Turning Luck into Strategy: Australia’s Economic Alchemy Amidst Great Power Rivalry

This article explores the opportunity afforded to Australia by its position in the middle of great power rivalry.

Great power rivalry between China and the US forms the backdrop to a set of national issues for Australia, including but not limited to: duress arising from the ongoing challenges of climate change, a portending economic downturn resulting from COVID-19, and nationally targeted cyberthreats with possible state involvement. However, there are a number of opportunities afforded to Australia by its position in-between its two biggest partners in trade and defence respectively. Namely, the chance to revisit its relationships in light of risks and rewards which have become more self-evident in a moment of global crisis. Australia’s strategic priorities need to be reassessed; what can the country offer so that it may continue to thrive amidst its key partners who are plagued with their own inefficacies? Even at its broadest level, research and development (R&D) is a key strategic area for review.

Spanning defence to biomedicine and light industry applications, R&D across multiple sectors has been faced with greater protectionism on both sides of great power rivalry. And while the US as a longstanding diplomatic ally has traditionally played a positive role in influencing Australia’s defence policy, it has increasingly begun to encroach on broader issues of national security within Australia. The US’ more protectionist policies and recent export laws which, despite being poorly defined at present look to extend beyond product supply chains and affect flows of human capital– that is, the labour force itself.

If Australia is to defer to more extensive intellectual property (IP) regulations led by policymakers in Washington, it could risk jeopardising its own strategic industry. The issue of labour is one which is holistically tied not only to Australia’s R&D outputs, but may also have widespread implications for the education sector in the country. With the intake of international students at nearly a third (26%), Australia cannot afford to fiscally destabilise its academic institutions, nor can it afford to endanger its R&D sector by deterring a skilled workforce, as per the Trump Administration’s hard pushback. This would ultimately result in a crippled innovation landscape and leave Australia less competitive in the short-to-medium term. Researchers and students alike are part of Australia’s flourishing innovation community and allow it to maintain a competitive advantage proportionate to its relative size as a middle power.

This set of risks is further problematised when viewed in context of the last few decades of industrial collaboration and R&D partnerships, which has resulted in deeply interdependent supply chains and processes. But out of trade tensions between China and the US comes a set of solutions for developing greater self-sufficiency. There is not just a need, but a desire to stay competitive in a global market, but Australia cannot be effective if its national security situation is reduced to a game of political side picking. Australia’s sophisticated cybersecurity governance, its early investment into next generation technology and understated but rich R&D landscape are all critical areas to tools which will see it maintaining its middle power economic position on world stage. Key strategic benchmarks will also be evidenced in how well Australia can broker trade deals for its natural resources and its R&D sector, adapting to the challenges of a digital age.

The status of China-US trade relations can be more accurately described as an ongoing conflict over ownership of digital industries, namely in AI, 5G and quantum technologies. And so, one of the biggest global challenges to come for the country lies in maintaining the ability to compete in future industry. But this will be somewhat determined by the direction that future US leadership takes on China. Australia will be able to mediate between the demands of both its diplomatic partners in China and the US by developing self-sufficiency in the areas it currently excels in.

A variable which could affect this is the imminent presidential elections in the US. With both Joe Biden and Donald Trump vying for the tougher stance on China, a strategic reaction from Australia will call for innovative offerings in the race to attain primacy in next generation technologies including quantum tech, an evolving security environment beholden to macrotrends such as fast-proliferating consumer technologies including 5G and facial recognition, changing models of consumption and a shifting energy market reacting to climate change.

Changing the perception of Australia from being merely ‘lucky’ to strategic is predicated on the country adopting viable futureproofing tactics and refusing to succumb to diplomatic pressure from allies. Through seizing the chance to reassess and renegotiate its core trade partnerships, Australia can develop the self-sufficiency that is of central strategic importance for maintaining a steady position amongst the greater uncertainties to come.