How to Understand the Quad: A Short Guide for Australian Business
by Richard Maude, Asia Society Australia Executive Director, Policy, and Asia Society Policy Institute Senior Fellow
Foreign Minister Marise Payne will this week host her counterparts from the United States, India and Japan for the fourth “Quad” foreign ministers’ meeting.
The Quad is increasingly prominent and consequential in the foreign policy of its members, so the Melbourne meeting is significant not just for the extreme rarity of having the foreign ministers from these three vitally important bilateral partners in Australia at the one time.
The Australian government describes the Quad as at once a diplomatic network committed to an “open, inclusive and resilient” region, a pillar of Australia’s Indo-Pacific strategy, and a group of like-minded countries responding to the “defining challenges of our time,” like the pandemic, climate change, infrastructure, cyber security and critical technologies.
This is all true enough, but conceals in diplomatic language as much as it reveals. So, how should Australian businesses understand the Quad and what it might mean for their efforts to navigate the Indo-Pacific’s ever-shifting security and economic landscape?
The Quad is one manifestation of a contest to shape the future
The recent summit meeting between the leaders of China and Russia is yet another striking example of the retreating boundaries of the US-dominated post-War liberal international order.
In their joint communique, Presidents Xi and Putin set out their own vision for global order, one that emphasises multipolarity and the “democratisation” of international relations, rejects any role for external powers in their respective “adjacent regions” while asserting their own core interests, and attempts to redefine both democracy and basic universal human rights in ways that legitimise authoritarian systems.
This is not a re-run of the Cold War, but the battle lines have been drawn for some time now and are stark. These are not just over securing economic, military and technological advantage, but about the values, norms, rules and standards that should shape the future and which ones will prevail in parts of the world where they are up for grabs.
The Quad should be understood first and foremost in this context. While not an alliance, Quad members want to work more closely together in ways that help create a “durable strategic balance” in the Indo-Pacific that protects their interests. This pits Quad members directly against Beijing’s intent to build a regional order in which it is dominant and countries defer to its interests and authority.
The Quad is also part of the increasingly sharp ideational struggle between China and fellow authoritarian travellers like Russia and much of the democratic world. Quad members describe the group as seeking to uphold peace and prosperity and strengthen democratic resilience, based on universal values. The Quad calls for a region that is “free and open,” anchored by democratic values and unconstrained by coercion. And Prime Minister Morrison talks of securing a balance in the Indo-Pacific “favourable to freedom”.
Quad members see technology as a key battleground
Technology has emerged as one of the frontlines of the contest with China, and the Quad is in the thick of it, with potentially significant implications for business.
The Quad has established a critical and emerging technologies working group, with a focus on technical standards (for artificial intelligence, for example), 5G diversification and deployment, horizon-scanning, and resilient technology supply chains.
The Quad's work complements much broader efforts by its four members (and others such as the European Union) to identify and manage risks from technological competition with China and to ensure supply chain resilience in critical technologies. Business should therefore understand the Quad’s work as reinforcing the drive for at least some further technological de-coupling from China. In the United States this agenda extends to industry policy interventions to encourage investment in domestic manufacturing of critical technologies, especially semi-conductors.
The Quad’s values agenda also reaches deep into the technology sphere, and all four countries want business onboard. The group’s “design principles”, released in September last year, emphasise approaches to technological design, governance and usage that “promote our shared values, including the autonomy, agency and dignity of individuals”.
The principles set out other expectations for tech businesses, including the requirement for suppliers, vendors and distributors to “produce and maintain secure systems and to be trustworthy, transparent and accountable in their practices”.
Finally, the Quad has a “senior cyber group” through which it seeks to strengthen cooperation between government and industry on cyber standards, the development of secure software, and the “scalability” of trustworthy digital infrastructure.
There’s also economic opportunity in the Quad agenda
The Quad’s agenda is not just defensive in nature. The group pitches itself as geared to respond to major global challenges. The Biden Administration is particularly keen to have Quad countries play a stronger role on climate change.
Australia and India are to some degree a coalition of the dragooned here, at least in relation to US interest in pushing Quad countries towards more ambitious national plans for emissions reductions under the Paris Agreement, but there is more alignment in the group when it comes to green infrastructure and clean energy.
The Quad, for example, has announced its intention to form a green-shipping network to encourage the greening and decarbonisation of the shipping value chain. The group has identified ports such as Los Angeles, Mumbai, Sydney and Yokohama as potential candidates for such a network.
The Quad has also established a clean hydrogen partnership, an initiative that aligns well with the government’s National Hydrogen Strategy to position Australia as a competitive supplier of clean hydrogen energy to the world. It’s not yet clear how much real value can come from leveraging the respective national efforts of Quad countries in clean hydrogen, but the stated objectives are ambitious, including to reduce costs across the value chain, support technology development and stimulate market demand in the region.
The Quad countries want to be good neighbours
Quad countries also want to deliver public goods in the Indo-Pacific. The impetus here is not solely altruistic – the Quad recognises that the best way to compete with China in the Indo-Pacific is to respond to the region’s needs.
Individually and collectively, for example, Quad countries have significantly ramped up the supply of COVID-19 vaccines to the Indo-Pacific, part of a goal of donating more than 1.2 billion “safe and effective” doses globally by the end of 2022.
The Quad also has an infrastructure partnership, one of many efforts to find an answer in the Indo-Pacific to China’s Belt and Road Initiative (BRI), a multi-faceted program that has hard and soft (digital) infrastructure components and that also serves as a major convening and standards-setting platform for China, helping tie the region back to Beijing.
The Quad’s agenda here is mostly about supporting existing initiatives, including the G20 quality infrastructure investment principles, the G7 infrastructure partnership and the Blue Dot Network, but Quad members like Australia also provide quiet technical assistance to regional countries to help them attract finance and support infrastructure governance.
None of these efforts have so far managed to direct investment flows in the way China has, nor counter the grand narrative of BRI. Still, the slowing of infrastructure lending by China in recent years, especially from its policy banks, might provide new opportunities for the Quad countries and Europe to compete more effectively.
The Quad won’t fix our economic relationship with China but may help open (some) new markets
The Quad is neither a trade arrangement nor an economic cooperation forum. Australia’s trade diversification agenda also operates independently from, and extends well beyond, the Quad membership.
Still, the knitting together of India, Japan and the United States with Australia in the Quad helps Australia strengthen each of these bilateral relations individually. The convergence of interests evident in the Quad, for example, has contributed to the recent momentum in our relationship with India, including the decision to re-start bilateral free trade agreement negotiations (Australia has existing FTAs with Japan and the United States).
The United States, India and Japan have given rhetorical support to Australia’s pushback against Chinese economic coercion. And all three have joined Australia’s action in the World Trade Organization (WTO – as interested “third parties) against China’s anti-dumping and countervailing measures on Australian wine and barley.
This support is helpful to Australia’s efforts to internationalise the issue of trade coercion but hasn’t so far changed China’s calculations when it comes to its economic punishment of Australia. Beijing views the reputational and economic costs of its measures as manageable.
In the meantime, companies from the United States have been happy enough to look for advantage in the Chinese market where Australia has left a gap to be filled (notably in cotton). This isn’t surprising, nor evidence of bad faith – we shouldn’t expect the Quad to override the competitive nature of private-sector driven economies, even when it comes to China.
Adding it all up
The Quad is more than a forum of like-minded countries for diplomatic exchanges and practical cooperation. It is one component, albeit an increasingly important one, of multi-faceted Indo-Pacific strategies to build a favourable strategic balance in the region, assert democratic values and support the resilience and sovereignty of regional countries.
The Quad embodies a long-term contest to shape global order. To be sure, this struggle co-exists with a vast amount of still mutually-beneficial trade and other economic activity with China. But the world the Quad represents is also one of partial de-coupling and fragmentation, of national economic sovereignty, “trusted” supply lines and divided technology realms.
The net result is a complex new duality of simultaneous separation and interdependence, with higher degrees of risk – material and reputational – for businesses to navigate.
Richard Maude is the Executive Director, Policy, Asia Society Australia and a Senior Fellow at the Asia Society Policy Institute.
An edited version of this article appeared in The Australian Financial Review on 10 February 2022.
Asia Society Australia acknowledges the support of the Victorian Government.