In Brief
Australia sees Southeast Asia as a vital partner for economic growth, focusing on areas such as agriculture, critical minerals and energy transition. Despite shared goals of integration, their approaches to economic security differ. Australia’s policies, while influenced by concerns over China’s economic influence, still favours flexibility and moderation. Southeast Asia adopts a more fluid view of China, seeking to balance economic ties with caution regarding geopolitical risks and regional autonomy. As both regions navigate these approaches, their collaboration will be shaped by evolving security concerns and shifting global dynamics.
Southeast Asia has attracted attention in Canberra as a key element in Australia’s plans to secure its future prosperity and security through strengthened economic integration with the Asia Pacific. Australia’s recent official medium-term economic strategy for Southeast Asia cites strong growth prospects, economic complementarity and the need for trade diversification as key drivers of closer economic ties with the region.
Cooperation is already underway in many sectors, including agriculture, critical minerals and energy transition, reflecting shared appreciation for the benefits of free trade and the liberal international trading order. But given significant shifts in the global order and the securitisation of strategic economic exchanges, reviewing each side’s approach to economic integration and its connection to security would be prudent.
Economic security has traditionally been a broad concept, encompassing basic social security, including access to social protection, healthcare and education services and employment security. Another aspect of this concept is associated with the pursuit of foreign economic policies to strengthen the economy and ensure its functioning against various threats. Geopolitical competition and pandemic-induced supply chain disruptions further highlighted this aspect, with focus on supply chain security and products with national security implications like semiconductors.
Being a US ally, and given recent experience dealing with China’s economic coercion, one would expect Australia to have a more robust approach to economic security. But reality shows a more level-headed approach from Canberra, which favours flexibility over rigid government interventions in the economy. Unlike the United States — whose international trade policy has often been embroiled in domestic disputes — Australian trade policy is a less contentious domestic matter and has avoided enacting comprehensive tariffs and trade and investment restrictions.
Simultaneously, Australia has security concerns over its economic ties with China and global supply chains. Canberra has introduced several policies to address these issues, including a Foreign Investment Reform Bill to screen inbound investments on national security grounds, an Office of Supply Chain Resilience to monitor critical supply chain vulnerabilities and targeted industrial policies through the Future Made in Australia initiative and National Reconstruction Fund.
Southeast Asia is inclined to view economic security through the concept of ‘comprehensive security’, which emphasises the importance of economic stability to regime legitimacy. At the domestic level, economic integration supports rapid development and prosperity, enhancing the survivability of the ruling elites. At the regional level, economic integration helps strengthen capacity and resilience against internal and external challenges.
As a result, the region has pursued its own approach. While trade policy became securitised elsewhere, ASEAN as a bloc has not imposed any region-wide foreign investment screening, monitoring of outbound investments or subsidies for critical sectors. Yet the region also favours a measured approach to economic integration which takes into account the diversity of members’ economic structures, domestic politics and national interests.
While Southeast Asia and Australia’s approaches to economic security converge with an appreciation for free trade and economic integration, their views differ regarding China’s role in economic security. Canberra’s perception largely mirrors the United States’ approach due to concerns over pandemic-induced supply chain disruptions and experiences dealing with China’s economic coercion. But Australia’s measures have been more moderate and flexible, probably due to a softening in tone under the incumbent Labor Party government. Yet there is also a risk that this approach might change as Canberra faces increased decoupling pressure from the Trump administration and possible retaliations from China.
Southeast Asia’s approach allows a fluid interpretation of China’s economic presence in the region, in the sense that it is not an outright threat or benefit. A positive example is the ASEAN–China Free Trade Agreement, which came into effect in 2010. The agreement cut down tariffs and other trade barriers, allowed easier market access for both sides and helped turbocharge regional trade.
But deeper economic integration also generated new dependencies on China. The region records a significant trade deficit with China, which jumped from US$44.8 billion in 2013 to US$140.5 billion in 2023, and relies on China in sectors such as tourism and EV supply chains. Southeast Asian elites and policymakers are certainly concerned about this trend, evidenced by their wariness over China’s growing economic footprint. Southeast Asian states have tried to pursue greater autonomy in their dealings with China, but their approaches vary based on national capacities, external partners and political power concentration, among other factors.
The shared appreciation for free trade between the two sides is a good starting point and will act as a springboard for further cooperation. Australia should continue supporting Southeast Asian states with capacity-building programs in critical minerals and energy transition to help them meet energy goals. The focus is not just on investments but also on opportunities for Southeast Asia to advance in processing critical minerals and producing EV-related supply chain parts, while avoiding harmful environmental and social consequences.
While Trump’s potential tariffs and decoupling pressure will be an important factor for Southeast Asia, what is more critical is that the region should have a greater awareness of potential geopolitical downsides in its economic relationships with China.
About the author
Hanh Nguyen is a Senior Research Fellow at Center for Global South and Public Diplomacy(CGSPD), as well as a Research Fellow at Yokosuka Council on Asia-Pacific Studies (YCAPS).
