What will the new White Paper say about China? More precisely, what will it say about the emerging strategic contest between China and the United States and its consequences for Australia?

Many observers, myself included, believe that we're headed for an even closer alliance between Australia and the United States as a result. Others aren't so sure, arguing instead that we'll be forced to choose between our economic relations with China and our strategic relations with the United States in what amounts to a zero-sum game.

There’s no denying that escalating competition between China and the United States carries risks. A breakdown in relations between those two countries would carry serious consequences, and an outright conflagration would be grave for all concerned. But it's a logical error of the first order (and a rhetorical trick of the lowest order) to conflate the dire consequences of outright war with the supposed incompatibility of having workable relations with both China and the United States in peacetime.

I’ve written at length elsewhere on why this is so; suffice to say there are two key arguments. First, given that China and the United States have an even closer economic interdependence than Australia and China, it’s hard to make a plausible argument that our strategic relationship with the United States is somehow incompatible with our economic relationship with China.

Second, the predominance of commodities in our trade with China provides few if any channels for the Middle Kingdom to coerce us economically. China isn’t buying our commodities because they want to be our best friend, or as part of a cunning plan to drive a wedge between us and the United States. Rather, they buy from us because we're an efficient and reliable supplier. It's a global market and we are a class act by international standards. Put simply, China doesn't buy our commodities, someone else will. Moreover, any attempt by China to punish Australia for its alliance with the United States by cancelling trade would severely damage their reputation as a reliable customer and force future suppliers to demand a sovereign risk premium.

Recent work by Shiro Armstrong at the ANU only strengthens the case. In his 2012 study of the China–Japan relationship—a relationship marked by deep mistrust and periodic heightened tensions—he concluded that ‘trade has not been diminished or disturbed by politics to a significant extent’. If Japan can enjoy growing trade with China while maintaining its alliance with the United States (and despite long-standing historical animosities dating back to the 1930s), surely Australia can do likewise.

That argument can be extended to South Korea, Singapore, Vietnam, Taiwan and a host of other regional countries that have close economic ties with China and a strategic relationship with the United States. There's little sign that they're pulled apart by irreconcilable interests, so why should we think that Australia is—surely our lack of proximity to China should make us less rather than more sensitive to China’s prerogatives?

Nonetheless, the narrative that Australia has to choose between China and the United States has gained considerable traction in the media in recent years. It's become a mantra to be repeated in every news story about Australian foreign policy. At the heart of the story is the notion that Australia is economically beholden to China—a perception that China is happy to encourage.

The risk of thinking that Beijing has an economic leash around Canberra’s neck is that it will become a self-fulfilling prophecy, whereby perceived economic dependence lead to actual political deference. If offending Chinese sensibilities is taken as synonymous with damaging our economic interests, our leaders will be hamstrung in what they can say and do.

I fear that this possibility may already be upon us. The carefully circumscribed (ie manifestly incomplete) discussion of China’s rise in the government’s Asian Century White Paper is indicative of just such a malaise starting to take hold. But perhaps that was simply a reflection of the economic focus of that document. In any case, the forthcoming Defence White Paper will be an important test in this regard.

Make no mistake; nobody in the defence business—inside or outside of government—thinks that there's any more important challenge facing regional and global security than the rise of China. Academics know it, journalists know it, your mother knows it, and every serviceman and servicewoman in the defence force knows it. If the Defence White Paper ignores the proverbial elephant in the room and avoids talking plainly about China, it won't only be a failure to face reality, it will also be a dismal sign of our lack of confidence as a nation.

Mark Thomson is senior analyst for defence economics at ASPI. Image courtesy of Flickr user Julia Gillard.