More than half the Australians surveyed in a Pew Research Centre poll of global attitudes and trends last year expressed increased concern over China's growing power and influence. This is hardly surprising given China's recent efforts to interfere in and influence Australian institutions and civil society, cyber attacks against Australian political and academic targets, and diplomatic and economic threats against Australia over issues such as Huawei.

As Australia seeks to address and manage these challenges, it has naturally looked to its largest foreign investor and closest historical ally, the US. In a region where the Chinese military budget comprises about two-thirds of all military spending in Asia, the US provides a necessary and critical balance in the region. The US also works closely with its allies and partners in the region through a series of treaty agreements and security partnerships. Among those is the Australian-American alliance, commonly referred to as ANZUS, widely recognised as one of the most robust and important bilateral strategic relationships in the region.

Yet these are challenging times for ANZUS. In particular, many Australians are unsettled by the current US administration and apprehensive about how the US is wielding its power and influence, and its more muscular American approach to global affairs.

However, regardless of who occupies the White House, the challenge posed by China is one that Australia and the US will need to find a way to work together to manage. It is true that Donald Trump has brought the issue to a head by taking a much more confrontational approach to China and has shown himself willing to risk greater friction with Beijing than previous administra­tions. But, while the speed of his actions has taken much of the world by surprise, this response has been building for some time.

After decades of encouraging China to emerge as a responsible stakeholder, the US has all but concluded that blueprint has failed. There is a bipartisan consensus in the US that the time has come to tackle China’s unfair trading policies, military build-up, worsening human rights record, coercive economic practices and drive to dominate the key technologies and industries of the future.

Australia also recognises these Chinese behaviours are problematic. On issues such as countering Chinese activities in Southeast Asia and the South Pacific, ensuring that Australia’s critical infrastructure and technology are protected, and maintaining the integrity of Australia’s domestic institutions against foreign interference, Canberra is on board. In some cases, Australia is even leading. In other areas, however, such as the US’s current economic offensive against China, the Australian approach is quite different.

Navigating an increasingly complex geopolitical environment demands clarifying expectations on both sides and pushing the conversation in Australia and the US beyond a celebration of history and “mateship”. The US would like Australia to be less cautious about calling out China’s destabilising activities and seek ways to lessen commercial dependence on China.

Canberra would like the US to clarify its objectives, strategy and resources in greater detail and to be clearer about what it would like Australia to do. It also would like the US to refrain from counter-productive actions, such as picking public fights with allies.

The two allies need to have an honest appraisal of areas of convergence and, more important, areas of divergence.

Greater attention to, and debate about, these areas of potential divergence should not be avoided but, rather, embraced when determining independent and joint courses of action for Washington and Canberra.

Why we disagree

The dynamic of the alliance up to this point has been shaped largely by geography and the disparate global roles played by the two countries.

As a large country, the US has a greater ability to compel or deter other states from doing something through threats, whereas smaller countries such as Australia tend to exhaust possibilities for persuasion before considering other alternatives.

In the context of China, this means the US has a far greater willingness to take confrontational positions towards China than Australia has. This is illustrated by the Trump administration’s recent efforts to force Beijing to agree to economic and trade concessions versus Australia’s reluctance to join the US in undertaking freedom of navigation operations in the South China Sea.

These tendencies also can be seen in the degree to which the US is more willing to contemplate swift and profound shifts in policy vis-a-vis other great powers as opposed to Australia’s preference to do so incrementally.

From Canberra’s perspective, this allows it to gauge the commitment of Washington to new policy initiatives, as well as assess the response from Beijing. With an increasingly assertive policy towards China from Washington, Canberra will likely seek more explicit guarantees of cover and more reassurance from senior US policymakers.

On the economic front, Australia remains wary of supporting an economic offensive against China for several reasons. First, Australia benefits in some ways from the status quo. For example, genuine economic liberalisation in China would be a mixed blessing for Australia, at least in the short and medium term. China’s state-led economy privileges state-owned enterprises and national champ­ions, who purchase significant amounts of Australian commodities. Australia exports enormous amounts of mineral, energy and agricultural commodities, as well as services, such as education and tourism. Australian firms do not suffer the same degree of problems with forced intellectual property transfers and theft as do other economies. As a result, Australia has largely avoided the worst aspects associated with the opaque and arbitrary nature of the Chinese political economy.

It is from this perspective that Australia is concerned about the outcome of a potential trade deal between the US and China. Without more information about what sort of deal may be reached, or the ability to provide input into the terms of the deal, it is difficult for Canberra to calculate what effect any agreement will have on Australia. Furthermore, while the relative size and importance of the US economy would likely limit or else protect it from retaliatory actions on it by Beijing, Australia could feel disproportionate economic pain — although China’s unilateral capacity to inflict prohibitive economic costs on Australia without suffering significant economic losses itself might well be over-estimated.

With respect to existing international institutions, given its relative size, Australia is more concerned about preserving even seriously flawed or ineffective institutions than the US. For example, even though Australia recognises the weaknesses of the World Trade Organisation, it will nevertheless seek to preserve the relevance and integrity of the institution because of the benefit it offers smaller economies.

In contrast, the Trump administration’s frustrations with the fundamental inability of the WTO to address Chinese economic practice — such as the enormous subsidies provided to SOEs and national champions, its “Made in China 2025” indigenous innovation drive and intellectual property violations — has led Washington to downgrade the importance of the WTO and attempt a bilateral reordering of the economic relationship instead.

Finally, the US is generally much more willing to receive, or simply has become accustomed to, criticism in the Indo-Pacific region. In contrast, Australia wants to be perceived to be a good neighbour and regional citizen, and therefore works harder to find consensus before acting. The result of this is that the US is prepared to take strong unilateral action and to try to bring along allies after the fact, whereas Australia prefers to first build the coalition before taking action.

Bridging the gap

The interests of Australia and the US, as two sovereign states, will never perfectly align but there will be many areas of shared concern and therefore many opportunities for co-operation.

First, more public discussion is needed about the challenges associated with China’s rise. Currently, there is a gap in both countries between governmental perceptions of the challenges posed by China, and public opinion. Without more consistent political leadership and communication, that gap is unlikely to narrow.

Moreover, in the absence of clear explanations of how Beijing’s actions threaten US and Australian values and interests, steps taken to mitigate those challenges will likely appear as provocative or counter-productive.

In Australia, the government needs to be more upfront with its public about the challenge the Communist Party poses to its interests and values, its efforts to weaken the alliance with the US, and Beijing’s attempts to revise key aspects of the existing rules-based order. China is a revisionist power and populations in both countries should be made aware of that reality and all it entails.

Second, the US and Australia need to strengthen the trade architecture in the Indo-Pacific region. Although the current US administration is disinclined to support most multilateral types of arrangements, ultimately it will be necessary if these overall efforts are to succeed. The original purpose of the Trans-Pacific Partnership remains the gold standard.

The TPP addressed many areas in which the WTO fell short. It was designed to increase collective pressure on China and create new opportunities for its members. Economic and diplomatic risks and costs were shared. And the TPP also left open the possibility of China eventually joining if it agreed to abide by the relevant rules and standards.

If the TPP is truly off the table for Washington, then it will need to find a new way to sell the vision of what its economic offensive against China is seeking to achieve. As a part of this, as the US and Australia pursue and promote economic and trade agreements, they should ensure that they are not only increasing mutual market access opportunities for firms from signatory countries but also promoting fair rules and standards at the same time.

Third, the US and Australia need to have a conversation about supply chains and diversifying markets. In the US, there is a nascent conversation about the importance of moving critical supply chains out of China. This is a conversation that also needs to include allies. For these decisions to have meaningful impact, allies will need to work together to determine which segments of the supply chain are critical, and from which sectors.

The Australian conversation is more about the virtues of diversifying export markets to reduce the impact of Chinese economic coercion or the threats of it. Again, the US and Australia will need to establish how open economies can achieve that and how they can assist each other. Washington and Canberra obviously cannot, nor should they try to, push private firms to make commercially irrational decisions or decisions that are unacceptable to their shareholders and other key stakeholders. But a more open conversation about the comprehensive challenge China poses means that as part of risk management calculations, private firms will need to take into consideration the predatory, coercive and punitive actions China can inflict.

Moreover, companies ought to be encouraged to consider themselves responsible stakeholders within a rules-based system, in addition to creators of economic wealth and value.

Fourth, the Trump administration would be well served by better advance co-ordination with Australia. Strategic and tactically important decisions by the US that affect allied interests should be discussed and co-ordinated in advance. Failing to do so can blindside allies and prevent them from properly being able to calculate the risks and benefits for their own countries. If allies such as Australia do not fully understand what Washington is trying to accomplish, or its strategy for doing so, they will be less inclined and less willing to help.

Finally, tighter co-ordination also should be used to blunt the risks allied states face. Such co-ordination could mitigate the challenges of China’s well-known tactic of economic coercion. For example, if Beijing deliberately were to reduce the number of Chinese students or tourists it sends to Australia as a way to put pressure on Canberra, the US should consider cutting the number of tourist and student visas it gives to Chinese visitors in response. Australia should recognise that the US is prepared to accept a large disruption to its own markets and trade in its attempt to rebalance the global trading relationship with China and will look to Australia to support these efforts, even if not to the same scale.

Rivals … not allies

An unpredictable White House has left Beijing unsure about what the US will do next and how it should respond. But the tactical advantage of escalation and unpredictability will not necessarily last. Meanwhile, some US allies are equally confounded. In Australia, there is a risk that the ANZUS alliance will be weakened instead of strengthened just when it is needed most.

Shared history, values and prosperity have allowed the US-Australia alliance to thrive for the better part of a century. But the closeness of the relationship can easily drift into complacency. Washington and Canberra tend to avoid highlighting differences. But it is precisely their closeness that should allow them to undertake the exacting work of candidly exploring those differences, asking more of themselves and demanding more from each other to take on the multifaceted challenges of great power competition.

This is the path to recapitalising their alliance and modelling how to revitalise other alliances in the region.