Author: Editorial Board, ANU

As most of the world grapples with controlling the spread of the coronavirus pandemic, some governments and societies are facing the next phase of the crisis: testing the gradual lifting of lockdown measures. Australia, China, South Korea, New Zealand, Taiwan and Vietnam are among those lifting restrictions earlier. Japan appears to be close to joining that group. East Asia looks poised to lead the global economic recovery.

System of government does not explain the success in these countries, but governance does. These governments have largely followed expert medical advice. How shallow their economic downturns have been and how many long-term unemployed will result depends on whether they listen to expert economic advice. What explains success in exit from the crisis is yet to be made clear.

The global economic downturn is the worst since the Great Depression in the 1930s, an event exacerbated and prolonged by a retreat to protectionism. The risk of repeating that mistake was real in the global financial crisis as economies faltered and trade collapsed, but the rejection of protectionism at the London G20 Summit of April 2009 helped pull the world back from the brink.

Whether the world is able to step back from the brink in this crisis remains an open question. There is a risk of turning the recession into a global depression. The Great Depression preceded, and was only ended by, world war.

International cooperation that keeps markets open and is necessary for economic recovery was already fractured before the COVID-19 pandemic by strategic competition between the United States and China. The once in more than a lifetime crisis has led to a further deterioration of the relations between the two superpowers.

As Sheila Smith writes in one of this week’s features, ‘beyond exposing a diminished American will to lead, the pandemic response is revealing a new reality — that of US incompetence’. Add a US election and fear of a rising China, the world’s most powerful country will increasingly be a source of global instability.

At these times what other countries do matters. Middle powers can work to bridge differences between the superpowers, creating the space for cooperation and compromise. If there was ever a shared interest that requires cooperation, it’s dealing with the COVID-19 pandemic and resulting global economic crisis. Easier said than done, of course.

Australia is well placed to play a role. A US ally that has over a third of its trade with China, Australia is a key middle power that can mobilise others to help find global solutions. Its own success in dealing with the pandemic allowed capacity to play into the international effort. It has used that capacity to push for an international inquiry into the origins of the COVID-19 pandemic, claiming victory with the EU-initiated World Health Organization (WHO) motion, supported by China.

Right outcome, excruciating execution. Australia’s initial proposal for the inquiry was advanced without consulting other governments, except perhaps the Trump administration, and in a way that was either designed to purposefully rile China, or demonstrated a complete lack of understanding of how China was likely to respond.

Canberra succeeded in catching Beijing’s attention. A mature and confident China might have protested and moved on. As Peter Drysdale argues in another feature this week, ‘both Australia and China are tripping over their increasingly complicated relationships with Washington and the reality that China is now a great power too — perhaps more sensitive than most because of the way foreign criticism plays into domestic politics’.

China sees an extremely hostile external environment in which it can do no right. As Jia Qingguo explains, ‘the Chinese government encouraged its diplomats to launch a new round of counter-China bashing campaigns’.

The Chinese Ambassador to Australia clumsily suggested that Chinese consumers might choose to boycott Australian products if relations deteriorated further. To complicate matters, an 18-month Chinese investigation into Australian barley dumping was brought to a head with Chinese tariffs of up to 80 per cent imposed on AU$600 million (US$392 million) worth of Australian barley exports by Chinese authorities. At the same time, four of Australia’s largest abattoirs were accused of technical export infringements, putting AU$200 million (US$131 million) of Australian beef exports to China at risk.

China’s moves fit with what are becoming increasingly dominant narratives of a more assertive China that is overly sensitive to external criticism and quick to use its economic levers to flex its political muscle. Ugly nationalism and self-righteousness have been unleashed in both countries. A more innocent reading of China’s moves is that the anti-dumping action was simply designed to protect Chinese barley farmers. Yet such protectionist measures fly in the face of China’s economic recovery and its championing of openness, and raise the costs of doing business with China.

Neither Beijing nor Canberra could explain with a straight face that their actions towards each other are in their national interest. The ‘Australia–China relationship desperately needs adult supervision and getting back on track’, as Drysdale argues.

Both need to step back from the childish bickering and focus together on the opportunity and the need to work together with others in the region and around the world on economic repair and the post-COVID recovery. Right now Australia looks like America’s deputy sheriff in the region and China a petulant adolescent not a great power.

With the successful response to the COVID-19 health crisis in key countries in East Asia, the region is well positioned to lead global recovery. It will only do so if it works together on cooperative strategies and avoids spreading protectionism, fear and enmity. At this time, getting foreign policy right is central to economic recovery from the pandemic. Working with others in the region will help Australia and China to nest their tricky bilateral relationship within a wider regional framework. This will boost regional cooperation and help Australia and China repair their trust.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

This article is part of an EAF special feature series on the novel coronavirus crisis and its impact.