There’s a fundamental problem in Australia’s relationship with China: China’s growth advances prosperity but menaces security. If the rules-based order construct does not suit volatile times—and balancing threatens war—is there an alternative?

China’s rise as a major trading partner has been matched by large-scale cyber espionage, prickly mercantilist policies, domestic repression extending to include overseas Chinese, and, most visibly, South China Sea territorial expansionism. Reflecting this dichotomy, the Turnbull government is advancing Australia’s free trade agreement with Beijing while also advocating standing up to China and debating sending warships into the South China Sea.

Officially, this disconnect is subsumed within the rules-based order construct that explains how we should think about and manage the relationship. This type of order though has inherent shortcomings that are becoming increasingly apparent. Given China’s recent assertiveness, some now propose balancing. But neither approach adequately fits Australia’s circumstances; new thinking is needed.

Following the rules?

Under a rules-based order, states only take actions that conform to agreed rules and norms. It is a consensual order with change managed by multilateral institutions and diplomacy. Given that states inevitably hold differing opinions, agreement by all concerned can be hard to get. A rules-based order is inherently unresponsive to change and can badly lag real-world events.

In 1995, China occupied Mischief Reef in the South China Sea. In response, local states worked hard, eventually producing the 2002 Declaration on the Conduct of Parties in the South China Sea. Since then, all involved have worked hard towards a code of conduct. Agreement may be reached this year—although significant differences remain—but since the mid-1990s circumstances in the South China Sea have evolved dramatically with China building seven large dual-use civil-military facilities and another possibly on the way. A rules-based order construct seems best suited for when change is slow paced and predictable, rather then for times like now when the international system is volatile and abrupt switches happen.

Moreover, China’s ongoing actions in the South China Sea and its disdain for the 2016 Hague Tribunal ruling on these actions highlights a second problem with the rules-based order: enforcement. In the anarchical international system of sovereign states there are no policemen.

A dangerous balance

Trying to address this, many rules-based order concepts now include balancing as a subordinate element. Balancing involves a state threatening or using violence to dissuade the adversary from taking unwanted actions. As an example, Australia’s 2016 Defence White Paper declares: “The Government is committed to making practical and effective military contributions…to maintain the rules-based order….” The recent 2018 US National Defense Strategy goes further and, for practical purposes, elevates balancing to equal status with the rules-based order.

Balancing is based on realist concepts diametrically opposed to the rules-based order’s liberalist notions, which makes combining the two problematic. The major incoherence is that combining the two implies that states must comply with the rules they have agreed to or else there will be war. Stressing cooperation while relying on armed conflict to solve the more difficult issues is an unsuitable basis for a stable international order.

Unsurprisingly, the rules-based order has proven straightforward for states to manipulate to their own advantage. In the South China Sea, China uses diplomacy, economic power, naval forces, threats, low-level violence, information management and international law arguments to adjust its boundaries with several ASEAN states unilaterally. All while continuing to claim adherence to the rule-based order, or rather with the rules it agrees with. China has been strikingly successful in achieving its national objective of territorial expansion and in demonstrating how to best exploit a rules-based order. Is there another type of order that might be more effective and less susceptible to purposeful manipulation?

The main alternative in play, balancing, seems inappropriate given China is a key economic power in the international system and that using balancing in the established manner involves threatening or waging war. Do we wish to adopt an order that in its normal workings might result in a major war with China? Is this move sensible given China may soon be the world’s largest economy (on PPP measures) and has 20 per cent of the world’s people?

Interdependence

An alternative, offered here to provoke debate, is Robert Keohane’s and Joe Nye’s complex interdependence. This has three main characteristics: multiple formal and informal channels connect societies; interstate relationships consist of many issues without any single issue dominating; and no use is made of military threats or force. For each issue area, each state has different interdependence sensitivities (short-term impact) and vulnerabilities (long-term impact) that can be purposefully exploited to obtain the objectives sought. China, or more precisely the Chinese Communist Party regime, has numerous exploitable sensitivities and vulnerabilities.

The order is based on those involved bargaining by manipulating their asymmetrical interdependencies across the multiple channels. There are not necessarily mutual benefits: the losing party may well incur costs. Complex interdependence then has some similarities to realism but provides “an issue-structural, rather than a power-structural, explanation of … change.” Issues are purposefully used by states to drive change.

There are problems with complex interdependence, but then the rules-based order is demonstrably ineffective and balancing’s key mechanism—making war—is unappealing. Tony Abbott notoriously said that Australia’s relationship with China was driven by fear and greed. Greed makes us prefer the rules-based order as it doesn’t threaten economic gains; our fear drives us towards balancing but war frightens everybody. We need to square the circle: to find a new more effective order to embrace and solve the conundrum of combining fear and greed in our crucial China relationship.

Dr Peter Layton is a visiting fellow at the Griffith Asia Institute, Griffith University. He is the author of the book ‘Grand Strategy’.