Progress towards the creation of an Australia-China free-trade agreement (FTA) will likely dominate relations between the two countries this year. But the growing hostility between China and Japan poses a major threat to Australia's economic and strategic future, including the likelihood of a successful conclusion to the FTA. Therein lies an opportunity for Australia to help cooler heads prevail in Beijing and Tokyo. Sino-Japanese relations took a distinct turn for the worse last year. It didn't help matters when the Japanese produced a new history textbook which, the Chinese say, glosses over atrocities committed in China by Japan's imperial army during the 1930s and early 1940s. Tens of thousands took to the streets of Chinese cities in April to attack Japanese businesses and consulates. Provocative visits by Japanese Prime Minister Junichiro Koizumi to a war shrine led to Beijing officials snubbing him at a regional summit last month. And the two countries began sparring over conflicting oil and gas claims in the East China Sea. From Australia's perspective, all this is bad news. Canberra does not want to have to choose between the two countries. While Australia is assiduously courting China on a range of levels, it has done so with Japan for the past 50 years. Japan has been Australia's biggest export market for over four decades. Not only that, but Australian and Japanese troops are working alongside each other in Iraq, and the two countries have begun preliminary discussions about a free-trade agreement. For all these reasons, Australian Prime Minister John Howard has made it clear that Australia cannot afford to, and will not, take sides in the tensions between Japan and China. While there is no sign at this stage that the Sino-Japanese conflict will escalate into a military conflict, this 'could possibly be the worst period of Sino-Japanese relations since [the second world war],' said James Mulvenon, of the Centre for Intelligence Research and Analysis in Washington, recently. And, in a paper released last month, the Carnegie Endowment think-tank warned that the booming Sino-Japanese trading and investment relationship could fall victim to the poison infecting relations between the two countries. The Bush administration - preoccupied by its adventure in Iraq and by the fact that its South American neighbours are veering sharply to the left - seems to be leaving the simmering dispute between Japan and China alone. And even if it were to involve itself in the quarrel it's not clear, given the suspicion with which the Bush administration is treated by the Chinese, that it could achieve much. Such a state of affairs leaves open the opportunity for Australia to see if it can offer to help ease tensions. Japan sees Australia as a benign and useful neighbour, while Canberra has won points from the Chinese for distancing itself from the Bush administration's sabre-rattling about Taiwan and China's nuclear capacity. So it is hard to think of a nation better placed than Australia to serve as a bridge between Beijing and Tokyo this year. As the Carnegie Endowment paper warns, allowing the status quo to continue will lead to 'an intensified rivalry [that] could divide Asia by driving a wedge between the United States and Japan on one side, and China and much of the rest of Asia on the other'. That would be Australia's worst nightmare. Greg Barns is a political commentator in Australia and a former Australian government adviser
