to deal with Afghanistan, a failed state on its border.  A new military alliance to which it has little response and can call upon few countries to support it, and all the while the domestic economy remains weak as one of its largest property developers teeters near bankruptcy.  Xi Jinping’s agenda has never been more complicated.  That is only compounded by his thinking being driven by ideology and surrounded himself with yes men.

The Economic Response

Within a day of the AUKUS announcement China formally announced its intention of joining the CPTPP trade grouping.  Which of course already has Australia as one of its founding members.  And less than a week later Taiwan too formally applied to join.  Britain, as already mentioned is currently in negotiations to join.  The complex interplay of economic and geopolitics illustrates very clearly the dilemma countries face when dealing with China.  They like the trade, and indeed are dependent on the trade, yet the Chinese overreach and bullying is unwelcome.

Some voices have suggested that China’s plan to join CPTPP is a trojan horse for reform, as WTO entry was over 20 years ago, but the world, and China has moved on since then.  The CPTPP was specifically written to adopt high standards especially around state industries and state support which China simply could not adhere to.  Xi Jinping’s economic agenda makes no doubt as to the role and importance of state enterprises in his glorious new Chinese future.  It would seem incredible that the CPTPP countries would admit China regardless of what promises it made given the experiences within the WTO and the path the country is currently on.  How can China’s move be nothing but short-term politics to dangle the economic carrot in front of partners who are preparing military sticks?  Regardless of the AUKUS deal no existing CPTPP member should entertain any discussion with China while it still holds two Canadians (Canada is a CPTPP member) hostage over the Huawei deal, and while it currently boycotts a broad range of Australia produce because of Australia’s early demand for a proper investigation in Covid-19’s origin in China.

Taiwan’s application to the group reminds all the parties that part of the concern with China is the continued stance it holds towards Taiwan, a thriving democracy of 24 million people.  Taiwan in all practical sense is an independent entity with an entirely different political, economic and social system from Mainland China.  It has never been part of the Peoples Republic of China and shows no indication of wanting to yet Xi Jinping has only increased the rhetoric around unification with the Mainland even if that means invasion and the use of military force.  It is this very threat, amongst a number of other well-known concerns which has driven the formation of the Quad and AUKUS in the first place.  That though is wholly lost on China’s leaders.  Taiwan and China are both members of the WTO and APEC so theoretically they could both join but that seems unlikely at time soon.  Accession talks will take years, even if they can ever get started in China’s case.

AUKUS one week on

None of the announcements of the past week will see immediate changes on the ground.  The details of AUKUS need to be worked, the accession to the CPTPP will take years of negotiation.  But some clear fault lines have been drawn as well.  Alliances are changing in response to China’s rise.  The old European focus will become less important in the coming decades, NATO will not disappear as Russian remains, if not a direct threat to Europe, then certainly a troublemaker looking to disrupt where it can.  France, and by extension the EU, has clearly been bruised by the needlessly callous treatment of a longstanding ally, but perhaps that too will jolt the EU into thinking what role it has to play in the new world order.  France has a significant number of (small) territories in the Indo-Pacific region and its submarine deal with Australia was part of its bigger global strategy, but France and the EU simply don’t carry the clout that the US does and will continue to have.  The EU has no army, the individual armies of the member states are minimal for most countries and few of the NATO states spend enough on defense.  The EU still sees China as a partner more than a competitor but that may change.  The EU and France may want strategic autonomy and not simply follow the US, but they will find that their primary adversary is the same.

There is now the Quad and AUKUS as two Indo-Pacific focused groups between them bringing in Japan, India, Australia, the UK and the US.  France already has joined with the Quad for naval exercises, and it would make sense that cooperation between countries increases.  Japan certainly can play a greater role as can South Korea and Vietnam.  Greater cooperation between nations does not mean hard military alliances, the Quad certainly falls short of that although AUKUS clearly is a higher level of tie and mutual commitment.  Few countries in the region are ready for a NATO Article 5 type of commitment of common defense in the event of an attack against a single member country.  But that is not needed, China is not, as yet at least, a threat in the way the Soviet Union was a threat at the end of the Second World War.  That military alliance was for its time, the new ones being formed are for this time with a different sort of adversary.

Diplomacy though must remain the first choice of countries, but it cannot be the only choice.  China may think it is being surrounded or contained but if that were the case then why would these same countries conduct so much mutually beneficial trade with it?  China may want to consider why after years of growth which Asia and the world has benefited from it still has no global friends or alliances bar a handful of near failed states.  Xi Jinping has taken China down a dangerous path of confrontation with the world to which the world is now responding.  None of the actions over the past weeks bring conflict closer, war with China is not inevitable and never welcomed but China needs to reflect on how the situation got do bad so quickly.

フレイザー・ハウイー(Howie, Fraser)|アナリスト。ケンブリッジ大学で物理を専攻し、北京語言文化大学で中国語を学んだのち、20年以上にわたりアジア株を中心に取引と分析、執筆活動を行う。この間、香港、北京、シンガポールでベアリングス銀行、バンカース・トラスト、モルガン・スタンレー、中国国際金融(CICC)に勤務。2003年から2012年まではフランス系証券会社のCLSAアジア・パシフィック・マーケッツ(シンガポール)で上場派生商品と疑似ストックオプション担当の代表取締役を務めた。「エコノミスト」誌2011年ブック・オブ・ザ・イヤーを受賞し、ブルームバーグのビジネス書トップ10に選ばれた“Red Capitalism : The Fragile Financial Foundations of China's Extraordinary Rise”(赤い資本主義:中国の並外れた成長と脆弱な金融基盤)をはじめ、3冊の共著書がある。「ウォール・ストリート・ジャーナル」、「フォーリン・ポリシー」、「チャイナ・エコノミック・クォータリー」、「日経アジアレビュー」に定期的に寄稿するほか、CNBC、ブルームバーグ、BBCにコメンテーターとして頻繫に登場している。 // Fraser Howie is co-author of three books on the Chinese financial system, Red Capitalism: The Fragile Financial Foundations of China’s Extraordinary Rise (named a Book of the Year 2011 by The Economist magazine and one of the top ten business books of the year by Bloomberg), Privatizing China: Inside China’s Stock Markets and “To Get Rich is Glorious” China’s Stock Market in the ‘80s and ‘90s. He studied Natural Sciences (Physics) at Cambridge University and Chinese at Beijing Language and Culture University and for over twenty years has been trading, analyzing and writing about Asian stock markets. During that time he has worked in Hong Kong Beijing and Singapore. He has worked for Baring Securities, Bankers Trust, Morgan Stanley, CICC and from 2003 to 2012 he worked at CLSA as a Managing Director in the Listed Derivatives and Synthetic Equity department. His work has been published in the Wall Street Journal, Foreign Policy, China Economic Quarterly and the Nikkei Asian Review, and is a regular commentator on CNBC, Bloomberg and the BBC.