Obama Pact Puts Australia on Economic Tightrope: The Ticker

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By David Henry

It was almost embarrassing. Not since Paul Keating put his arm around Queen
Elizabeth II in 1992 has an Australian prime minister gotten so physical with
a head of state. Julia Gillard and U.S. President Barack Obama seemed like
they'd known each other for years when they met this week in Canberra to
announce a defense arrangement that puts China on notice that the U.S. is here
to stay in the Asia-Pacific region. The awkwardness of the moment didn't stop

"The kissing (through a couple of international conferences as well as on
Obama's arrival) and the arms around each other's backs as they left
Wednesday's news conference became the new version of  'all the way with LBJ,'
'' wrote Michelle Grattan, the political editor of the Age newspaper. She was
referring to a 1960s slogan of Australian support for Lyndon Johnson's war
drive in Vietnam.

The decision to host as many as 2,500 U.S. Marines on local military bases in
the Northern Territory of Australia sits uneasily with China, its biggest
trading partner, and Indonesia, Australia's closest Asian neighbor with
strategic significance. Both reacted to the news: The People's Daily newspaper
warned that Australia risked being "caught in the crossfire'' if it helped the
U.S. damage Chinese interests. Indonesian Foreign Minister Marty Natalegawa
said he hoped the pact wouldn't result in a "vicious cycle of tensions and

As hard as Obama and Gillard tried to dispel the perception that China was the
target of the cozy deal hammered out over the past year, it didn't work. At
the joint press conference of the two leaders, talk of ``the provision of
humanitarian assistance'' and "dealing with natural disasters'' as examples of
the military cooperation didn't throw anybody off the scent. It was about
possible aggression in the region and about China.

"Australia is now in a strategic spot it has been resisting being drawn into
for decades,'' wrote Peter Hartcher, the political editor at the Sydney
Morning Herald. "As the former head of Australia's defence planning, Hugh
White, put it, the new Marine deployment 'puts Australia at the centre of the
U.S. military response to China's growing power.' ''

Former senator and Labor Party powerbroker Graham Richardson said in a
commentary in the Australian that the country must maintain "a really
difficult balancing act.'' Now reaping the rewards of a relationship that was
set in motion 40 years ago with Prime Minister Gough Whitlam's visit to China
in 1971, Australia must now safeguard its own interests without harming
relations with the U.S. or China.

The joint exercises with U.S. forces "will make us all feel safer and warmer
as we tuck into our beds, but it won't pay the bills,'' Richardson wrote.  "I
trust that as we heap accolades on Barack Obama during his visit here, we are
reassuring the Chinese that our door remains open to them.''

Grattan of the Age agreed. "Australia's old fear was of America retreating
from the region,'' she wrote. "But now America's stepping forward -- which
puts pressure on China in the short term and warns it for the future --
presents problems as well as opportunities for Australia.''

So getting cozy with foreign visitors is fine, just so long as your neighbors
don't get jealous. When Chinese President Hu Jintao next meets Julia Gillard,
many Australians will be hoping to see a friendly arm behind her back and
maybe even a kiss.

(David Henry is a Bloomberg View editor.) -0- Nov/17/2011 23:20 GMT