Without much fuss, Australia is decoupling from China

Scott Morrison told us this week the government was setting up an office for managing our use and development of critical technologies, and his main explanation for doing so was avoiding a bunch of risks.

One risk was losing access to some vital foreign technology because it came from only one place - a place that, we can imagine, might withhold supply. (Guess which place he's thinking of.)

Morrison also said we had to guard against someone (who do you think?) exploiting technology in our critical infrastructure - meaning we had to make sure that someone couldn't bring it all crashing down. Imagine the electricity, telecommunications and banking systems suddenly going haywire, for example.

And we're told we have to make sure "espionage and foreign interference" doesn't result in our own technology being used against us. "Foreign interference" is a nice way to mention our cash-hungry universities blithely working on militarily useful technology in co-operation with researchers from You-Know-Where.

Co-ordinating critical technologies will bring benefits as well as avoiding risks, the government says. But the main thrust is clearly defensive.

This is part of an international movement called "decoupling" - disconnecting countries from Chinese trade and technology.

Here and there, in bits and pieces, the government is building protective walls around our society and economy. It has been doing it since around 2017, when the country belatedly woke up to the Chinese threat.

Each of the measures is important, and each sounds really dull when a minister mentions it. If you're looking for a new way to discipline your children, try threatening them with an hour's reading about the Critical Technologies Policy Coordination Office.

Apart from that new office, we have one that pays manufacturers to set up local production of some physical things that we don't want to have to import. Early priorities include personal protective equipment, which, we all suddenly learned last year, comes from China.

In 2020, we limited foreigners' ability to invest in sensitive national security businesses. And now we also have an office that's promoting Australian production of vital minerals that our friends and allies must currently buy from China - including stuff that goes into phones, computers, solar panels, batteries and electric vehicles.

As for the critical technologies office, it's focusing at first on such areas as communications, artificial intelligence, genetic engineering, vaccines and computing, including encipherment. Whether it will actually achieve much, or just get bogged down in a bureaucratic swamp, I can't say. But the idea is good.

Controlling the economy in such a manner is in fact rather Chinese. For decades, Beijing's whole economic policy has been aimed at making China increasingly independent of imported goods, services and technology. National plans issued every five years set out programs for developing this technology or that industry, routinely focusing on areas where the country heavily relies on foreigners - or will if it doesn't act soon.

When China does this, it's called economic nationalism. When other countries do it in reply, it's decoupling.

Realising that China is happy to use its economic influence as a weapon, the idea is gradually dawning on governments that the benefits of a deep trading relationship with the country may not be worthwhile. The US, Australia and Japan are the leaders in this movement, but more will join them.

In the US, the big move so far has been Donald Trump's application of punitive tariffs on imports from China; Joe Biden has retained these measures. Washington has also stepped up screening of foreign acquisitions of US businesses.

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What we're really waiting for is US policy for protecting supply chains - and in this area Canberra is ahead of Washington. The Biden administration is still thinking about how to secure the US economy from dependence on critical supplies from abroad (that is, from China).

Of course, doing this would go down well politically: voters always like to hear that things are being made domestically. And, of course, business people and economists are warning that excluding Chinese supply would be disastrous.

Australia's experience suggests otherwise.

In this country, China is helping decoupling along by economically punishing us for disobedience - particularly for calling for an independent inquiry into the origins of the pandemic. Few Australian managers can now be shaping business plans that rely heavily on sales to China. With more direction from Beijing than Canberra, our exporters are already decoupling.

We did a globally important job in not backing down in the face of Beijing's punishments in 2020 and 2021, and it turns out we're doing an even greater service to the world in revealing that we're not actually suffering much because of it. This will probably go down as our biggest influence on world history in the 2020s.

What has happened has been exactly what should have been predicted: by and large, exporters suddenly shut out of China have found other markets.

Last decade, our economists and business people from time to time warned against offending China, lest we lose sales. But the answer was in the free-market principles those people should have understood so well: faced with changing conditions, an economy adapts. Ours has adapted rapidly.

Jeffrey Wilson, research director at the PerthUSAsia Centre, writes in Foreign Policy magazine this month: "If this is what decoupling from China looks like, Australia's resilience suggests the costs are far lower than many have assumed. That fact will not be lost on other countries that have differences with China."

It's shaping up as a disaster for Beijing's diplomatic and trade policy.