Over the past several years, Australia has been trying to get the mix right with its foreign policy calculus. On one hand, Canberra understandably has a strong desire to capitalise on the tantalising economic opportunities borne out of China's rise.

Australia is also looking to profit from its early entry - relative to most of its other Western friends - into the Chinese market. Last December, the landmark China-Australia Free Trade Agreement entered into force.

For Canberra, this was an important move that helped secure better market access to its top trading partner. Last year, Australia exported nearly $75bn in goods and services to China and received nearly $50bn in direct foreign investment from the Chinese.

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Australia's 'rebalancing'

The other side of Canberra's strategic policy decision-making is rooted in its security alliance with the United States. In 2011, under the government of former Prime Minister Julia Gillard, Australia and the US agreed to the rotation of US marines in the northern port city of Darwin.

Under the deal, hundreds of US marines have begun training at the Darwin base for six-month rotations and work on interoperability with their Australian counterparts. The troop rotation deal, which has been heavily criticised by Beijing as provocative, has been hailed by the Obama administration as another example of its commitment to "rebalance" to the Asia-Pacific.

Beijing has made no secret of its distaste for the US alliance network in the Asia-Pacific and also its desire to hedge against this through military modernisation and through trying to drive wedges between Washington and its allies.

 

In addition to its alliance with Washington, Australia has also looked to foster stronger ties with states along China's periphery - such as India, Japan and countries in Southeast Asia.

The relationship with Japan especially has thrived in recent years, with the finalisation of long-running free trade agreement negotiations, and ramped up collaboration on political security issues through the Trilateral Strategic Dialogue (TSD) with the US.

The evolution of TSD is another dividend for the US "rebalance" as it sets a model for the networking of Washington's Pacific alliances and works to address regional security issues such as tensions in the South China Sea or provocations on the Korean peninsula.

The South China Sea is particularly an area of sensitivity for Australia due its geostrategic environment and its reliance on the freedom of navigation being preserved to maintain the integrity of its supply chain.

As China ramps up its land reclamation activities in the South China Sea, there is a loose coalition - led by Washington and its regional allies - that is upping the stakes in an effort to deter Beijing from looking to coercively change the status quo in the disputed seas.

In response, Australia is cautiously contemplating whether it might undertake freedom of navigation operations in the South China Sea in order to reinforce a joint commitment with the US towards free passage of maritime vessels, and also showing public denouncement of land reclamation activities in the area.

Not alone

Despite these real achievements, stewardship over its strategic interests vis-a-vis China and the US remains a tough challenge for Canberra.

One telling example of this struggle to balance economic and security interests was last year's decision by the Northern Territory government to lease the port of Darwin to a Chinese company, the Landbridge Group, for 99 years.


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The Chinese bid of $360m was extraordinary both in its length and generosity, which reportedly was more than 20 percent higher than any rival bids.

The Australian government is trying to conduct damage-control measures and defend the deal that was made by the Northern Territory, claiming that the deal followed Canberra's guidelines for reviewing foreign investment proposals on state assets and critical infrastructure.

Criticism from Washington revolves around the concern that the deal is a piece of kabuki-investment with an ulterior motive aimed at procuring intelligence on the US and Australian military activities in and around Darwin.


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Magnifying these concerns was Canberra's failure to consult Washington before approving the bid, especially considering the enhancement of alliance activities in Darwin.

In addition to the potential for Chinese espionage activities as a result of the lease, there are also glaring potholes on the optics front.

Beijing has made no secret of its distaste for the US alliance network in the Asia-Pacific and also its desire to hedge against this through military modernisation and through trying to drive wedges between Washington and its allies.

While the case of the Darwin lease deal doesn't represent alliance drift, it does represent alliance mismanagement and can be leveraged by China.

On the positive note, these divergent interests, while amplified by its geopolitical position, are not unique to Australia.

Nearly all of Canberra's neighbours in the Asia-Pacific also have an interest in engaging with China and managing underlying suspicions and regional tensions.

The key will be the successful management of this balance through enhanced and holistic cooperation with the US and "eyes-wide-open" engagement with the Chinese on economic matters.

J Berkshire Miller is the director of the Council on International Policy and is a fellow on East Asia for the EastWest Institute.

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.

Source: Al Jazeera