Australia urged to work with allies on China coercion

Policy think tank the Lowy Institute says the EU and Australia should work together to share their intelligence and expertise with other nations affected by coercion.

It also suggests Australia should work more closely with the NATO security alliance to counter such measures.

"With geopolitical rivalry between the United States and China likely to intensify further, there is a risk that more countries could become targets of Chinese economic coercion," it said in a new report.

"There would appear to be both the scope and political will in the European Union to co-operate with Australia towards shared aims in relation to China."

The institute says Canberra and Brussels working together could also complement the Quad, which includes Australia, Japan, India and the US.

The US has also moved to limit Beijing's ability to use economic coercion through the critical minerals sector as Australia tries to scale up its ability to process the raw materials onshore rather than send them to China.

With global competition for critical minerals growing and known deposits not enough to outstrip demand into the future, the US is working to shore up not only its own supply chains, but that of crucial allies.

Electric vehicles can only be built with US-sourced battery components and critical minerals to access tax credits, with carve outs for nations which Washington has a free trade agreement with, such as Australia.

The Biden administration is using the Inflation Reduction Act to boost supply chain co-operation with Australia, with the US having more than $1 trillion invested down under.

Australian Associated Press