Exercise MALABAR, coercive practices, and export diversification

Week of 23 to 29 August 2021

A rose by any other name

Australia’s Chief of Navy, Vice Admiral Michael Noonan, on the Royal Australian Navy’s participation in Exercise MALABAR 2021:

“Australia is committed to working closely with our partners to address shared regional challenges, including in the maritime domain.”

Quick take:

All four participating countries framed Exercise MALABAR differently. Japan emphasised the Free and Open Indo-Pacific and the United States highlighted the “rules-based maritime order in the Indo-Pacific” and the goal of deterring “malign influence.” Meanwhile, India’s official statement used more pared-back language. But regardless of these rhetorical differences, the exercise is a significant development in terms of the signal it sends about the potential evolution of the Quad.

Exercise MALABAR is not a Quad naval exercise and began life in 1992 as a US-Indian exercise. Moreover, as the Indian government’s press release was careful to point out, the Australian navy is not a permanent member of Exercise MALABAR, unlike its US and Japanese counterparts. But this is the second consecutive year in which Australia has participated, making it the second consecutive year in which all four Quad navies have been involved. In the context of deepening Quad cooperation on a range of fronts, Exercise MALABAR provides an indication of how the Quad might develop into a grouping with much more strategic and military weight.

Beijing criticised the Quad earlier this year as an example of “closed and exclusive ‘cliques’” that target and undermine the interests of third parties. If the Quad were restricted to coordinated diplomatic messaging and international economic and public health cooperation, this threat might remain relatively modest from China’s perspective. But with Exercise MALABAR showing that Quad countries are developing increasingly sophisticated interoperability, including anti-submarine warfare, Beijing probably sees the cooperation that this naval exercise represents as a growing and potentially serious long-term threat to China’s strategic and military ambitions in the Western Pacific.

China’s official public reaction to last year’s iteration of Exercise MALABAR was relatively muted, and the 2021 version hasn’t so far prompted a strong response, beyond the typical rhetorical salvos from the nationalistic tabloid press. But regardless of the rhetorical back and forth, the strategic fundamentals speak to the significance of an expanded Exercise MALABAR. The maritime domain will be one of the Indo-Pacific’s most critical, and China is in the process of building a navy capable of achieving overmatch against any regional navy, including eventually even the US Navy. Any effort to create a viable military counterbalance to China’s power in the Indo-Pacific of the future will therefore depend on cooperation and interoperability among the most capable regional navies, which is precisely what Exercise MALABAR is designed to deliver.

HMAS Warramunga sails for Exercise MALABAR [POIS Yuri Ramsey/defence.gov.au]

Calling out coercion

Joint Communique on 27 August from the 12th Meeting of the Singapore-Australia Joint Ministerial Committee:

“Ministers … underlined the importance of an open, inclusive, rules-based and resilient Indo-Pacific region, which supports and promotes free trade and open markets and respects the rights of countries to lead their national existence free from external interference, subversion and coercion.”

Quick take:

As a general statement of the principles of non-coercive state-to-state relations, this communique seems unremarkable. But in the context of China’s sustained and severe campaign of economic coercion against Australia, this is a noteworthy joint criticism of Beijing’s behaviour, albeit a relatively oblique one. Coming in the form of a joint communique between six Australian and Singaporean ministers—foreign affairs, defence, and trade—gives the message added clout, especially considering Beijing’s past admiration for the South-East Asian city-state and Singapore’s scepticism of the US policy of open-ended and adversarial strategic competition with China.

This joint communique also points to an emerging feature of Australian foreign policy. As well as directly calling out Beijing’s economic coercion unilaterally, Canberra is using bilateral and multilateral diplomacy to regularly raise its concerns with China’s statecraft and emphasise the principles of non-coercive state-to-state relations. Whether in joint leader- and ministerial-level statements with allies and partners or via interventions in multilateral fora and joint communiques, Canberra is using its bilateral and multilateral diplomacy to take issue with Beijing’s behaviour. Of course, many of these concerns about coercion don’t mention China by name, but international and domestic audiences are never really left with any confusion about which country is doing the coercing.

Will this diplomatic messaging change China’s behaviour? Almost certainly not. But these diplomatic responses to economic coercion are not intended to do anything quite so ambitious. Instead, Canberra’s goals are probably much more modest: Draw international attention to Beijing’s coercive conduct and strengthen the global legitimacy of the principles of the rules-based international order, including those embodied in the multilateral trading system. From Australia’s perspective, efforts to reinforce these principles are especially urgent when both the United States and China have mixed recent records when it comes to upholding the principles of the rules-based international order.

Stay calm and diversity

Recent market intelligence offered to Australian exporters as part of the government’s Agribusiness Expansion Initiative:

• Tariff reductions assisting Australian agricultural exports to Thailand

• Extended shelf-life for chilled, vacuum-packed beef and sheep-meat exports to Saudi Arabia

• Sri Lanka’s rule changes mean fresh opportunities for grain, pulse and oilseed exporters

• Seafood exports to Taiwan to be streamlined under new systems recognition arrangements

• Argentina introduces quota limits on beef exports ‘Eco-score’ labelling hits the shelves in Europe

Quick take:

Perhaps unsurprisingly, all these market insights share a couple of features. First, they all concern either specific exports or agricultural sectors that have been targeted by China’s trade restrictions. Second, they equally all concern either alternative markets to China or factors that may impact Australia’s access to these alternative markets.

Understandably, attention tends to focus on Australia’s public diplomatic responses to China’s economic coercion. Yet practical Australian policies for achieving diversification also contain an important diplomatic signal for China. As well as providing tangible support for Australian businesses to find alternative markets, initiatives such as the Agribusiness Expansion Initiative should be read in Beijing as a sure sign that Canberra plans to live with and manage the costs of economic coercion.

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