Australia's Direction in a Dual Superpower World

Address to the Oxford Business Alumni Forum

Sydney

Speech, E&OE — Check against delivery

13 October 2011

KEVIN RUDD:  

To the OBA, having listened carefully to what your mission statement is, I congratulate you on your commitment to business excellence, to academic excellence and to broad leadership.

These are essential ingredients to the future of our Australian economy.

The excellence of Australian business and business leadership lies very much at the core of our vision of Australia's future.

I cannot boast an Oxbridge training. I tender those apologies at the very beginning. I'm a mere graduate of the Australian National University which, by the way, was modelled on the School of African and Oriental Studies, a rival institution of Oxford but I won't dwell on that.

[Laughter]

And I went there as a slightly acneous 18-year-old to study Chinese language, literature and culture and history and, after many, many years of study I graduated with honours.  I then went to the employment market and discovered that the only people who would employ me was the Australian Foreign Service.

And having joined the Australian Foreign Service with half reasonable Chinese they then, consistent I'm sure with the strategic direction and management of many of your corporations, decided that the place to send a graduate in Chinese language was to Sweden.

[Laughter]

I know it's only in government that these decisions…

[Laughter]

…have done anything like that but, having spent a couple of years in Sweden and with enough Swedish then to capably imitate the Swedish chef from The Muppets…

[Laughter]

…then the Department of Foreign Affairs in its strategic wisdom decided to send me to Beijing, having rusted my Chinese in the process.

When I got to Beijing, one of the great advantages of studying at the Australian National University is that they are highly disciplined in the way in which they teach the language and, having been there for four or five years they teach — and I think you uniquely as an audience would understand this — orthodox Oxbridge Chinese so that when Chinese folk run into me speaking Chinese, and I'm sure this is probably David's experience as well, they fall down laughing.

It's not because I don't speak Chinese reasonably, it's just that when their good folk hear me speak Chinese it sounds a bit like this:

I say, Jimbo, why don't we just pop down to the club for a spot of tennis.

[Laughter]

Followed by an ale and perhaps some hijinks afterwards.

And we were taught impeccable BBC Chinese and it does cause most of my Chinese interlocutors seriously to fall about laughing.

But then, having arrived at the embassy in Beijing, my then ambassador, Ross Garnaut, heard from the local staff at the embassy that my Chinese was so good that I should become his interpreter.

Those of you who speak Chinese here or speak another language, there is a vast ocean of difference between (a) being able to speak a language and (b) being able to interpret for some other person because you can control what you say but you can't control what they say.

So despite my protests, and they were wretched over many days, he insisted on taking me to his first official engagement in the Great Hall of the People.

You've been to Beijing, you know that this is a largish building to the right of Tiananmen Square. We arrived in a limousine, flags flying, in we go, first meeting, I recall was with the Chinese Minister for Agriculture and as we sat there in the traditional Chinese horseshoe with senior Chinese pooh-bah, deputy pooh-bah, assistant deputy pooh-bah, down to chief cook and bottle washer down the other side and so the barbarian side of the table as well: chief barbarian, deputy chief barbarian, bringers of tribute and the rest. I'm sure things have changed.

We began the discussion and Ross Garnaut unremarkably began the discourse that day by saying to his Chinese interlocutor, Australia and China are currently experiencing a relationship of unprecedented closeness.

Now, having been to university, I thought that was clumsy. It just didn't sound right — unprecedented closeness — so I thought we could improve on this.

[Laughter]

Note to file. Whenever you are so tempted to improve on your boss's work, particularly when it comes to matters of language, don't.

But modesty has never been my strongest virtue. I just heard some of you laugh.

And so I rendered in what I thought was quite elegant Chinese, a little bit of a classical flourish, and when I rendered the sentence, there were two reactions from the Chinese side of the table. At the senior end of the Chinese horseshoe basically there was a visible draining of blood from the face and a dropping of jaws. At the junior end of the Chinese horseshoe there were peals of unrestrained laughter.

[Laughter]

Remember the phrase I was translating, interpreting was very straightforward — Australia and China, a relationship of unprecedented closeness. Apparently what I did say was that Australia and China are currently experiencing a fantastic mutual orgasm.

[Laughter]

Pretty close, when you think about it.

[Laughter]

It was the last time I was asked to interpret for the Australian Ambassador to China.

[Laughter]

Now, George, that's about five minutes. Here's the status of the evening, about the topic we've been set this evening. It's an important one — Australia's direction in dual superpower world.

What I'd like to do is spend a few minutes on three basic propositions.

The first is what does China want in the decade ahead and the second is what does America want in the decade ahead and, thirdly, what do we want, as Australians, in the midst of (a) and (b) above.

So let me try and be as cryptic and to the point as possible.

The first thing when we look at China is as follows. The first thing that the Chinese leadership aspire to for the decade ahead is to sustain in continuing the power of the Chinese Community Party.

Therefore, when it comes to questions of political dissent, the Chinese will continue to be hardline.

The second objective of the Chinese is as follows: to maintain at all cost national unity.

In Chinese history the worst thing you can do is to preside over the dissolution of a Chinese empire. No Chinese leader ever wishes to be responsible for any fragmentation of the realm and therefore when it comes to maintaining Tibet, maintaining Xinjiang in the north-west, maintaining the position that Taiwan must return to the motherland's embrace, it’s axiomatic in Chinese politics.

A third goal for the Chinese for the decade ahead is that they know that to maintain political and social stability they've got to continue to deliver economic growth in the vicinity of seven to eight per cent per annum.

And the Chinese — the Chinese economic growth model, for those of you who study these things closely, is changing. We can come to that in the Q&A but the growth model is now changing from the one of the last 30 years to a new one which is based primarily on domestic consumption, based primarily on the rise of its megacities — 101 cities in China with a population larger than this one in Sydney, Australia — and thirdly with that urban middle class and its disposable income, a growth model based increasingly on China's services industries, as opposed to the historical model based on investment in labour-intensive manufactures for export.

We can come to that later, but it is a critical element in understanding how the Chinese wish to sustain their growth into the future.

Four, as a consequence, to generate sufficient employment for the 20 million plus who emerge into the Chinese employment market fresh each year.

Fifth, also minimising the economic disparities between rich and poor; between city and country; between coastal provinces and the hinterland.

If you are a communist party sustaining a view of equity is fundamental and, given that China since '78 has embarked upon a market economic policy, opening to the outside world, domestic economic reform based on market principles, the disparities within China have grown and grown and grown and grown.

Chinese billionaires are large now in number but they still have 150 million people plus who live below the poverty line. So managing the challenge of social inequity and economic inequity is fundamental to China's goals for the next 10 years.

Number six, maintaining a military capability capable of bringing back Taiwan by force to the mainland if that becomes necessary.
Going back to the earlier point, that the reunification of the motherland is etched deep into the soul of the Community Party leadership of that country.  They would prefer not to use military means but they will obtain the military means from their perspective necessary to achieve that objective should it become necessary.

Number seven, to ensure that China's strategic position around its borders is as benign as possible in the many states which border the Middle Kingdom because that is essential to Chinese domestic economic growth, not to have destabilising neighbours, from their perspective.

Number eight, as consequence also China's strategic objective is over time to reduce US military influence and, as a consequence US alliances in East Asia and the Pacific, both that with China, China has with Japan, that China has with the Republic of Korea and which the United States has with Japan, the United States has with the Republic of Korea and the United States has with us, as well as other relationships both with Thailand and [indistinct].

Objective number nine is protecting your sea lines of communication right out to the sources of China's long term energy supply, across the Indian Ocean to the Gulf where most of its oil supplies come from but also its land-based supply lines to various other countries in terms of delivery of natural gas as well.

And number 10 — and this is somewhat harder to measure but it is real and is palpable and drives China's long term national ambitions and that is to become the preeminent regional power, to become a great power if not the world's second superpower but also a power which is respected in the councils of the world.

This is also etched deep in the Chinese national psyche.

So if we were to roll out therefore to 2020, and I am reluctant to dispute the sage observations of my prime ministerial predecessors, Bob Hawke and John Howard, but according to most recent data that we have available to us, using — put this in parity terms — we'll see China potentially as the world's largest economy as early as 2019, the end of this decade, possible 2020, and using market exchange rate mechanisms the largest economy in the world by 2030 or the early 2030s.

Therefore this is no longer a mid-century prospect. It is a decade plus prospect for the world and when China achieves that objective, which it is on target to do, China will then have become, for the first time, the world's largest economy since the days of the Ming and Qing dynasties. Secondly, it'll be the first time that in the world for 250 years we've had a non-western democracy as the world's largest economy.

That broadly is where China seeks to go over the decade ahead.

I said before I'd also speak about the United States. The United States and where it seeks to go over the decade ahead is harder to determine in a contested democracy than it is in a one-party state but nonetheless the lines of overall policy are clear.

The United States, I believe, and understandably, wishes to remain as a preeminent global power both economically, foreign policy terms, in strategic terms, but also in the unique American aspiration to provide democratic leadership across the world in the great tradition of what is called American exceptionalism, the light on the hill, the American tradition which is a torch of freedom for all countries around the world.

That is so much the American wellspring of their view of their future in the world they will remain such for the decade ahead.

More specifically, the US wants to maintain and broadly uphold the liberal democratic global order. Secondly, they want to uphold and maintain open markets, despite the recent pressures and historical pressures of US protectionism.

Thirdly, the United States wishes to maintain its global edge in science, technology and innovation. There are good grounds for having confidence in that. We've seen the extraordinary creativity of what US science, technology and innovation is capable of producing.

On top of that, again, the US wishes to maintain its global military pre-eminence and no one should be in any doubt that whatever may occur in the economic stakes between China and the United States, the United States will remain for many decades ahead, based on any reasonable trajectory, the world's greatest military power and capable of extraordinary power projection, still, across the world notwithstanding recent budget pressures.

The United States also wishes to maintain its deep alliance structures in Europe and in particular in Asia which — this will be, the 21st century, the Asia Pacific century and the bedrock of American interest in this part of the world lies on its underpinning alliance structures in which we also feature here in Australia.

On top of that again, America wants to curb, contain and ultimately stop the spread of weapons of mass destruction. People often think that this a minor challenge. It doesn't make the newspapers much. It's faded since the collapse of the Soviet Union.  Two caveats to this always, as you encounter and contemplate the next decade ahead: what happens in North Korea and what happens in Iran.

North Korea, right today, represents the single greatest potential tripwire for major armed conflict in the world. An unstable leadership, an erratic leadership and a rapidly escalating nuclear weapons capability.

The United States also, I believe, wants to maintain their global rules-based order not just with the United Nations but through other regional systems as well, to which I'll come in a minute.

The US also, importantly, though rarely articulated as such, wishes to maintain its preeminent global leadership in soft power, the capacity of the United States to project power whether it's in the world of ideas, the world of science, innovation, technology, movies, Hollywood, culture and the rest and why so many people from round the world still, in 2011, flock to America to make their home.

These are, in my perspective, and from my perspective the faultline of American projection for the decade ahead. Can it sustain itself as the world's largest economy? The population of China would speak to the contrary.

Beyond that, however, I believe that it's only one thing potentially standing in the road of the United States losing its preeminent leadership in other dimensions and that is the emerging evidence of the dysfunctionality of US congressional politics.

The predisposition of the United States Congress to make it impossible for an administration, be it Democrat or Republican, to get on with the business of strong US global leadership which means fundamental relevance to our interests and the interests of our friends and allies around the world as well.

Lastly, George, and you'll be pleased to know I've used the word lastly, is I come to Australia, what are our priorities for the future?

Well, let me go to the core of them, these have been reflected in recent statements by the Prime Minister, and other ministers, including myself, on the foreign policy domain.

Number one, keep our public finances strong. Anyone who seeks to talk down the Australian book, look carefully at all the international comparatives on budget deficits, budget surpluses, net public sector debt, net public sector surpluses.

This country has emerged through combined use of governments of both political persuasions, going back a long period of time, but through the Global Financial Crisis in a first class state, in a first class state in terms of its public finances across the board.

We came through the Global Financial Crisis with the lowest debt, the lowest debt set of any major economy in the world. That is not a bad achievement.

So our objective for the decade ahead is to keep our public finances strong — second to diversify our economy. We support fully the dividends to Australia from the mining boom, but some have asked, well why introduce a minerals resource rent tax? Well I think many of you in this room would have experienced the impact of the Australian dollar, at $1.10 on the export competitiveness of every other export sector of the Australian economy, even manufacturing, but also in the services sector as well.

If you don't believe me, speak to manufacturers, speak to the universities selling education to places around the world, and speak also to the tourism operators in this country as well.

And so what we're seeking to do again over time, is to ensure that we have a national economy which is able to sustain an exchange rate which allows other sectors of the economy to grow, and remain competitive as well.

Because so much of our future lies in our services sectors, the financial service sector is so strong in this country it should become a financial services export industry, for our country's long term future, given the enormous debt of the savings base in this country, delivered by Paul Keating's reforms on superannuation a decade plus ago.

Our further objective for the decade ahead is to sustain and enhance high levels of domestic savings, that is why we've taken the decision to increase the superannuation guarantee, from nine to 12, to ensure that the existing pool of domestic savings of $1.2 trillion-plus, continues to grow and grow in the future.

Fourthly, to ensure that our infrastructure keeps pace with our future economic development needs, and hence the government's decision to invest in a National Broadband Network.

Fifthly, on top of the these as well, to ensure that we are equally investing in our human capital, what we in the government call an education revolution, and that is, how do you sustain the investment necessary to make our workforce and our technical experts, our scientists and the rest, world-beating in every class?

And unless we are investing in childhood education, for our school education systems, for our universities, in a way which is competitive with, and in excess of our competitors around the world, we will miss the race.

Beyond that again, to ensure that through our quarterly migration program, we continue to sustain population growth in this country, offsetting as well our declining national birth rate as a country in itself.

And beyond that again, making sure we maintain and sustain a strong national defence, which we are through the Defence White Paper and two per cent real expenditure out to 2030.

To maintain our strong alliance with the United States, to be also an actor in terms of creating middle power diplomacy.

But here is my concluding point. The concluding point is this, drawing upon these great national, economic, social stability, social strengths, our national security strengths, and our tradition of being a robust, diplomatic actor in the region and beyond, to draw upon those talents to ensure that our Asia Pacific century is indeed a peaceful one.

The worst outcome that you could ever imagine for a country like Australia, is that there be conflict or war between the United States and China — that is the worst conceivable outcome.

Therefore our diplomacy, drawing on the strengths that we have, our friendship with China, our alliance with the United States, our strong relationships across the region, is to craft in this Asia Pacific region a different vision for the future.

Some have described this sort of activity as a diplomatic form of leadership; we seek to describe it in those terms ourselves, sometimes. We began to debate two or three years ago on how we could build an Asia Pacific community in a region which doesn't have regional institutions capable of bringing around the table the Americans, the Chinese and the rest of us, on how we craft the rules of the game for this region, for the next half-century.  Because if you fail to do that, and to cultivate and to develop a culture, and have it of economic and security policy and foreign policy cooperation, it is very easy to drift in the reverse direction.

The region itself has so many underlying unresolved territorial and political challenges; the Korean Peninsula I've mentioned; complex, and disagreements between China and Japan on territorial possessions in the East China Sea; the South China Sea about which much is spoken; not to mention the ongoing nuclear challenges between India and Pakistan.

This region is replete with unresolved disputes, it's a bit like where Europe stood in the 19th century.  If we don't have regional institutions capable of harmoniously resolving these challenges, then you apply diplomatic muscle to it.

And the value-add of a country like Australia is this — we can provide alternative paths to the future, we can improve innovation through such regional institutions as the Asia Pacific community, or now as it's become, the Expanded East Asian Summit, which meets in Bali very soon for the first time, a summit that will give the Americans, the Chinese and the others a different course for the future, not one which by default, moves in a reverse and negative direction.

That's our main aim for the future. How do we get on? How do we make it possible? How do we imagine new possibilities for those currently in Washington, those currently in Beijing, and those in other capitals of regions, thinking the worst, and planning for the worst? How do we imagine, in fact, a different possibility, whereby we can engineer a peaceful and prosperous East Asia in the next half century?

That's the business of Australian diplomacy, we're hard at work at it, whether we succeed or not, history will be the judge.

I thank you.

[Applause]

SPEAKER: Thanks Kevin. Just to make you feel better, there are a lot of us in this room, I suspect, who can't get mutual orgasm right in English.

[Laughter]

END

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