Australia Caught in Middle of US-China Power Tussle

By Nick Derewlany

April 14, 2015

http://thediplomat.com/2015/04/australia-caught-in-middle-of-us-china-power-tussle/

Canberra could struggle to balance its interests as tensions rise over the AIIB and TPP. 

Tensions between the United States and China over the Chinese-led Asian Infrastructure Investment Bank (AIIB) are the next embodiment of a hard and soft power battle for economic and political dominance in the Asia-Pacific, and come amid concerns arising from the stalled negotiations for the Trans-Pacific Partnership (TPP). For Australia, a key focus of its foreign policy should be how to balance its economic ties with China and its cultural ties with the United States; appeasing both without getting in the middle of an ugly tug-o-war that forces Canberra to take sides.

Officially, both the U.S. and China have attempted to downplay the gravity of the tussle. Hugo Llorens, U.S. Consul General, in a guest lecture given at the University of Sydney, reassured students that “Australia does not have to choose between the United States and China.” But while it is true that Australia is not at a point where it needs to make such a choice, the reassurance misrepresents the dynamic of Australia being caught in the middle of a power struggle between the worlds two largest economies.

The TPP, drafted in 2005, is a by-product of the U.S. rebalance to Asia. Its intent is to eradicate preferential trade agreements (PTA) in the Asia-Pacific and construct in their place a multilateral trade platform, thus connecting a plethora of geographically incongruent countries at varied levels of development.

Unfortunately, divergent interests and innate agendas have inhibited progress with the deal. Australia’s vision for the TPP lies in developing the regional architecture that will provide a viable gateway to the entire Asia-Pacific; in short, an unrestricted multilateral agreement. In contrast, the U.S. envisions the TPP as an extension of its established bilateral arrangements in the region, with a focus on developing further PTAs with countries it hasn’t already partnered with. The U.S. opposes an unrestricted multilateral agreement because it would lay waste to established protectionist measures – such as long implementation periods and product specific rules of origins – that are a feature of sensitive U.S. domestic industries such as sugar and dairy. A proliferation of PTAs in the region would be counterproductive for Australia because it would close off certain markets, and make others harder to utilize.