April 7 (Bloomberg) -- Australian Prime Minister Tony Abbott, having called Japan his country’s closest friend in Asia, will seek this week to overcome Chinese unease about his loyalties in a region beset by territorial tensions.
Abbott is visiting Japan, a strategic ally, and China, his country’s biggest economic partner, in his first visit to North Asia since taking office almost seven months ago. The trip is aimed at giving momentum to free-trade deals with both nations, which together account for a third of Australia’s annual trade.
With the U.S. looking to its allies to counter a more assertive China, and with Japan embroiled in a dispute with its neighbor over the East China Sea, the task for Abbott, 56, will be to balance longstanding diplomatic leanings against the need to safeguard economic ties with China. Japan, China and South Korea, which Abbott will also visit, buy more of Australia’s iron ore, coal and other exports than the rest of its customers combined.
“China is the ascending power and Japan is the declining power and there’s nothing that Abbott or his values can do to change that,” said Geoff Raby, Australia’s ambassador to China from 2007 to 2011. Abbott’s willingness to criticize China means “he will be under a great deal of scrutiny about his messaging and whether he can get the balance right.”
Abbott met Japanese Prime Minister Shinzo Abe last night, Chief Cabinet Secretary Yoshihide Suga told reporters today. He said he did not know what they discussed. Shotaro Yachi, head of the National Security Council secretariat, was also at the meeting at the state guest house, the Nikkei reported. Abbott will today become the first foreign leader to take part in a meeting of Japan’s NSC.
Abbott is seeking to build on international goodwill generated by his handling of the search for a missing Malaysia passenger plane off Australia’s west coast, and his government’s success so far in hosting this year’s Group of 20 meetings. G-20 finance ministers in February agreed to a proposal to lift collective gross domestic product by an additional 2 percent.
The lead Australia has taken in the hunt for Malaysia Air Flight 370, which carried more than 150 Chinese nationals, risks being overshadowed by Abbott’s “beginner mistakes” that have fostered tricky ties with China, according to Hugh White, a professor of strategic studies at the Australian National University in Canberra.
A month after winning power Abbott labeled Japan his “best friend in Asia.” Previous governments avoided so overtly aligning with the country from a strategic perspective in the region. Abbott has said he plans to bolster defense cooperation with Japan as part of his visit this week.
“He’s still going to be on probation,” said White, author of “The China Choice: Why America Should Share Power.” “The challenge will be whether he can refrain from causing further offense and salve the wounds in Beijing,” he said.
China has become a bigger economic imperative, having tripled trade with Australia in seven years and taking three-quarters of its iron ore shipments. Twenty-five years ago Japan accounted for 23 percent of Australia’s two-way trade of merchandized goods, and China 2.3 percent; now Japan has a 13 percent share against China’s 27 percent.
Tensions with China increased after the previous Labor government cited national interest concerns for its refusal to let Huawei Technologies Co., China’s largest phone-equipment maker, work on Australia’s A$30 billion ($27.7 billion) broadband infrastructure project.
In November Abbott’s government publicly rebuked China for its introduction of an air-defense identification zone over the East China Sea. Ambassador Ma Zhaoxu, who was summoned by Foreign Affairs Minister Julie Bishop, issued a statement condemning the “erroneous remarks” and said China “required the latter to respect facts, do not take sides and take concrete measures to uphold China-Australia strategic partnership.”
Australia hosts as many as 2,500 Marines in its northern port of Darwin and China is closely monitoring Australia’s alliance with the U.S., Raby said.
“The real challenge for Abbott is whether he can find the right policy framework and narrative to manage Australia’s interests in China, Japan and Korea in the context of the security relationship we have with the U.S,” Raby said from Beijing, where he manages an advisory business.
Such tensions haven’t hindered economic ties, Trade Minister Andrew Robb said.
“I’ve continued through all of that to engage in a thorough fashion” with China, Robb said in an April 4 interview. Maintaining good ties with each is “a matter of showing respect. When I’m in Japan, I’m not thinking of China and when I’m in China, I’m not thinking of Japan.”
As opposition leader during a July 2012 visit to China, Abbott said investment from the country was “complicated” by the prevalence of state-owned enterprises. A campaign promise to lower the threshold for official review of land deals to A$15 million from A$244 million triggered concern it may deter foreign direct investment from China.
“There’s been a bit of concern, especially in the Australian business community, at what appeared to be happening when it came to the China relationship” after Abbott won office, Bob Carr, who served as foreign minister under Labor until September, said by phone from Sydney. “He would probably be seeking to address that” during his visit.
Abbott’s immediate priority in North Asia will be progress on free-trade agreements.
This week he will witness the signing of the first deal -- with South Korea, which the government says will eventually boost exports to the Asian nation by 25 percent. He will also seek progress on separate pacts with Japan and China. Premier Li Keqiang said March 5 that China will “accelerate free-trade area negotiations.”
Negotiations with Japan continued last week on beef and dairy imports. Two-way trade between the nations in the 12 months to June 30 reached A$69.2 billion.
The two countries have now agreed on tariff cuts, Nikkei reported today, citing people it did not identify. Japan will lower its tariff on Australian beef to around 20 percent from 38.5 percent, the Nikkei said, while Australia will drop a 5 percent duty on small and mid size Japanese vehicles.
“I am confident that the long awaited free trade or economic partnership agreement between Japan and Australia will shortly be finalized,” Abbott said in a speech today in Tokyo. “I am confident that this will be seen as a milestone in our relationship and a testament to far-sighted governments the way we now see the 1957 agreement” on trade between the two countries.
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