Australia Needs to Decouple From China as ‘Second Cold War’ Looms: Expert

July 13, 2020 Updated: July 14, 2020

An international strategist has told a parliamentary inquiry that Australia will need to build stronger “resilience” and less “dependence” on China, as in the near future, the world will likely fracture into two major geopolitical blocs akin to the Cold War—one bloc centered around Washington and democratic nations, and the other around Beijing and Xi Jinping’s ambition for a new world order.

Speaking to the Joint Standing Committee on Foreign Affairs, Defence, and Trade on July 2, Alan Dupont, CEO of the Cognoscenti Group, said increased economic and political tensions between Washington and Beijing (particularly related to the trade war, Taiwan, and the South China Sea) would accelerate a “decoupling” of the world’s economies and see the formation of two geopolitical blocs.

Dupont, who is an expert in international affairs, said Beijing would likely lead an “authoritarian” bloc, which would include countries such as Russia, Iran, North Korea, and countries from Central Asia, the Middle East, Africa, and South America.

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Russia’s President Vladimir Putin (L) shakes hands with his Iran counterpart Hassan Rouhani during their bilateral meeting in Shanghai on May 21, 2014. (Alexey Druzhinin/AFP/Getty Images)

The other bloc would include democracies from North America, Europe, and parts of Latin America and Africa. He noted that Australia would “certainly” side with the United States.

Dupont acknowledged that trading relations would be “fluid” in what he called “the second Cold War, the one we’re going into now.” There will be “a lot of movement across the divisions” compared to the original Cold War (1947–1991), which saw trade limited to within each political bloc.

However, in the event that a split does occur, Dupont noted that it was unlikely countries could “straddle” both factions; and aligning with one side was inevitable.

“The more entrenched and rigid these divisions become, the more difficult it will be for countries to have choices and to remain in both camps.

“You will get to a point at some stage where you do have to make a strategic decision about which one you are going with.

“I think most countries do not want to be in that position, and I think that would include Australia too. We don’t want to go down that track, but the risk is that we will.”

The parliamentary committee is examining the implications of COVID-19 for Australia’s foreign affairs, defense, and trade, and is looking into issues related to supply chain vulnerabilities and international trade relations.

Australia Needs to Rectify ‘Vulnerabilities’ Amid Beijing Decoupling

Dupont called on Australia to examine vulnerabilities in its supply chains, saying: “In my view, our dependence on China for a range of critical technologies and goods has become a major security liability and must be reversed.”

Since April, Australia has been locked into a Beijing-instigated trade dispute, which has seen the Chinese Communist Party (CCP) impose 80 percent tariffs on Australian barley imports, ban beef imports from four abattoirs, and advise local Chinese power plants not to buy Australian coal.

Australian politicians have also called for greater decoupling and less reliance on the China market.

According to Dupont’s submission (pdf) to the inquiry, Beijing has already been implementing a form of decoupling.

The submission noted: “China has practised a form of decoupling for many years, by carefully avoiding dependencies, creating protective trade barriers, and positioning itself to control strategic areas of the economy—from rare earths and pharmaceuticals to advanced manufacturing.”

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Employees work on a micro motor production line at a factory in Huaibei on June 23, 2018. (AFP/Getty Images)

Further, Dupont told the committee the CCP hasn’t received “enough pushback” in response to its actions, effectively allowing it to continue unabated.

He called for Australia, in the meantime, to look seriously at its own vulnerabilities and examine how they can be rectified quickly in the short and long term.

“It’s going to require significant investment. It means that we will lose certain efficiencies, and we’re going to have to trade off loss of efficiency for the resilience that we’re going to get,” Dupont said.

According to the submission: “Some degree of economic separation is unavoidable and, indeed, necessary to preserve the integrity of a robust, open trading system and democratic values, freedoms, and institutions.

“This is not a rejection of trade but a rethinking of its architecture and norms as well as interdependence.

“It must be done with a surgeon’s scalpel, not a blacksmith’s hammer.”