Speech to the Japan Institute for International Affairs

The Australia-Japan Partnership - Growing Stronger Together

Introduction

I am delighted today to speak at the Japan Institute of International Affairs.

In the over 45 years since this Institute was founded it has made an invaluable contribution to the foreign policy dialogue Japan has in its own region and more globally.

Founding the Institute in 1959, former Prime Minister Shigeru Yoshida was motivated by a desire to build knowledge and understanding among Japan and the international community.

I think the founders and those associated with the Institute since can be very proud of its achievements.

I would also like to note that the JIIA's special links with Australia.

JIIA President (Yukio) Satoh is a former Ambassador to Australia.

And the JIIA is the Japanese convenor of our bilateral 1.5 track security dialogue.

On that note, I would like to talk to you today about the contemporary strengths and future prospects of the Australia-Japan bilateral relationship.

A relationship - indeed a friendship and a partnership - which has also developed and grown over the past decades as both our nations have worked together to achieve prosperity and security.

Put simply, in terms of the depth and breadth of our relationship there is no stronger partner for Australia in the region than Japan.

We share fundamental strategic interests, and cooperate closely on political and security issues.

And of course, our trade and economic links, long a mainstay of the relationship, continue to flourish.

Ours is also a relationship that is grounded in common values.

Our two countries are both liberal democracies - and we both have an enormous commitment to liberal democratic principles.

Both our economies have been highly successful in the post-war period; we are the only significant, advanced economies in the immediate region. We are also aid donors as a result of that.

We are bound together by our alliances with the United States, and drawn together by global challenges.

We deal with regional issues very often from the same perspectives.

It is my firm view that the period ahead provides an opportunity for Australia and Japan to set our relationship on the path to further growth and enhanced cooperation - spanning security, strategic, trade, economic and community linkages.

On matters of security and stability, it is crucial that Australia and Japan, as capable and responsible nations, do all we can together to continue the fight against terrorism, combat proliferators of weapons of mass destruction and promote good governance and open and inclusive regional institutions.

On the trade and economic agenda, Australia and Japan have vital shared interests in the success of the Doha round of multilateral trade negotiations.

We have one of the most significant bilateral economic partnerships in East Asia; and we want this partnership to keep pace with the economic integration occurring in the region. Managed well, it can spur economic growth in the region as well as provide a model for other economies in this part of the world.

We also have before us with the World Expo and the Australia-Japan Year of Exchange opportunities to expand further the people-to-people links that are the fabric of relations.

Australia's foreign policy has at its core the ambition to achieve security and prosperity for Australia and Australians. That won't come as a surprise to any of you.

As such, the Government's approach to international affairs remains a pragmatic one, reflecting a clear understanding of how the world works, the strategic environment and Australia's place in the international system.

It continues to reflect the values that Australians hold dear - freedom, a commitment to a vibrant liberal democracy and a desire to assist others.

We recognise that the security challenges we face are significant - with international terrorism, the threats posed by proliferation of weapons of mass destruction, and the vulnerabilities for nations and our region from poor governance and state weakness foremost in our minds.

We also recognise that many of these threats and challenges are distinctly transnational in nature, and that in addressing them we must work with friends and allies - bilaterally, in the region and globally.

For Australia, Japan is an important regional partner and respected international player.

The world, and Japan's place in the world, has changed in the 60 years since the end of World War II.

Over recent years in particular Japan has played an increasingly active role on maintaining international peace and security.

Australia warmly welcomes this trend, which should continue.

For example, Australia strongly supports Japan's claims for permanent membership of the United Nations Security Council and would want to see Japan take a permanent seat at the table of any expanded Council. There is no single country that has a greater claim to be a permanent member of the Security Council than Japan.

For Japan, Australia is also a partner on whom it can rely and a partner of substance.

Indeed, the recent decision by the Australian Government to deploy an additional 450 troops to Iraq to help maintain the security environment in which the Japanese contingent can continue undertaking reconstruction work in al-Muthanna Province underlines the strong commitment Australia brings to cooperation on security and strategic issues.

Japan and Australia, along with the United States, the United Kingdom, and many others in the international community, understand the importance of supporting Iraq's journey along the road to democracy, and of supporting stability and prosperity in Iraq and across the Middle East.

We know that the initial decision to deploy defence forces to Iraq was a difficult one politically for Japan and for the Japanese Government - but can I just make the point to you that from the perspective of the Australian Government it was the right decision to make...

…and we are therefore very pleased to be working with Japan - and with other coalition partners - to help Iraq build a better future. Let me just make this point. I have said to some of the political leaders I have been meeting today that people in Japan and in Australia can have legitimate differences of view on whether it was the right thing for the coalition of the willing to overthrow Saddam Hussein and to encourage the establishment of democratic institutions. But today we are not dealing with March 2003, today in March 2005 we are dealing with the world as it is now, not as it was two years ago. And we have a simple choice in Iraq, the choice as an international community is on the one hand to ensure that the new and emerging democracy of Iraq and the freedom the people there are starting to enjoy is successful.

Or we can abandon Iraq to the insurgents and the terrorists with catastrophic consequences for the Iraqis themselves, catastrophic consequences for the Middle East and disastrous consequences for the United States and the Western Alliance network. I just don't think we can afford to allow that to happen. We have to make sure that the thrust towards democracy and freedom in Iraq is successful and that the people in the Middle East more broadly can start to enjoy the fruits of freedom that you in Japan have enjoyed so much for most of the last 60 years and we in Australia have enjoyed for a very long time.

This initiative in the defence sphere builds on other recent cooperation, such as peace-keeping in East Timor….

…and it also reminds us that over 90 years ago, the Japanese navy helped escort the convoys of the first ANZACs on their way to the Middle East.

But in the 21^st Century, our cooperation with Japan also extends beyond the more traditional forms of challenge our nations knew in the 20^th Century.

Recognising the changed environment and the need for cooperation, Australia and Japan, together with our major ally the United States, have established important dialogue on strategic and security issues - including trilateral discussions at Senior Officials' level on subjects of common interest.

Willing partners in dialogue, Japan and Australia also have a shared commitment to practical action and getting results - the kind of day-to-day work which is vital to making progress and securing a more stable regional and global environment.

Australia has been prepared to take a leading role in the region to help build capacity and cooperation on counter-terrorism.

We therefore welcome Japan's cooperation on counter-terrorism - particularly Japan's support for the regional ministerial meeting on counter-terrorism Australia co-hosted with Indonesia in Bali early last year.

Japan's key role in the Legal Issues Working Group arising from that meeting has underlined to regional governments the importance of adherence to multilateral rules to combat terrorist financing.

Law enforcement cooperation plays a major role in successful regional counter-terrorism cooperation - as we well know from our experiences with the Bali bombings and the more recent attack against our Embassy in Jakarta.

Japan is already working closely with Indonesia to build capacity of its national police forces and enhance transport security.

Australia and Japan are strongly committed to counter-proliferation cooperation in the region and globally.

The situation in North Korea, the evidence of illicit global market in WMD materials and technologies and the desire of terrorists to obtain such items all combine to make this an urgent problem.

Japan and Australia are working together to ensure a peaceful resolution to the North Korean nuclear issue - Japan as a participant in the Six-Party Talks process, with Australia also using its formal links with Pyongyang to reinforce the message that the talks remain the only viable way to resolve the problem and end North Korea's isolation.

I myself have visited Pyongyang on two occasions to urge the North Korean leadership to make a strategic decision to renounce nuclear weapons programs and engage with the international community.

Our current Ambassador to Japan, Murray McLean, has undertaken similar visits to Pyongyang as my special envoy.

We also used those visits to reinforce with North Korea the importance of resolving the abductees issue.

I would like to assure you all that Australia shares Japan's deep dissatisfaction at recent developments relating to the abductees.

On a wider basis, Japan has been active in promoting stronger safeguards and export controls in the region, organising forums for regional players.

I very much appreciated the active support of Japan for the Asia-Pacific Nuclear Safeguards and Security Conference Australia hosted in Sydney last November.

And Australia, as a strong supporter of the Proliferation Security Initiative, also applauds Japan for its participation in PSI - showing the region by leadership and action the important contribution that practical cooperation can make in stemming the illicit trade in WMD-related materials and technologies.

We also have a shared ambition for a stronger and more effective Nuclear Non-Proliferation Treaty - and we are working assiduously to make full use of the opportunities offered by the NPT Review Conference in May this year.

Australia and Japan both understand the central importance to regional security and stability of good governance and sound economic development throughout the Asia-Pacific region.

We are both aid donors. It is therefore inevitable that we would share a commitment to promoting good governance - encouraging the rule of law and the development of sound national institutions through our development assistance programs.

Australia and Japan were the only two countries in the region to contribute to all three IMF packages during the Asian Financial Crisis.

And Japan recently announced new initiative on law and justice and the fight against HIV AIDS - both areas of keen interest to me as Foreign Minister and which constitute important and growing activity for Australia's development assistance work in the region.

As committed, well-resourced and capable regional players, Australia and Japan also responded promptly and generously to help nations and communities affected by the tsunami disaster.

Another area of immense importance to both our nations is the development of regional institutions in the Asia-Pacific.

Australia and Japan share an ambition for the development of regional architecture that is open and inclusive.

We know that stability and prosperity will flourish in our region if we in turn are pragmatic and take initiatives, minimise excessive form and process, and discourage exclusivity.

Economic and Trade agenda

Our bilateral cooperation on issues of importance to regional stability and security has expanded and diversified in recent decades, complementing our extensive trade and economic ties.

Japan today remains vitally important to us as an economic and trade partner, given the magnitude of our bilateral commercial exchanges, given the international trade policy environment and given Australia's ambitious trade agenda,.

Japan is Australia's biggest export market, with $44 billion worth of two-way (goods and services) trade recorded in 2004. Australia is Japan's fourth largest source of imports.

For Japan, Australia is a reliable and efficient producer of quality products, from beef to LNG and coal, from dairy to iron ore, from aluminium to a range of machines and other manufactures.

Many new Australia companies are also finding markets for their products in Japan for the first time.

Japan is an important partner for services trade which is a priority area for further expansion.

Two-way investment is a core element of our economic relationship. Japan is the third-largest foreign investor in Australia and, at a value of $45 billion, plays an important role in our real estate, mining, commerce and services sectors.

I am pleased that Australian investment in Japan has shown some recent signs of renewal - and I hope very much that this continues.

Of course, our bilateral commercial links do not exist in isolation - but in a complex and dynamic regional and global trade policy environment.

For Australia, the current WTO Doha round of multilateral trade negotiations offers an opportunity to achieve real, lasting trade reform and support for future global prosperity.

It is therefore a key focus of our trade advocacy.

We urge Japan, as a major global trading nation, to do all it can to support progress in the Doha round and ensure this opportunity is not lost to make a real difference for developed and developing nations.

Australia and Japan are also committed partners in the APEC context, supporting development of sound trade policies and initiatives to facilitate trade among member economies, as well as on security to help safeguard trade and economic activity in the region.

The 1957 Commerce Agreement, which normalised bilateral trade and economic relations, and the 1976 NARA Treaty provided the foundation for our mutually beneficial trade and economic relationship that has contributed significantly to both countries' prosperity for more than four decades. These agreements were ground breaking at the time.

But now countries, including Australia and Japan, have recognised that free trade agreements and other instruments which foster economic integration, such as economic partnership agreements, are important vehicles for updating and fostering economic relations.

Australia's ambitious free trade agreement agenda is playing a central role in our trade advocacy - complementing the WTO negotiating process and building on, but not supplanting, the rules of the WTO.

The great benefits which are now being delivered to Australian exporters in the New Zealand,Singaporean, Thai and US markets would not be available but for the FTAs which Australia has negotiated with these important trading partners.

In addition to these, Australia is exploring FTA opportunities with China and Malaysia, and has commenced negotiations with ASEAN and the United Arab Emirates.

Japan is also contributing to the growth in FTAs in the Asia-Pacific and globally - its network includes agreements with Singapore and Mexico and it is in negotiations with Malaysia, Thailand, the Philippines, ASEAN and the Republic of Korea.

Together, Australia and Japan have recognised that there is more we need to do on a bilateral basis if we are also to maximise Australia-Japan trade and economic links for the future.

An important initial step was taken in 2003 when Prime Minister Howard and Prime Minister Koizumi signed the Trade and Economic Framework.

Under the Framework, we have been undertaking a joint study on the costs and benefits of trade and investment liberalisation. We hope to see the study finalised next month.

This is important work that will help inform the next steps in bilateral trade and investment cooperation.

It is Australia's view that the strength and depth of the Japan-Australia bilateral trade and economic relationship also make it a candidate for consideration of a comprehensive FTA.

Indeed, it would be disappointing if our bilateral ties with Japan - our number one export market - were not able to at least keep pace with our expanding regional links.

For Japan, a comprehensive FTA with Australia would offer the opportunity to become more closely integrated with one of the largest and most developed economies in the region and a major global supplier of food, energy and minerals resources.

Econometric analysis indicates that the economic gains from an Australia-Japan FTA would be greater for both of us than FTAs with most other partners.

It would also ensure that Japan does not face competitive disadvantage in relation to those countries with which Australia has already negotiated an FTA.

More broadly, an FTA between Australia and Japan would reinforce our strategic partnership in the Asia Pacific region.

We recognise, of course, that Japan has, to say the least, a number of sensitivities regarding an FTA, including with respect to agriculture, but this problem is smaller than many imagine...

…with some 80 per cent of Australian exports (by value) to Japan already entering duty free and a further 9 per cent entering with tariffs of ten per cent or less.

Australia has demonstrated in its comprehensive FTAs with countries such as Thailand and the United States that we have been able to negotiate mutually acceptable outcomes on sensitive sectors.

We welcome the strong support from senior Japanese business figures and politicians for a comprehensive FTA between Australia and Japan...

…and think an FTA feasibility study, a study into the merits and demerits of an FTA would be a sensible next step forward.

Conclusion

Ladies and gentlemen

With the opening of the Aichi World Expo just days away and 2006 promising the Australia-Japan Year of Exchange to celebrate the 30^th anniversary of the signing of the Nara Treaty, Australia and Japan will have unique opportunities to explore the realities of contemporary life in our respective nations.

But these are major events that will also help set the scene for the next 30 years - at least - of the Australia-Japan relationship.

It has been a great pleasure to join you at the Japan Institute for International Affairs to share my views on the Australia-Japan relationship - and on where Australia sees opportunities to develop the relationship yet further.

Put simply, this is a partnership whose current value and future potential should never be underestimated…

…not just for what the partnership will continue to mean for our own great nations, but for what it contributes to the Asia-Pacific region and to the cause of peace and prosperity at a global level.

Thank you

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Question and Answers

Q. Mr Shojiro Arai - Commentator, Japan Association of International Law. Mr Howard answered an interview in 1995 that if the US were to play the role of a Sheriff then Australia could be a Deputy Sheriff and the problem is South East Asia and South Pacific area and security in these areas. Now as a Howard doctrine this is known and at the same time there is another thing that Prime Minister said which is about pre-emption on the terrorist activities and some criticism was raised from the South East Asian nations about this - pre-emptive strikes - because it was unilateral in nature and you could say that is like Mr Bush's doctrine and his monopoly and also this pre-emptive strike cannot be done on your own. You need approval from the UN Security Council - that would be assumed. But regardless of that fact Australia is taking similar approaches to the US it would seem - kind of emulating the US - and that the Security Council often times there was no approval of the Security Council as regards to the attack on Iraq and what do you do if later on you found out that there is no legitimacy of the attack? The theme today is the partnership with the region and therefore I think that you have to have a very broad mind especially. South East Asia and Japan feel that Australia has a very strong position based on a position of strength that you are trying to promote conciliation. What would you say to that?

A. I would say that, of course, within Australia there have been all sorts of attempts to try to discredit the government as there would be in any country. We have campaigns run against us. Somebody claimed that the Prime Minister made some comment about Australia being a Deputy Sheriff, this was in 1999 or 2000. Actually, the fact that he didn't say that doesn't seem to be added much into the mix of the comments made by the critics. But if he didn't say it, it is a bit unfortunate that they still wish to make that point. Though let me say that we are unapologetic about our alliance relationship with the United States. So if the critics are saying we shouldn't have an alliance relationship with the United States, if that is their real point, then I tell you what they are wrong. They are wrong because if we want security in this part of the world, countries like Japan and Australia need to be close to the US. We need to have those alliance relationships with the United States. And too many people think, you know, well America is not very popular domestically, or some people don't like President Bush in the media or whatever it is, and therefore we should try to curry favour by attacking the Americans and being critical of the Americans. People should think, particularly decision makers like me, should think geopolitically and strategically not just think about cheap political shots about people. I think in this part of the world we owe an enormous amount to the role the Americans have played and, if I may say so, the pretty generous role the Americans have played in stabilizing the region. And I am glad to say that in Japan and I am glad that in Japan somebody asked me that question. Mr Howard never mentioned a Sheriff or a Deputy Sheriff but you know, we just let that one fly through, but the bigger point here is that we don't walk away from the importance of America in the region and our close relationship with America and we know that the Japanese government doesn't either.

On this question of pre-emption and Security Council resolutions and so on, well, I wonder again if the critics have thought through their criticism. I wonder if they really understand what they are saying, I mean. Are they really saying there is a circumstance where we should not try to defend our people who are about to be killed by terrorists or whoever they may be, or do we have a right to defend our people if our people are threatened. That is all we are saying, I mean Article 51 of the United Nations Charter provides all of us, the whole of the international community, with the right of self defence. We are not talking about invading other countries, occupying territory. All we are saying that is that if somebody is going to come and kill us we are going to try and stop that. And normally you would stop that in cooperation with other countries, particularly if those people were on someone else's territory, or they were in international waters or whatever it may be. So I think this is another example of my point. It is an empty sort of a debate. Did the United States act in Iraq without Security Council authorization? What about the 17 Security Council resolutions that Saddam Hussein didn't act on, including Chapter 7 resolutions where he had a mandatory legal requirement to act and refused to do so. Is there no debate about that? Was it alright for Saddam Hussein to ignore those mandatories? Not Chapter 6 Security Council resolutions but Chapter 7 resolutions. Was it alright for him to ignore those, no it wasn't. And, we don't concede that the overthrow of Saddam Hussein's regime was illegal at all. We think it was consistent with Security Council resolutions.

And the last point I leave with you is one I want, you know, the whole of the international community really to reflect on this in the context of reform of the United Nations. We, of course, are a founder member of the United Nations and we have given it tremendous support over the life of the United Nations, but can I just tell you we are not uncritical of the United Nations. I went to a film the other night, it was called Hotel Rwanda it reminded me of how nearly a million people were slaughtered in Rwanda while the United Nations stood by. Would it have been better to have acted? I am reminded in 1999 of the slaughter of people in Kosovo and demands being made on President Milosevic to stop the slaughter, not responding to those demands. The impossibility of getting a resolution through the Security Council. I just think the world is better for having the Americans and the NATO countries, for them having stopped that slaughter and having got rid of President Milosevic. I just think the world is a better place for that and I know there was a bit of, you know, circumventing Security Council processes because there was going to be a veto exercised in the Security Council - couldn't get a resolution through the Security Council. I am in favour of using the United Nations as much as possible. But I do agree with Kofi Annan that you have got to find ways of stopping slaughter. I respect people who believe in multilateralism, I believe in it when it is effective. But I am worried about what is happening in Darfur. The United Nations says 180,000 people (I don't believe it is as high as that) but the United Nations says 180,000 people have been killed in Darfur in the last 18 months. Well, we are waiting you know for the decisive action by the United Nations to stop this. We are waiting. It is a lot of people to die.

Q. Professor Naoko Sajima, Associate Professor, Senshu University. As you know I really believe that the strong thing of defence links between Japan and Australia contribute to the peace and stability in the region and I am really happy to hear of the recent development of the two countries, especially the Australians despite your lack it is really helpful to Japanese self defence forces I am sure. But today's question is different it is about China. You haven't mentioned anything about China but ……..Australia the shares, the view, attitude towards China in future, especially in the security context?

A. Well you know, we have a good relationship with China and we welcome the success of modern China. The pragmatic approach that the government there takes to economic management. It is working well for China, we are seeing rapid economic growth, substantial improvements in living standards. Japan and Australia are examples of two countries that are benefiting enormously from that. I suppose the question in the backs of people's minds is what will this new more powerful China, as it becomes richer, becomes by definition more powerful, what will that mean for the security environment of the region? Well, I think you can take comfort from the fact that China is being quite robust in trying to get the Six Party Talks process going, well it did get going, and try to keep it going. China understands the particular role it has in supporting the denuclearization of North Korea and China has been positive and responsive on that issue. So I think we should take encouragement from that. I think it is important that we work with China in regional institutions such as the ASEAN Regional Forum. I think it is important we have constructive bilateral security dialogues with China. We have a good security dialogue with them on a range of different issues. We have a human rights - we are one of the first countries, we might have been the first - to have a human rights dialogue with China. So we, you know, have no illusions about. China is not a liberal democracy like Australia and Japan. We have no illusions about that. But I think it is incumbent on us to work constructively with China. But it, of course, equally incumbent on China to make sure that it is sensitive about its growing power and weight in the region, that whilst the region needs to accept the growth of China, China needs to understand that this arouses sensitivities in different parts of the region. And it needs to work closely in partnership with countries I the region. I think on balance China is quite sensitive to that question. And I hope they will continue to be so.

I suppose the last think I should mention is the issue of Taiwan because if there is one security issue which causes concern about the region in relation to China it is definitely the Taiwan question. Now, our position on this is that we want China to resolve the status questions of Taiwan through peaceful means and through negotiation and discussion. We don't want to see that resolved through resort to military force. The consequences of using military force would be catastrophic for the region. On the other hand from Taiwan's point of view the message we have for Taiwan is we would like to see Taiwan exercise restraint as well. And that of course in their case is political restraint, that Taiwan should be careful not to move towards some declaration of independence which would be seen, whether we in Japan and Australia agree with this or not would be seen in China as highly provocative. That would be to cross a red line as far as China is concerned. So, provided that both sides will exercise appropriate restraint it is a problem that can be resolved diplomatically and through negotiation and discussion and I remain, if you like, some people will criticize me for this, in fact people criticize me for many things. But some people criticize me for being too optimistic about the resolution of cross-straits tensions but I think in the end both sides have so much at stake here. There is so much at stake economically, financially - in terms of the living standards of the Chinese people. There is so much at stake it is hard to believe that they will destroy all of that by making terrible decisions and choosing conflict over peaceful negotiation.

Q. Ms Jane O'Dwyer, Daily Yomiuri. Welcome Mr Downer to Tokyo. Just two quick questions. The first one is during your visit here have you had any indication from senior Japanese officials or government members of a softening towards a Free Trade Agreement with Australia. Any change in their position towards that? And secondly, related to Iraq, if the worst happens, and Australian troops are killed in defending the SEF what do you think the political ramifications would be for our relationship with Japan?

A. Well, let me make it absolutely clear. Let me make this absolutely clear so no-one in Japan can in any way be confused and there is no ambiguity about it. We would not hold, and we do not hold Japan responsible, for the lives of the Australian soldiers. We will take responsibility for our own security and our own lives and we will endeavour to do an effective and professional job and the Australian Army always do an effective and professional job. I have no hesitation in saying that. They are extremely professional as they demonstrated so clearly in East Timor and they have demonstrated up until now in Iraq as well. But, nobody has any intention in Australia if the worst comes to the worst and there are casualties, and I normally don't stray into the hypothetical, but if the worst comes to the worst and there happen to be some casualties you now we hope and pray that will not happen. But if insurgents were to attack Australians then the people who would be ultimately responsible for that would be the insurgents who attack the Australians. And it certainly wouldn't be a question of a Japanese responsibility and we will live with the consequences as Australians of our own decisions and not pass the blame to Japan should that happen. But, remember ultimately, I know in some elements of the western media there is a desire to blame, you know 'us', including Japan (I am throwing Japan in here), Japan and Australia I suppose are not technically 'western' but you know what I mean. But to hold us responsible for casualties caused by insurgents or by terrorists. I am sorry, the people who are responsible will be the terrorists and the insurgents not Japan or Australia. But we will not in any way pass the responsibility to Japan or hold Japan to account for casualties that are caused by insurgents. We will live with the consequences of our own decisions in Australia and we will blame anybody .. we will not only blame people who attack Australians and if they kill them we will blame them but we will get them as well. We will be after them. Because Australians you know are the nicest and friendliest people but we can be ever so slightly aggressive if you start doing that sort of thing to us. So that is a warning to the insurgents and the terrorists. So I don't want anybody in Japan to think that we are preparing to create a political crisis in Japan if that happens. That will not be a matter that Japan will be held responsible for.

On the trade issue, I have only really met the Opposition Leader and the Prime Minister so far. I am going to meet other Ministers this afternoon, including the Agriculture Minister. But I was pleasantly surprised and pleased by the response of the Prime Minister to my suggestion that we could perhaps begin work on some sort of a feasibility study on a Free Trade Agreement. He was very positive about that. I think the Japanese words are, they don't seem to like the word 'feasibility' they like a study into the merits and demerits of a Free Trade Agreement for us. Well whether you call it that or a feasibility study is what we would say, 'merits and demerits' that is three words, 'feasibility' that is one. But anyway I am not sure what the difference is but I think the meaning for us and for our side is pretty much the same, I am very happy with the response I got from Prime Minister Koizumi and I will be talking to other Ministers about this this afternoon and of course our Prime Minister, Mr Howard, will be discussing this when he comes to Japan next month. I think the point to make is that we understand, I mean I am a politician, I understand only too well the political issues in Japan in relation to agricultural trade. But as I said in my speech I think some of the concerns are exaggerated, that I don't really think Japanese farmers would in any substantial way be threatened by a Free Trade Agreement between Australia and Japan. Australia is not suddenly going to produce billions of tons of rice and dump them into the Japanese market. I mean I don't think .. Australia is a dry country it produces very good rice by the way, very high quality rice, it doesn't produce an enormous amount of it. It is quite difficult to produce in vast quantities in such a dry country so I don't think in other areas there is any particular need to worry. Japan already is a very substantial agricultural importer from Australia as it is from other countries as well - beef and wheat and sugar and so on are imported from Australia into Japan. Our seafood in vast quantities. So I don't see this as being quite the problem that it is sometimes made out to be. But having said that I am quite aware of the political sensitivities and the difficulties here. I don't want to create any difficulties for the Japanese Government but I am ultimately on Australia's side and if we do a feasibility study into an FTA then we will all be the wiser about what the opportunities are, I think mainly political not economic, but what the political difficulties are I was very happy with the response I got from the Prime Minister on that question.

Q. Mr Noritake Kai, Research Fellow, The Japan Forum on International Relations. Recently, the European Union has been talking about lifting their arms and embargo vis a vis China. I believe they are about to make that decision. In spite of the importance of this matter I believe Japanese press has not been reporting much about this. My understanding is that the United States is basically opposed to this because it will destroy or undermine military balance in East Asia. Russia conversely, fears that the Russian exports to China will decrease because of European increased exports to China and therefore they are opposed to this. What is the Australian Government's position on this arms embargo and especially how do you see the impact of this on East Asian military balance?

Next question immediately follows.

Q. Mr Yukio Yoshimura, Vice President and Special World Bank Representative of Japan. Indonesia is, of course, your important neighbour and also Japan is providing a large amount of assistance to Indonesia and the World Bank is very happy to be there. Could I hear your view on Indonesia. How those important players can cooperate for the economic development of that country?

A. Okay, well first of all on the EU arms embargo. The situation for us is that this arms embargo as introduced in 1989 in response to the Tianneman Square massacre and in 1992, I must say I am not entirely familiar with the history of this, but in 1992 the then Australian Government decided it would lift the arms embargo on China and not surprisingly that has not been reintroduced. So our response to the European Union is that, well we lifted our arms embargo on China so we are not arguing to you that you shouldn't lift your arms embargo, we could hardly do that we could hardly say to the Europeans you keep your arms embargo but we have lifted ours. But we have said to the Europeans that whether you lift your arms embargo or not we want you to give us a commitment that you will not take action which will change the strategic balance in East Asia. And we would like to be fully consulted about what you have in mind when you talk about lifting your arms embargo. Because in our case we have an enormous number of restrictions on our exports of defence equipment and we do nothing in terms of our exports of defence equipment to the region which in any way destabilizes the balance within the region. And I am pleased to say that the European Union is sending an envoy to Japan, I think, and to South Korea and also to Australia to consult with all three of us on this issue. I just heard in the last two days that the European Union Special Envoy was going to come to Australia as well as Japan and South Korea. I appreciate that. I think it is an opportunity for us to make the point quite clearly about not changing the strategic balance in the region. And of course I know the Japanese Government makes that point. The Japanese Government opposes the lifting of the arms embargo as well. Well we cant really do that because we lifted our arms embargo in 1992. So I try to avoid the charge the hypocrisy on the one hand but on the other I don't want to see the strategic balance be changed by actions that the European Union might take. I have already had some discussions with the Europeans about this and they have given me some assurances but I want to hear in more detail from them when the Special Envoy comes, I think, in the next month some time.

A. As far as Indonesia is concerned. Look, you know, people in the media concentrate as you would I suppose if you were running a media organization, any of us would, concentrate on the bad things that happen. But you know that one of the great things that happened world in 2004, one of the great things that happened was that the world's fourth most populous country became the world's third largest democracy. That a Muslim, a country of 197 million Muslims, so predominantly Muslim country, joined the family of democracies by democratically electing its President and prior to that they had democratic parliamentary elections as well. This is no small matter. This is an enormous break through and countries like Australia and Japan, such champions of freedom and democracy we should rejoice in the steps that are being taken towards democracy in Indonesia and hope that others around the world will see that as an example. There are some people who say that Muslims don't take to democracy, well that is not true. Indonesia has got the largest number of Muslims of any country in the world and they all trotted out and voted and I think Indonesia has a fine new President in President Susilo Bambang Yudhoyono. I think he has got off to a very strong start. I think he is going to be a great contributor to Indonesia and I think he is going to be a great contributor to the Asia Pacific Region.

You know we need a prosperous, strong and stable Indonesia as a next door neighbour and I think you know it is heading in the right direction. I am very positive about it. I met on Thursday and Friday with a group of Indonesian Ministers in Australia. We have every 18 months or so, or every two years, a Ministerial Forum with the Indonesians and that Ministerial Forum was to use a Chinese expression "a complete success".