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Despite attempts to bolster national and supply chain resilience throughout the COVID-19 pandemic, concerns about the growing economic and strategic power of an increasingly multipolar world has revealed just how vulnerable the supply chains of the United States and its partner nations are, with a presidential adviser warning they are “absolutely behind”.
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It is an indisputable fact that much of the peace, prosperity and stability of the post-Second World War paradigm came as a direct result of the US-led global order providing the opportunity for the unprecedented economic transformation of the last half of the 20th century — which is responsible for propelling once developing nations onto the world stage.
For Australia and comparable Western nations, like the US, the UK, and increasingly across the European Union, the outbreak of COVID-19 has only served to further hasten the economic decline, stagnation, and political malaise experienced throughout the developed world, with many once-powerful, world-leading nations beginning to feel the pressure.
Across the Indo-Pacific, competing economic, political and strategic interests, designs and ambitions are beginning to clash, flying in contrast to the projections of many historians at the end of the Cold War — further compounding these issues is the continued instability caused by COVID-19, economic disruption through the advent of automation and artificial intelligence and, of course, concerns about ecological collapse.
Meanwhile, Russia’s invasion of Ukraine, increasing tensions over Taiwan off the back off increasing animosity and antagonism by Beijing, coupled with the mounting power and influence of the Brazil, Russia, India, China and South Africa (BRICS) economic, political and increasingly quasi-strategic bloc are adding further pressure to the globalised, post-war economic, political, and strategic order.
This confluence of circumstances and events is applying increasing pressure to the globalised supply chains and model of “just in time” delivery that the developed world, especially Australia as a relatively isolated, island continent has become dependent upon, raising concerns among many politicians, strategic policy thinkers, and the general public.
The Biden administration has also become increasingly concerned about the growing vulnerability of the United States economy and the broader, interconnected global trading network to supply chain shortages, blockages and state or non-state actor interference, with President Joe Biden’s Special Presidential Coordinator, Amos Hochstein, warning, “Look, this is a major concern for the US and I think for the rest of the world. As we are going into a cleaner, greener, an entirely new energy system, we have to make sure we have a diversified supply chain.
“We can’t have a supply chain that is concentrated in any country, doesn’t matter which country that is. We have to make sure from the mining and refining process to the building of the batteries and wind turbines that we have a diversified system that we can be well supplied for. That is the only way this will work from an economy perspective,” Hochstein added.
Absolutely we’re behind
Building on these points, Hochstein, when pushed on the status of the United States when compared to peer and near-peer competitor states, like China for exampled, stated, “Absolutely we’re behind.”
This concerning statement was reinforced by a White House briefing document for the Biden administration’s “Securing a Made in America Supply Chain” policy from February of 2022, which details, “The US is increasingly dependent on foreign sources for many of the processed versions of these minerals. Globally, China controls most of the market for processing and refining for cobalt, lithium, rare earths, and other critical minerals.”
Hochstein reinforces this point, with a startling admission by the United States, “We have to recognise that we have not invested, and that’s what the United States is trying to do now, is not only say the same old talk of we want to have partnerships. We’re going to come to this table together with our G7 allies, we’re going to pool our resources, we’re going to make sure that the money is there.”
Of particular interest is the global scramble for rare earth elements (REEs), a collection of 17 elements and are broken up into two unique groups: light rare earth elements (LREE) and heavy rare earth elements (HREE), each with unique and highly specialised uses in contemporary technologies — with key defence and aerospace technologies heavily dependent on extensive use of REE.
The intensifying trade war between the US and China in particular has shed new light on the growing importance of REE, particularly in the national security context — with China responsible for producing 97 per cent of rare earth ore, 97 per cent of rare earth oxides, 89 per cent of rare earth alloys, 75 per cent of neodymium iron boron magnets, and 60 per cent of samarium cobalt magnets, all critical for contemporary weapons systems, sensors, and more broadly, civilian technologies.
Despite their name, REEs are relatively plentiful in the planet’s crust — however, the complexity of the refining process, namely the prevalence of low levels of radioactivity and the potential for radiation contamination as a result of the refining process, has prompted many Western nations, including the US and Australia, to outsource refining.
Something Hochstein highlights as part of a broader recognition of the supply chain challenges facing both Australia and the United States, “We’re giving the incentives, through the IRA, to tell companies ‘look, if you make sure you’re mining in the US or in other countries and bring it to the US for refining, processing and battery manufacturing, there’s going to be the kind of financial incentives there.”
Time for a Strategic Industries Act?
Contributing an essay to the London-based Henry Jackson Society’s Breaking the China Supply Chain: How the Five Eyes can Decouple from Strategic Dependency report, now-shadow defence minister Andrew Hastie revealed Australia’s startling dependency upon Beijing, thus exposing itself unnecessarily to economic coercion and further compromise, despite the recent period of trade tension between the two nations.
Hastie detailed Australia’s overwhelming dependence on Beijing, highlighting startling figures that impact the overall competitiveness, security, and long term prosperity of the Australian economy, particularly when compared to allied nations, namely:
- Australia is strategically dependent on China for 595 categories of goods — 167 of these have applications in critical national infrastructure.
- New Zealand is strategically dependent on China for 513 categories of goods — 144 of these have applications in critical national infrastructure.
- The US is strategically dependent on China for 424 categories of goods — 114 of these have applications in critical national infrastructure.
- Canada is strategically dependent on China for 367 categories of goods — 83 of these have applications in critical national infrastructure.
- The UK is strategically dependent on China for 229 categories of goods — 57 of these have applications in critical national infrastructure.
Despite attempts by the former government and now seemingly a shifting emphasis away from “sovereign” manufacturing industries by the Albanese government to focus upon more “manageable” sustainment, maintenance, upgrading, and final assembly for key technologies and capabilities, it is clear that Australia, like the United States, needs to identify certain industries, including heavy manufacturing like steel production, shipbuilding, auto-manufacturing, aerospace and chemical engineering, resource and energy exploitation and agricultural output, serve core components of a strategic industrial base.
Identifying these industries is the first step in building a cohesive, long-term plan as part of a broader National Strategic Industries Act — using the legislative power of government to counter-balance industry development policies of allied, yet still competitor nations like South Korea — which leverages the industrial development policies of export oriented industrialisation (EOI) to develop its economy into a major economic and modern, advanced manufacturing powerhouse.
Lessons for Australia’s future strategic planning
There is no doubt that Australia’s position and responsibilities in the Indo-Pacific region will depend on the nation’s ability to sustain itself economically, strategically and politically in the face of rising regional and global competition. Despite the nation’s virtually unrivalled wealth of natural resources, agricultural and industrial potential, there is a lack of a cohesive national security strategy integrating the development of individual, yet complementary public policy strategies to support a more robust Australian role in the region.
While contemporary Australia has been far removed from the harsh realities of conflict, with many generations never enduring the reality of rationing for food, energy, medical supplies or luxury goods, and even fewer within modern Australia understanding the socio-political and economic impact such rationing would have on the now world-leading Australian standard of living.
Enhancing Australia’s capacity to act as an independent power, incorporating great power-style strategic economic, diplomatic and military capability serves as a powerful symbol of Australia’s sovereignty and evolving responsibilities in supporting and enhancing the security and prosperity of Indo-Pacific Asia, this is particularly well explained by Peter Zeihan, who explains: "A deglobalised world doesn’t simply have a different economic geography, it has thousands of different and separate geographies. Economically speaking, the whole was stronger for the inclusion of all its parts. It is where we have gotten our wealth and pace of improvement and speed. Now the parts will be weaker for their separation."
Accordingly, shifting the public discussion and debate away from the default Australian position of “it is all a little too difficult, so let’s not bother” will provide unprecedented economic, diplomatic, political and strategic opportunities for the nation.
As events continue to unfold throughout the region and China continues to throw its economic, political and strategic weight around, can Australia afford to remain a secondary power, or does it need to embrace a larger, more independent role in an era of increasing great power competition?
Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific region and what you would like to see from Australia’s political leaders in terms of partisan and bipartisan agenda setting in the comments section below, or get in touch
Stephen Kuper
Steve has an extensive career across government, defence industry and advocacy, having previously worked for cabinet ministers at both Federal and State levels.
