DENNISS ARGALL. Thinking through the choppy issues in trade and strategic threat.

Jun 4, 2019

The public discussion of trade war and security issues is too simplistic. Trump’s bilateral adventures in liking and bullying will mean discussion of structural changes in regional affairs to which Australia will not be party. Trump is not a passing phenomenon. We cannot say as some are saying “our alliance is with the US, not Trump”.

I am sitting at a computer attached to the internet via two things. A modem of ordinary quality, provided by my ISP, a Chinese brand, with 5G connectivity to the computer. Beyond the modem is the National Broadband Network, large parts of which are made in China. I suspect that those Chinese bits are not the elements of the NBN that fail us often here. I can’t see the strategic case against Huawei without mention of such inconvenient details.

I read the tabloid-stirring news of the US-China trade war. The Deal Artist, among changes and shocks in terms on offer, seeks to hit China by killing the world’s leading communications technology company, Huawei. Equally involved is Apple, whose products dreamt up in California are manufactured in China. There are other companies in similar situation, with Google now forced to cut off use of its software use in Chinese products.

But it’s not a simple bilateral matter.

According to a report released last year by the International Monetary Fund (IMF) titled, “A New Smartphone for Every Fifth Person on Earth: Quantifying the New Tech Cycle,” which analyzed the global smartphone supply chain, “the supply chain has evolved over the last few years and become more complex,” consisting of “large shipments [of intermediate goods] from several Asian countries to China, where final manufacturing and assembly of most smartphones takes place. [. . .] The main contributors to this complex supply chain were Japan, Malaysia, Singapore, South Korea, and Taiwan Province of China.”

This network of mutual reliance is a major element in the rise of East Asia. With the movement of components goes language. Businesses communicate with each other. Governments nod and bind together. The ways to deal with the simple-minded US bash of China will be discussed and resolved by very smart people in this region. What languages they use, what they resolve to do, will reshape the world. Australia is not part of that evolving world.

On this ranking of international competitiveness

Singapore, Hong Kong, China and Taiwan, China, rank ahead of Australia. We delude ourselves in sense of superiority.

President Trump has been in Japan recently and, cloaked slightly in macho entertainments, has given Prime Minister Abe a roughing up. Gavan McCormack has written recently about the curious instabilities in Japan, and Abe’s circumstance.

In my view Abe’s obsequious approach to the US reflects his awareness that Japan’s economy has not recovered from its last trade war with the United States in the 1980s. The next trade war with the US will likely take down Abe and more. Trump gracelessly disagrees with Abe on North Korea as they stand together and patronisingly says he will talk to Kim Jong-un about allowing an Abe-Kim meeting. He gives this Prime Minister his approval to talk to Iran, a task, in representing the US, likely to be as successful as Menzies’ excited desire to talk to Egyptian President Nasser and tell him not to take the Suez Canal in 1956. Though Japan has been assiduous in its pursuit of good relations with the oil producers since the 1973 oil shock, that represents how Japan could be wedged away from the US, not an asset in speaking somehow for the US.

To fend off the next US economic shocks for Japan for a bit, Abe ordered another 105 F35 aircraft. An aircraft of which Wikipedia at today’s date says:

As the largest and most expensive military program ever, the F-35 became the subject of much scrutiny and criticism in the U.S. and in other countries. In 2013 and 2014, critics argued that the plane was “plagued with design flaws”, with many blaming the procurement process in which Lockheed was allowed “to design, test, and produce the F-35 all at the same time,” instead of identifying and fixing “defects before firing up its production line”.By 2014, the program was “$163 billion over budget [and] seven years behind schedule.” Critics also contend that the program’s high sunk costs and political momentum make it “too big to kill”.

Aircraft of this type are enthusiastically sought by air forces because others might have similar and because of the general enthusiasms that infect air forces. Of course a Japanese purchase like this needs to be seen in the context of Japan’s large foreign reserves and negligible cost of money in Japan.

Big tech items, military and civil, are central to the approach of the US to stem the tide of declining competitiveness. The Boeing 737MAX built in haste with accountant imperatives

has (yet to be measured) negative consequences for the US, political and financial. There are 96 MAX aircraft grounded in China and Chinese airlines will seek compensation for this loss. As will others.

We have recently been witness to an alleged security alert in the Persian Gulf. With suggestions that Iran must be responsible for non-critical damage to several oil ships not shown to journalists and drone attacks from places unknown on pumping stations in Saudi Arabia causing slight damage. In response to this US naval forces in the Gulf have been expanded, to a total strength there much greater than the rest of NATO could assemble anywhere. There is ambiguity in threats by the US towards Iran. It seems to me that the major achievement of this American deployment against a declared threat has been Presidential approval of arms sales that would probably not be approved by Congress. I find my suspicion has been articulated already by The Intercept.

There continues to be discussion as to whether we should take sides with either China or the US. I wrote recently about how the choice is about how to see the world.

But war commitment too often arises from inadvertence and unexpected foci of irritation inflaming public opinion and policy: from Sarajevo 1914, to the Gulf of Tonkin 1964, excuse for widening US commitment in Vietnam, to the minor event near the Gulf of Tonkin in 2019 involving the Australian navy.

Menzies said in 1939 that as Britain was at war with Germany, so was Australia. We live still on such a slope of easy commitment. At what level are alternatives discussed and by what strategic judgement are we engaged in Indo-Pacific exercises aimed at China, far from Australia, far from the US? Where is the debate?

Dennis Argall’s career included work in Foreign Affairs and Defence departments and overseas postings including Washington and as Ambassador to China.

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