If push comes to shove between China and the United States, Australia’s international trade with Asia is at risk of becoming collateral damage. 

The sea routes through Indonesia and to Asia around the east of Papua New Guinea account for 90% of Australia’s sea-borne exports and 83% of its imports. 

Last year’s Defence Strategic Review identified the defence of trade routes as a priority. Australia was at little risk of invasion, but adversaries could exercise military coercion at a distance by targeting Australia’s trade, it said. 

A new ASPI Special Report, The trade routes vital to Australia’s economic security, identifies the narrow shipping channels through Indonesia as the most vulnerable choke point for Australia’s trade. They carry about two-thirds of Australia’s exports, including all its iron ore and most of the west-coast liquefied natural gas, while they are also the route for 40% of our imports. 

The Malacca Strait between Indonesia and Malaysia is the main route for shipping from the Indian Ocean trading with Asia. It carries about 80,000 ships a year. If it were blocked—and it’s only about 15 kilometres wide alongside Singapore—all that shipping would be rerouted around the south of Australia, travelling past the east of Papua New Guinea. 

The Malacca Strait is used by most container and vehicle ships coming to Australia from Europe, although since the attacks by Houthi militia in the Red Sea more are travelling around South Africa’s Cape of Good Hope and directly across the Indian Ocean. 

The route to the east of Papua New Guinea is taken by most container ships coming to Australia from North Asia and also Australia’s coal ships supplying Asia. 

Once ships from Australia reach North Asia or pass through the Indonesian archipelago, they enter the busiest shipping lanes in the world. The ships carrying Australia’s bulk commodity exports are a significant presence: it’s estimated they account for 29% of global bulk shipping, however the 8 million containers handled each year at Australia’s ports are less than 1% of the global total. 

The report notes that while Australia’s trade would be seriously damaged by any blockage of the Indonesian shipping channels, so too would the trade of China. China depends on maritime imports for 80% of its iron ore, 70% of its oil and 35% of its protein. 

US strategic analysts have explored the option of a distant blockade of China’s maritime trade using the Malacca Strait to interdict commercial shipping. 

However, international trade has a proven resilience in the face of military disruption. While the Houthi attacks since October have halved the flow of ships through the Suez Canal, they have had little measurable effect on global trade flows. 

Ukraine is managing to ship high volumes of grain and other goods across the Black Sea in the face of Russian attacks by devising a route that hugs its coast and then the coasts of NATO members Romania, Bulgaria and Turkey. It has been helped by the British government subsidising war-risk insurance. 

Military defence is important: Ukraine’s resumption of shipping through the Black Sea following the collapse of a UN-brokered grain-shipping deal with Russia has been helped by Ukrainian attacks on Russia’s navy. 

However, it is essentially the prospect of profit that keeps the merchant fleet moving. 

The availability of alternative sea-routes is one source of the resilience of trade: if one channel is blocked, there is usually another way around it. The provision of war-risk insurance is another. Ship owners and operators will weigh the cost of insurance against the expected profit from the trip. 

The competition between shipping lines is also important. The oil tanker business is hugely competitive: the top 30 companies control less than half the global capacity. The operators of a ship that turns down a cargo because the route is too risky can be sure that a competitor will pick it up. 

Bulk shipping is even more competitive, with the top 20 companies operating barely a quarter of the global fleet. Container shipping is a lot more concentrated, with the top five companies accounting for two-thirds of global capacity. 

Container ship operators were quick to stop using the Suez Canal after the Houthi attacks began, with traffic at the end of January down by two-thirds from a year earlier. The cost of the detour around Africa was passed on to customers. 

In the much more competitive oil tanker business, traffic was only down by 18%, while for bulk shipping the fall was only 6%, according to analysis by the UN Conference on Trade and Development. 

The ASPI report calls for the Australian government to review the security of Australia’s container shipping supply, noting that the country has the advanced world’s highest dependence on manufactured imports, most of which arrive by container. 

Australia is a high-cost route for the container lines, as it has relatively low volume, is not on the way to anywhere else, and up to half the containers that arrive in Australia full leave empty. 

There has been no official review of Australia’s shipping routes since one was conducted by the forerunner of the Bureau of Infrastructure and Transport Research Economics in 2007, which was based on data from 2001 to 2004. The direction of Australia’s trade has changed dramatically since then, and the ASPI report calls for the government to fund an update of the official report. 

The ASPI report also says the government should prepare contingency plans for supporting the provision of war-risk insurance to ships trading with Australia in a time of conflict. There should also be planning for emergency chartering of shipping. The provisions in the Defence Act for requisitioning shipping in war-time were drafted in 1903 in the wake of the Boer War and need to be updated.

Machine-learning algorithms that process data might not immediately come to mind when we think about Covid-19, but they supercharged our ability to respond to a disruptive threat. Countries emerged from rolling lockdowns due, in part, to concurrent advancements in artificial intelligence and biotechnology that produced mRNA vaccines. As the Australian government rethinks and reviews its approach to critical technologies, whether policy is technology-centric, capability-centric or a combination of the two will be crucial for creating strategic effect.

Multiple factors affect innovation and strategic effect. Precise terms are important. The phrase ‘artificial intelligence’ has proliferated, but it’s more accurate to think in terms of developments in data science, cloud computing, machine learning, data protection and intelligent data capture.

The speed at which mRNA vaccines were deployed in 2020–21 creates the impression that innovation is all about rapidity. In part, it’s true: speed is key. But the story of Moderna’s version of the mRNA vaccine began decades ago. Despite successive failures, patent conflicts and sideways paths, the story looks linear. Long-term bets made by institutions such as the US Defense Advanced Research Projects Agency, and later by venture capital firms, look prophetic, not risky.

Across an entire portfolio of technologies, predicting what the impacts will be or which combination will come together is difficult. Governments can set a broad vision, but the vagaries of innovation can make us discount effort across research, financing, commercialisation, logistics, translation and communication and look for moments of lone genius, not collective endeavour.

The changing parameters of risk and security, particularly in relation to economic and geopolitical threats, mean we’re witnessing an evolving global consensus on innovation policy.

Countries are increasingly having to navigate harder choices in relation to industry priorities. Competition between great powers and the weaponisation of economic (and data) connectivity are inciting conflict over scarce resources. Parallel institutional structures that bifurcate the global economic system and systemic threats such as climate change are contributing to uncertainty. Assumptions about the stability of market access along with the security and diversity of supply have shifted.

Across the globe, several sovereign innovation funds have been announced this year alongside other government initiatives aiming to boost research and development outcomes. Australia’s version is the $15 billion National Reconstruction Fund; NATO will invest €1 billion in early-stage start-ups;  Japan’s ‘Moonshot’ research and development program promotes high-risk, high-impact projects. The Quad leaders have committed to convening a business and investment forum for networking with industry partners to expand capital.

These initiatives don’t just channel investments or provide opportunities to de-risk projects. They are, in theory, a means to ensure that research solves issues facing future society. A 1991 US report on critical technology put the challenge succinctly: if technology is critical, the question is, critical for what?

Without a strong sense of mission, we risk not working to solve challenges. Sectors characterised by the rise of platform business models and winner-takes-most dynamics dominate research and development. The centre of gravity of AI research has shifted from academia to industry. Many sectors, including defence industries and technology areas like cloud computing, are dominated by a handful of companies.

Market-led opportunities don’t necessarily correspond to social needs or consider negative long-term impacts, geopolitical dependencies or other ethical considerations. Setting algorithms loose to sell trinkets may oil the wheels of commerce, but if the net result is a floating mountain of plastic in the Pacific, then we must consider whether our notions usefully address criticality and for whom.

Government innovation can benefit from quick lead times in the commercial sector. Industry tends to favour monetising in the short term, cementing incumbency and creating higher barriers for new entrants. Governments need to have good policy frameworks that provide incentives for industry collaboration, including for small and medium-sized firms, that pulls in the same strategic direction.

Proliferation of technology is meant to drive competition, reduce costs and improve efficiency. These assumptions have shifted because of a deteriorating strategic context. The international playing field is skewed by actors playing by different rules and creating rules for themselves—often dishonestly and at times criminally. In the defence sector, the proliferation of defence-related technologies must balance goals such as strategic stability and non-proliferation to maintain a military edge while contributing to arms control.

Australia has a strong history of invention, including wi-fi, the Cochlear implant, the CPAP machine and the black-box flight recorder. The invention of wi-fi involved intense and protracted contestation over patents and technical standards. There are lessons here for Australia’s tech sector, which has been disengaged from standards-setting forums in which it could advance its market reach and contribute to the public interest internationally.

The stronger message now is that there’s a critical need to define sovereign technological missions and grand challenges, and to fund them appropriately.

Australia’s previous critical technology plan mentioned national security, economic prosperity and social cohesion. Those are worthy goals, but the plan offered only a vague reference point rather than a systematic sense of purpose.

Earlier this month, an indication of where the new government might be driving the national conversation about critical technology. Noting the persistence of systemic threats—cybersecurity, climate change, foreign interference—Home Affairs Minister Clare O’Neil indicated a way forward. The politicisation of security over the past 10 years, she noted, ‘didn’t make us any safer’. We have often taken a whack-a-mole approach to risk. In contrast, O’Neil emphasised building resilience. ‘Scalpels, not sledgehammers’, she said, need to be deployed to build democracy as ‘our biggest national asset’.

This is a step-change. Previously, our critical technology action plan emphasised social cohesion. Building democratic resilience will need more than rhetoric. This shift in mindset will need to filter through into program and policy. Technology can bring us together, but differences (of opinion, and in approaches to problems) allow democracies to build characteristics and capabilities to absorb, recover from and adapt to disruption.

In the meantime, Australian innovators are seizing opportunities. Initiatives such as the national medical countermeasures program delivered by DMTC Limited—a defence technology partner—are harnessing inputs from government, publicly funded research agencies, industry and academia. Their development of a novel pathogen-detection technology shows that our biotechnology capability and capacity are world-leading when mission, financing, expertise and capability pull in the same direction. Australia’s health security system will reap dividends in preparedness for future disease threats. Technologies identified as critical to Australia’s national security such as flow chemistry are also being developed.

We often chase the shiny and new. But we’ll need to think harder about democratic resilience and the fundamental role of critical technology in building capability across systems alongside its ability to address and adapt to cascading effects of system failure. As we strengthen our participation in global forums such as the Quad, Australia can build this important contribution to shaping global technology policy.

John Coyne provides an interesting perspective on what he sees as the problem of our political leaders focusing on quick-fix, get-tough security measures (such as installing bollards and calling for a 24/7 AFP tactical response at airports, tougher bail laws and heavier-armed police), rather than long-term strategies for addressing complex security problems.

John is right that ‘people expect and value steadfast resolve when it comes to terrorism’ and that after recent terror attacks here and abroad ‘it’s understandable that our leaders want to appear tough on security’.

I’d add that in a paradoxical way the public’s expectations are higher today because of the security improvements we’ve made in recent years. The recent Lowy Institute annual poll has some interesting findings on this. Feelings of safety remain at their lowest point in the 13-year history of Lowy’s polling. While most Australians (79%) say they feel ‘safe’ overall, only 20% (down four points since 2015) feel ‘very safe’, and 21% feel unsafe overall. Terrorism was the main factor here—68% of Australians saw it as a ‘critical threat’.

National security spending continues to grow as the community has accepted that we need long-term investment in critical policing and intelligence capabilities to counter future terrorism threats. But because of these investments, ironically any security lapses have become more unacceptable to the public.

So, it’s not surprising that people expect state and federal governments to reach the highest standards of security they can. Even though our political leaders know they can’t deliver perfection, they often inflate community expectations by acting as if vulnerability to terrorism can be eliminated completely. Thus even minor security failures loom much larger to the public than plots foiled. (And with saturation media coverage of recent terror events in Manchester, London and the Melbourne suburb of Brighton, people find it difficult to judge the actual risk of a terror attack occurring.)

I’d add one further comment on John’s article. He says that federal and state government leaders should focus their domestic security thinking on ‘how their decisions will support the detection, disruption and/or mitigation of risks’. I agree with that, but I think that we need to be careful not to put all our eggs in the detection-and-disruption basket.

An equal emphasis in my view should be placed on planning to respond and recover. The kind of response we saw from Londoners in the recent attacks—not just ‘keeping calm and carrying on’ but also the help they offered to first responders—provides some measure of deterrence to would-be terrorists who want us to panic and overreact. In other words, the way that London has been preparing for these kinds of emergencies has helped to strengthen the communities and make them less surprised when attacks do occur. (It’s worth a look at this BBC story on how British people reacted on social media to a New York Times story that stated that the UK was ‘reeling’ from the recent London attacks.)

Put bluntly, we need to prepare much more for national security emergencies, and that will affect perceptions of public safety: communities will be able to exercise more control over how they react to terrorism. That applies especially when it comes to healthcare preparedness for mass casualty terrorism.

When terror attacks occur, we need to minimise the loss of life and speed recovery. That’s something that London’s Metropolitan Police did superbly when they intercepted and killed the three attackers within eight minutes of receiving the first call. We can also learn from Israel, whose highly resilient population has been tested by many disruptive events. Its communities have very high capacities to continue operations and daily life during crises. There’s a high rate of preparedness based on known doctrine and many exercises, continuous systems and programs to mitigate the effects of the disruption. There’s effective dissemination of relevant information to communities and trust in local leadership. As a country that’s endured decades of conflict and terror, yet still managed to build a flourishing economy and vibrant democracy, Israel offers insights into individual and societal resilience in the face of terror.

The more empowered people feel the less afraid they’ll become: investing in enhanced community resilience isn’t admitting defeat or neglecting efforts to prevent terrorism. It’s about minimising the costs of terrorism. When it comes to counterterrorism, our political leaders need to regularly articulate the value of and benefits from investment in resilience.

Countries, coalitions, organisations and communities across the world put enormous effort into countering terrorism. Much of that work is done out of the spotlight, in legislatures, police forces, policy departments, security agencies, social services, academia and community groups. Almost all of the vast global activity undertaken to counter terrorism is done without the headlines that accompany terrorist attacks. ASPI’s new Counterterrorism Yearbook series contributes to redressing the balance. Through this first Counterterrorism Yearbook, in what will be an annual publication, we aim to promote that understanding and contribute to shared knowledge of CT.

Sharing knowledge about what others have done, including what does and doesn’t work, is one of the most important aspects of counterterrorism. While working level intentions are often good, differences in politics, culture, law, language and variations in the security environment across the globe make it challenging to translate the experiences of others into relevant lessons for our own situation.

The Yearbook is arranged by country and region, looking at areas around the world where terrorism and CT are in greatest focus. Each chapter examines CT developments in 2016, including the nature of the terrorist threat being faced and how governments and others have approached CT through both policy and operations. Highlights of many chapters will be published in a series on The Strategist.

What emerges is a story of a CT world in three parts. At one extreme is the Middle East and North Africa: the epicentre of Islamist terrorism. CT in that region is about the immediacy of fighting wars and insurgencies. But the battlegrounds feature a complex array of players and histories of political instability, social divisions, criminality and corruption. The problems facing those countries go beyond the remit of CT alone, and will endure beyond the current battles with terrorism.

Western countries provide the counterpoint. While the world was shocked by terrorist attacks and plots in Europe, North America and Australia in 2015 and 2016, there are few instances of actual terrorist violence  compared to to other regions. Western countries also have strong political, legal and social institutions enabling a complex and considered array of activities to address terrorism at home and abroad, as well as to build collaborative arrangements and resilience. While the threat remained high in in those countries in 2016, so did the level of CT activity.

The third area encompasses a range of experiences, from those such as Indonesia which had turned the tide against homegrown terrorism and continued to build effective governance, but which is facing a renewed threat; and those across Asia, Africa and the Middle East who are dealing with longstanding and complex disputes complicated by allegiances to external terrorist groups, or opposition elements being labelled as terrorists. Others, such as some of the Gulf states, are affected by proximity to terrorist violence in neighbouring countries, and may be contributing to CT operations at the same time as their nationals or governments are supporting some of those considered to be terrorists.

At the core of the CT story for 2016 is the fundamental challenge of security: how to protect society from terrorist violence while maintaining other human rights.

Countries and their communities are taking various approaches to resolving that challenge. Many states see the protection of fundamental liberties as the core aim of CT. At the same time, CT practitioners will advise their governments to change laws, take additional security measures, and conduct operations to make the environment harder for terrorists, and also ensure that terrorists are held to account. The net result of those additional measures can, however, be restrictions on the very liberty that the terrorists are aiming to undermine. That conundrum led to substantial debate in many countries and globally in 2016, and we expect that debate to continue as long as the challenge of terrorism remains.

In his preface to the Yearbook, Dr Susilo Bambang Yudhoyono, former President of Indonesia, identifies four key areas of focus for CT. The first is to keep the fight against terrorism away from politics as best as possible. When counterterrorism activities become subject to politics, matters become disoriented in a way that ultimately benefits only the terrorists. A quiet, focused, sustained and professional approach is the best way to fight terrorism. Second is the imperative to engage in international cooperation for the very practical reason that terrorist operations are mainly transnational. Third is the need to shore up public support and to maintain religious moderation: a resilient society, thriving religious tolerance and a strong civil society is the best antidote to terrorism. Fourth is the need to constantly adapt.

As Dr Yudhoyono concludes, the Yearbook aims to help practitioners and the community alike understand the nature of those challenges and what’s being done globally to make the world safer. As he states, ‘In a security environment that appears sometimes dominated by the threat of terrorism, let us focus on and learn from the many and varied efforts being undertaken to counter this insidious threat.’