Last month, Stephen Kuper highlighted his concerns about the security of the global supply chain for rare-earth elements (REEs), particularly as it relates to sustaining the US defence force. Right now, it’s a bleak outlook. The Chinese government dominates the global supply of REEs and has demonstrated an increased willingness to use that as leverage against America and its allies during the continuing US–China trade war.

However, it’s not all bad news. Anxiety over access to supply chains could create an important strategic and economic opportunity for the Australian government, a suggestion raised elsewhere in the media recently. With new thinking, and the right investments, Australia could source and process REEs.

REEs are essential for manufacturing of a range of everyday products, such as mobile phones, refrigerators and cars. They also play a critical role in the production and maintenance of the world’s cutting-edge defence capabilities.

REEs didn’t get a mention in the 2016 defence white paper, but, more recently, Defence Minister Linda Reynolds has recognised that securing the supply of REEs is in our strategic interest.

Australia holds 2.6% of the world’s estimated reserves of REEs. While that may not sound like much, we were ranked third worldwide on that measure and second for production in 2016.

Extracting and processing REEs is expensive and time-consuming, and any investment in the industry needs to make both strategic and economic sense. Central to the decision-making exercise should be a discussion of the feasibility of fostering and sustaining a viable Australian REE extraction and processing industry. The Australia-based REE mining company Lynas already extracts elements from a mine at Mount Weld in Western Australia—one of the world’s richest known deposits of REEs.

REEs are not exactly rare, but they aren’t found in high concentrations and are mixed with other minerals in deposits. If they can be found and extracted, there’s a high level of toxicity and significant adverse environmental impact associated with processing them. The US had ceased processing REEs because of the environmental impacts; however, one mine in California has recently reopened. It’s likely that many private-sector ventures have been deterred from investing in Australian onshore processing by the devastating environmental effects.

There’s not much of an extraction and processing industry base or a lot of expertise in the field outside of China.

Convincing the securocrats in Canberra of the necessity of developing an Australian rare-earths industry based on strategic considerations would be relatively simple. Engaging with industry and developing a nuanced investment plan that is both feasible and sustainable is a far more difficult proposition.

The impetus for a rare-earths industry in Australia will have to come from the federal, state and territory governments. Under the direction of the defence minister, the Department of Defence could work with industry to identify essential REEs to maintain our supply chain of defence hardware. Other Commonwealth organisations, such as the Department of Industry, Innovation and Science, could provide guidance and financial support to the industry.

The Northern Australia Infrastructure Facility has, in the past, been critical in the development of the capital infrastructure required to support the extraction industry. Writing in the Australian Financial Review, Angus Grigg and Peter Ker suggest it will also be critical to the development of an Australian REEs industry. A resource company based in the Northern Territory, Arafura Resources, has already applied to use it for a rare-earths project. The facility provides a well-tested framework for ensuring that decisions on a rare-earths industry in northern Australia will critically examine environmental impacts and undertake meaningful engagement with Indigenous peoples.

The government could implement other policies to support the creation of this industry onshore.

First, the government should consider increasing funding for research and development into cleaner processing of REEs. Even though China has gained a significant strategic advantage by monopolising the REEs market globally, it is now grappling with the consequences of an extremely toxic industry. Areas in China with significant REE mining are now attempting to clean up what has been left behind.

Lynas’s licence renewal in Malaysia was almost stopped due to concerns about the removal and disposal of 451,000 tonnes of radioactive water-leach-purification residue produced in the mining process.

In Australia, the CSIRO has indicated that it is researching new methods that could drastically reduce the amount of processing required, as well as the processing costs. The government should expand its support for this work by offering bigger R&D grants to universities and other organisations to accelerate the creation of new processes. The aim of such a program would be to help address the environmental concerns and reduce uncertainty about the industry’s ability to survive in Australia.

Second, the government should consider providing tax incentives for companies that want to explore, extract and process REEs. Financial concessions could be used to reduce the barriers to market entry, which would in turn ease the process of creating this industry onshore.

Finally, the government should consider developing a national strategy for REEs that prioritises investment from domestic companies. For example, it could develop a specific compliance framework that emphasises the role REEs play in Australia’s national security. The Security of Critical Infrastructure Act 2018 sets out compliance strategies (such as reporting obligations and directional powers) to limit the investment of hostile actors; a similar system should be created to regulate the rare-earths industry.

For business, prioritising sale to allies and for domestic use should also be a consideration. Lynas’s prioritisation of US military needs for the REE production plant it is building in Texas should serve as an example for the industry.

It’s time to start using creative economic policies and incentives to better support Australia’s strategic needs. China has had a head start in extracting and processing REEs and it has come with significant domestic environmental costs. If the strategic need to secure this resource is clear, then the government needs to create an environment that enables industry to support this objective economically and sustainably.

For millions of years, monsoonal winds have cycled between Asia’s tropical seas and the Tibetan Plateau, delivering snow to its high-altitude mountains and rains to the plains below them. The melting snow and summer rains combine to create a system of rivers that fan out from the mountains, delivering water and fertile soil to East, Southeast and South Asia.

Known as the Great Himalayan Watershed (GHW), this hydrological phenomenon has created richly diverse ecosystems and the right conditions for some of the world’s earliest agricultural and urban centres. The GHW encompasses most of Asia’s rivers—today around 45% of the world’s population depends on the watershed and it is home to many significant manufacturing centres and trade networks. Despite this, the GHW has received little public or political attention.

Increasing attention is now being paid to the watershed’s degraded state. Scientists, environmentalists and locals are particularly concerned about its glaciated headwaters and its deltas. Both are experiencing accelerated climate change and biodiversity loss.

The best-case scenario for the GHW would be a pervasive management plan, focused on its interconnected headwaters and threatened deltas. But the complex mix of the ‘geo’ and ‘political’ within the GHW makes a management solution unlikely.

China controls the uppermost reaches of all these rivers, but only the Yellow and Yangtze Rivers flow within its boundaries. Even then, their upper reaches lie in Tibetan ethnic regions—environments foreign to most Chinese citizens. The Mekong, Salween, Brahmaputra, Ganges and Indus Rivers are transboundary river systems and most of them transverse more than two countries.

In the GHW’s southeast, intergovernmental organisations have only made tentative steps towards the transnational management of the Mekong. On its southern side, cooperation is proving even more elusive. The Indus, Brahmaputra and many of the Ganges’ tributaries flow through areas contested by China, India, Bhutan, Nepal and Pakistan. These river systems are not only un-managed, but a heavy military presence within them is also further straining their fragile ecologies.

All Himalayan nation-states are now concerned about water security, but their competitive efforts to secure the GHW’s water are depleting rather than reviving its rivers.

Border standoffs are at least partially a result of the region’s topographical imbalance. China’s control of the rivers’ sources is a powerful strategic advantage that feeds paranoia in downstream countries. New development and technologies have allowed China to increase its presence on the plateau, and it has also demonstrated a willingness to manipulate the region’s water flows and water flow data.

After the Doklam standoff between India, Bhutan and China in 2017, China refused to adhere to its data sharing agreement with India on flow levels. India depends on this data to prepare for monsoon floods—a lack of information about river flows puts lives at risk. While the Indian government’s reaction was mute, perhaps given its ability to monitor the river through military satellites, the media stoked local fears. Many people living along India’s north-eastern rivers now fear that China will use flash floods or even river-delivered poison against them.

The rivers are being mined for gold and other metals, sand and boutique water, and are being dammed for large hydropower projects. The size of these hydropower projects reveals their builders’ state-making intent; large projects allow governments to solidify their control in ethnic minority regions, make ‘first use’ water usage claims against international competitors and connect the periphery to the centre through the electricity grid.

One country’s hydropower projects would put environmental strains on this river system. Mirrored projects on either side of international borders are a result of intensifying competition for resources between states. On the upper Indus River, for example, China, India and Pakistan have all built hydropower dams within a few hundred kilometres of each other. One well-managed hydro project could have provided enough energy for the entire region.

Like many other minoritised areas, the Himalayas’ resources are being extracted for the benefit of urban majorities. Any local resistance to the hydropower projects has been curtailed by heavy state presences across the Himalayas.

China, India and Pakistan have approached the mountains as distant, impenetrable and effectively empty. India and China took effective control of the region in the 1960s, marginalised its peoples and dissected their homelands with international borders.

Despite promoting themselves as the world’s premier post-colonial states, they have behaved like colonists in these mountains by importing lowland populations and armies and extracting their resources.

The rivers that flow from the Himalayan icepack are notorious border flouters and continuously work to erode state infrastructure. The states’ intensely nationalistic approach to these rivers is not only environmentally disastrous but also fundamentally impractical.

The environmental strains that militarisation and resource extraction place on the region will eventually force change. The degradation of the upper GHW will make it unliveable for soldiers and locals. Intensifying upstream decline will impact the billions of people who live downstream.

The GHW needs an international management council that would balance the needs of its fragile glacial heights, large downstream populations and biodiverse deltas.

It would need to combine icepack and river management. The ‘third pole’ could be managed by an organisation like the Arctic Council, which operates between the governments and indigenous peoples of the Arctic. This body could then liaise with a series of river management authorities that could be modelled on the existing Mekong River Commission.

But what would it take to create such a council? Forward thinking or a catastrophe?

There’s a credibility problem in the South China Sea. When ASEAN states consider China’s commitment to dominating maritime Southeast Asia, its capability and the risks it’s willing to take, they undoubtedly come up with a pretty clear-eyed assessment. It’s knowledge won through painful experience.

ASEAN states also know that opposing Beijing too strongly will bring punishment, while conformity can bring rewards. And they have a good deal of certainty that China’s strategic intent won’t be changing anytime soon.

They don’t, however, share similar confidence in America’s commitment to upholding a ‘free and open Indo-Pacific’. The failure of the pivot to Asia, the derailment of the Trans-Pacific Partnership, President Donald Trump’s transactional approach to international relationships, resource challenges in Asia and growing strategic distractions all help to reduce America’s credibility in the eyes of ASEAN states. And from their position on the frontline of China’s rise, they know that American talk is cheap.

ASEAN states may not like a lot of what China is doing, but it’s easy to see why acknowledging the realities imposed by a rising power next door might seem more attractive than betting on the vague promises of a superpower thousands of kilometres away.

It’s not surprising, then, that at least some ASEAN countries have shifted more support to China, and that China is becoming even more emboldened. And as time goes by without any real, practical checks on Beijing’s behaviour, its momentum continues to build. The growing credibility gap has real consequences.

America’s most visible military responses to China’s maritime aggression and territorial expansion have been in the form of freedom-of-navigation operations (FONOPs) around some of China’s claims, as well as some high-profile port visits and exercises with regional partners. But these initiatives don’t provide the level of reassurance needed to encourage ASEAN states to really help balance China’s power.

Although US FONOPs attract a huge volume of media coverage and elicit creative diplomatic responses from Beijing, as James Goldrick has pointed out, these operations aren’t specifically about China. Rather, they’re part of a 40-year-old US program designed to challenge all states’ excessive maritime claims. The US carries out FONOPs against its own partners, including against ASEAN states’ own South China Sea claims, and a program partly aimed at those states is unlikely to help build much confidence with them.

Similarly, port visits and military exercises don’t really do much to bolster ASEAN states in the face of growing Chinese power, and this goes for visits and exercises by Australian units too. Traditionally, these types of activities carry significant diplomatic value, because the highly visible presence of sovereign power can reassure or deter as the case requires. But what exactly are we reassuring Southeast Asian nations of? And how much power is necessary to do it effectively?

According to Australia’s chief of navy, Michael Noonan, the recent Indo-Pacific Endeavour deployment demonstrates to our regional partners the fleet’s ‘growing capability’. That may be true, but in maritime Southeast Asia, capability needs to be seen in relative terms, and I’m not sure that the arrival of a couple of Australian ships provides much confidence to countries staring down the People’s Liberation Army Navy, which in raw numbers is now the largest navy on earth.

Moreover, when Noonan speaks of the deployment sending a ‘strong message’ that Australia is a ‘committed partner’, the obvious question arises: committed to what? Commitment to exercises and partnerships is terrific, but we hold exercises and have a partnership with China too, so what reassurance are we actually giving? ‘Committed to the region’ is a common cliche, but it’s so vague as to be meaningless.

If the US and Australia want to build real credibility with Southeast Asian nations in an effort to collectively balance China’s power in the South China Sea—and it can’t be done without collective commitment—then we need to demonstrate more than just capability while repeating vague platitudes. We need to clearly demonstrate intent and a willingness to take risks to counter China’s aggression. The environment has changed and we can’t just do what we’ve done before.

Joint South China Sea maritime patrols with ASEAN partners would be one way of signalling this commitment. While ASEAN states have previously regarded joint patrols with the US as overly inflammatory, the same isn’t necessarily true for Australia. Our involvement would be less outwardly provocative than that of the US and more likely to gain support from ASEAN countries.

Indonesia, for one, has repeatedly raised the possibility with Australia, and been given a quiet ‘no thanks’. But joint patrols of the southern reaches of the South China Sea with Indonesia would be a good starting point in clearly signalling our rejection of China’s aggressive actions, while also expanding military-to-military links in an operational environment.

Admittedly, such patrols would have to confront an extremely complex and sensitive geopolitical and operational environment and would require some carefully crafted and workable rules of engagement. These difficulties aren’t to be understated, but they’re also not impossible to resolve.

Such a move would risk worsening the ‘deep freeze’ in Australia–China relations. But focusing only on the short-term consequences ignores the bigger problem: with all hopes of China becoming a ‘responsible stakeholder’ now dead, the capacity for China to constrain our maritime freedom of movement will only grow as its power grows. Without action, at some point we’re likely to find ourselves strategically reliant on the benevolence of an expansionist dictatorship.

To change the dynamics, we need to help foster a meaningful, US-led collective balance to China’s maritime power within Southeast Asia. And the same old flag-waving won’t cut it.

The Australian Army’s strategic paradigm since the end of World War II has been based on the belief that the US will be the defender of last resort for Australia. However, a more inward-looking America, a more assertive China and an apparent waning of liberal democracies are forcing a reassessment of that belief. Those developments also raise the all-important question of whether a ‘new normal’ is emerging in the Indo-Pacific region—one that’s marked by opportunistic aggression, disintegrating security partnerships and expanding mandates for militaries.

In such a highly uncertain and dynamic strategic environment, countries would be forced to take greater responsibility for their own defence while devoting more resources to preparing for a wider set of contingencies over a longer period. It would also fundamentally affect the Australian Army’s identity and purpose. Like other armies, Australia’s operates in the zone of ‘known unknowns’—it knows it will face situations in the future that it can’t fully foresee at present. It can’t predict when they will arise, or in what combination or intensity, and yet it must prepare for them as best as it can.

How should the army comprehend and conceptualise this challenge? What implicit assumptions are revealed by conversations now taking place, and how should those assumptions be judged? The assumptions represent the ‘unknown knowns’—shared values and beliefs that are so deeply ingrained in the army’s organisational ethos that they’re rarely articulated, let alone tested. They affect decisions without people even being aware of their existence. If they turn out to be faulty or outdated, they could prove highly destructive. Being clear about them is of paramount importance for the army as it seeks to orient itself for 21st-century challenges.

Discussions within the army currently centre on how it should maintain its strengths relative to those of its adversaries, including in the domains of information, urban, space and cyber warfare. The most recurrent questions are about how best to defend our territorial and economic interests against China’s assertive expansion and how to maintain our technological edge against adversaries, including violent non-state insurgents.

As apt as those questions are, they reveal an assumption that the most appropriate response to a potential threat would be unilateral action by the Australian Army. Other underlying assumptions are that technology is a game-changer for Australian military capability and that a technological edge, once achieved, can be easily maintained over time. While those assumptions need to be rigorously tested, they are neither conceptually sound nor consistent with the pattern of the army’s engagements since federation.

Comparing one’s capabilities to those of other players—to judge whether or not we’re better than others—is a measure of what in academic parlance is called ‘absolute advantage’. By contrast, judging our own expertise in particular skills or capabilities relative to all other skills or capabilities that we could be engaged in is a measure of ‘comparative advantage’.

Absolute advantage is more appropriate for large armies that need to achieve battlefield dominance over adversaries to win wars. Such armies envision a comprehensive, joint-force ability to engage in at least two theatres simultaneously, and to both overcome adversaries and withstand attrition. Neither of those goals is feasible for a small, ‘boutique’ army like Australia’s, which could never overcome the much larger forces in the region, even if it were to double its size. This is particularly true of conventional forces, but also in asymmetric capabilities such as information and cyber warfare.

Instead, the army should focus on what it does best. It should embrace the concept of comparative advantage as the framework for thinking about future capability. This will allow it to make the most appropriate use of scarce resources and provide flexibility to deal with new and unexpected threats. It should also enforce discipline in evaluating what capabilities to maintain and enhance and what new ones to acquire. Doing so would also be consistent with its historical pattern of engagements.

The army’s operational deployments have been as a partner in multinational coalitions, which, in most cases, were spearheaded first by the UK and later by the US. Those operation have almost always been overseas, though always limited in scale and scope to discrete zones within a broader theatre. And the army has proved its mettle in every combat theatre it has participated in. The respect it has earned in combat has been enhanced by its contributions in areas such as commanding and training contingents of smaller and/or local armies, planning, transportation and logistics. The army would not have achieved this but for the clear focus it has maintained on its strengths and constraints, as well as the contribution it can make within a bigger team of coalition partners.

This raises some important questions:

• What qualities and capabilities did the army demonstrate, and what outcomes did it deliver, to earn respect in the past? Will they become more or less valuable and important in the 21st century? Is the army’s valuation of them changing over time?
• Will an apparently newer focus on overcoming adversaries and maintaining a technological edge allow the army to achieve the same kind of effectiveness it has in the past?
• Will multinational coalitions be less relevant in the future than they have been in the past?
• Does Australia envisage having to defend its territorial interests more than participating in overseas coalitions, including in peacekeeping, counterinsurgency and disaster-relief operations?
• How does the army define effectiveness in terms of capabilities and strategic outcomes? Will those definitions change through the 21st century?
• Will the US continue to guarantee Australian security?

So, will the future be fundamentally different from the past? A reasonable hypothesis is that, while the strategic environment will be more dynamic, uncertain and complex, the core pattern of the army’s engagements will continue to be defined by its relatively small size, scarce resources and traditional strengths. To be effective, it will need to continue focusing on what it does best in working with others. Future capabilities and operations should be judged by this standard of comparative advantage.

Australia and China convened the inaugural Australia–China High-Level Security Dialogue in Sydney in April 2017. The joint statement from the dialogue outlined a range of areas for future law enforcement cooperation: combating transnational crime—including counter-narcotics operations and economic crimes—cybersecurity and counterterrorism.

The two countries already have an established framework for cooperation, especially on counter-narcotics. Cooperation on other crime types is either nascent or aspirational. However, there are also risks and limitations for Australian law enforcement agencies working with China.

My ASPI special report, Australia–China law enforcement cooperation, released today, examines existing cooperation, discusses the risks and limitations, and makes recommendations for future cooperation.

Today, Australia has one of the strongest police-to-police relationships with China of any Western liberal democracy. And it has longevity: the Australian Federal Police has maintained a presence in China since the 1990s.

Australia and China signed a treaty on mutual legal assistance in criminal matters in 2006, leading to the confiscation and repatriation of criminal proceeds. The two countries signed a treaty concerning the transfer of sentenced persons, which came into force in 2011. Australia and China also cooperated in the ultimate arrest and conviction of Zhao Nuo, a Chinese-born Australian citizen who murdered his wife in Western Australia before fleeing to China on a false passport.

Countering narcotics importation from China to Australia is an important priority for Australia, which has a serious crystal methamphetamine (or ‘ice’) problem. China is a major drug production and transit hub and has the largest number of clandestine ice labs in the region. A large majority of the total ice imports detected entering Australia come from China. The AFP has been working with its Chinese counterparts on a successful joint counter-narcotics effort called ‘Task Force Blaze’ since 2015.

China has a particular interest in working with Australia on ‘economic crimes’, with a primary focus on fraud and corruption. This is particularly the case since Xi Jinping’s crackdown on corrupt officials. Many alleged economic criminals have fled China, taking their assets with them. Western countries such as Australia that don’t have extradition treaties with China are attractive destinations due to the lower risk of fugitives being returned to China.

China has long sought an extradition treaty with Australia. A treaty was signed on September 2007, but successive Australian governments of both political persuasions have failed to ratify it. This is due to Australian concerns about China’s political and judicial system and human rights protections.

The arguments made against ratifying the treaty highlight the concerns and risks of working with China on law enforcement. A diverse range of individuals and groups have expressed concern over China’s political and judicial system, the rule of law, and civil and human rights. The deteriorating human rights situation in Xinjiang province is of particular concern, and large-scale cyber espionage targeting Australia can’t be overlooked.

It’s important that Australia makes it clear to China that these differences complicate law enforcement cooperation and limit what can be done.

That said, Australia and China have a mutual interest in law enforcement cooperation and need to work together. Both countries experience criminal threats from drug production and supply, economic crime, money-laundering, cybercrime and terrorism. These crimes cross borders, and crime emanating from one country can, and does, reach the other.

The Australian government has a duty to protect Australia and Australians from crime and terrorism. Those threats are transnational, so effective relationships and collaboration with foreign countries such as China are essential. Australia must prevent itself from becoming an attractive destination and safe haven for criminals. And Australians who are the victims of crime expect perpetrators to be brought to justice. That means Australia should continue to cooperate with China and look for opportunities to enhance cooperation where it’s in Australia’s interests to do so and where that cooperation doesn’t conflict with Australia’s laws and values.

To ensure that Australia can continue to work with China on mutually beneficial law enforcement activities and enhance that cooperation in appropriate areas, while managing the risks involved with cooperation, Australia should delineate what it’s prepared to cooperate with China on and what it isn’t, and communicate this clearly to China.

How much cooperation is undertaken and on what issues may depend on what crime type is involved and future developments in China’s domestic and international politics. For example, Australia may be able to undertake deeper cooperation on counter-narcotics, in which legal definitions of the crimes are more aligned and less political compared with counterterrorism or cybercrime.

Australia may need to reconsider its future cooperation depending on the state of bilateral relations and future developments in China’s domestic politics. For example, a further deterioration in human rights in China may require Australia to reduce or curtail cooperation. Likewise, an improvement could allow for greater cooperation and assistance.