In calmer times Australia would not be asked to choose between friendship with China or the U.S. These are not normal times, and we might soon be asked that awful question.
In calmer times Australia would not be asked to choose between friendship with China or the U.S. These are not normal times, and we might soon be asked that awful question.
Diplomats will try to fudge the answer or talk the issue to death, a job for which our foreign affairs minister, Kevin Rudd, is uniquely qualified.
That will not be good enough because the U.S. is hurt, angry, looking for someone to blame for its self-inflicted economic wounds, and China is copping most of the blame.
Trade issues are at the root of the problem, primarily the whopping dislocation between what China sells to the U.S. and what the U.S. sells to China.
The pain from the multi-billion dollar imbalance can be measured in the 10% unemployment rate in the U.S., and was seen close up this week during a visit to New York.
It is the trade question which has triggered an accusation heard all too frequently by visitors to the U.S. that China is "a currency manipulator", deliberately holding down the value of its currency to aid its exports, costing U.S. jobs in the process.
But, what the U.S. cannot see is that it too is indulging in currency manipulation with its carpet bombing of the world with trillions of extra dollars designed to kick-start its economy while also having the effect of depressing its currency.
Much of this is known, and is being routinely reported, with the most obvious effect in Australia so far being the rise in value of our dollar, which is actually an event which has more to do with the falling value of the U.S. dollar than something Australia has achieved on its own.
The value of the dollar is, however, a sideshow compared to what might happen if the U.S. takes the next step designed to please its domestic audience and formally declare China a currency manipulator.
If that happens, and it has an even-money chance if the ruling Democratic Party of U.S. president, Barak Obama, performs as badly as tipped in next month's mid-term elections, then a war of words will escalate into a war of aggressive economic action.
China knows this, and made a conciliatory move overnight when it raised interest rates by 0.25%, the first rate hike in three years and a move which will help raise the value of its currency.
The next event in this dance of the world's economic elephants will be the mid-term elections with blue-collar workers in the U.S., the voting class which put Obama in the White House, demanding strong action against the country which they believe has stolen their jobs.
The workers are partly right and partly wrong for heaping all the blame on China and its low-cost workforce, but it's rare that a mob considers the finer points of a debate. It just wants blood.
This then is the dangerous situation into which innocent Australia is walking. We are a century-old friend of the U.S. and it provides a comforting military umbrella over our country.
China, however, provides the money to support our economic and carefree lifestyle.
And that's the core question; the money or the guns.
Do we stay close to the U.S. with its military might and long-term ties. Or do we go with the money and get cosier with China.
To say this is a tricky issue is an understatement because the U.S. and China could hardly be more different and it is in Australia's best interest to remain friends with both.
But, staying friends with two sides of a divorce is rarely possible and if China and the U.S. move further apart by ratcheting up their mutual accusations of currency manipulation then Australia will get dragged in by both sides and asked to make a decision on which country is its best friend.
