China's last trade restrictions and the Australian angle on the TikTok fight
Weeks of 8 to 28 April 2024
This is the free fortnightly(-ish) BCB newsletter. For readers looking for breaking analysis of major bilateral developments, BCB now also offers a paid subscription add-on. BCB in Brief provides quick assessments of the big stories shaping the Australia-China relationship. You can upgrade to a paid subscription here:
Lobster and red meat inch towards trade relief
Minister for Trade and Tourism Don Farrell speaking in Sydney on 8 April:
“The Government continues to press for the removal of the remaining trade impediments on live rock lobster and a number of red meat export establishments.”
Quick take:
The last few weeks saw bilateral ties peppered with points of disagreement. News of Japan’s potential involvement in Pillar II of AUKUS prompted displeasure in Beijing (here, here, and here), while China didn’t welcome the generally negative portrayal of its external policy in Australia’s National Defence Strategy. Among other things, this document assessed that “China has employed coercive tactics in pursuit of its strategic objectives” and is “improving its capabilities in all areas of warfare … without transparency about its strategic purpose.” The release of this strategy followed an Australian parliamentary visit to Taiwan in early April, which elicited a muted public response from China but would’ve been dimly viewed in Beijing. Yet none of this will be enough to upset the trend towards more relationship repair, much less seriously roil bilateral ties.
Although there’s no guarantee that China’s last trade restrictions on lobster and red meat will tumble, positive signals—albeit small and inconclusive ones—continue to emerge (here and here). Forthcoming high-level engagements also augur well for these Australian export industries. China’s Ministry of Foreign Affairs has remained taciturn on the timing and other details of Premier Li Qiang’s Australia visit, and yet Beijing still seems determined to fete this trip with a hefty dose of bilateral positivity and pomp and circumstance. If that’s right, then it’d arguably make sense for announcements about the removal of trade restrictions on lobster and red meat to precede this leader-level visit, which is widely expected in June. So, China’s last trade restrictions could be removed within the next couple of months or even the next few weeks. This means that China might finally wrap up its economic coercion campaign almost exactly four years after it began with duties on Australian barley in May 2020.
Incoming TikTok tremors
Senator James Paterson, Shadow Minister for Home Affairs and Cyber Security, on 24 April in response to the passage of US legislation aimed at forcing ByteDance’s divestment from TikTok:
“The Coalition stands ready to work with the Albanese government to make TikTok safer for all Australians by removing the Chinese Communist Party’s control over the app.”
Quick take:
Despite the Coalition’s endorsement of the US use of the threat of a ban to compel TikTok’s Chinese owner to divest, the Albanese government remains reluctant to pursue similar measures. Responding on 14 March to a question about whether Australia would ban TikTok in the Australian consumer market (in addition to the already implemented ban on federal government-issued devices), Prime Minister Anthony Albanese said: “Look, we’ll take advice, but we have no plans to do that.” The Prime Minister has reiterated a version of this position several times (here, here, here, and here). This stance is probably based on a range of considerations, including: the desire to avoid antagonising China while relationship repair is still ongoing; the danger of domestic political blowback stemming from potential market restrictions that would impact Australian consumers and businesses; and the Albanese government’s own assessments of the risks posed by TikTok’s current ownership structure. But perhaps more important than these factors is a simple point about sequencing. Even if the security risks posed by ByteDance’s ownership of TikTok necessitate either divestment or a ban, there’s arguably significant danger and limited gain for Australia in implementing concrete measures now when the United States is already going so hard. Not only could taking action against ByteDance damage ties with Beijing, but it seems unlikely to impact TikTok’s ownership or yield substantial benefits for Australia beyond those that might be secured thanks to the US divestment push.
With China deeply concerned about US-led efforts to hobble its leading technology companies, Beijing would likely respond harshly to any moves by Canberra to either join a push for ByteDance’s divestment or impose broader market restrictions on TikTok. Despite the many differences, echoes of the intensely bilaterally contentious 2018 exclusion of Huawei and ZTE from Australia’s 5G rollout are hard to miss. Beyond the risk to bilateral ties, it also isn’t obvious that Australia taking a position on divestment now would materially change the outcome of the battle between Beijing and Washington over ByteDance’s ownership of TikTok. Yes, Canberra could probably add some extra pressure on Beijing by introducing its own divestment measures and the United States would likely welcome Australia taking such a forward-leaning position. But the fate of ByteDance’s ownership of TikTok—in the United States and potentially elsewhere—will likely be determined by a fierce tug-of-war between Beijing and Washington over the next 9-12 months. And it seems improbable that Australia, with its relatively small market (here and here), would shift the calculus on divestment in either Beijing or ByteDance.
Finally, and perhaps most importantly, if the scuppered foreign purchase of TikTok in 2020 is any guide, then there’s a good chance that ByteDance’s divestment will apply not just to the US market, but other jurisdictions as well. For example, Microsoft’s unsuccessful 2020 bid to buy TikTok would have involved purchasing the social media giant’s US, Canadian, New Zealand, and Australian businesses. If the US divestment push plays out similarly this time, then the Albanese government might be able to enjoy the claimed security benefits of prying the app from its Chinese owner without having to run the risk of earning China’s ire by joining Washington’s effort to force the sale. So, even if there’s a strong security argument for shielding Australians from the current Chinese-owned version of TikTok, it might still make sense to wait for Beijing and Washington to duke it out in the hope that ByteDance divests in the United States and other markets, including Australia.
Canberra might still be cornered into tough TikTok decisions
China’s Ministry of Foreign Affairs Spokesperson Wang Wenbin speaking to journalists on 14 March:
“If ‘national security’ can be abused to bring down other countries’ competitive companies, there would be no fairness or justice at all. It is sheer robbers’ logic to try every means to snatch from others all the good things that they have. How the US has handled TikTok enables the world to see clearly whether the US’s ‘rules’ and ‘order’ serve the whole world or only the US.”
Quick take:
Regardless of the rights and wrongs of a ByteDance divestment, such an outcome—assuming it also applies to TikTok’s operations outside the United States—is likely to be the easiest to manage for Australia. If the US-forced sale of TikTok covers the company’s operations in other jurisdictions, then the Albanese government could potentially dodge two bullets. Canberra wouldn’t need to answer any more tough questions about the security risks associated with TikTok’s Chinese ownership, while also being able to minimise damage to its relationship with Beijing by sliding into the slipstream of the US-forced divestment. To be sure, Beijing’s intense distrust of Washington would deepen in such a scenario. But China probably wouldn’t direct much hostility towards countries like Australia that might have privately welcomed divestment but didn’t take any concrete actions against ByteDance’s ownership of TikTok.
Unfortunately for Canberra, such a convenient outcome appears unlikely. Given Washington’s enduring bipartisan suspicion of Chinese companies like ByteDance, the chance of the United States dropping its divestment push appears small. And it seems especially unlikely in 2024 with a presidential election looming and both the presumptive Democratic and Republican candidates staking out tough China policy positions. (Albeit with former President Donald Trump’s current stance on TikTok seemingly in flux.) This US determination is likely to be met with an opposite and equally strong force: Chinese resistance to divestment. Not only is Beijing already bristling (here and here) at the prospect of forced foreign ownership of an immensely valuable Chinese technology company, but letting the United States get its way on ByteDance’s divestment might be politically untenable for the Chinese government. Such a sale is likely to be perceived by many in China and abroad as a monumental capitulation to the United States that doesn’t befit a great global power.
Where does this leave us? Perhaps with the most likely outcome also being the hardest for Australia to navigate. ByteDance probably won’t sell TikTok in the US or other markets and the United States will, like India in 2020, probably ban the app. (See * below for some big caveats on that prediction.) Although such an outcome wouldn’t compel Australia to take any specific actions, it would sharpen the Albanese government’s TikTok dilemma. It’d keep China onside if Australia didn’t subsequently enact its own TikTok ban. But the Coalition would likely attack Labor for such an approach and Canberra might start getting some sharp elbows from Washington aimed at prompting Australia to follow its lead with market-wide restrictions. Canberra banning TikTok might be welcomed in Washington and would neutralise a possible line of Coalition attack. But it would also risk seriously destabilising the Australia-China relationship.
Of course, even in a scenario in which ByteDance doesn’t divest, Australia won’t necessarily confront a binary choice between leaving TikTok be and banning it. The Albanese government has a track record of making China policy decisions that seek to strike a balance between mitigating the potential security risks posed by Beijing’s actions while also reducing the likelihood of damaging bilateral ties. Minister for Foreign Affairs Penny Wong’s decision to not remove Confucius Institutes from Australian universities and instead “keep these arrangements under review” is a classic case in point. If ByteDance doesn’t divest, then it’s possible that the Albanese government would similarly seek to both manage security risks and reduce blowback from Beijing. Canberra could, for example, subject TikTok to extra parliamentary and regulatory oversight, insist on stringent data localisation requirements, and force additional corporate disclosures. This is not to say that such measures short of a ban would adequately mitigate the security risks, much less neutralise Coalition criticisms. But these kinds of policy permutations do nonetheless suggest that Australia will have options to (at least partially) manage security risks and reduce the damage to bilateral ties even if ByteDance doesn’t sell and Canberra is eventually confronted with a sharper TikTok dilemma. And yet, even if there are policy pathways available between leaving TikTok be and banning it, how to handle this app is likely to emerge as a big bilateral issue for Canberra in the months ahead.
* Caveat: As well as likely hard-fought and drawn-out legal wrangling over efforts to force ByteDance’s divestment, the 2024 presidential race makes it difficult to predict what Washington will do in the end. If Trump wins the presidency in November and continues to soften his stance on TikTok, then it’s entirely possible that the wheels will fall off the US divestment push. Not only is Trump beating Biden in many recent polls, but he seems to have had a change of heart on TikTok. That said, Trump’s approach to TikTok could shift depending on who he selects for key posts (if he wins), while many in MAGA-land seem poised to push him towards tougher China policies. Given all this uncertainty, the above analysis needs to be caveated with the acknowledgement that the US moves to force ByteDance’s divestment could be derailed depending on, among other things, how the legal challenges play out, who takes the presidential oath of office in January 2025, and the evolution of Trump’s views.
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.
China might finally wrap up its economic coercion campaign?
That was just a gentle warning.
If China used coercion we'd be permanent recession.
If we keep our promises – written, oral and implied – with China, we need not fear coercion.
If we persist, we risk permanent damage.
https://herecomeschina.substack.com/p/what-australia-did-to-china-c64?r=16k