By Peter Drysdale and Shiro Armstrong.
This article was originally published by the East Asia Forum.
Australia, it has been said, is faced with hard choices in strategic policy because its principal security partner is the United States and its major trading partner, China. By defining Australia’s national interest comprehensively where both China and the United States matter — and where security and economics are integrated into strategic decision making from the outset — Australia would be better placed to deal with the ongoing challenges from both countries (and others) in a complex world.
The problem lies in how Australia’s strategic policy choices are currently being framed and made.
Strategic policy is overwhelmingly framed from a security perspective in political–military terms. Yet the economic dimension of national power and influence is also central to the hard choices to be made on strategic policy. Economic policy and engagement reinforce and habituate a rules-based international order and, significantly, they create bigger, broader interests and pluralities in countries. Incorporating economic options with political-military elements in thinking about strategic policy broadens options for attaining both national security and prosperity.
Consider infrastructure. Concern is expressed in the media that China is seeking to use its Belt and Road Initiative (BRI) on infrastructure to make developing countries more dependent on China and to use debt to compromise these countries’ political independence — all at a time when concerns are rising about the South China Sea, cyber activity and the signalling from China’s shift to presidential life-time tenure. While the BRI does provide China with a means to increase its influence, as other countries like Japan have in the past, it is also a way for China to support economic development and poverty reduction by building infrastructure and creating economic links between countries, and to become a responsible global and regional player commensurate with its growing economic size and power.
The security specialist’s impulse is to stay clear of the BRI. The economist’s impulse is to ensure that project selection is based on delivering high local economic and social returns (through independent cost-benefit analysis, open bidding and transparency) and is supported by strong governance and laws in recipient countries or nested in global norms and institutions to ensure debt sustainability and growth. Taken separately, the responses of the security specialist and the economist are each inadequate. But bringing them together offers a path of constructive yet active engagement that can support both security and prosperity. Drawing away is not going to stop China pursuing the BRI, while engaging intelligently and systematically can mitigate some of the downside risks and help lift global prosperity and security.
This sort of complexity is not isolated to infrastructure. Trade, investment, energy, communications, resources, agriculture, financial markets, water, mechanisms for preventing and resolving financial crises, the Pacific Islands, Southeast Asia and Antarctica are all specific policy areas where there is some mix of security and economic interests and, arguably, strategy needs to be comprehensive, integrated and forward-looking.
The problem is that Australia’s strategic decision making is not currently configured to integrate security and economic considerations in a way that balances and integrates these twin objectives.
Responsibility for defining and achieving the national interest lies with ministers, and the cabinet relies for advice on its National Security Committee, which is chaired by the prime minister and comprises the defence, security and foreign affairs ministers and the treasurer, supported by their officials and the heads of the military and intelligence agencies. The treasurer is the only economic minister systematically engaged, and economic ministers and officials are only brought into the ministerial and the bureaucratic processes on issues as required and as guests.
This system worked well when our main security and economic partners were the same. But the world has changed while our systems for formulating strategic policy have not but remain fixed on the security dimension.
There are two significant changes that might help strengthen strategic policy making.
The first relates to cabinet decision making.
The National Security Committee is essential for dealing with the sensitive and secret matters of national security, but it is not the right place to determine Australia’s broader national strategic interests and actions. A cabinet committee on national strategy, which brings senior economic and security ministers together at the outset under the leadership of the prime minister, is the right place for ministers to discuss and decide Australia’s domestic and international priorities, policies and actions in an integrated way. Material from this committee would then proceed to the full cabinet. The National Security Committee of cabinet would continue to deal with security issues but not overall national strategy.
The other change relates to the public administration that supports strategic decision making by the prime minister and ministers.
There is an extensive bureaucracy, centred on national security, defence and intelligence departments and agencies that support the National Security Committee of cabinet. These institutions are not well placed to provide advice on strategy that integrates Australia’s security and economic interests and see economic engagement as a form of political influence. If the world has changed and stronger institutions are needed to integrate strategic analysis and policy advice, the Australian government — and the Parliament — might consider creating a new agency for that specific purpose.
The crucial element is to develop deep and integrated capability in security and economic analysis and advice, in a way that lifts the capability of existing departments and agencies and properly supports the policy performance of ministers in an area that is clearly now of the highest priority.
Peter Drysdale is Professor of Economics and head of the Asian Bureau of Economic Research, The Australian National University.
Shiro Armstrong is Director of the Australia-Japan Research Centre and Director of the Asian Bureau of Economic Research, The Australian National University.
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