APEC address, trade, and the South China Sea

Week of 12 to 18 July 2021

APEC broadside

Prime Minister Scott Morrison addressing the Asia-Pacific Economic Cooperation (APEC) Virtual Informal Leaders’ Meeting on 17 July:

“[W]e cannot have a recovery without a free and open Indo-Pacific. And that means respect for the rule of law. It means regional stability and security. It means the region being able to operate free of coercion and free of interference. And where we respect the law of the sea, where we respect the rule of law, we respect human rights right across our region, and that we hold fast to those important values for a free and open Indo-Pacific. And it also means we have rules based trading system [sic] that we can all trust, one that has binding mechanisms to resolve disputes. And it’s an urgent issue to ensure that the WTO’s appellate body is restored and fully functional, because without a referee, it’s very hard to play the game. And we all want to be on the field as we come back from this recovery. And the WTO plays an absolutely essential role in policing the rules of world trade and ensuring that no country can be subject to economic coercion, which can take place.”

Quick take:

Ouch. With presidents Xi Jinping and Joe Biden on the call, Prime Minister Morrison called out China’s economic coercion and the US spoiler role in the World Trade Organization (WTO) .

This address would have presumably left a sour expression on President Xi’s face. But from the Australian government’s perspective, China probably wasn’t the audience.

By my count, there were at least six other economies on the call that have experienced China’s economic coercion: Taiwan, Japan, South Korea, Vietnam, Canada, and the Philippines. Then there’s the long list of other APEC economies that probably worry about whether they’ll be hit with Beijing’s politically motivated trade restrictions.

Prime Minister Morrison was most likely speaking to this majority APEC constituency of past, present, and potential victims of China’s economic coercion. The size of this group could easily lead to the calculation that there’s more to be gained by convincing the Asia-Pacific region to share Australia’s concerns than there is to lose by entrenching President Xi’s already unfriendly view of Australia.

Maritime missives

Foreign Minister Marise Payne’s statement on 12 July, marking the 5th Anniversary of the South China Sea (SCS) Arbitral Award:

“Five years ago today, an Arbitral Tribunal established in accordance with the UN Convention on the Law of the Sea (UNCLOS) reached a clear and unanimous decision on the South China Sea arbitration between the Philippines and China.”

“It found that China’s claim to ‘historic rights’ or ‘maritime rights and interests’ established in the ‘long course of historical practice’ in the South China Sea were inconsistent with UNCLOS and, to the extent of that inconsistency, invalid.”

Quick take:

Although Australia hasn’t changed its position on the Arbitral Award, it’s striking how much Canberra’s SCS language has stiffened in recent years. At the time of the Award in 2016, Australia issued a statement. But the language was paired back compared to both the recent statement and Australia’s July 2020 Note Verbale in relation to Malaysia’s submission to the Commission on the Limits of the Continental Shelf.

The 2016 statement didn’t include explicit references to China’s claims being “inconsistent” with UNCLOS or “invalid.” Indeed, the strongest criticism of China in the 2016 statement was indirect, referring back to the Award itself: “The Australian Government calls on the Philippines and China to abide by the ruling, which is final and binding on both parties.”

The 2016 statement was also lower octane, rhetorically speaking. By contrast, last week’s statement lent heavily into the normative language of the rules-based international order: “Adherence to international law is fundamental to the continuing peace, prosperity and stability of our region.”

Despite not generating comment at the Ministry of Foreign Affairs’ regular press conferences last week, Beijing probably noticed Canberra’s stronger language on the 5th anniversary of the SCS Award. Afterall, China devoted one of its 14 grievances to Australia’s July 2020 Note Verbale.

But for all of Beijing’s frustration with this kind of statement, it likely won’t cause a big dip in bilateral relations. Rather, it’ll probably just serve as yet further confirmation in the Party-state’s eyes that Australia is a hostile actor in the SCS. So, perhaps just another case of status quo ante in frosty bilateral ties?

Tough trade talk

The spokesperson for the US Embassy in Canberra, talking to The Guardian on 14 July:

“We have Australia’s back against economic coercion, and other countries do too.”

Quick take:

Statements of support like this make eminent sense given the Biden administration’s foreign policy agenda of international coalition building and shoring up US allies and partners. And they are encouraging for Canberra to the extent that they signal concrete US support in WTO processes.

But they equally belie some uncomfortable realities. Beyond moves in the WTO, Washington faces a tough task in seeking to provide Australia with tangible support against China’s economic coercion.

To be sure, numerous policy options have been floated to help the United States back Australia against China’s economic coercion. These include proposals for measures like counter-coercion coalitions that might impose “punitive retaliatory tariffs on Chinese exports” and a Five Eyes “collective economic security measure, analogous to Article 5 of the North Atlantic Treaty establishing NATO.”

Yet regardless of the potential benefits (and costs) of these kinds of deterrence initiatives, it seems that even Washington lacks the risk appetite required to fight China’s economic coercion with counter-coercion. And that’s even in the context of the Biden administration’s “extreme competition” with China.

Politics aside, it remains unclear whether any of these count-coercion strategies would actually shift China’s calculus and deter Beijing. Then there’s the risk that these kinds of counter-coercion policies could lead to a host of negative unintended consequences, ranging from undermining the rules-based international trading regime and provoking more economic coercion from China. There’s also the complicating factor of US companies probably benefitting from China’s economic coercion of Australia.

So, beyond rhetorical gestures and support in the WTO, Washington is left with few (maybe 0?) risk-free and politically palatable means of supporting Canberra in the face of Beijing’s economic coercion. In the end, maybe the best way for the United States to back Australia would be to throw its full weight behind the WTO and, to quote Minister for Trade, Tourism and Investment, Dan Teehan, “champion support for a functioning global rules-based trading system”?

As always, thank you for reading and please excuse any errors (typographical or otherwise). Any and all objections, criticisms, and corrections are very much appreciated.