Australia has weathered “sustained trade sanctions” from its top trading partner, China, to become more resilient, but has lost ground when it comes to diplomatic influence in the region, according to the latest rankings of power in Asia.
Australia’s response to trade actions from China helped it to improve its score on its capacity to deter real or potential threats to state stability – one of the factors in the Lowy Institute’s fourth annual Asia Power index launched on Sunday night.
Australia remained ranked sixth in the overall rankings of comprehensive power in the region, after the US, China, Japan, India and Russia, but narrowly ahead of South Korea.
No country was left untouched by the health and economic impacts of Covid-19 in 2021, meaning a majority are not performing as well as they were a year or two ago, the Sydney-based thinktank found.
Japan is an over-performer in wielding influence compared with the resources it has at its disposal, but it has “struggled to sustain its once-formidable regional economic clout” as China makes “foreign investment inroads into countries across the region”, the Lowy Institute found.
At the same time, India’s economic growth has been thrown off course by the pandemic. The Lowy Institute’s analysts said Japan and India’s loss of standing compared with China “has been more pronounced and continuous than is the case for other middle powers such as Australia”.
“By comparison, sixth-ranked Australia has weathered China’s growing power better than most US partners over the course of the last several years,” the analysts, Hervé Lemahieu and Alyssa Leng, said.
“A loss of 1.6 points in its overall score in 2021, after gaining ground last year, means the country’s overall standing is now approximately back to its pre-pandemic level.”
Beijing has rolled out tariffs and other trade actions against Australian export sectors including barley, wine, beef seafood and coal over the past year and a half, adding to existing strains in the relationship.
Chinese officials have argued the Australian government “bears full responsibility” for the souring of the relationship, while the Morrison government vowed not to bow to “economic coercion”.
“Despite coming under sustained trade sanctions by its primary trade partner, Australia has improved its resilience in 2021,” Lemahieu and Leng wrote.
“The damage wrought by Chinese trade restrictions has been largely offset by untouched iron ore exports to China and trade diversion in other sectors.”
The Lowy analysis is in line with comments by the treasurer, Josh Frydenberg, that Australia has suffered a much lower than expected impact from China’s trade actions.
In a recent speech, Frydenberg said of the goods targeted by trade actions, Australia’s total exports to China fell by about $5.4bn over the year to June 2021. But exports of those goods to the rest of the world have increased by $4.4bn.
But Treasury has blocked Guardian Australia’s application for analysis the department provided to Frydenberg about the impact of China’s trade restrictions. The freedom of information decision maker argued releasing the information would harm the relationship with China.
‘More adversarial relationship’
Despite the gain in resilience, Australia trended down in economic relationships, in part as a result of China overtaking it as the primary foreign investor in Papua New Guinea, according to the Lowy report. It also trended down on diplomatic influence.
The Lowy Institute assessed 26 countries or territories against 131 indicators to produce an interactive index of performance across Asia.
The indicators fall within eight main themes: resilience, economic relationships, diplomatic influence, defence networks, military capability, cultural influence, future resources and economic capability.
Despite the formation of the Aukus deal with the UK and the US – which aims to deliver at least eight nuclear-propelled submarines to project power further from Australia’s shores – the country is trending down on military capability and regional defence networks.
“The first development highlights the fact that the nuclear-powered boats will not arrive for perhaps two decades, during which time Australia’s signature military capabilities will remain limited and its navy reliant on an existing fleet of ageing conventional submarines,” Lemahieu and Leng wrote.
“The second is a reminder that the trilateral pact marks a deepening rather than a widening of Australia’s defence partnerships. Though still ranked second for its defence networks behind only the United States, the pace of Australia’s regional defence diplomacy with non-allies was disrupted by the country’s pandemic-related border closures.”
Vaccines ‘the new currency of geopolitics’
The Lowy Institute report described vaccine diplomacy as “the new currency of geopolitics”, as responding to the non-traditional security threat of pandemic disease had become the overriding concern of virtually every government at the current time.
As of October, the US had “donated and delivered more than 90 million vaccine doses to the region – twice as many as China”.
“China, Japan and India have also been active in donating Covid-19 vaccines to Asia, while New Zealand and Australia have been relatively generous after accounting for their population size.”
Despite Australia’s relative generosity in vaccine diplomacy, the country’s prolonged border closures had “weighed heavily on external views of the country”.
The US gained in overall points relative to China in the past year, in part due to Joe Biden’s efforts to strengthen alliances in a break from Donald Trump’s “America First” approach.
But the US is also suffering a loss of economic influence in the region, and over time China is steadily eroding US military advantage.
“The single biggest risk to US power remains the polarisation of US politics and the threat this poses to the stability of its democratic institutions and, ultimately, America’s commitment and reliability as an ally and partner in the Indo-Pacific,” Lemahieu and Leng wrote.
Southeast Asian countries face growing challenges as they seek to navigate tensions between the US and China by not choosing sides, the report said. Aukus “raised further concerns that Southeast Asian powers may become bystanders to geopolitical changes driven largely by more powerful outsiders”.
Indonesia is in the top 10 in the latest power index, but southeast Asian middle powers are “struggling to maintain their collective clout or sustain the diplomatic narrative”.