North Asia on the move: An Australia perspective

Speech

Speech by the Hon Alexander Downer, MP, Minister for Foreign Affairs,
to the Asia Society/AustCham, Hong Kong, 17 November 2000.

North Asia on the move: An Australia perspective

Introduction

Thank you ladies and gentlemen.

It is a great pleasure to be in Hong Kong once again. This is the seventh time I've travelled here since I became Foreign Minister in 1996, a period that has included my attendance at the ceremonies to mark the return of both Hong Kong and Macau to China. So I have strong and very vivid memories of this vital city.

I am also very pleased to be able to address the members of the Asia Society and AustCham. Both organisations have over the years, developed a well-deserved reputation for advancing thoughtful debate about the countries of this region and the issues that face them.

Today I'd like to focus my remarks on the North Asia region, and offer an Australian perspective on developments here. I want first to explain why North Asia matters to Australia - why the region features so prominently in our foreign and trade policy considerations - before I turn to the major relationships of the region.

Why North Asia matters

North Asia matters to Australia not least because it matters, of course, to the world. The North Asian region is one of the major drivers of the global economy - the days are long gone when the Atlantic axis almost exclusively determined the health of the international economy. Now developments in the economies of Japan, Korea, China including Hong Kong and Taiwan profoundly affect developments in the old developed world. And we sometimes forget that Russia is very much a part of this North Asian economic dynamic. While the Russian economy in the far east is still in a largely parlous state, it contains rich resources and minerals - many of which are yet to be exploited.

North Asia is also one of the world's most critical strategic zones -the intersection of global and regional powers - the United States, China, Russia and Japan. This dynamic is not new of course. The competition between tsarist Russia, Meiji Japan and imperial China in the late nineteenth and early twentieth centuries was intense - in part this rivalry was a battle to control the Korean Peninsula. Throughout the twentieth century, strategic competition has boiled over with dire consequences for both the people of the region and the rest of the world.

We are now living in a much more stable strategic environment and the region has become much better at managing some of its once seemingly intractable difficulties. To take but one example China and Russia have managed to settle some long-standing border disputes. But tensions across the Taiwan Strait and, until the recent rapprochement, on the Korean peninsula have reminded us that there is still some way to go before this can be considered a safe, innately benign, predictable region.

The North Asian dynamic has then two main forces - economic strength and strategic interests which are not necessarily always pulling in the same direction. There is no straightforward relationship here of course - I'm not talking about a simple, reductionist dichotomy between good economic drivers and bad strategic drivers. The Asian economic crisis demonstrated only too graphically that the region has some deep-seated economic problems that can engender tensions in the regional system.

The policy challenge for all of us is to maximise the potential for these two forces to reinforce each other, rather than generating periodic systemic tensions, to ensure that they are moving the region and in turn the world in a more harmonious, cooperative and prosperous direction.

Australia's involvement in Asia

Just as North Asia's fundamental importance reaches back into the past, so Australia's own engagement with the region has its own rich and long past. Clippers were plying the trading routes between Australia's east coast and North Asia as far back as the late eighteenth century. A century later, a Japanese diplomatic representative was present at the ceremony to inaugurate the federation of the Australian colonies into a new nation.

While the newspaper headlines over the last two years have been focusing more often than not on Australia's relationship with South East Asia, this should not obscure the vital importance of North Asia to us.

The trade figures speak loudly. In the financial year ending June 2000, Australia's total trade with North Asia reached almost A$70 billion, representing 40 per cent of our total exports. Of all the economies in this region, only the DPRK fails to rank in the list of the top 10 destinations for Australian merchandise exports: Japan ranks first by a long shot, the ROK third, China fifth, Taiwan seventh and Hong Kong ninth. And, in spite of the Asian economic crisis, our bilateral trade with North Asia has performed solidly over the past five years, with average annual increases of around 6 per cent.

Australia also has strong security interests in this part of the world - any threat to the security of North Asia would have an immediate and very deleterious impact on Australia's economic wellbeing. It would also have negative implications for the security and stability of South East Asia.

So, what happens in this part of the world has a very direct effect on the national interests of Australia. Where possible, we work hard to play our own part in making this dynamic move in positive directions, exerting what influence we can. We do this in part by talking regularly, intensely and frankly with all the main players in the region. There is no substitute to dialogue. We now have high-level economic, political and military discussions with Japan, China and Korea.

US Engagement

Before I talk of Australia's current engagement with North Asia, I want to mention the role of United States in the region as it represents a key to the strategic framework of the region.

The Australian Government believes that the United States plays a particularly valuable and constructive role in North Asia. Its alliances in the Asia-Pacific - including with Australia under the ANZUS Treaty - are important features of the regional security architecture. The United States has historically played a key-balancing role on the Korean Peninsula, and the United States and Japan are in the process of revitalising their defence cooperation guidelines.

US engagement has guaranteed stability on the Korean Peninsula, and has lessened the possibility of violent conflict between China and Taiwan. And without the US-Japan security relationship, it is quite likely that we would have seen a destabilising strategic competition - perhaps even an arms race - arise between China and Japan. It is clearly in the region's best interests for the United States to remain firmly engaged.

Whoever is elected to the White House that commitment is sure to remain. However it is important that we encourage and facilitate this process. The disengagement of the United States would upset the strategic balance in region and if you examine the lessons of history this is clearly in the interests of no one.

Historic change on the Korean Peninsula

The developments on the Korean Peninsula over the last year or so have demonstrated that in spite of a troubled history, results can be achieved when a coordinated strategy is pursued. Even though there is still considerable progress to be made, the transformation has been a remarkable one. Consider if at this time last year I had told you there would be an historic summit between the leaders of the two Koreas and that the US Secretary of State, the Italian Foreign Minister and I would visit North Korea in the year 2000. I am sure it would have made some interesting headlines.

To put it in some perspective an Australian Foreign Minister last went to the DPRK in June 1975, not long after our countries established diplomatic relations in 1974. At the initiation of the DPRK, relations were suspended in 1975 and events have prevented an early resumption of ties.

Last year, I initiated a dialogue between Australia and the DPRK. This was fully in the spirit of President Kim Dae-jung's visionary approach towards reconciliation with the North. It also matched thinking in Washington where former Defence Secretary William Perry had been invited to review US approaches to the Korean Peninsula with a view to mapping out a new approach. Our own dialogue was therefore part of a coordinated effort to find new ways of addressing one of the region's most dangerous and long-standing flashpoints - a hangover of the cold war.

Our efforts over the last eighteen months culminated in the restoration of diplomatic relations on 8 May. We took that step as the evidence mounted that the policy of engagement with the DPRK was gaining hold. We were naturally delighted when the new spirit between Seoul and Pyongyang resulted in the leaders' summit in June.

This rapprochement was given a very tangible face at the Sydney Olympics: over 100,000 people at the opening ceremony rose to their feet as the two Koreas entered the stadium under a common flag.

The United States has been pivotal in forging these trends. It was the United States which led the way in convincing North Korea to freeze its nuclear program in return for assistance in the provision of alternative energy sources. This averted a very real and immediate threat to regional stability. While being far from linear, progress has still been made on this front. As I noted earlier US Secretary of State Albright has visited Pyongyang, and speculation continues about a visit by President Clinton.

Welcoming North Korea into regional structures lies at the heart of this new engagement. The DPRK has joined the ASEAN Regional Forum, along the way reaffirming the role and potential of that grouping. The Four Party Talks bring together the DPRK, the ROK, China and the US to discuss their vital regional interests, adding another dimension to the policy of dialogue.

My visit to North Korea, then, was to encourage the spirit of engagement and change. In my meetings, I underlined Australia's support for the steps taken by the ROK, the United States and Japan. I stressed that we wanted to see a reduction in regional tensions and an early resolution of the lingering concerns about North Korea's nuclear and missile programs. I confirmed our intention to continue helping North Korea find its way out of the cycle of hunger. We initiated a modest program of training and cooperation in agricultural research.

Australia strongly supports efforts to find an early and comprehensive arrangement to address these issues. In this regard I was particularly heartened by the discussions I had with the DPRK on missiles. Instead of previous discussions that could be characterised as running in parallel, there was frank dialogue. A dialogue canvassing all aspects of the missile question from the direct security concerns of its neighbours, to proliferation issues and further detail on its commitment to end the test firing of long-range missiles in return for satellite launches.

Ultimately it will be in all our interests for Korea to reunify. The signs of reunification albeit as a confederacy of one country two systems, are more promising now than they have been for half a century. We will do what we can to encourage this process.

Japan's future directions

While developments on the Korean Peninsula dominated foreign policy discussion in the last few months other developments in the region also warrant close attention.

The Japanese economy is by far the largest in the region and plays a major role in powering the economies of Asia. Its return to growth is encouraging. But the recovery is fragile - we are yet to see a strong rise in private consumption, which contributes some 60 per cent towards GDP. There is no scope for complacency. In Japan's search for sustained growth, continued deregulation and reform are high on the agenda.

Australia's relationship with Japan is of utmost importance. It is a relationship of great depth, diversity and dynamism.

Australia supports a leadership role for Japan in the region and welcomes Japan's interest in promoting closer regional economic integration. Free trade agreements covering all aspects of trade and reducing trade barriers, as well as bilateral currency swap agreements contribute to a more dynamic and stable region. We are also committed to working closely with Japan, including in APEC, so that the region capitalises on the digital dividend.

Alongside Japan, the largest aid donor in the region, Australia has a shared interest in ensuring that our assistance is targeted at strengthening economic, legal and governmental institutions, including markets, in the region.

Japan's importance in regional security issues cannot be underestimated - we strongly support enhanced dialogue on regional security and strategic issues. The revised US-Japan defence guidelines strengthen and clarify Japan's security role within the US-Japan alliance. Japan's generous contribution to the International Force in East Timor Trust Fund enabled developing countries to participate in the operation. Australia fully supports Japan's bid for permanent membership of the UN Security Council.

Developments in China, Hong Kong and Taiwan

China is in many ways the region's fulcrum. Although its growth rate slowed, China weathered the Asian economic crisis in surprisingly good shape. The upswing is gathering extra steam this year. Official statistics put GDP growth at over 8 per cent for the first nine months of this year, figures that are borne out by large increases in trade. It appears that China is benefiting from recovery around the region.

China's WTO accession, which Australia has strongly supported from the outset, should give this upswing another push. But that is not the end of the WTO story. Once it finally joins, and this seems now more likely to happen early next year, China will face a challenging task in implementing its WTO commitments as well as reforming the state owned sector and its financial system.

Peace and stability in North Asia are impossible without China's active and constructive engagement. It has played a useful role recently, not least on the Korean Peninsula. China's responsible reaction to the Asian economic crisis and its more accommodating position in the South China Sea have had positive economic and strategic implications for the wider region.

It is particularly pleasing to see Hong Kong prospering again. Hong Kong is our leading business base in Asia and has been rated again this year as the world's freest economy. Some 350 Australian companies operate here, and the Australian Chamber of Commerce in Hong Kong is our largest overseas. Your projected economic growth rate of 8.5 per cent for the year 2000 is a commendable achievement. It is also encouraging that Hong Kong's attractiveness as an international financial centre is being enhanced, by reviewing the cost of doing business here, and the quality of your physical environment and cultural infrastructure. You are moving as well to improve the competitiveness of your services sector, particularly in IT. Australia is happy to be Hong Kong's partner in these endeavours.

A very large part of the success of Hong Kong is due to its very distinctive institutions - an independent and vigorous media, the rule of law, a free economy and accountable government. I congratulate Hong Kong and China for having maintained the high degree of autonomy that the people of the region were promised, and look forward to the continued healthy development of its institutions in the future.

Cross-strait relations will continue be a major factor in the region security architecture. Australia like all the countries of the region, wants coolness and moderation to prevail. China and Taiwan can either manage this dispute with goodwill and foresight, to the benefit of all; or they can manage it badly, with disastrous consequences for the whole region.

I'm encouraged that both China and Taiwan have approached cross-strait relations in a cautious fashion since the election of Chen Shui-bian. We encourage both sides to show flexibility and to engage in level-headed dialogue, so that their differences can be resolved in a peaceful fashion, without any resort to military force.

Over time, ever growing economic links must help China and Taiwan to settle their differences in a constructive fashion. I have been struck by what I have heard during this visit the extent of economic integration between Taiwan and China particularly in Southern China. These links can only contribute to a harmonious relationship between the two sides.

Conclusion

What can we say about the region after this brief survey? The economies of the region are picking up after the downturn of the Asian crisis. However now is not the time to backtrack. North Asia is moving ahead because of its commitment to economic liberalisation and market forces - a message it carries not just to the region but also to the world.

On the security side of the equation, the very positive events that have taken place on the Korean Peninsula hold the promise of a historic reconciliation between the North and South. It is early days yet, and Australia will continue to do all it can to encourage the DPRK Government to persist with its more open approach. In turn, we hope the political relaxation on the Korean Peninsula can set the right tone for the resolution of other disputes in the region, not least that across the Taiwan Strait.

The powerful twin forces of the regional dynamic in North Asia, economic strength and strategic interest, can be shaped and channelled in the right direction. This will not always be an easy task, and we can expect complications, even some setbacks. But the right kind of commitment, imagination and flexibility from all the major countries of the region will deliver what we need: continued prosperity and peace.

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