Remarks to the panel discussion 'America, Europe and the Rise of Asia'

Munich Security Conference

4 February 2012

Speeches, E&OE, check against delivery

Thank you very much Henry, and if I could acknowledge the wisdom of the Munich Security Conference in putting together this session on the future of Asia, because how we manage Asia's future will have not just profound implications for those of us who are in the Asian hemisphere, it will have profound implications for the world, including Europe.

You could have no better moderator for this session than Dr K [Kissinger] — not just an extraordinary career in statesmanship but in terms of intelligent diplomatic scholarship, including his most recent book On China which is a classic of our time.

Every time I come to Europe there is a certain unreality I sense about the debate in Europe about Asia and about China. It's almost as if it is seen as, at best, an economic phenomenon and often with a strategic afterthought — and that's about it.

In our part of the world it's vastly different — as you could expect. Our friends and partners in the United States and allies see the rise of China, the rise of Asia, as both an economic and a strategic phenomenon which is deeply challenging the current order.

And for countries like Australia, this is a day-to-day strategic, economic, business, investment, environmental reality.

And it has been so for a long time.

So as a Western country in Asia, a G20 member, the fourth largest economy in Asia, a longstanding ally of the United States, we have a few perspectives on this, which I might share with you in a few points — four points really.

The first is that this profound shift, which Dr Kissinger mentioned in his opening remarks, in terms of the global centre of gravity is of historic proportions. These words roll off our lips very easily. The dimensions, the statistical dimensions of it, are reflected in my good Singaporean colleague's remarks just now.

But simply consider this: here in the decade in which we are, the second decade of the twenty-first century, it is likely that China will become the largest economy in the world, by either measure. Secondly, there is analysis around, credible in its source, that in absolute quantitative terms, China's absolute military expenditure may pass that of the United States by about 2025.

Thirdly, if the transition of China to the world's largest economy occurs in the decade ahead, which we believe it will, because what we see is compounding growth, on compounding growth, on compounding growth, and quantum change occurring before us, then this will be the first time in 200 years that the world will have a non-democracy as the world's largest economy. It will be the first time in about 400 or 500 years that a non-Western country will be the world's largest economy.

The reason I make these stark points in a gathering such as this here in the heart of Europe and the heart of Germany is that this is of profound global consequence. It's not just to us who are part and parcel of this region.

Let me just give one example. Senator McCain spoke just before of the longstanding liberal internationalist values which underpin the architecture of the post '45 global order. They exist. These are the norms by which we seek to live by in the international community of nations. But we're about to have, through the emergence of not just China but other emerging economies as well who will not necessarily share — by instinct, and by tradition, and by historical circumstance, and by culture — each and every one of those values. It is therefore an open question to the international order to think about how this will settle. And therefore, it is something that all of us should think about and be engaged on, whichever continent we come from.

The second point I wanted to make is that Asia, this economic phenomenon, this compounding growth that we have seen — certainly with its own vulnerabilities contained within in it — occurs in a hemisphere which is replete with every conceivable strategic instability known to man.

Put it this way: we have the hopes of the twenty-first century global economy riding on a set of security arrangements in Asia which are positively nineteenth century in their character.

We have so many unresolved security disputes of a territorial nature. The Korean peninsula we are all familiar with: it is the world's most heavily armed zone as we speak. And with leadership transition and the rest, we all know what the scenarios could or might be, and we hope none of them come to pass.

But that's one. Go down the coast you have, obviously, the unresolved question of the Taiwan Straits, you have unresolved territorial claims in the South China Sea involving multiple states. Then if you swing around to the rest of Asia and go to the Indian sub-continent, the unresolved disputes between India and Pakistan.

Many of these disputes involve nuclear weapons states and/or those who are in the process of nuclear weapons proliferation — North Korea, Iran. My overall point is: the strategic circumstances in which this phenomenal growth is occurring are of an inherently fragile nature. My friend and colleague from Singapore said just before, quite accurately, the strategic undercurrent felt for the last half century plus has been the underpinning strategic presence of the United States.

That, in reality, is now open to challenge. The challenge is unfolding. But the core point is this: we have a deep interest as a region and as a global community in making sure that this growth phenomenon is not undermined by a profound strategic event. If it does, the impact on the global economy — including markets here in Europe, including investment flows, including everything else, including the transhipment of goods and services through the Straits of Malacca, the South China Sea etcetera — will have profound consequences to the future of business operations in this city of Munich, quite apart from the other cities of Europe and the other cities of the West.

My third point is this. How can we therefore given this reality construct a Pax-Pacifica which actually works? How can we learn from the experience of Europe over a troubled century just past? How can we learn from the post-'45 and post-'90 experience of Europe in our part of the world?

Of course China has legitimate aspirations as a country which has been through a century plus of Western humiliation represented by imperial powers, all of whom are in this room today. This is writ large in the political consciousness of China today. It really is.

I mean China sees itself rising in part as a reflection of its own legitimate search for national sovereignty, given that from the Opium Wars until the 1940s it did not have that.

How do we accommodate that in a way which is reflecting of the US continued strategic engagement in Asia so welcome by so many of the states of the region, including my own, and therefore underpin the stability which we need for the future?

I think there is a way through this.

And again, reference has been made to it through the emergence slowly of the region's architecture. The expansion of the East Asian Summit, which occurred last year, to include for the first time the United States and Russia, does this. For the first time in the history of Asia we have every major power around a common table at Head of Government level with an open agenda on security and economic questions now meeting every year. That has never happened before.

The opportunity now to engage on what we describe as the unfolding of common security concepts in Asia just now starts to emerge.

Will it deal with so many of the real politic questions that we are all familiar with as hardened security policy analysts in this room? Probably not.

But will help create a different culture of common security in a manner consistent with China's legitimate national aspirations? Well, it may well do so.

For the first time I believe we have a way through, which didn't exist before. Prior to that, we basically had a world dominated by a series of von Clausewitz's scholars with colliding billiard balls, one of whom could go off at any time. This provides us with a new opportunity.

My final point is this. Here in Europe, this continent has largely been missing in this debate. This should no longer be the case. This continent of Europe has so much to offer by way not of just of its experience, but by the potential of its common security and foreign policy voice beyond the continent itself, to help shape this emergence of a sense of common security across wider Asia.

The danger that I see in Europe, and many in Asia see in Europe, is Europe progressively becoming so introspective — and so preoccupied with its internal problems on the economy and of the Eurozone in particular — that Europe runs the risk of talking itself into an early economic and therefore global political grave.

We don't want that. We actually think Europe has fundamental strengths to deliver to the rest of the world, but we're not seeing a whole lot of that right now.

Thank you very much.

ENDS

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