Introduction

Thank you Mr Hellner; Ambassadors, distinguished guests; ladies and gentlemen.

I am delighted to be here in Stockholm and to have this opportunity to speak to this gathering of the Swedish Institute of International Affairs. The world over, organisations such as yours play a vital part in the process of debate that is so valuable for those of us involved in day to day diplomacy - and none more so than your own Institute. I am particularly heartened by your active interest in the issues confronting Australia and the countries of the Asia Pacific region.

During my first visit to Europe at Foreign Minister in 1996, I gave a speech at the Adenauer Institute in Bonn. In that speech, I said that, in this increasingly interdependent world, good foreign policy required a global perspective. I said at the time that one of the implications of this was that cooperation between Australia and Europe should be not just bilateral but should also have a regional dimension. Five years on I still hold to this - and, as the European ambassadors based in Canberra well know - I have put a great deal of effort into encouraging greater European engagement in the region. Hence the theme of my address - Europe and the Asia Pacific Region.

The interest shown in developments in the Asia Pacific region is understandable. The great historical trend of the past century has been the shift in the axis of power from one that was firmly centred in Europe at the beginning of the century, to one anchored in the Asia Pacific at its end. It has been a century that has seen a phenomenal rise in the status of the United States, China and Japan, both in politico-strategic and economic terms.

Asian economic crisis notwithstanding, the region's economic importance cannot be doubted. East Asia accounts for more than a fifth of world output, up from just over 15 per cent in 1980. And East Asia also accounted for more than one quarter of world merchandise exports in 1999. When combined with the economic might of North America on the western rim of the Pacific, the global pull of the Asian Pacific region becomes overwhelming. This is clearly a region that demands serious attention.

I want, then, to explore three main themes with you today. First, recent developments in the Asia Pacific region, which is Australia's doorstep. Second, the Australia-EU relationship, our common interests and aspirations for the Asia Pacific - why I see value in the EU seeking to increase its influence in the Asia Pacific region. And third, how we might work to strengthen the regional dimensions of our relationship by greater strategic cooperation in areas of mutual interest.

Australia's strong regional ties

At the outset, let me say that Australia has a long history of involvement in the Asia Pacific. Our record in the past half-century speaks for itself:

• our Colombo plan initiative, which from the 50's onwards saw thousands of young people from the region come to study in Australia - many of whom have now gone on to occupy positions of influence in regional governments;
• our involvement in the establishment of APEC, the forum for Asia Pacific Economic Cooperation;
• the brokering of the peace settlement in Cambodia;
• our support for IMF packages for Thailand, Korea and Indonesia during the Asian economic crisis; and
• Australia's assistance to the people of East Timor in their transition to independence.

As with any significant relationship, extensive trade and commercial ties make up a very important part of Australia's regional involvement. Ours is a large and advanced economy - the fourth largest in the Asia Pacific, and the fourteenth largest in the world. In East Asia, only Japan, the Republic of Korea, and China have larger economies. Indeed, our economy is nearly the size of the economies of Indonesia, Malaysia, the Philippines and Singapore combined.

The Asia Pacific region accounts for the large majority of Australia's total global trade. In the financial year 1999-2000, about 72 per cent, or nearly A$150 billion, of our trade was with the economies of the APEC grouping. In that same year, Australian exports to APEC members rose by 16 per cent to A$71 billion, while imports from those economies rose 14 per cent to over A$78 billion. Eight out of our top ten trading relationships are with economies in the Asia Pacific - Japan, the United States, China, the ROK, New Zealand, Singapore, Taiwan and Malaysia. And Australia also enjoys significant investment relationships with countries in the region.

Peace and security in the region

The Asia Pacific is our neighbourhood. In the South Pacific, we are assisting efforts to achieve lasting peace and stability in the Solomon Islands, Fiji and PNG. North and South East Asia are important for our security and, as I have noted, are home to many of our major trading partners. And, in the Indian Ocean region, we are engaged in a process of reinvigorating our relationship with India.

Much has changed in our region in the past five years, and despite those developments, the overall security situation has remained stable. The balance between the United States, China and Japan is essentially unchanged. While there will likely be some changes in emphasis under the new Administration in Washington, I believe that the United States and China will continue to pursue a policy of engagement with each other and to build upon their already extensive economic linkages. The US-Japan relationship remains strong.

Stable relationships between those three powers, and, in particular, the continuing commitment of the United States to the region, has contributed to a number of positive outcomes for the Asia Pacific:

• it has helped build positive momentum on the Korean Peninsula, where the DPRK has recognised the need to engage more constructively with the international community and, in line with that, joined the ARF last year, and has stated its commitment to North-South reconciliation;
• it has encouraged a cautious approach to cross-straits issues on the part of both Beijing and Taipei, although much has to be done here to reduce tension further in the Taiwan Straits;
• it assists the avoidance of conflict in the South China Sea where a number of countries have competing territorial claims - a regional Code of Conduct is slowly emerging in response to continuing pressure for a diplomatic solution; and
• it has contributed to the avoidance of acute strategic competition between China and Japan.

Much of this encouraging, and while I don't want to down play the extent of the challenge in addressing the potential problems at the core of each of these issues, the fundamental security architecture of the Asia Pacific remains in generally good shape.

Despite this stability at the strategic level, the Asia Pacific region has seen the emergence of several new areas of tension and conflict, prompting some observers and commentators to refer to a so-called 'arc of instability' around Australia, incorporating Indonesia, Fiji, Papua New Guinea and the Solomon Islands. Leaving aside the question of how accurate this appellation is, this environment poses challenges for Australia, and has prompted our government to examine closely the way in which we operate in the region.

Dealing with the region's problems

Some of the causes of instability in the region would be familiar to you, echoing as they do some of the root causes of instability which can be seen in the Balkans. In addition, the Asia Pacific faces the legacy of decisions made under colonial governments, when borders were drawn in arbitrary ways, ignoring ethnic sensitivities, leading to concerns over inter-regional migration, land ownership, and uneven economic development. This instability also reflects the difficulties caused by inadequate political and constitutional frameworks - for example, a number of states have had to grapple with poor power-sharing arrangements between the centre and the provinces, which have given rise to much anger over disempowerment and lack of access to government resources. The quality of governance plays a critical part.

When many of the Asia Pacific countries ended the colonial era, the process was rushed. The veneer of democracy was, in many parts of the Asia Pacific, very thin. And, as the case also was in parts of Europe, these factors have contributed to long-standing, deep and complex divisions between communities.

The unhappy results are all too evident in East Timor and in Indonesia, as well as the Solomon Islands, and Fiji.

The consistent approach of our Government to all these significant recent developments has been to commit Australia unreservedly to the development of positive and long-term solutions to the challenges of the region. That was seen most memorably in Australian leadership of the international response to East Timor's transition to independence, and also in our development of solutions to the crises in Fiji, the Solomon Islands and Bougainville in PNG. It was also seen in our prominent role in the development of IMF packages for the ravaged economies of the Republic of Korea, Thailand and Indonesia (indeed, Australia and Japan were the only two nations to have provided funds for all three packages).

But the depth of Australia's regional involvement is demonstrated in less high-profile ways. It can be found in aid programs that both address immediate poverty-alleviation needs and the longer-term need to develop stronger standards of good governance in our region. It can be found in our strong support of regional security mechanisms, from the ASEAN Regional Forum to an entire web of sub-regional and bilateral security dialogues that we have developed since we came to office in 1996. And it can also be found in our Government's Defence White Paper, released last December, which unequivocally stated our national commitment to the peace and stability of our region.

Australia's ties with Europe

That Australia and Europe share much in common has been reinforced by my discussions with Government leaders throughout this visit. Stockholm is my last stop on my visit to Europe, which began in Davos at the annual meeting of the World Economic Forum and has included visits to Madrid and Copenhagen.

Here in Sweden, I have had the opportunity for detailed discussions with your Foreign Minister, Anna Lindh, representing Sweden's Presidency of the European Union, Trade Minister Pagrotsky and Commissioner Chris Patten, who came from Brussels for the talks.

From these talks, and my prior meetings with Foreign Ministers Piqué of Spain and Lykketoft of Denmark, I have received a timely update on developments in the European Union. Collectively, we have been able to identify a number of new areas for strategic cooperation, both in Brussels and with member states.

Of course, as you all are aware, we have our differences with the European Union. We will continue to complain about the trade distorting effects and the social injustice of the Common Agricultural Policy, which we regard as a price support mechanism that discriminates against the poor. But, on balance, we have far more in common than not.

Our commercial relationship is strong and growing. Taken as a single entity, the EU is currently Australia's largest trading partner. Australia's merchandise trade with the EU for 1999/2000 was worth A$36.4 billion. Our services trade in 1999 included Australian exports to the EU worth A$5.5 billion - our largest overseas market - and imports from the EU worth A$6.5 billion, which again places the EU in first place. We remain concerned about the extent of our trade deficit, but acknowledge the great potential for further growth. The EU is also our largest source of investment, as well as a major destination for Australian investment.

Europe looms large in Australia's modern history. Our common experiences in the First and Second World Wars cemented strong and enduring bonds.

We also share a commitment to democracy and the rule of law, to increased global and regional integration reached through a process of dialogue and constructive engagement, and to a transparent and accountable multilateral trade framework. And I believe we have a shared interest in working together on these and other issues in a regional context.

Europe and our region

The nature of European engagement with the region on Australia's doorstep is of great interest to us, and we are closely following the development of EU policies and strategies in this area.

While we recognise the enormous challenge posed by the European enlargement and institutional reform, I have on previous occasions spoken about our concern that the EU is overly preoccupied with its internal agenda. Of course, individual member states continue to pursue their own interests very successfully in the region - for example, we very much welcome French engagement in the Pacific - but we also appreciate the collective efforts of European governments to bolster stability and security in the Asia Pacific region.

European trade and investment links in the region are, of course, extensive. In 1999, Asia accounted for over 24 per cent of the EU's external trade. This was more than the countries of the Mediterranean, Latin America, Africa, Russia and eastern Europe combined. Despite the impact of the Asia economic crisis on investor confidence, EU investment in Asia continued to grow to Euro7.8 billion for ASEM countries.

If we exclude intra-EU trade, in 1999 (the latest figures available to us) the Asia Pacific region accounted for about 20 per cent of EU merchandise trade imports and 13 per cent of EU exports. EU imports from the Asia Pacific region rose by almost 50 per cent between 1994 and 1999, from US$152 billion to US$226 billion. EU exports to the region rose 12 per cent from US$118 billion to US$121 billion.

Australia sees much value in a Europe that is actively engaged in the region on our doorstep. That is particularly so given the extent of Europe's economic interests in the Asia Pacific and the diversity of its regional experience, especially that drawn from its own experiment with multilateralism as it continues to build through the process of EU enlargement.

I have been pleased to observe that the European Commission is more sharply focused on advancing its engagement with the Asia Pacific. We very much welcome recent statements by Commissioner Patten, such as that in Hong Kong prior to the Asia-Europe meeting in Seoul last year, when he announced that the EU would develop a new Asia strategy reflecting a mutual commitment to furthering regional stability through greater integration and cooperation. High Representative Javier Solana outlined a similar vision in his speech in Singapore in July 2000 on the future of relations between the EU and Asia.

Australia also welcomes the more collaborative EU approach evident on the ASEAN Regional Forum and the other measures adopted by the EU following its ARF policy review completed in late 1999. The EU's establishment of a political dialogue with Indonesia and its commitment made at the Donors Meeting in Brussels in early December to support East Timor's development are further demonstrations of the EU's commitment to make an effective contribution to our region. The continued support and engagement of EU donors will remain crucial in the lead up to East Timor's independence and beyond.

Where we can work together

I am very much looking forward to the Australia-EU Annual Ministerial meeting to be held in Australia in April this year. We are keen to explore deepening our strategic cooperation in a number of key areas, both at the bilateral levels in the European capitals and in Brussels.

There are a number of areas where joint action could bear fruit, including:

• deepening strategic dialogue and cooperation in efforts to strengthen democratic systems in the region, including through aid and development programs focusing on institution building and good governance;
• working together to address humanitarian concerns, particularly through strengthening the United Nations through reform;
• deepening our dialogue and cooperation in combating illegal immigration and people trafficking - a scourge which knows no borders - as well as the further development of strategies to counter money laundering and drug smuggling in the region;
• joint action to ensure the launch of a new WTO round this year; and
• strengthening dialogue on ways to ensure that the new economy benefits all.

And, of course, we would like to deepen the dialogue on Asia Pacific issues more generally. That is currently the focus of the annual senior officials talks on Asia between Australia the EU. The third round of these talks was held in March 2000, and we are looking forward to a further round during the course of the Swedish Presidency.

The talks have covered a wide range of regional political, economic and security issues. They have, I believe, consolidated Australia's reputation as a knowledgeable interlocutor for the EU in the Asia Pacific, and contributed towards building a more substantial political relationship between us.

Conclusion

Ladies and gentlemen, this year Australia celebrates one hundred years as a nation. On 1 January 1901, the six British colonies federated to form the Commonwealth of Australia. It is worth remembering that Federation in Australia was achieved through the ballot box. The people of the six colonies voted for unification - a tremendously far sighted move that provided Australia with a stable democratic political system that is the bedrock of everything that Australia has achieved since.

Australia has the distinction of being one of the few countries to have maintained, continuously throughout the twentieth century, a system of representative democratic government. This is a great source of inner strength and stability in the rapidly changing global environment that all countries are facing at the present time.

My European colleagues frequently tell me that Australia is too far away for them to make regular visits. In this age of Internet communication I find that hard to believe - and as the large numbers of young Australians in Europe would attest - Australians certainly think nothing of travelling to Europe. Perhaps that reflects a greater willingness on our part to embrace the benefits of globalisation!

For many of you, I hope the Sydney Olympics have changed some of your preconceptions about Australia. Certainly, from what I've read, the European media seem to have a much better understanding of modern Australia - both our achievements and our challenges.

May I urge you all, therefore, to get to know Australia better. I think that our relations with Sweden, and the rest of Europe, have great potential, which deserves to be tapped. But, as I have indicated, I think that greater cooperation between us can also pay dividends in the wider Asia Pacific region, on issues of vital importance to us both. Individually, we have done much - together, we can achieve so much more.

We welcome Europe's decision to lift its profile in the Asia Pacific, and look forward to working with you in the years to come. You will find no greater friend and supporter than Australia, as you seek to expand your bilateral and multilateral ties. Our cooperation can achieve much in a region of great potential.