2017 Japan Update

  • Speech, check against delivery

Good morning, I am delighted to be here – the 5th annual Japan Update – with such a distinguished audience.

I acknowledge Japanese Ambassador Sumio Kusaka, Vice Chancellor Brian Schmidt – thank you for the introduction – and Chair of the Australia-Japan Foundation Murray McLean, a great friend of Japan.

I also make particular mention of Professor Peter Drysdale who has done so much throughout his career to deepen our understanding of Japan and of the regional economy.

Ladies and gentlemen, five years ago, I addressed the first Japan Update over dinner which was attended by then Bank of Japan Governor Masaaki Shirakawa.

It is fitting that Bank of Japan chief economist Toshitaka Sekine is here to address the audience today.

The Japan Update has become the peak academic gathering on Japan and the event has increased in profile and relevance each time it has been held.

This gathering does represent ANU's deep expertise on Japan and the University's ability to draw the best thinkers on Japan from both our countries to deepen the level of collaboration.

It also serves as an important forum to advance our appreciation for developments in the Japanese economy, Japanese society, politics and foreign relations.

The discussions during the Japan Update are important and deserve to be publicised and disseminated widely, and it is notable that the issue of the East Asia Forum Quarterly is dedicated to Japan with themes and topics based on Japan Update each year.

Good foreign policy is never formulated in a vacuum. It is made better by the collective efforts of and debates amongst experts and commentators including those who are here today.

I am particularly pleased that several of the speakers on the program will visit Western Australia and bring the Update to my home city of Perth later this week.

With our friend Ambassador Kusaka in attendance, I take the opportunity to acknowledge the important support that Prime Minister Shinzo Abe has given to the ANU in the study and understanding of Japan when he visited Canberra in 2014.

During that visit, Prime Minister Abe announced a $1 million program to support the Australia-Japan Research Centre which is enhancing policy development and collaboration between the two countries.

This is on top of the earlier investment that both governments and business communities made in the 1980s to establish the Centre.

One initiative of note is the collaborative effort between the Centre and the Japanese Government and academics to develop a HECS-style income contingent loans scheme in Japan, and I know Brian is particularly involved in that initiative.

This is just one example of the policy innovation in education that is occurring between our two countries.

Australia-Japan relations celebrates a significant milestone this year.

2017 marks the 60th anniversary of the Commerce Agreement between our two countries.

The relatively simple title of "Commerce Agreement" doesn't do justice to its importance.

What may appear today to be an uncontroversial event in the history of our bilateral relations was anything but six decades ago.

In 1957, the Commerce Agreement had fierce critics.

The decision to normalise trade between our two countries took political and moral courage.

The tumultuous events of the 1940s were still fresh in the minds of populations in both countries.

However, the Australian Government, led by Sir Robert Menzies, and the Japanese Government, led by Prime Minister Kishi were determined to look to the future and not to be constrained by the past.

It was a visionary act that has had an extraordinary impact on our nations.

The Agreement became the cornerstone of the strong bilateral partnership between our two countries.

It formalised and entrenched the shift toward Japan as an important export market and source for manufactured imports.

Rarely do acts of courage by political leaders pay such handsome dividends so soon after.

Just one decade after its signing, an economically rising Japan overtook the United Kingdom to become Australia's largest export market while Australians became accustomed and wanted cheaper and high quality Japanese goods.

Japan remains one of our largest trading partners and is the fourth largest source for foreign direct investment into Australia.

The simply named Commerce Agreement was not just ahead of its time in a bilateral sense.

Japan was then in the middle of pioneering the aptly named East Asian model of rapid economic development based on attracting foreign capital into one's economy, producing or else assembling exports cheaper, efficiently and more reliably than competitors, and developing the know-how and entrepreneurial spirit domestically in the process.

Subsequently, South Korea, Taiwan, Singapore, Hong Kong, Malaysia, Thailand and the Philippines all adopted similar approaches.

More recently, China has learnt and benefitted enormously from Japan's experience.

India, Indonesia and Myanmar are destined to do the same.

Since the late 1950s, we have witnessed the largest and most rapid alleviation of poverty in human history throughout our region.

When we signed the 1957 Agreement, East Asia and Australia accounted for approximately 10 per cent of global GDP.

Our region now accounts for around 27 per cent of global GDP and that could be as high as 40 per cent in a decade's time.

Having been a regular visitor to Japan as Foreign Minister, I am also invested in the Australia-Japan economic relationship in a rather personal way.

In February, I visited Goeje in South Korea to inspect the $43 billion Ichthys LNG project which is the largest ever overseas investment by a Japanese firm.

During that visit, I was honoured to be named godmother of the Ichthys Explorer Central Processing Facility which is the largest semi-submersible structure in the world – an enormous 130 metres by 120 metres – now that is some godchild!

The construction phase alone created more than 10,000 Australia jobs.

The Ichthys Explorer now sits some 220 kilometres off the Western Australian coast and will be managed by INPEX from Perth.

When fully operational, the Ichthys LNG Project will produce up to 8.9 million tonnes of liquefied natural gas, with 70 per cent sold on long term contracts to boost Japan's energy security.

This project is a great example of how governments, firms and individuals from our two countries work together for our collective greater well-being.

Our two countries have learned how best to grow our respective economies through two-way trade and investment.

Deepening economic relations go hand-in-hand with greater respect for rules and international law, without which trust and transparency between countries is not possible.

Australian and Japanese voices in the region matter greatly and are especially important at the present time.

The case for the international rules-based order needs to be made and re-made at a time when alternative approaches – or instances when international law is being ignored – are on the rise.

This order is one designed to protect the rights of larger and smaller countries alike.

It does not pre-determine the winners of the international system or entrench advantages for the privileged few.

The order regulates competition and protects nations from coercion and intimidation by stronger powers.

It allows nations to legitimately advance their interests and resolve disagreements amicably whenever they arise.

Japan's remarkably peaceful and prosperous rise after the Second World War is a constant reminder that the international rules based order is worth preserving.

Japan has become our closest Asian strategic partner.

As allies of the United States, we are both vocal champions of the liberal rules-based order as the foundation for peaceful development and greater prosperity.

We elevated our bilateral relationship to that of Special Strategic Partners in 2014 and I meet regularly with my counterpart, first Foreign Minister Kishida and now Foreign Minister Kono, to discuss ways we can pursue our interests and support the region's common objectives.

Our conversations are always warm, frank and constructive.

In Manila last month, and on the sidelines of the East Asian Summit Foreign Minister's meeting, I met with Secretary of State Tillerson and Foreign Minister Kono during our annual Trilateral Security Dialogue to discuss how our three nations could best approach challenges in our region.

These challenges are substantial, and the Prime Minister and I have been in recent contact with our Japanese counterparts to discuss the behaviour of North Korea, its illegal missile and nuclear programs, and the threat they pose to Japan, Republic of Korea, our allies and friends in our region, and the threat to peace and stability – and of course it was brought into even sharper focus this week following Pyongyang's sixth illegal, and most powerful, nuclear test which continues its history of defiance of UN Security Council resolutions and international law.

Other challenges include managing maritime disputes peacefully, without coercion, and in accordance with international law; and preventing extreme Islamic groups from gaining an enduring foothold in Asia.

The agreement and understanding between our two countries in terms of meeting these challenges and the outcomes we seek are genuine.

That stems from our common interests, values and the remarkably similar way our governments and people view the world.

There was strong agreement that Asia cannot take economic growth for granted, including in the face of the technological revolution in automation, artificial intelligence and the Internet of Things that will modify how we live, work and create value – meaning economic models will change.

Another important factor that Japan knows better than probably any other country, is that demographic challenges from population ageing are growing and we must prepare for them.

Many of these developments will be disruptive and unsettling.

However, the opportunities for countries that innovate and adapt are considerable.

As markets change and how we work and add value is modified, innovative economies with skilled people in countries with strong institutions will thrive.

In periods of uncertainty and constant change, our close partnership with Japan in all matters makes even more sense.

Australia and Japan are leading advocates for freer and more open trade.

The economic history of this region provides compelling evidence that free and open markets generate opportunity and will lead to greater prosperity as it allows countries to focus on and excel on what they do best.

Even so, the reasons for continuing to open and liberate markets need to be made and re-made to all our economic partners in Asia and beyond.

Protectionism is not a distant problem, and has arguably found a resurgence in some populist policy platforms.

As has become common with respect to our two countries, Australia and Japan have led the way.

The Japan-Australia Free Trade Agreement came into force in January 2015.

The Agreement is the most comprehensive trade agreement Japan has signed with any developed economy.

As it stands, over 98 per cent of Australia's merchandise exports to Japan are able to receive preferential access or enter duty-free.

Japan's private sector can now invest around $1 billion in non-sensitive Australian sectors without having to seek Foreign Investment Review Board approval. This is an increase from $252 million prior to our Free Trade Agreement entering into force.

Foreign direct investment represents a long-term bet in any particular economy.

We welcome Japan making ever larger long-term investments in the Australian economy.

Prime Minister Abe demonstrated immense courage and tenacity in persuading the Japanese Diet to ratify the Trans Pacific Partnership last December.

Australia and Japan are now championing the preservation of the principles underpinning the Trans Pacific Partnership, as these are the gold standard for free trade arrangements, and we are leading the way in exploring a framework for a TPP 11 in the region.

Our bilateral relationship goes much deeper than trade and investment, with growing cultural and community links.

Ever growing individual ties between Japanese and Australian are important to sustain the relationship.

To give a contemporary example, around 1,500 Australian undergraduates have chosen to live, study and undertake work experience in Japan under the first four years of the government's New Colombo Plan from 2014-17 – and I know that at least another 800 students will study in Japan next year under the New Colombo Plan.

This is a significant diplomatic and foreign policy investment in our region, for by the end of 2018, just 5 years since the establishment of the New Colombo Plan, over 30,000 Australian undergraduates will have lived, and studied and undertaken work experience in one of 40 countries our region.

There will be powerful personal links between our young citizens that will endure over a lifetime. We are investing in the leaders of the future and we want them to know and understand and appreciate the importance of our bilateral relationship with Japan, and the importance of our place in the world – the Indian Ocean-Asia Pacific.

In 2019 and 2020, millions of visitors, including from Australia, will flock to Japan for the Rugby World Cup and Summer Olympic Games respectively.

These visitors will discover what I already know.

Japan is the paradigm of a modern, successful, prosperous, vibrant and free country in Asia.

With Japan and Australia as to shining examples, liberal-democracy is as successful in our region as it is in North America and Europe.

I trust the discussion for the rest of the day will be stimulating and productive.

I congratulate the ANU for hosting this excellent event each year as both our countries benefit greatly from the interaction.

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