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A club for hemming China in
On Monday — the day that Prime Minister Justin Trudeau told reporters that Canada is interested in joining the AUKUS defense alliance — documents were released at a public inquiry that showed that Canada’s intelligence agency believes China “clandestinely and deceptively interfered in both the 2019 and 2021 general elections.”
Also on Monday, as Chinese ships carried out exercises in disputed waters in the South China Sea, the US, UK, and Australia announced that they were talking to Japan about inviting that country to participate in Pillar II of the security pact.
China’s growing military and political belligerence is rattling other countries, and they are responding by drawing together in a way that would have been out of the question a decade ago.
Neighbors under pressure
Pillar I of AUKUS, which was announced in 2021, is a collaboration between Australia, the Americans, and the Brits aimed at adding a powerful new capacity to Australia’s military: nuclear-powered (though conventionally armed) submarines. This is a huge spend for Australia — $368 billion over 30 years — that carries an inherent political risk. And to make the deal, Canberra had to blow up relations with France by abandoning a deal to buy French subs. The Aussies only did that after a year of tense political and economic confrontations with China that left decision-makers in that country gravely concerned about its future in a neighborhood dominated by Beijing. Australia’s back was against the wall.
Like Australia, Japan is being driven to closer cooperation with the United States by its concerns about an increasingly powerful and assertive China. Japan’s trade-focused economy depends on international shipping passing freely through the South China Sea, for instance, where China has been clashing with the Philippines.
So Tokyo has reason to be interested in Pillar II of the AUKUS arrangement, which focuses on defense technology sharing, including quantum computing, hypersonic missiles, artificial intelligence, and electronic warfare — all areas where China presents a technological challenge, and where Japan could offer expertise.
With China rapidly expanding its military, Japan has decided to break with its post-war pacifist tradition and dramatically increase defense spending.
Northern lightweights
Canada is also opening its checkbook, but at a much smaller scale, which would explain why the AUKUS partners are making a point of talking about doing business with Japan, rather than Canada.
Nobody is talking about adding other countries as full members, Australian Prime Minister Anthony Albanese said Tuesday, but proceeding on a project-by-project basis.
Historically, Canada spends little on defense, falling well short of the 2% of GDP that NATO members have all agreed to spend. In an increasingly dangerous world, though, pressure is mounting for Canada to step up, and on Monday, Trudueau’s government did roll out a five-year plan to bring defense spending up to 1.76% of GDP by 2030, up from 1.38% last year.
Allies welcomed the announcement, but there was nothing significant enough to make Canada a much more desirable partner for AUKUS, says Eugene Lang, a former Liberal defense official turned Queens University professor. Officials are interested.
“I just don’t know that we're doing anything to get their attention,” he says. “What they're doing in AUKUS is investing in developing brand-new technologies. To my knowledge, Canada has not got any specific money set aside for any of that.”
University of Ottawa Professor Thomas Juneau, who has interviewed allied officials about Canada’s potential role in AUKUS, found that Canada is increasingly seen as a free rider in defense and intelligence circles. It’s not surprising that Japan was invited before Canada, he says.
“It's really normal for AUKUS to bring in Japan before Canada because Japan is not only a much bigger country than we are, but it's right next to China.”
Wolf warriors
On the other hand, because of its Five Eyes intelligence-sharing experience, Canada could more easily cooperate with AUKUS than Japan, says Graeme Thompson, a senior analyst with Eurasia Group.
And while it may not be spending enough money to be taken seriously, the Trudeau government has moved to be more circumspect in its relationship with China, limiting Chinese investment in critical minerals and being cautious about research projects.
“The scales have fallen from a lot of politicians’ eyes in the West,” Thompson says. “The question remains, how do you have constructive diplomatic and economic relations with Beijing, while at the same time competing with them geopolitically and seeking to build up and maintain deterrence?”
China will object to the new alliances being organized around it, but don’t expect Beijing to stop buying sabers and rattling them.
“China has a rising economy, so the idea that its rising economic power wouldn't come with rising geopolitical ambition is a fantasy, and we've kind of believed in that fantasy for a while, not just in Canada but in other Western countries,” says Juneau.
“But it was a fantasy all along.”
FILE PHOTO: Chinese Coast Guard vessels fire water cannons towards a Philippine resupply vessel Unaizah May 4 on its way to a resupply mission at Second Thomas Shoal in the South China Sea, March 5, 2024.
Is the South China Sea the next Sarajevo?
The US, Japan, Australia, and the Philippines banded together Sunday for their first joint naval exercises in the South China Sea to push back against Beijing’s aggression and territorial claims in the region. A recent op-ed published in the state-owned China Daily drew parallels between current tensions with the Philippines over the disputed maritime zone and the “Sarajevo gunshot” that preceded World War I. This view is echoed by China expert Gordon Chang, who told Fox News that “it’s more likely that the fight starts over the Philippines than it starts over Taiwan or Japan.”
Cue the cavalry: These drills, including anti-submarine warfare training, are designed to uphold the rule of law and freedom of navigation, according to a joint communique. China said it conducted its own military drills in the region in response. The drills come just ahead of a meeting between US President Joe Biden, Japanese Prime Minister Fumio Kishida, and Filipino President Ferdinand Marcos on Wednesday, when the allies will discuss further cooperation in the South China Sea — with bigger ambitions on the horizon.
The AUKUS alliance is also flirting with the idea of inviting Japan to be a new partner in countering China's assertiveness. Japan would engage in “Pillar Two” of the Alliance, which commits members to jointly developing quantum computing, undersea, hypersonic, artificial intelligence, and cyber technology. (Pillar One, which will deliver nuclear-powered attack submarines to Australia, will not include Japan. Before JAUKUS is born, however, experts say Japan must enhance its cyber defenses and better protect sensitive information. We’ll be watching for an impending announcement at the summit on Wednesday.US Defence Secretary Lloyd Austin (left) , US Secretary of State Antony Blinken, Australian Foreign Minister Penny Wong and Defence Minister Richard Marles
AUKUS for all of us?
Canadian politicians and observers are wondering what he meant by “other partners.” A May report suggested Canada was keen to cooperate with the trilateral group in its second phase. This suggestion came after the Liberal government had previously said it had no interest in taking part and neither wanted nor needed nuclear submarines. The White House has said there are no plans to invite Canada to join the pact. But that may not preclude cooperation in the second phase, like New Zealand.
Last week, US Senator Dan Sullivan criticized Canada for its low military spending. While questioning Lt.-Gen. Gregory Guillot during his confirmation process to head the North American Aerospace Defence Command, Sullivan quizzed Guillot one whether the US could count on him to have “tough conversations” with Canada on the matter.
Canada has long been pressured by allies to spend more on defense. In April, a report suggested that PM Justin Trudeau told allies he has no intention of hitting the 2% of GDP military spending target. In response to Sullivan’s criticism, Trudeau defended Canada’s military spending, including a pledge of roughly CA$40 billion to modernize NATO and the recent purchase of a fleet of F-35 fighter jets. But whether that’s enough depends on whether allies believe it’s enough – and Canada’s participation in AUKUS, or its absence, may indicate how the United States, Australia, and the United Kingdom really feel about that.
Silicon Valley Bank collapse: Not 2008 all over again
Ian Bremmer shares his insights on global politics this week on World In :60.
With the Silicon Valley Bank collapse, is it 2008 all over again?
There's one very clear way that it's not, which is that it's not a big enough crisis for people to come together. And remember, after 2008, everyone understood that we needed to do everything possible to get the markets functioning, get trust in the system again, and avoid a great depression. Nobody's saying that right now. And it's not just because the US political system is more divided, it's also because people feel like it's fine to go after the "woke" banks. It's fine to go after the Trump era deregulation around the medium size banks. And everyone can point at their favorite villain while you don't really need to do a hell of a lot beyond the bazooka that Secretary Yellen threw at SVB and Signature Bank this weekend. So no, in that regard, it's very much not 2008 all over again. In some ways I'm happy about that and other ways I'm not.
As China reopens to tourism, is COVID finally behind us?
Well yeah, in the sense that we can travel everywhere. I mean, the fact that you haven't been able to go to China for three years now. First because of COVID, then because of zero-COVID policies is a real problem. I mean, engaging with Chinese policy leaders, corporate leaders on a Zoom, you're just not getting a lot of information. And Munich Security Conference was the first time I met with a senior Chinese delegation face-to-face, aside from China's then ambassador, now foreign minister to Washington in three years. So I mean, just my level of understanding of what the hell is going on in China is significantly less than I need it to be. And now that we can all start going to China again, that's a really big deal. So I think that makes COVID behind us. Of course, long COVID isn't behind us. And this is a permanent disease that, in terms of COVID's reality, people are still going to die from this thing, but in terms of treating it like a pandemic, yeah, I think it's pretty clear that that we are over and done with and I'm glad to say it.
Will the AUKUS deal shift the balance of power in the Indo-Pacific region?
No, I don't think so. I mean, it's a big deal for the Americans to be sharing advanced nuclear technology and hardware with the Australians, something the Americans wouldn't have done before. That is in part a growing concern about China. By the way, it's also potentially an intelligence risk because Australian level of security around their intelligence and information and their susceptibility to espionage from Beijing is a lot higher than that of the United Kingdom, than that of the United States. So there is a risk on board with that, but no, I think the important thing is that the Americans are continuing to focus on what is really a pivot towards Asia, more military equipment, more economic engagement, and of course, more concern of American allies and partners all across the region that they need the Americans from the security perspective, even as China becomes the critical economic partner. So that I think is important incrementally, strategically, but I wouldn't say AUKUS is the big mover, this week's San Diego meeting notwithstanding.
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US President Joe Biden and French President Emmanuel Macron
Can Macron woo Biden?
French President Emmanuel Macron is in Washington, DC, for an official state visit, the first world leader given that honor since President Joe Biden moved into the White House nearly two years ago.
Marked by military processions and fancy dinner parties, a state visit is essentially the greatest expression of “friendship” between two countries.
Biden and Macron, both known for public displays of affection, will surely go to great lengths to demonstrate that US-French relations are warmer than ever. But behind the scenes, the two leaders will have to hash out a series of thorny issues.
Macron’s already winning. While Macron is hoping to secure certain material gains, the invitation itself is likely already deemed a win by the French president, who has long been trying to carve out his place as the de facto leader of Europe.
To be sure, the competition isn’t stiff: The leader of a degraded Britain was hardly going to get the star treatment from the White House – nor was German Chancellor Olaf Scholz, Angela Merkel’s wildly underwhelming successor.
What’s on the agenda?
Relatively straightforward: Reaffirming the transatlantic alliance and a coordinated Ukraine policy
The US and France have come a long way since Sept. 2021, when Macron briefly withdrew his ambassador from Washington after the AUKUS debacle, where the US froze Paris out of a crucial Asia Pacific security pact with Australia and the UK.
But since then, the US and France – leading the broader European Union – have exhibited a resilient partnership in an effort to isolate Russia and bolster Ukraine. Despite some divergent economic and strategic interests, the EU and US agreed early on to hit the Kremlin with coordinated coercive economic measures, while also presenting a united front on the diplomatic stage. Indeed, Biden and Macron will want to highlight this unity for Presidents Xi Jinping and Vladimir Putin watching at home.
However, Biden and Macron have at times seemed to offer conflicting visions of an eventual endgame in Ukraine. While Paris previously called for dialogue with Russia to end the war, Biden has mostly reiterated Kyiv’s view that a settlement will only be reached once Russia withdraws from all Ukrainian territory.
Still, what leaders say in public is often very different from admissions made behind closed doors, and this multi-day summit will give Biden and Macron an opportunity to talk candidly about their views of a lingering conflict that has sent the global economy into a tailspin.
What’s harder to fix?
Made in America vs. Buy European
The EU – and France in particular – has made no secret of the fact that it abhors the Inflation Reduction Act, a key component of Biden’s legislative agenda that includes tax breaks for Americans who purchase electric vehicles made from parts manufactured only in North America. Decrying America’s protectionist policies, which he says discriminate against Europe’s robust auto industry, Macron has called for subsidy loopholes for the EU resembling those given to Mexico and Canada.
But Clayton Allen, a US expert at Eurasia Group, says that remains a pipe dream. “There is no room to extend the same exceptions granted to Mexico and Canada without new legislation,” Allen says, adding that “there is no appetite to pass that legislation in the lame duck [session],” or to do so in the next Congress.
Biden, for his part, “has no real wiggle room on the provisions of the IRA itself,” Allen adds.
Indeed, this sticking point has caused Paris to push its own “Buy European” agenda – a move aggressively backed by Berlin – with Macron calling for Europe to pass its own subsidy package to safeguard key industries.
Still, both Macron and Biden will be keen to stave off a transatlantic trade standoff that could deepen the global financial crisis. Rather, Macron will be trying to feel out how the US might respond to reciprocal protectionist measures.
Energy wars. While energy-dependent Europe is bearing the brunt of Western efforts to transition away from Russian energy exports, the US has in fact benefited from the global energy flux. Indeed, in the first half of 2022, the US surpassed Qatar and Australia to become the number one exporter of liquified natural gas, in large part due to the EU and UK having boosted their LNG imports to offset dwindling supplies from Russian pipelines.
With the EU feeling the pain, Macron has called on the Biden administration to pressure US gas companies to lower prices. The White House, for its part, says that its options are limited, noting that increased LNG prices are largely a result of the US Federal Reserve’s efforts to tackle inflation, which have made US exports more expensive for everyone. In reality, there’s little the Biden administration can do: High global demand for LNG is pushing prices up, including domestically. Indeed, some US lawmakers have even called for export limits on US LNG, but the Biden administration isn’t going for it.
Still, Macron isn’t buying it and accuses the White House of a “double standard” on energy and trade policy.
France and the US: et maintenant?
Despite all the tough talk, European – and French – “political preferences will be to maintain transatlantic unity over the Ukraine war and avoid a trade spat with the US,” says Mujtaba Rahman, Europe Managing Director at Eurasia Group. Indeed, Uncle Sam seems to be in a strong bargaining position.
Hard Numbers: AUKUS compensation, $5 gas in America, Iran-Venezuela cooperation, counting toes in Zimbabwe
600 million: Australia will cough up $600 million to compensate the French defense company it scrapped a submarine deal with in order to join AUKUS. Le sub snubstrained relations between Canberra and Paris and opened up a can of worms with Beijing.
5: Average US gasoline prices surpassed $5 a gallon for the first time on Saturday, just as peak driving season gets into full swing. This is bad news for President Joe Biden, who's struggling to ease inflation at the pump ahead of the November midterms with his own approval ratings in the tank.
20: Iran and Venezuela signed a 20-year cooperation agreement during Venezuelan President Nicolás Maduro's visit to Tehran. Details are murky, but the two oil-rich international pariahs will likely continue scratching each other's back while they remain under crippling US sanctions.
130: An internet rumor about Zimbabweans selling their toes for cash became so widespread that the deputy information minister asked Harare street vendors to debunk it by showing they all had 10 toes. What is true is that inflation has surged more than 130% since the beginning of the year in a nation with painful memories of worthless money.
What We're Watching: Australia-China tension rising
For Beijing, there is thunder Down Under. Tensions between Australia and China just keep rising. After China responded to Aussie requests for a COVID investigation by imposing devastating tariffs and unofficial bans on Australian exports in 2020, Oz is pushing back hard now. Canberra on Friday accused China of “economic coercion,” while cybersecurity officials publicly confirmed malicious attacks against Australia by Chinese spy services working with Chinese telecom giant Huawei. The Aussies also say Chinese intelligence vessels are snooping around in Australia’s Exclusive Economic Zone. These accompany several clearly pro-American moves this year: the Aussies have signed on to AUKUS, an exclusive military club with Washington and London that gives them access to unprecedented weapons tech, are allowing the buildup of US military infrastructure (read, bases) on its soil, and joined America in a diplomatic boycott of the 2022 Beijing Winter Olympics. But the Australians are taking the tensions directly to China’s neighborhood, too. Canberra just signed a $770 million weapons deal with South Korea, including tech to build Howitzers — really, really big artillery guns. And even though the spat between the two continues, there is evidence that Australia, though heavily dependent on trade with China, is successfully pushing for diversity in trade partnerships.
Chile's President-elect Gabriel Boric celebrates with supporters after winning the presidential election in Santiago, Chile, December 19, 2021.
What We’re Watching: Chile’s new prez, Manchin sinks Biden’s agenda, Russian NATO wishlist, Australia vs China, Afghan trust fund
Boric wins in Chile. In the end, it wasn’t even close. Faced with two diametrically opposed choices for president in Sunday’s presidential runoff, more than 55 percent of Chilean voters went with leftwinger Gabriel Boric instead of his far-right opponent José Antonio Kast. The ten-point gap was so wide that Kast conceded before the count was even done. Boric, 35, now becomes the youngest president of any major nation in the world. Elected just two years after mass protests over inequality shook what was one of Latin America’s most reliably boring and prosperous countries, Boric has promised to raise taxes in order to boost social spending, nationalize the pension system, and expand the rights of indigenous Chileans. But with the country’s legislature evenly split between parties of the left and the center-right, the new president will likely have to compromise on his sweeping pledge to make Chile the land where neoliberalism “goes to its grave.”
Joe sinks Joe. It looks like US President Joe Biden has come to the end of the road with his $1.75 trillion Build Back Better Plan, now that Sen. Joe Manchin (D-WV) has announced flatly he’ll vote “no.” With the Senate split 50-50, Biden needs every Democrat vote in the chamber. The White House haggled with Manchin for months — “dancin’ for Manchin”, you might say. Biden even cut the proposed spending in half. But the moderate Manchin said he still “couldn’t get there” because of concerns about the deficit, and further stoking already high inflation. Republicans, of course, are ecstatic, because passing BBB is Biden's key pitch for Americans to vote for Democrats in next year's midterms and re-elect him (or another Democrat in his place) in 2024. It's not too late to reach a fresh compromise on the bill, but the longer the Dems keep squabbling, the longer their odds of retaining control of Congress next November.
Russia makes its demands. With 100,000 Russian troops at the Ukrainian border, Moscow released a bombshell list of demands for the “West” on Friday. Among other things, NATO must relinquish any right ever to expand further eastward, and must stop sending its troops or ships anywhere that could conceivably threaten Russia. What’s more, the Russians are impatient: they want the US to discuss these proposals right now. The US is happy to talk, but won’t give the Kremlin a veto over the choices that sovereign nations want to make about their own security alliances. The Ukrainians, naturally, agree, and on Monday President Volodymyr Zelenskiy will meet with his counterparts from Poland and Lithuania to emphasize the point. We’re watching to see what the US comes back with — one version of a maximalist response would look like this — and what, precisely, Russia is prepared to do if it doesn't like what it sees.
For Beijing, there is thunder Down Under. Tensions between Australia and China just keep rising. After China responded to Aussie requests for a COVID investigation by imposing devastating tariffs and unofficial bans on Australian exports in 2020, Oz is pushing back hard now. Canberra on Friday accused China of “economic coercion,” while cybersecurity officials publicly confirmed malicious attacks against Australia by Chinese spy services working with Chinese telecom giant Huawei. The Aussies also say Chinese intelligence vessels are snooping around in Australia’s Exclusive Economic Zone. These accompany several clearly pro-American moves this year: the Aussies have signed on to AUKUS, an exclusive military club with Washington and London that gives them access to unprecedented weapons tech, are allowing the buildup of US military infrastructure (read, bases) on its soil, and joined America in a diplomatic boycott of the 2022 Beijing Winter Olympics. But the Australians are taking the tensions directly to China’s neighborhood, too. Canberra just signed a $770 million weapons deal with South Korea, including tech to build Howitzers — really, really big artillery guns. And even though the spat between the two continues, there is evidence that Australia, while heavily dependent on trade with China, is successfully pushing for diversity in trade partnerships.
An Islamic trust fund for Afghanistan. They didn’t officially recognize the Taliban government. They didn’t even allow the Taliban’s foreign minister to appear in the official group photograph. But foreign ministers from the 57-member Organization of Islamic Cooperation, the second-largest intergovernmental organization after the UN, met in Islamabad on Sunday and pledged to set up a trust fund to address the worsening humanitarian crisis in Afghanistan. Neither the exact amount of the fund nor the contributions by member countries was released, but may not match the $4.5 billion that the UN has appealed for aid to Afghanistan amid warnings that the Afghan economy is in a free-fall, with 23 million facing starvation. The lead organization of the fund will be the Islamic Development Bank, the OIC’s in-house global lender.