Warning from Australia: Meet the Threat of Chinese Economic Coercion to Democracy

February 9, 2021 Topic: Security Region: Australia Blog Brand: The Buzz Tags: AustraliaChinaEconomicsTrade WarGreat Power Competition

Warning from Australia: Meet the Threat of Chinese Economic Coercion to Democracy

Chinese tariffs on Australian wine show how far Beijing will go to coerce a democracy over a political dispute.

What do tariffs on Australian wine have to do with global democracy? For the Joe Biden administration, they represent an emerging challenge as China’s far-reaching economic coercion can threaten civil society and democratic values. China has relied upon economic measures in a nearly year-long dispute with Australia, but the core of the issue between the two countries is not economic but political—it is whether China can leverage its economic heft to impose its will upon, and receive the full deference of, a democracy. As strengthening democracy at home and abroad is a central aspect of its foreign policy plans, the Biden administration should heed the warning from Australia. With growing economic reach, China is strengthening the coercive tools at its disposal and working to perfect their use against democracies. 

This is not the first time Australia has acted as the canary in the coal mine. When the Trump administration declassified its 2018 Indo-Pacific strategy, Axios reported that officials cited Australia’s experience with Chinese influence operations as strongly influencing the drafting of the document. After a string of high-profile scandals exposed pervasive covert efforts by Beijing to manipulate Australian politics, Canberra mounted a vigorous response, culminating in 2018 with a far-reaching set of counter-interference laws and reforms. Its covert operations thwarted, China has switched gears to more overt exertions of power.

Since Canberra’s call for an independent inquiry into the origins of the coronavirus in April 2020, China has deployed an array of coercive economic measures against Australia. These measures include punitive tariffs and de-facto import bans on crucial Australian agricultural exports such as barley, timber, beef, coal, and wine, threats of boycotts, warnings to potential university students, and regulatory foot-dragging delaying Australian lobster exports. In November, the Chinese embassy in Canberra provided several Australian news outlets with a dossier of fourteen grievances. Some of those complaints were economic, such as the tightening of Australian foreign investment law, and the decision to ban Huawei and ZTE from Australian 5G networks in 2018. However, other grievances were political: the “political manipulation” of calling for an independent inquiry into the origins of the coronavirus, or the temerity to make a statement on the South China Sea.

But most striking are the grievances aimed beyond the Australian government, targeting Australian society itself. Among the grievances are the “outrageous condemnation of the governing party of China by MPs,” “an unfriendly or antagonistic report on China by the media,” and the Australian government funding an “anti-China think tank for spreading untrue reports… aimed at manipulating public opinion against China”—referring to the Australian Strategic Policy Institute (ASPI), a think tank partially funded by, but independent from the Australian Department of Defence. These grievances extend beyond the pale of standard diplomacy. By listing the activities of the independent media and civil society alongside those of the state, it is clear that in Beijing’s eyes, the Australian government is to be held equally responsible, raising the disquieting question of how it expects Australia to redress these wrongs.

China’s focus on the activities of civil society is perhaps tacit recognition of the essential role it played in the exposure of and response to China’s interference campaign. The scandal that kicked off the affair—the discovery that Australian senator Sam Dastyari had Chinese donors pay his bills—was first reported by the media. And it was through the dogged effort of journalists like John Garnaut and Alex Joske that the full extent of the campaign became clear. Think tanks then advanced press coverage and media reporting in influential reports that shifted the policy debate. Eventually, free and open discussion across society produced overwhelmingly bipartisan legislation that took an aggressive stance on foreign interference. 

China’s measures so far have been more successful in poisoning Australian public opinion than in producing any behavioral changes in Australian civil society. Yet as tempting as it would be to point to the backlash and declare China’s coercive measures counterproductive, that would ignore their deterrent effect on other countries and the experimental value of the campaign. The sheer range of measures across industries, from universities to lobsters, all varying in intensity, suggests that Beijing is using Australia as a testing ground for economic coercion. Under observation is not just the material impact of these measures on the Australian economy, but also which industries proved most politically sensitive, which measures caused the most collateral damage at home, and how other countries and how other countries respond to these coercive tactics.

China also tests new methods, such as exploiting the political decentralization common in democracies, especially so in federal systems like Australia. In 2018, China’s National Development and Reform Commission bypassed Australia’s federal government to sign a memorandum of understanding with the opposition-led state government of Victoria for the state to take part in China’s Belt and Road Initiative. The move, taken without consultation by either side with Australia’s foreign ministry, increased China’s economic leverage over Australia, and generated another political constituency invested in a less confrontational relationship with China.

As one of the world’s strongest democracies, Australia will likely weather the current storm, but the Australian experience is a foreboding one in a world where democracy is already on the decline, a phenomenon that has only accelerated amidst the ongoing pandemic. Chinese economic coercion, which is increasingly sharpened and refined by experience, will likely increase the incentives for would-be authoritarians or weak and economically vulnerable democracies to clamp down on the freedom of the press and political expression at home to maintain access to Chinese markets and investment. 

As Australia’s experience with Chinese interference operations shows, a vibrant civil society can act as democracy’s potent antibody against malign foreign influence. The health of civil society of U.S. partners is essential if the Biden administration’s “coalition of democracies” is to successfully push back against authoritarianism. It is crucial that the Biden administration engage with fellow democracies vulnerable to Chinese economic coercion in developing collective measures to resist coercion and ensure that civil society does not become a casualty of economic necessity. 

Megan Ophel is the Joseph S. Nye, Jr. Intern for the Energy, Economics, and Security Program at the Center for a New American Security (CNAS).

Image: Reuters.