Speech

12 May 2006, Brisbane

Speech - Future Summit 2006

Australia, Asia and Global Drivers for Change

Thank you Michael Roux (Chairman, Australian-Davos Connection) (tbc)

Distinguished guests, ladies and gentlemen,

It is a great pleasure to be here today, and not just because it's six degrees warmer than my home town.

Rather, I think the Future Summit is an exciting and timely event.  You've heard from speakers of a very high calibre.  And I'm told the level of debate in the panels has been excellent.

The topic for these two days - Re-inventing Australia in the Age of Asia - is a topic that matters for all of us. It matters for government, for business, for academia and for civil society.

And it's a moving target.  Just when we think we know where the world is heading, a new challenge, threat, or event reshapes our thinking.  Conferences such as these play an important role.  They test our thinking and shape our policies.

So, I congratulate the Australian-Davos Connection for putting on this event.

In my remarks today I would like to focus on three drivers for change that I face as Foreign Minister.  Three drivers of change that influence our foreign policy.

My three drivers are:

• first, economic change;
• second, regionalism; and
• and third, globalisation.

The three drivers overlap.  And they reinforce each other.

In my view, the drivers for change tell us that we can expect a bigger, wealthier Asia in ten and twenty years. An Asia that is strategically even more important to Australia than it is today. 

There are also question marks.  One question is whether Asia's growth is sustainable at its current rate. 

A second - a more philosophical question - is the spread of liberal democratic values in Asia. 

Over hundreds of years across the world, there has been a constant march towards this model.  In recent times we have seen great progress in a number of countries, particularly Indonesia. Will that be replicated right across Asia?

Let me explain these points by taking you through my three drivers for change.

Economic Change in Asia

The first driving factor is economic change in Asia.

Everyone is familiar with the widely told story of the rise of China and India.  Their rise is causing a major shift in the centre of global economic activity.

The centre of gravity in the world is shifting to Asia.  And the shift is quite rapid. 

Japan is still the biggest economy in the region and the second biggest in the world.  And it is back on a stable growth path after some years in the doldrums.

But China's economy probably will overtake the Japanese economy sometime next decade and India could do the same in less than twenty years. 

Korea and Taiwan play a key role in global supply chains. And ASEAN remains the source a great amount of economic dynamism.

For Australia, this is one reason why we must maintain our strong economic and political links with the region. 

This is why we are negotiating free trade agreements with China, ASEAN and Malaysia.  And we are pushing for an FTA with Japan. The feasibility study for this is due later this year.

During his trip to India in March, the Prime Minister signed a Trade and Economic Framework Agreement.

The increased economic weight of Asia presents great opportunities for Australia.  We send a higher proportion of our exports to Asia than even Asian countries themselves.  Seven of our top ten trading partners are in Asia.

Of course, there are challenges that come with this growth. 

For example, in strategic or geopolitical terms the rise of China poses important questions for China-US relations and for China-Japan relations. 

Australia's view is that a stable and prosperous China is a positive force for the region and for Australia.  

It is very much in our interests to see China fully integrated into the international community. 

Of course, China's integration will bring with it certain responsibilities, to contribute to global challenges in a constructive way. 

We're looking to China to help manage difficult international issues such as North Korea and Iran.

Some competition in the China-US relationship is an inevitable side-effect of China's rise, although both sides have taken a constructive approach and are managing their differences carefully. 

The China story is an incredible one - to average growth of 9 per cent over two decades is a great achievement. 

Some of the numbers are startling.  China now consumes one quarter of the world's base metals.

Last year Chinese enterprises produced half the world's digital cameras, a third of its computer hard drives and a quarter of its major kitchen appliances.

But China's future path to development is by no means assured.  We cannot take for granted that China will grow at such a high rate indefinitely.

China has faced two economic downturns over the past 25 years.  Another slowdown is probably inevitable at some point. 

The country's policy-makers face a number of thorny problems, such as the growing gap between rich and poor and between rural and city dwellers. 

China also has the most rapidly ageing population in the world, which is bound to pose challenges for delivering social services in coming decades.

The Chinese Government has so far dealt with the economic challenges with mostly sure hands.

So while rapid growth is not guaranteed, I think we can reasonably assume at this point that China will continue to grow strongly over the five to ten years, even as it manages some of these difficulties.  

China's tear-away growth has some people wondering whether it might be the hare to India's tortoise. 

India's rise may well prove to be slower but just as enduring.  Importantly, India's growth is shifting the strategic centre of gravity in Asia westwards. 

So we need to get into the habit of thinking of the Indo-Asia-Pacific region, rather than just thinking in terms of East Asia.

India's participation in the East Asia Summit is a reflection of this new reality. 

East Asian Regionalism

And that's where I should start to explain my second driver for change - greater regionalism in East Asia. 

At the end of last year, the Prime Minister attended the first East Asia Summit in Kuala Lumpur.  I attended the Foreign Ministers meeting in the lead-up to the Summit.

I think there are two points worth making on the East Asian Summit. 

First, Australia's very presence at the summit gives us a stake and a degree of influence in how regionalism evolves. 

We use our presence to emphasise the importance of open and inclusive regionalism. 

We want to see barriers come down, not be erected. 

We want to see economic integration occur, but not at the expense of relations with countries outside the region such as the United States.

Second, it's very early days for the East Asia Summit process.  A true East Asian community is some time away. 

I come back to China and Japan here. 

The relationship between these two countries will be an important factor in shaping the development of East Asian regionalism. 

But compare this relationship to the key relationship in Europe - between France and Germany.  It was a desire for a permanent peace between France and Germany after World War II that drove the European project in its early stages.

We do not find in the China-Japan relationship at present a central binding factor such as the France-Germany desire for permanent peace.  

Throw Korea into the mix and - unlike Europe - East Asia has numerous unresolved territorial and historical issues.

Tensions over history are getting in the way of closer ties at present, and I hope these can be resolved over time. 

Keep in mind that China and Japan have never been strong at the same time over the last one thousand years. 

So some competition is inevitable in this relationship.  But we hope and expect these differences can be managed, perhaps with a bit more goodwill on both sides.

But even as tensions ease, I can't see Asia developing into an economic community such as you find in the European Union.  Not for some decades anyway. 

Rather we expect to see the gradual evolution of an East Asian community that reflects the character of the region. 

This will entail growing economic integration through a web of free trade agreements which might eventually merge into one regional FTA. 

We can also expect a gradual strengthening of security cooperation in the region, particularly to tackle trans-boundary threats such as drugs, people trafficking and counter-terrorism.

Regional integration goes beyond just East Asia.  For Australia, the role of APEC is critical.

It remains the pre-eminent forum for economic cooperation in the region and it has an expanding agenda. 

The engagement of the United States gives it an added dimension as a driver of regional cooperation and a body able to deal with global as well as regional issues. 

As a grouping that includes Asian, North American, Latin American economies and Russia it goes beyond just East Asian trade and investment issues…

…issues such as disaster and pandemic preparedness and counter-terrorism cooperation…

…issues that go beyond APEC's original work of economic integration and technical cooperation.

We will be looking to give this substantial agenda a further boost next year when Australia hosts APEC.

We also increasingly find ourselves involved in what we call functional cooperation.  Examples of this are:

• cooperation following the Tsunami;
• the Proliferation Security Initiative; and
• the Trilateral Strategic Dialogue.

Globalisation

And this is where the boundaries of regionalism become blurred and I should discuss my third driver for change - globalisation. 

Globalisation of economic activity and the increasingly global nature of security challenges mean that we can't separate our regional interests from our global interests and alliances.

A good example of this is the Asia Pacific Partnership for Climate Change. 

Six countries are involved in this initiative - Australia, China, India, Japan, Republic of Korea and United States. 

While it has a regional focus, it would not be a significant forum without the participation of the United States.

The same goes for the Trilateral Strategic Dialogue between Australia, Japan and the United States, which we held for the first time at Ministerial level in Sydney in March. 

The dialogue serves to strengthen our security ties with Japan, a close friend of Australia and a country that remains a major power in Asia and critical to regional security. 

But we do so in the way that complements our alliance with the United States, which I am proud to say is as strong under this Government as it has ever been. 

We would not be as engaged in Asian security matters was it not for this strong US alliance.

My point here is: in a globalised world, with global challenges, Australia cannot draw boundaries around its relations in the region. 

Rather, we bring an additional strength to our regional relations, which is our strong alliance with the United States.

Another point to make about globalisation is that economic change in Asia will see globalisation taking on a more Asian and less Western flavour. 

Until now, the economic, political and cultural power of the West has given globalisation a predominantly western flavour. 

But globalisation will take on a more Asian face in the future. 

For example, more Asians are likely to leave their home countries to study and work in China, Japan and India in the coming decades than will go off to study in the United States and Europe.

Globalisation influences foreign policy and Australia's medium term outlook in other interesting ways. 

Although globalisation is likely to become less westernised as a result of the shift of world economic weight to Asia, it will also have a reverse effect.

As Asia grows rapidly, globalisation will bring further change to Asia.  This is because of the importance of good governance, education, open markets and democracy to economic security and sustainable economic growth. 

We find in our technical assistance to the region an increasing demand for institution-building and training in these areas. 

Asian countries are recognising the importance of well-functioning courts, functioning financial markets and regulatory regimes that provide certainty for investors - foreign and domestic. 

First class education is in high demand and Australian institutions are delivering this, increasingly through partnerships with local institutions and through courses delivered in Asia.

So Asia will change how globalisation occurs; but globalisation is changing Asia also. 

The question that remains to be answered is whether globalisation will bring a change in Asian political systems as well, and whether that change can be successfully managed. 

I'm a strong believer in the liberal democratic model of government.  And I think we will only find true stability and peace in the world when that model is widely applied.  When that will be, I cannot say - probably quite a long way off.

Conclusion

And this is pretty much where I think I will conclude, with a couple of final comments.

The next ten years will be exciting for Australia's foreign and trade policy.

I wouldn't like to say exactly where we will find ourselves in ten years time, just as I could not have projected when I first became Foreign Minister in 1996 where that we would be in 2006. 

But I can forecast that economic change in Asia will reshape the region, bring economic integration within the region and bring liberal economic influences to the region.

And I expect that Australia will benefit greatly over the coming ten years from these changes. 

Australia will play a role in the process of change.  We will continue to provide the raw commodities and energy to fuel Asia's growth. 

But we will also contribute some of the intellectual fuel for the region's development, just as so many people from the region have fuelled Australia's development in the past.

In my ten year tenure, I have found that we have come to debate less our identity in Asia, and more how we identify our role in Asia.

As Asia re-invents itself as a middle and high income region, and as Asia changes as a result…

… I think Australia and Australians will find themselves linked more and more with Asia.  I think we will interact more and more easily with Asia.  

Living and working in Asia will become unexceptional - to a great degree it is already. 

When you look at the sources of world economic growth in the coming decades, this is a very good place to be.

Thank you.

ENDS