AUSTRALIA AND ASIA: TAKING THE LONG VIEW

Address by Mr Alexander Downer, MP, Minister for Foreign Affairs, to the Foreign Correspondents' Association, Sydney, 11 April 1996

INTRODUCTION: Closer Engagement with Asia

I would like to thank the Foreign Correspondents' Association for their invitation to speak today. The community of foreign correspondents is an important channel for communication between Australia and the rest of the world.

Today, on the verge of my first formal trip as Foreign Minister to three countries of our region, namely Indonesia, Singapore and Thailand, I want to give an unequivocal message to the region: closer engagement with Asia is the Australian Government's highest foreign policy priority.

Australia embraces the region because this country's prosperity and that of its neighbours depends upon our mutual success.

Australia embraces the region because, in the world of today, security must be cooperative.

Above all else, Australia embraces the region not only because these are our neighbours, but because we number them amongst our friends.

Beyond this simple message of commitment I also want to use this speech as a road map.

It is a guide to the policy direction the new Australian Government will take in its engagement with the region. In policy terms, it is about where Australia has come from in its relations with Asia, where Australia's relations with the region are heading and about how this country will get there.

PART ONE: Australia in Asia: A Longstanding Commitment

It is important therefore to start by clarifying the historical record.

I want to correct a misconception that Australia's engagement with Asia results from politicians in Canberra suddenly seeing the light in the 1990s after decades of neglect.

Australia's recognition of the vital importance of Asia and of our region generally has a rich history of which even some Australians may not be fully aware.

I believe it is vital to understand this history if one is to understand both the depth of Australia's commitment to its region and the genuine desire for partnership that this Government and this country as a whole has.

The Asia Pacific region has been crucial to Australian foreign policy since the Menzies government opened our first independent diplomatic missions in 1940/41. Two of the first four were in Asia, in Japan and China.

And it is worth recalling that when the Coalition was in government from 1949-1972, Australia was at the forefront of efforts to ensure regional stability and economic development.

My predecessor Percy Spender was instrumental in developing the Colombo Plan in 1950 which was the region's first serious program of economic and technical cooperation. And he helped develop the ANZUS Treaty signed in 1951.

In 1957, despite the Labor Party's opposition, Prime Minister Menzies negotiated the Australia-Japan Trade Agreement. And it was under Menzies that Australia established the Ministerial Trade Talks with the Republic of Korea in 1966 - Australia's first such regular forum at that level with any country.

It was Richard Casey, Australia's Foreign Minister from 1951-60, who perhaps more than anyone pioneered Australia's modern relationship with our Asian neighbours. As he put it,

"Our own special role lies in South East Asia and consequently our foreign policy is largely but not exclusively concerned with that region".

Casey's statement not only set the general pattern of Australia's relationships with our region but also ensured that Colombo Plan initiatives and UN programs brought real economic benefits to countries throughout the region. He also forged strong security ties with key partners in Asia.

This Casey-like pattern of Australia's engagement with Asia continued when the Coalition parties formed Australia's government from 1975-1983. It was Prime Minister Malcolm Fraser, who along with the Japanese Prime Minister Ohira, founded APEC's predecessor, the Pacific Economic Cooperation Council. The Fraser government's foreign policy, in the Casey tradition - what increasingly will become known as the Casey tradition - included a strong focus on issues of development and economic equity.

The point of recalling all this is to remind ourselves that a tide of Australian engagement in the Asia Pacific has been gathering momentum for more than half a century. Australian governments, both Coalition and Labor, have been energetically pursuing our interests in the region throughout the entire period of our diplomatic representation abroad.

This commitment to Asia is especially true today. There is a national consensus on the importance of Australia's engagement with Asia and there is a strong recognition that no side of Australian politics "owns" the Asia vision.

PART TWO: The New Asia Pacific Landscape

All history sheds light on the present. The long-standing engagement process that I have just outlined tells its story of the transformation of this country's relationships with its region, a region which is undergoing vast change.

The last decade has seen the economic and security environment of the Asia Pacific change dramatically - and generally for the better - under the twin influences of East Asia's economic transformation and the end of the Cold War.

Economic Changes in the Region

Looking forward I am confident that rapid economic growth in the region will continue and I am cautiously optimistic that growth will continue at high rates at least until the year 2020. By one favourable estimate the region will then include China as the biggest economy in the world, India the third or fourth, and Indonesia perhaps the fifth. Technological trends could see Malaysia with the economic profile of a developed country. Region-wide, the Asia Pacific would account for three-quarters of world trade and three-quarters of world output.

There is no doubt these changes in the region will have a potentially greater effect on our national fortunes than any external development since World War Two.

Australia's geographic position should allow us to capitalise on the enormous trade and investment opportunities that will result from this extraordinary economic transformation.

But Australia and our regional partners will need to look very carefully at the economic and social assumptions underlying that scenario, and will need to work hard to ensure it comes to fruition.

I reject the Krugman thesis that Asian growth is based merely on increased factor inputs rather than increased productivity. But I do believe all countries in the region will have to solve some very difficult problems to achieve sustainable growth and political stability over the long term.

Those issues needing to be addressed include: the impact of regional demand for capital on global interest rates and the impact of this factor and a shifting distribution of current account deficits on exchange rates.

Increasing prosperity will have an accelerating effect on the environment: when tens of millions of middle class people trade in bicycles for cars, for instance, greenhouse gas emissions will skyrocket. That is an issue that can't be put off indefinitely.

The Effect of Economic Changes

Growing prosperity will lead to social and political shifts, too. As the rapidly growing middle classes age, they are likely to save less of their income - as we are already seeing in Japan and Taiwan. In conjunction with the huge growth of investment needs in developing Asia, this may raise the global price of capital. The question is: by how much.

This poses the question as to whether Australia will be sufficiently competitive to compete for capital and maintain our investment levels, our productivity growth and therefore Australia's standard of living.

Within the region, the emerging middle class is likely to become more critical of their own governments. They will tend to hold politicians accountable for environmental degradation and economic pressures. Regional politicians, under pressure from newly assertive constituents, may be tempted to deflect blame to other governments, throwing pressure, in turn, on to relationships between the states of the region.

Security Implications of Economic and Social Change

Over the longer term, economic development will lead to shifts in power that will need to be accommodated through regional consensus. That process will rest on the framework of the relationships between the key major powers - the United States, China, Japan, Russia and India. Australia's security will be dictated in large part by how these relationships interact - but developing regional arrangements such as the ASEAN Regional Forum can make a major contribution to influencing and shaping the future strategic environment.

The Australian government does not see any direct security threat to Australia, but there is some risk of a spillover of conflicts originating in the region. Particular challenges at present are the Korean Peninsula, the status of Taiwan, and the Spratly Islands.

There are other international dangers relating to the proliferation of weapons of mass destruction, terrorism, environmental degradation and international crime. Importantly, the armed forces of the region are becoming increasingly capable as the growing wealth of regional economies allows the purchase of more powerful weaponry.

The Region: The Economic and Political Task Ahead for Australia

None of what I have outlined should make us any less confident about the future of the Asia Pacific. But Australia needs to keep working to ensure continuing regional prosperity and stability, especially through institutions such as APEC and the ARF. And Australia must clearly do more to increase our domestic competitiveness, to increase the depth and pace of microeconomic reform, to lift our savings rate, and to inject greater discipline into our macroeconomic performance generally.

It must be remembered, too, that the East Asia boom was launched on the back of free trade - initially through access to the giant United States market. Future rapid growth will continue to depend on free trade and investment, so all regional countries must now show greater commitment to strengthening the international trading system by removing barriers to trade and investment.

The intense debate over agriculture liberalisation in APEC illustrates the domestic pressures governments have to overcome. And it illustrates the key role APEC must play in keeping the region on the liberalisation track.

In short, the region is trying to establish long-term structures which will accommodate the massive economic transformation which will leave the region forever changed. The next 50 years will therefore depend on the decisions made over the next five. For these reasons alone, Australia must be actively involved in the region.

PART THREE: Policy Directions for Australia

The key question is how Australia will do this and now I want to set out clearly the main features of the Government's policy approach.

It will be clear to you from what I have said so far, that Australia's foreign policy will be built on the foundations of foreign policy laid by Casey and continued on by successive Australian governments.

Building on Regional Economic Structures

The first way the Government will be engaged in Asia is by building on regional economic structures. Australia will continue to contribute actively to the development of regional economic and security structures, and in particular APEC and the ARF. Those structures are central to building the trust, the sense of shared interests and the sense of shared responsibility that the Government believes are the essential basis for shaping the region's economic and security future.

The Australian Government is committed to ensuring that APEC develops as a non-discriminatory trading organisation. The Government will be pursuing that objective by seeking to put real flesh on the bones of the 1994 Bogor Declaration and the 1995 Osaka Action Agenda.

The Government's appointment today of Peter Grey, the Department of Foreign Affairs and Trade's most senior trade negotiator, as Australia's Ambassador to APEC, is a clear sign of our commitment.

There is no doubt that APEC has real potential to contribute to Australia's future prosperity. It is also important in the context of our efforts to enhance regional stability. That is because the establishment of a process of informal multilateral consultation and dialogue is enabling governments with widely different political agendas to exchange views and develop a custom of consultation on regional issues.

The Australian Government will continue to place importance on the ASEAN Post Ministerial Conference as an important forum, which brings together the ASEAN countries with all the other major players in the region, to discuss global and regional issues.

The Australian Government will take forward proposals for developing dialogues on an AFTA-CER link. In addition, the Government is interested in exploring further Indian Ocean regional cooperation. Australia is, after all, an Indian Ocean country as well as an Asia Pacific nation.

Promoting Regional Security Cooperation

The second way the Government will pursue engagement in Asia is by further promoting regional cooperation on security. A custom of cooperative engagement lies at the heart of the development of the ARF, which is presently providing the principal avenue for security dialogue in the region. This Government strongly supports strengthening the ARF. The Government seeks to see it evolve into a body that contributes positively to the resolution of tensions and, through its adoption of practical cooperative measures, to understanding and confidence among regional countries.

Supporting APEC and the ARF is a growing web of bilateral and sub-regional defence and economic linkages.

The Government will continue strongly to support active United States engagement in the region's affairs. The US presence is central to regional security. It is the region's balancing wheel and overwhelmingly a positive force for regional stability. For that reason, Asia Pacific approaches should have primacy in regional economic and security arrangements. In that context the American alliance will remain a central feature of Australian security. In economic terms, one fact sums up how important the United States is to us and the region: the US is the largest trading partner of Australia's largest trading partners - Japan, Greater China and Korea.

Strengthening the Focus on Bilateral Relations

The third way the Government will promote engagement in Asia is by strengthening the focus on bilateral relations.

Australia's relationship with Indonesia will continue to be of particular and growing importance. Indonesia's regional influence will undoubtedly continue to grow and the Government will be working hard further to strengthen the relationship. The Australian Government wants, in particular, to increase the level of trade between our two countries while also developing our diplomatic and strategic relationship.

Specifically, the new Government places high priority on the Australia Indonesia Ministerial Forum to meet later this year in Jakarta. The forum provides both governments with an ideal vehicle addressing key issues and advancing strong commercial and strategic links.

Before travelling to Jakarta next week I believe it is important to reaffirm that the Australian Government does support the Agreement on Maintaining Security that was concluded late last year between Australia and Indonesia.

The Government will also be working to advance Australia's relations with the other ASEAN countries. Australia's primary objective will be not only to advance our economic and security interests, but also to improve the overall quality and strength of our contacts in ASEAN countries, so that Australian regional influence will be enhanced.

The Prime Minister's decision to send a special envoy to Kuala Lumpur within four hours of being sworn in and the genuine warmth of Dr Mahathir's stopovers are encouraging signs of early progress.

The Government will also be working to improve commercial relations. In particular, the Government will be taking initiatives to redress our declining share of foreign direct investment in ASEAN countries.

Of course, Australia will maintain and enlarge our relationship with Japan. Apart from being directly vital to Australia's economic future, Japan is the preponderant regional economic force in Asia. Australia believes there is more that can be done to fulfil the vast potential of the bilateral relationship. The Government will continue to encourage Japanese deregulation. The Government is also determined to expand our cooperation with Japan on a wide range of political and security issues as part of a continuing transformation of the relationship from its original trading base to a fully rounded and diverse partnership.

Australia's relationship with China will remain a central feature of Australian foreign policy. As China's economy modernises and expands, its influence as a regional and global power will become increasingly apparent. It will naturally be active in pursuing its national interests, and of course you would expect that. It is important for all regional countries that as China assumes its place as a major power, it is able to reassure other members of the region that it is committed to working with them in the region's broad interests. Australia will be engaging with China cooperatively and the Australian Government will maintain our one-China policy.

The Coalition Government will encourage the development of strong trade and investment links with China across all sectors - primary, manufacturing and services. It will build on the natural complementarities between the two economies and draw upon the Chinese Australian business community's links with China.

The Republic of Korea is a country of great importance to Australia. Its stability is central to the preservation of regional security and Korea is now Australia's second largest export market and fourth largest trading partner.

In particular, the Australian Government will be looking to step up ministerial-level contacts as well as to establish regular dialogue on political and security issues. On economic issues, the Australian Government will seek greater market access for services and agricultural products.

Finally, Australia will pursue a more positive approach to Indian involvement in regional structures. In both economic and security terms, India is emerging as a major and dynamic regional player.

The Australian Government will support its participation in the ARF, and Australia recognises India's strong and understandable interest in APEC membership. The Government believes its claims, along with those of other strong contenders like Vietnam, should be given close consideration when APEC reaches a consensus that it should again expand membership.

The Australia-India New Horizons promotion later this year underlines the importance the Australian Government attaches to the relationship with India, which we will be upgrading across the board. And we will work with India to encourage economic cooperation in the Indian Ocean region.

PART FOUR: New Emphases under the Coalition Government

My review of the Coalition Government's policy directions makes it clear that this Government will be building on, not tearing down, the previous government's work. But there are, nonetheless, real differences of policy emphasis between the Coalition and Labor. These differences will work to strengthen Australia's engagement with Asia.

First, in developing Australia's national interests in a realistic way, this Government will be placing greater emphasis on strengthening key bilateral relationships throughout the region. Strong bilateral relationships are the core of a successful regional policy. The previous government put a strong emphasis on multilateralism, but sometimes it neglected the development of major bilateral relationships. The key point to be made here is that multilateral institutions will always be far more effective if the countries within them have confident, strong bilateral ties.

Secondly, the Australian Government sees a strong domestic economy and increased international economic competitiveness as a key foundation of successful foreign policy. Economic competitiveness brings international credibility and influence in all areas of our national interests - security as well as economic. The Government's commitment to labour market reform, and to further microeconomic reforms in shipping, the waterfront, transport and communications is vital to Australia assuming its place among the dynamic nations of the Asia Pacific.

Thirdly, the Government recognises that while governments establish much of the framework for international relationships most of the substance belongs to businesses and private individuals. Community support is crucial to engagement with Asia, and the Australian Government will be working to build it.

Therefore, the Government will be reforming the Treaty-making process so as to ensure that as Australia engages more closely with the region the Australian community is given a greater role in that process itself. If Australia is to engage with our region then the community must be brought into and own the process. I do not think, let me say, it is something that can automatically be taken for granted.

A vital message that the Australian Government will communicate more clearly is that a policy of "Asia First" does not mean "Asia Only". Nor is Australia's regional policy a case of all "Asia" and no "Pacific". The Government is committed to maintaining and strengthening those crucial links. Australia, like its neighbours, has global interests to pursue and assets to nurture. Australia does not need to give priority to the region at the expense of interests elsewhere.

Australia has important interests and ties in the South Pacific.

Australia's foreign policy needs to reflect, too, the fact that Australia has intimate links with countries like Britain, Greece, Italy and Germany, as well as with the newer source countries for immigration from within our own region.

Fourthly, this Government believes that Australia's links with North America and Europe can be an asset to our Asian neighbours that Australia should use more creatively.

I do not want to overplay this theme. Communications between Asian countries and Europe/North America run principally through direct channels. But there are occasions when Australian perceptions, interests and experience add distinctive value.

This was evident only last month when a regional country - Thailand - explicitly recognised the value of Australia's connections with North America and Europe. In Thailand's Defence White paper it was noted that, "Thailand must cooperate with other nations that play important roles in maintaining world peace, such as Australia, a regional country that has close relations with Europe and the United States."

The fifth difference in emphasis between this Government and our predecessors will be our style of interaction with the region. Australia will say what we think and believe, but this Government will make it clearer that Australia's engagement with Asia is a process of mutual give-and-take, a process of learning, a process of common endeavour.

Australia has both given to, and gained from, our neighbours: in science and technology, in cultural and human terms, in cooperation across the whole range of the international agenda. Australia needs to acknowledge the gains more.

Australia should also pause more often to acknowledge the contribution that immigrants from Asia have made to Australia. For example, our excellence in information technology relies heavily on skilled Asian immigrants, at all levels of the industry. Ethnic networks boost our exports and of course they enrich Australian culture.

Individuals have made outstanding contributions. Dr John Yu's contribution to children's medicine earned him the Australian of the Year award for 1996. I am pleased to see that in the Victorian State elections two weeks ago Mr Lim Hong added to the growing number of Asian-born Australians who have entered State and Federal Parliaments.

The Government will also continue to encourage Australia's diversity and tolerance. Remarks thrown around during the course of the federal elections raised questions on that score overseas, notably in Asia. I want to make it absolutely clear that the Coalition Government is resolutely opposed to racist sentiment, whether directed against our indigenous population or against people of any other ethnic origin. That is an iron-clad guarantee.

PART FIVE: Conclusion

The priorities and policy approach I have set out today are based on Australia taking the long view of its commitment to the region. Australia has a proud history in the region, and this Government is fully committed to ensuring an even more substantial future.

I referred earlier to my predecessor Richard Casey and his statement that Australia's own special role lies in South East Asia and that Australia's foreign policy is largely but not exclusively concerned with our region. Today, despite a radically different Asia Pacific landscape and the vast changes of the subsequent 40 years of history, Casey's words find new meaning in this Government's continued commitment to Asia as our highest foreign policy priority.

Australia is neither Asian nor American nor European. We are Australian and relate to our neighbours as Australians. While the goal of Australia's national interests extends beyond Asia, the history of our engagement with Asia and the policies I have outlined today reflect and express the fundamental conviction of this Government: that Australia is and must always be an active player in the region.

This Government is committed to advancing Australia's security and prosperity with its Asian partners.

It is committed to improving country to country relations.

It is committed to developing and improving Australia's economic performance in the region.

Finally, and most importantly, this Government is committed to fostering the people to people contacts which are the single best guarantee of regional trust and interaction.

This message of Australia's full commitment to Asia and to the region is the message I will be taking to Asia when I visit Indonesia, Singapore and Thailand next week.

And it is the message the Prime Minister and every cabinet minister will be taking each time they make their visits to and build relations with Asia in the weeks and years that lie ahead of this Government.