Australia and Japan in the 21st Century

Australia Japan Conference, Brisbane

Speech, E&OE, check against delivery

4 November 2011

In a time of great global and regional change and uncertainty, the future of Japan is taking on a new urgency.

As is the future of Japan in Asia.

As is the future of the bond between Japan and Australia.

The economic rise of China and India has caused a significant shift in the global economy and in regional geopolitics.

Many of the Western economies and democracies that we have long seen as the bedrock of our global order are struggling.

Emerging economies all around the world are rising.

Economic and strategic weight is shifting to the Asia-Pacific in what has already become the Asian Century.

The multilateral system that we have painstakingly put in place over the past sixty years to build and spread security and prosperity is itself under challenge, as the global geo-strategic and geo-economic relativities begin to change.

And as the capacity of long-standing global institutions to deal with apparently intractable global challenges is brought into question, we are seeing increasing volatility in the global economy.

Our region is changing at an unprecedented pace.

In this context of profound change, the continuity of our relationship – one that spans the full range of strategic, security and economic ties – is of profound importance.

Sometimes there is a problem with familiarity.

We sometimes become so familiar over so many years that we fail to appreciate afresh the importance of old friendships.

This applies to human relationships.

It can also apply to the relationships between nations.

For Australia and Japan - common democracies and open economies – it’s time not just to re-affirm but also to re-define our relationship for the half century ahead.

Of course, words like relationship, or partnership, don’t quite touch the depth of the bonds we share together.

Friendship is closer – just look at the extraordinary grassroots response in our two countries to the troubles that have visited us this year.

Japan was shocked at the devastation the Queensland floods brought us last summer.

And Australians will never forget the other-worldly images of that day in March when tens of thousands of Japanese lost their lives.

Empathy and compassion are what we feel spontaneously for each other.

By nature, we could never be indifferent to each other.

Today I want to speak to Japan as a friend, because Japan’s success is so integral to global success in a changing world.

Japan is among our closest partners in Asia and the world.

Our security relationship – and our joint security ties with the United States – are pillars of strategic stability in our region.

Ours is no marriage of convenience, but a set of deep bonds underpinned by shared values and common interests.

These are fundamentals.

But with clear vision for the future, we must build on these fundamentals.

Together, we have done great work in building our international community, in extending security and prosperity in the Asia-Pacific. 

But we must do more.

The truth is this – against any objective measure, Japan’s role in the region and the world is fundamentally important – but Japan’s continuing significance is often missing from the accepted international political narrative.

China and India are unquestionably assuming new economic and strategic weight.

Every nation is working to digest the implications of that change.

But there are some absolute realities at play here.

First, despite the past two decades, and despite all the legitimate excitement about other emerging powers, Japan remains an economic giant.

Japan has a major impact on the global economy.

Japan has under 2 per cent of the world’s population.

But nearly 10 per cent of global GDP.

Five per cent of global trade.

At US$5.5 trillion, the world’s third largest economy.

In absolute economic size, China is bigger.

And India will soon be bigger.

But Japan is a wealthy, open nation whose influence across the world is immense.

With a per capita GDP of around US$42,000, the Japanese will remain key drivers of economic development around the region, particularly through technology and foreign direct investment, for decades to come.

Japan’s transformation from wartime ruin to the world’s second-largest economy for more than 40 years, and with living standards the envy of almost every nation on earth, is an unrivalled historical achievement.

And it speaks volumes of the immense capabilities of the Japanese people.

Second, Japan is the world’s largest creditor nation, with net foreign assets worth over 5 per cent of world GDP.

Third, Japan has a highly skilled and educated labour force of over 60 million.

Japanese curiosity, ingenuity and diligence have made Japan home to world-leading industries, including the world’s best electronics and robotics.

Japan has defined much of the technological age in which we live: high-speed trains, portable music players, digital cameras.

Fourth, the resilience and selflessness of the Japanese – if we ever doubted it – has been made plain again through the March tsunami.

Japan must draw on those unchallengeable strengths as together we engage the world that’s changing around us.

Let me make some remarks as a friend as we face the future together.

In recent years, Japan hasn’t been as strong and successful as the world needs Japan to be.

Japan has not been as ambitious in reforming and revitalising its economy as it could be.

And these challenges lie at the core of Japanese politics today.

It is good for Japan and good for the world that Japan has started to talk about trade liberalisation.

Australia knows from our own experience there is never an easy time to push economic reform at home and trade liberalisation abroad.

The truth is that economic reform is a continuing process.

It’s important never to step back.

Just as it’s important always to look at the next step forward.

That is because the global economy is not static.

Continued economic reform is fundamental to future economic growth, investment and employment.

In Australia, the Hawke and Keating reforms of the 80s and 90s laid the foundations for two decades of unprecedented economic growth.

We want Japan to see the benefits of its own reforms, and are heartened the new government has started a real debate on tough areas like fiscal consolidation and trade reform.

The IMF, too, recently urged Japan towards fiscal and structural reform.

Japan will be the biggest winner from reform.

But Australia will benefit from the continuation of a strong, resilient and outward-looking Japan too, as will the region and the world.

Over the past fifty years, Japan has helped shape a better world, with a foreign policy agenda proudly aimed at promoting global peace and prosperity.

Japan brings huge strengths to the multilateral table – not least of which is its proud record in international relations.

The second largest contributor to the United Nations.

For decades Australia has supported Japan’s desire to become a permanent member of the Security Council.

And a major overseas development donor over many years – another area, incidentally, in which Australia wants to work even more closely with Japan.

On the security front, Australia respects the Japanese Constitution – but efforts in recent years have shown that Japan has been able to do more and more, even within the limits the Constitution imposes on international action.

We’ve seen that even in the last weeks.

Australia is keen to support Japan’s security role further.

We want to see Japan take its proper place in global and regional security dynamics, particularly as regional dynamics change.

As a profound force for good in the world, we want Japan to play its part to the full.

To use the full gamut of both its soft and hard power – its aid, its economic influence, its security policy assets – to strengthen regional security, prosperity and democracy in our region.

We are well past the time that Japan should feel constrained in its role in the world on the basis of the legacy of World War II.

That thinking is an anachronism. 

My father fought against Japan in Borneo in the war.

The man my mother planned to marry was killed by Japanese troops at Milne Bay.

I’m absolutely confident that were they here today, they would have the same view as I have expressed today.

We need the modern Japan, unmistakably a force for good, to continue to express fully its modern values both in our region and beyond.

Australia and Japan

As Australia and Japan have both grappled with the changes taking place in our world in recent years, we’ve become closer than ever before.

Our relationship today is better than it was a decade ago.

Recent years have also seen strong progress.

The Security Partnership

In 2008 we agreed to the Joint Statement on Comprehensive Strategic, Security and Economic Partnership.

We also signed a Joint Statement on Nuclear Non-Proliferation and Disarmament and established together the International Commission on Nuclear Non-Proliferation and Disarmament.

In 2009 we updated our Joint Declaration on Security Cooperation.

In 2010 we signed the Australia-Japan Acquisition and Cross-Servicing Agreement – the only agreement of its kind that Japan has with a country other than the US.

We have a Trilateral Strategic Dialogue with the United States.

We have a regular 2+2 Joint Meeting of Foreign and Defence Ministers.

And we’re negotiating a free trade agreement.

We have to build on all of our engagements.

In ten years time, we want to be able to look back on a wider-than-ever field of cooperation and support.

As our people instinctively felt for each other through this year’s challenges from nature, we should instinctively look to each other as a natural partner in almost any endeavour.

We must be imaginative in building a common security and economic future.

Imaginative about deeper economic integration – challenging both our countries’ bureaucrats to be bold.

We must also be imaginative, creative, and forward-leaning about how we shape the region’s collective security architecture in the future.

Japan is our most important security partner in Asia.

Australia is widely described in Japan as its second most important partner after the US.

In times of trouble, we back each other – Australia’s support in March was second only to that of the US, with our 76 person search and rescue team and Defence operation-response officers.

We sent all of Australia’s operational RAAF C17 heavy-lift aircraft, delivering more than 500 tonnes of supplies and equipment to some of the most devastated areas.

We sent other C17 aircraft to a US base in Japan to move essential fire-fighting equipment to Fukushima.

We’ve worked together in third countries like Iraq, where our diggers provided security for Japanese engineers.

In the Pakistan floods, the ADF provided airlift capacity for Japanese medical teams.

And our security relationship will only deepen, as we look at a framework for sharing classified information.

At the next 2+2 meeting, we will set out how we see our security and defence relationship growing.

We will build on the TSD with the United States.

The US has been fundamental to peace and stability in the Asia-Pacific for nearly 70 years, underpinning the region’s phenomenal economic growth and prosperity.

Nothing has changed in that equation - it is in both our interests that the US remains engaged in the region.

So as our security relationship deepens, we should look to expand our trilateral cooperation.

Beyond security, we must also continue to build our economic engagement.

The economic relationship – delivering for Australian households

In ambition and creativity, we have to live up to the vision of our predecessors in signing the 1957 Commerce Agreement – a document that has transformed our economic destinies.

Japan is one of Australia’s top three commercial partners.

Our trade and investment ties are unparalleled, in comparison to our other Asian partners.

China has become our largest trading partner, but Japanese investment in Australia is still far stronger.

Likewise, Australia and the US have a bigger investment relationship, but our trading relationship with Japan is deeper – $66 billion in two-way trade, almost 5 per cent of Australia’s GDP.

Our trade with Japan produced our largest bilateral trade surplus - $25 billion in 2010.

And that doesn’t even include goods made by Japan outside of Japan, using global supply chains including Australian manufacturers.

Japanese investment has been crucial to developing our resources sector – it’s been capital that we simply couldn’t have raised domestically.

It has been crucial to building our manufacturing sector – look at Toyota Australia’s Camry, the biggest-selling car in the Middle East.

Toyota accounts for 21 per cent of our local car market.

And investment from Japan is only growing – more than doubling in the past five years to $117.6 billion.

Only the US and the United Kingdom invest more in Australia.

Our trade and investment relationship with Japan has helped us to improve living standards here in Australia.

It helps Australia to achieve one of the lowest unemployment rates in the developed world, and low government debt.

And let’s face it folks – that is what our work here is all about.

We work to strengthen our trade and investment relationships to keep our economies strong.

In Australia we do so:

  • To support the jobs that families rely upon.
  • To ensure that the social support network of health and education we expect in Australia can grow, not shrink.
  • To protect our national security, to avoid a world where countries use force rather than trade.
  • So that when the next big economic challenges come we will be ready.

In Australia, we know that families across our country are under financial pressure.

Cost of living pressures are real.

It’s hard to keep up payments.

Australians are working hard, but many still find it tough to make ends meet.

That might seem divorced from our relationship with a country over 7,000 kilometres away.

But it’s not.

Because every Australian household, on average, benefits $5,000 per year from Australia’s exports alone to Japan.

Including the investment relationship, that figure would be even higher.

Trade and investment from Japan bring jobs and prosperity to many, many Australians.

It has since Japan became a foundation investor in Australia in the 1970s. 

It will for decades into the future.

This is true of the relationship in both directions.

Australia is also a key economic partner for Japan.

We were one of Japan’s earliest economic partners as it rebuilt after World War II.

We helped supply the raw materials that fuelled Japan’s rapid industrialisation.

We’re now Japan’s main supplier.

Japan’s largest source of coal – larger than all other countries combined, providing 65 per cent of Japan’s needs.

Fifty-five per cent of Japan’s iron ore.

Twenty-two per cent of its uranium.

Japan’s second-largest supplier of LNG, to become its largest after 2015, based on current projects underway.

As my colleague Martin Ferguson has said, our exports of LNG to Japan will increase to 30 million tonnes a year over the next five years.

That’s more than the 18 million tonnes we exported in total last year, 13 million of which went to Japan.

We know how important a stable supply of rare earths is to Japan, a front we’re working on.

We’re collaborating on clean energy, including carbon capture and storage – particularly important for our coal exports.

We’re establishing the Japan office of the Global Carbon Capture and Storage Institute – an Australian initiative.

And we’ll continue to collaborate on infrastructure projects across the region.

The next step is a free trade agreement.

Of course, we understand the pressures put on Japan with the March disasters.

But it is important that we resume negotiations as soon as possible.

Japan’s agricultural protection is holding Japan back.

Japan’s self-sufficiency in food has dropped from 79 per cent in 1960 to 39 per cent last year.

An FTA with Australia will help Japan address rising food insecurity – and help Japan’s economy grow and transform.

We know hard work is being done to improve the efficiency and competitiveness of Japanese agriculture.

But the FTA offers scope to do even more.

And we must use our bilateral ties to drive real reform in global security and economic structures.

We’ve already been proactive and creative in driving regional and global reform – look at the East Asia Summit, where we worked hard to draw in the US and Russia.

This month, for the first time, the EAS will have the membership and mandate it needs to discuss the full range of issues that will be critical in the future – consistent with Australia’s vision for an Asia Pacific community.

In the 80s and 90s, we worked together to create the region’s first comprehensive forum for economic and trade issues, APEC.

That cooperation will continue.

Today, in Cannes, we're coordinating our efforts in the G20 – the only forum that can give the leadership the global economy needs.

We must keep up our leadership on nuclear non-proliferation and disarmament.

There is a growing momentum here – and together we can continue to build its strength.

We need to break the impasse in the Conference on Disarmament and get it back to work.

And we must push for a constructive dialogue on the Fissile Material Cut-Off Treaty, to kick-start formal negotiations.

As I said earlier, Japan is also a major regional player in development assistance – an area we would like to cooperate even more.

Conclusion

As one of the region's strongest democracies, Japan's efforts to tackle these global challenges have given it a considerable soft-power and hard power credibility.

Australia wants Japan to use these assets to take a more prominent role regionally and globally.

As our closest partner in the region, we want to see a stronger and more active Japanese voice in global and regional affairs.

If I might be blunt: it is time for Japan to dispense with its historical reluctance to assume a higher global and regional profile.

In the years after the war, Japan's reluctance to do anything that appeared expansionist, or worst, imperialistic, was understandable.

But the world has changed.

We are now seeing Germany assume a leadership role in European economic affairs and in the international community's response to the financial crisis.

It is time that Japan, too, assumes a greater leadership role on challenges of regional and global importance.

The road ahead for Japan will be a tough one as it rebuilds and recovers.

But its success is important for Japan, for Australia, and for our region, and for the world.

What Australia can attest to is that Japan, by its very nature, is a resilient country, with a people who have an unwavering spirit to succeed.

Again and again Japan has shown that with every setback, it has not only been able to recover but has been able to reach new heights.

Australia will be standing by Japan's side every step of the way.

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