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Thawley backs a ‘G2’ but is China ready or willing to lead?

Four questions formed the basis for an interesting panel session at the Crawford Australian Leadership Forum in Canberra yesterday and “like a good bureaucrat”, as he put it, the Australian Government’s most senior public servant answered all of them simply and directly.

Does the contemporary world need leadership, from the US or anyone else?

“I think the answer is blindingly obvious; yes,” said Michael Thawley, secretary of the Department of Prime Minister and Cabinet and a former ambassador to the United States.

Thawley had to tread more carefully than the other panel members: a jovial Bob Carr with the weight of office gone from his shoulders, and Rand Corporation senior fellow Richard Solomon, who was the US State Department’s deputy secretary for East Asia and the Pacific and later ambassador to the Philippines during the late ’80s and early ’90s.

Next question. What are the external and internal constraints on the capacity and willingness of the US to lead alone?

“Well, they’re sort of obvious but my conclusion is that they’re not so great that the US can’t continue to play a leading role,” said Thawley. “But it’s going to need greater support from allies if it’s going to succeed.”

How able and willing is China to play a global leadership role? “The answer is no. It’s not willing to, or able to play a serious global leadership role.”

And finally, what position should US allies, including Australia, take on these issues?

“Well, our role has to be to increase our own economic weight and our military power, and help the United States maintain its military role, suitably influenced by us,” was Thawley’s short answer.

“We are in a long-term struggle for influence in our part of the world and we might as well just get used to it … ”

Acknowledging that many people would disagree with him, the head of the Australian Public Service blamed China for the failure of co-operation between the world’s two most powerful nations, which he said the current US administration had pursued early on.

“It didn’t work out very well; China wasn’t ready to take on responsibility economically or politically, or security-wise,” he said.

“While China wasn’t ready to attempt to create a new international order, it certainly wasn’t interested in endorsing the present one. Instead I think it’s waiting for the correlation of forces — a relic of the Soviet era, for those who remember that period — to shift and create more space, and it will attempt in the meantime to create more space for itself in Asia.”

While sceptical of a G2 arrangement emerging without a big shift in its attitude, Thawley praised the People’s Republic’s “unprecedented success” in raising living standards: “It’s a real phenomenon and China has done enormously well and earns gratitude and congratulations from us.”

“But now it faces a problem of how to make this huge shift from investment-led growth to a new model, and while one would be crazy to bet against China succeeding or at least having some success, this is a truly huge challenge,” he continued.

“And if China does succeed, it won’t be the same place afterwards. It won’t be a democracy, maybe, but it won’t have the same institutions as it does now; it will be a very different country.”

To map out its future, China would need to do much more than learn from the mistakes of the Soviet Union, according to Thawley, and he was extremely sceptical of the Chinese currency, the Renminbi, playing a similar role to the US dollar in the world economy anytime soon: “China can’t afford the costs and who would want all that Chinese credit risk?”

“China will get in the way or get out of the way; very rarely will it take the leadership role in the way the US will … ”

Moving to the capacity of the US to continue providing world leadership, Australia’s top bureaucrat said people underestimated the superpower’s ability to bounce back economically “at their peril”.

“It’s inventiveness is immense,” he assured the highly influential audience. “Of course it’s not going to be the same dominant economic power in the world that it was but it is still … a mighty machine of economic power, inventiveness and … still the key financial centre for the world.”

Later, experienced bureaucrat and public sector commentator Stephen Bartos asked if that ability could be used to provide the kind of joint China-US world leadership that is needed to solve big issues like climate change, or a possible future financial crisis that is genuinely global. Bartos argued the GFC mainly affected the North Atlantic nations and that the solutions to it could still “unravel” down the track.

“It’s a really important point and I agree with you,” said Thawley. “If you look at attitudes in the United States it’s very clear that more Americans see China as a partner than a rival, and sometimes we misunderstand US policy and US attitudes. It’s quite clear that the US is interested in a partnership, not in a military confrontation with China.”

Bartos also linked his comment to one made earlier by Chinese military academic Major-General Yao Yunzhu, in which she asked whether a more multilateral form of global leadership could emerge, given there were clear “deficiencies” in the US model.

“I think that the speakers … all agree that there are some deficiencies,” Yao said. “So I’ll agree that China is not going to take over as the world leader, but that does not mean the American leadership does not need to reform [or] some change … so my suggestion is that maybe American leadership with Chinese characteristics?”

The comment drew a hearty laugh from the room, but Yao continued:

“Maybe American world leadership with Indian characteristics, or Indonesian characteristics, just to make it more multilateral. …The monetary system should be democratised and the alliance security system should be … reconsidered.

“… I think there are a lot of things we can discuss but we should not constrain ourselves. When we discuss world leadership we have only one model in our mind. We should be more open minded and to think of something else.”

China’s international finance play

In his response to Yao, Solomon suggested the idea of US unilateralism was overstated by critics, giving examples of its attempts to bring other nations with it to attack what it saw as global problems. He said the US was pursuing closer collaboration with China on world issues but this often fell short due to different values, his example being the “kerfuffle” over China’s recent moves to establish the Asian Infrastructure and Investment Bank (AIIB).

“Politically it probably would have been smarter [for the US] to go along with it but the fact is there are standards of transparency, economic management, that we view as significant and one of the reasons why people continue to invest in the American economy — and why China for one is now, as with Russia, faced with capital flight or declining direct foreign investment,” said Solomon.

Former Treasury secretary Martin Parkinson was rankled by the suggestion that co-operation with China on the AIIB was held back by lack of transparency and low probity standards.

“Frankly it’s a nonsense; it’s a complete and utter nonsense,” he said.

“As somebody who actually was involved with discussing with the Chinese how we would reshape this — I went to China, I had multiple conversations with them, my colleagues went to China on my behalf — we actually made very, very significant changes in the way the Chinese first conceived of that.

“We could have made even more changes, if we’d had US and Japanese support, but we didn’t.”

Parkinson pointed out the standards that were agreed to were “good enough” for South Korea, Canada and Great Britain, as well as Australia.

“Last time I looked they were all allies of the US; they were pretty much committed to proper operation of international institutions. I just think if you’re going to keep saying, not you personally, but if people are going to keep saying the problem with the AIIB is a lack of standards and a lack of transparency, then they better start being concrete about it, because I think it’s absolute garbage.”

The former Treasury boss said the issues were wider, with the International Monetary Fund acting as “an extension of the US treasury” and the Asian Development Bank “a tool of the Japanese”, he saw the AIIB as more or less inevitable and able to co-exist with other global finance bodies.

“We’ve got an emerging China, wanting to reshape the rules of capital markets and it’s going to happen whether we like it or not,” said Parkinson. “If we’re not actually in there helping shape it then it’s going to be a much harder task.”

“… Australia missed a terribly important opportunity not to have even more influence, by not taking up the mantle when the Chinese invited us to do so, but I’m glad to see the Treasurer is there signing the document now.”

No “supreme dictator of the world” required

Thawley said it was not the role of the US to be “supreme dictator of the world” but argued it must be involved in any global problem, for it to be solved.

Former Australian Foreign Minister Gareth Evans offered a counter-view: “But maybe we need China just as much… why be single-mindedly focused on the US?”

Thawley was frank in his reply: “Because China won’t help you produce a solution. China will get in the way or get out of the way; very rarely will it take the leadership role in the way the US will, and it quite openly says it does not want that role.”

He also recommends Australia’s foreign policy doctrine should include getting richer, more powerful militarily, and staying calm in the years ahead, avoiding “over the top” hysteria, as China rises and the US pivots around a world where its forces and influence is spread increasingly thin.

“We are in a long-term struggle for influence in our part of the world and we might as well just get used to it, and start thinking about how we’re going to deal with it in a matter-of-fact way,” Thawley said.

“My personal view is that the key to dealing with this situation is to maximise our own economic weight; we need to get our economy back into gear and growing.

“… We need to maximise our military power. There’s a limit to what we can do, but we ought to be aiming to have the capability to play a larger role at least in our part of the world.”

He said Australia should stop being proud to punch above its weight: “We should make sure that both our weight is more substantial, and that our punch is more substantial.”

“Our Australian aim, said Thawley, “has to be to maintain sovereignty over our own political and economic choices and not be waking up every morning asking what people elsewhere in the world think if we do X or Y.”

“The Australian public sees the US alliance as an extension of shared values and ideals … [whereas] we don’t share these values with China,” he continued, referring to survey data showing most Australians think China does not respect personal freedoms. He said similarly dim views about its respect for proper governance and honesty in government and international business were also prevalent.

“Finally, our aim must be [that] we ought to maximise our capacity to influence US strategy and to make sure that it maintains its alliance commitments.”

Author Bio

Stephen Easton

Stephen Easton is a journalist at The Mandarin based in Canberra. He's previously reported for Canberra CityNews and worked on industry titles for The Intermedia Group.