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OUTCOME 1: Australia's national interests protected and advanced through contributions to international security, national economic and trade performance and global cooperation

Output 1.1:
Protection and advancement of Australia’s international interests through the diplomatic network and Canberra-based activity

Output 1.2:
Provision of policy advice and analysis to portfolio ministers

1.1.1 & 1.2.1 North Asia

EFFECTIVENESS INDICATORS

Cooperation strengthened with Japan on strategic, economic and regional issues, consistent with commitments undertaken in the Australia–Japan Partnership Agenda.
Cooperation strengthened with China on economic, security, regional and consular issues through focused bilateral institutional arrangements and high-level visits.
Contribution made to stability in North Asia through strategic cooperation and dialogue, with particular focus on the Korean peninsula.
Access to markets for Australian goods and services in Japan, China, Taiwan and Korea improved in the priority areas identified in the Trade Outcomes and Objectives Statement 1999.
Australia’s economic relationships with Taiwan and Hong Kong developed further in close cooperation with Australian business.
Australia’s economic and trade performance supported through assessments of the impact, on the region and Australia, of developments in the Japanese, Republic of Korea and Chinese economies.
Human rights and democracy promoted in China through regular dialogue with the Chinese Government, targeted representations and support for an effective technical assistance program.

Overview

Australia’s relations with North Asia remained strong during the year. The Prime Minister visited Japan and South Korea, and the Chinese and South Korean presidents visited Australia, reinforcing the foundations of these important bilateral relationships. The department made a major contribution to these visits and promoted Australia’s economic, strategic and political interests in North Asia.

Five of Australia’s top ten merchandise export markets are in North Asia: Japan (1), Korea (3), China (5), Taiwan (7), and Hong Kong (9). North Asia accounted for 40 per cent of our total merchandise exports in 1999–2000. As North Asia continued its recovery from the East Asian financial crisis, the department advanced Australia’s commercial interests in the region, working closely with Australian exporters and investors and encouraging reform policies. Much was achieved on market access, though barriers remain. A major achievement was the sealing of a bilateral World Trade Organization (WTO) accession deal with China. Economic consultations with our North Asian partners focused on regional liberalisation and identified emerging issues. We also exchanged views on free trade arrangements with Japan and South Korea. At the same time, our economic links with Taiwan and Hong Kong continued to expand.

Two striking developments had implications for Australia’s security interests in North Asia: the summit between the two Korean leaders in June 2000 and the election of a new leader of Taiwan earlier in March. Like other regional countries, Australia has a vital interest in rapprochement on the Korean Peninsula and a peaceful resolution of cross-Strait tensions. The department played a central role in Australia’s resumption of diplomatic relations with North Korea and took every opportunity to encourage China and Taiwan to adopt a patient and cooperative approach to settling their differences.

Human rights remained an important issue in Australia’s relationship with China, attracting considerable public and parliamentary interest. The department made representations on specific cases and again led the Australian side in the annual human rights dialogue, which met for the third time.

Japan

The department strengthened Australia’s already close cooperation with Japan on a wide range of strategic, economic and regional issues. Visits to Japan by the Prime Minister, Mr Downer and Mr Vaile improved Japan’s understanding of Australia’s position on key issues and helped coordinate Australian and Japanese approaches to world affairs. Visits by the Secretary and other senior officials enabled wide-ranging strategic and international policy exchanges. Frank discussions focused on regional developments in East Timor, the Pacific and North Korea, and the roles of the United Nations, the WTO and APEC. In particular, our discussions helped pave the way for Japan’s generous contribution to the International Force in East Timor (INTERFET) Trust Fund, which in turn enabled developing countries to participate in the operation.

Australia’s then Ambassador to China, Mr Ric Smith, AO, at the opening of the Lotus House ‘street kids’ centre in Ulaanbaatar, Mongolia, in November 1999.

International economic issues continued to occupy a high place on the Australian–Japanese agenda. Officials from the two countries discussed their policy approaches to free trade arrangements, improving understanding of how these might affect regional and international trade. The department contributed to negotiating a joint statement on electronic commerce with Japan, which was issued by the Australian and Japanese Prime Ministers in July 1999. Among other things, the statement commits Australia and Japan to adopting common approaches on the regulation of e-commerce.

We worked closely with Japan in various forums, including APEC, to strengthen economic governance in the region, a prerequisite for long-term growth. We co-organised a seminar in Japan to discuss deregulation and competition policy, and facilitated a visit by a Japanese delegation to study our experience of micro-economic reform in the postal sector, which informed the Japanese Government’s consideration of postal liberalisation.

Resolution of Australia’s and New Zealand’s dispute with Japan over southern bluefin tuna fishing remained a high priority. The department contributed to outcomes aimed at conserving the tuna stock. Australia and New Zealand obtained provisional measures from the International Tribunal for the Law of the Sea limiting Japan’s catch. At the end of the year, the dispute was still before an arbitration tribunal formed under the auspices of the United Nations Convention on the Law of the Sea (see also sub-outputs 1.1.7 and 1.2.7).

For information on the activities of the Australia–Japan Foundation, see sub-output 3.1.2.

China

The department played a key role in expanding our cooperation with China on a broad range of economic, security, regional and consular issues.

The success of the state visit of President Jiang Zemin in September 1999—the first visit to Australia by a Chinese head of state—consolidated Australia’s value as an economic and political partner of China. The department was central to preparations for the visit and the negotiation of several memorandums of understanding on economic and legal questions, signed while President Jiang was in Canberra.

Nine visits to China by federal ministers, including Mr Downer and Mr Vaile, augmented the positive impact of President’s Jiang’s visit. The relationship with China has strong institutional underpinnings and this framework was further strengthened by securing China’s agreement to hold annual meetings of senior leaders and foreign ministers. This new annual cycle of meetings at the highest level reinforces the other elements of our dialogue with China, such as the Joint Ministerial Economic Commission, the Senior Officials Talks, regional security talks and the human rights dialogue.

The department negotiated a consular agreement with China, signed by Mr Downer on 8 September 1999 during President Jiang’s visit. The agreement provides a framework for consular relations and ensures improved conditions for consular assistance to Australians in difficulty (see also reporting against outcome 2). We negotiated a separate consular agreement with the Macau Special Administrative Region which was signed in December during the hand-over of sovereignty from Portugal to China. After many years of advocacy, including by ministers, we successfully gained the release of imprisoned businessman James Peng on 12 November 1999 and arranged his return to Australia. We also played an important role in negotiating arrangements, which came into effect on 28 December 1999, for eligible Australians to adopt Chinese children.

For information on the activities of the Australia–China Council, see sub-output 3.1.2.

Reflecting widespread community concerns about China’s protection of human rights, the department continued to press China to improve its human rights record, monitoring issues and making representations on specific cases such as Falungong followers, China Democracy Party activists, Christian leaders and individuals from ethnic minorities, including Tibetans.

The department led Australia’s participation in the third round of the human rights dialogue in August 1999. It served as a useful channel to underline Australia’s serious concerns. The meeting secured wider Chinese Government participation and more open discussion and, for the first time, included a visit to an ethnic minority area outside Beijing in the province of Qinghai. The Chinese and Australian Governments agreed to expand the Human Rights Technical Assistance Program, valued at around $1 million, funded by AusAID. This program is designed to promote greater respect for human rights and the rule of law through practical projects. Although China has made some progress, including a gradual improvement in its legal system, Australia’s concerns about China’s protection of human rights remain.

The Korean Peninsula

South Korea

President Kim Dae-jung’s visit to Australia in September 1999 and the Prime Minister’s reciprocal visit to the Republic of Korea (ROK) in May 2000 reinforced a close strategic dialogue between the two countries on regional issues, including the Korean Peninsula itself. The department played a significant role in the planning, organisation and briefing for both visits. Regular and close contact between officials complemented this high-level dialogue, underlining Australia’s support for the ROK’s policy of engagement with the Democratic People’s Republic of Korea (DPRK). These exchanges strengthened our cooperation on other matters of shared interest, especially APEC and the ASEAN Regional Forum (ARF), and supported UN efforts in East Timor, not least through a significant ROK troop contribution to INTERFET. The exchanges also enhanced our political and economic dialogue with the ROK, including on the scope for a bilateral free trade arrangement.

For information on the activities of the Australia–Korea Foundation, see sub-output 3.1.2.

North Korea

Working closely with key regional partners, the department contributed to the promotion of stability in North Asia through increased bilateral dialogue with the DPRK. Talks at senior officials level in Pyongyang covered regional security issues, encouraging the DPRK to join the ARF. Sustained efforts in this area culminated in the Australian Government’s decision, announced on 8 May 2000, to resume diplomatic relations with the DPRK. The region welcomed this development as a valuable contribution to the management and eventual resolution of regional tensions. We buttressed this outcome by securing additional financial support for the Korean Peninsula Energy Development Organisation and for humanitarian aid for the DPRK.

Economic relations with Taiwan

The department offered strong support for Australia’s important economic and people-to-people relationship with Taiwan by assisting with arrangements for the annual joint business councils meeting in Taipei in November 1999, including an unofficial visit by Senator Ron Boswell, Parliamentary Secretary for Transport and Regional Services. This meeting provided a forum for us to push for stronger joint action to boost low levels of two-way investment, and contributed to the conclusion of a commercial memorandum of understanding on the supply of Australian liquefied natural gas to Taiwan.

Economic relations with Hong Kong

The department worked to consolidate relations with the Hong Kong Special Administrative Region, consistent with our interests in its continued success as a regional base for Australian business. We worked with Austrade and Environment Australia to put together sporting and environmental business missions in May 2000. In facilitating these missions, we were able to highlight Australia’s interest in improving bilateral air services and to promote Australia’s strengths in sports services, smartcard technology, and niche environmental technology in the Hong Kong market.

Table 1. Australia’s regional trade with North Asia

	EXPORTS			IMPORTS
	1998–99 ($M)	1999–00 ($M)	TREND GROWTH 1994–95 TO 1999–00	1998–99 ($M)	1999–00 ($M)	TREND GROWTH 1994–95 TO 1999–00
Japan	16 566	18 800	2.5	13 587	14 138	4.1
ROK	6 320	7 615	4.7	3 894	4 311	17.9
Taiwan	4 203	4 687	8.3	2 978	3 244	5.0
Hong Kong	3 071	3 208	3.8	1 228	1 280	7.3
China	3 948	4 959	8.3	6 106	7 520	15.7
Other	16	21	18.6	16	14	–5.4
Total North Asia	34 124	39 290	4.3	27 810	30 508	8.2

Source: Compiled by DFAT from ABS data.

Market access in North Asia

In support of ministers’ own representations, the department pursued market access for Australian goods and services in Japan, China, Taiwan and Korea.

Our achievements in Japan included contributing to:

securing market access for citrus fruit, four additional mango varieties and raw oysters;
improving market access for building and construction materials, citrus juice and racehorses;
reduced chemical testing of Australian rice;
expediting Japanese approval to market a new Australian bionic ear; and
promoting Australia as a provider of aged care services.

We had only limited success in gaining greater access to Japan’s agriculture market, which remains largely closed to Australian and other foreign producers.

Figure 6. Australia’s merchandise trade with Japan

Our achievements in China included assisting:

an Australian bank to obtain approval to conduct local currency operations and two more Australian law firms receive licences;
the signing of two memorandums of understanding on mining and energy cooperation;
Australian suppliers to be well placed to compete successfully for the first Chinese liquefied natural gas contract;
the first Australian insurance joint venture to remove the last hurdle before commencing operations in China;
the conclusion of an interim quarantine understanding with China, averting potential disruption to Australian wheat and barley exports; and
wool exporters in obtaining Chinese approval to issue the general wool quota earlier in the year and to abolish the specific re-export quota.

However, the administration of the wool quota system remains flawed, and we have not yet persuaded the Chinese to conclude an animal quarantine agreement. Technical barriers remain in some other agricultural areas.

China’s accession to the WTO will be a significant event in international economic affairs. The department negotiated a bilateral market access agreement with China that contains a series of commitments by China to open its markets for goods and services and to regularise its treatment of Australian imports (see also sub-outputs 1.1.5 and 1.2.5).

In other efforts to develop Australia’s trade and investment relationship with China, the department assisted in the organisation of:

the Australia–China Trade and Investment Summit in Melbourne on 7 September 1999 (see sub-outputs 1.1.6 and 1.2.6);
a mission of 74 senior business representatives accompanying Mr Vaile on his visit to China in May 2000; and
an environment business mission accompanying the Minister for the Environment, Senator Hill, on his visit to China in May 2000.

Figure 7. Australia’s merchandise trade with China

In the Taiwan market, the department:

negotiated improved access for Australian food sector exports through a reduction in lobster tariffs from April 2000 and an agreement for the extension of global quotas for beef offal, pork cuts and pork offal, and chicken meat until June 2000, in advance of Taiwan’s WTO accession.

Figure 8. Australia’s merchandise trade with Taiwan

In the South Korean market the department, working with other agencies:

secured market access for Australian horticulture, citrus and seafood products;
made progress on improving access to the beef market through action in the WTO. Findings favourable to Australia about South Korea’s internal distribution system for beef in a recent WTO Panel Report will apply further pressure to South Korea to meet its liberalisation commitments. We made representations on industrial tariffs, but South Korea still asserts its discretion to adjust tariffs (within WTO-bound levels) on a six-monthly basis; and
through the Australia–Korea Foundation, encouraged collaboration between national quarantine services by supporting a visit by South Korean veterinary scientists to Australia, thus providing practical help to Australian food exporters (see also sub-output 3.1.2).

Despite some progress on particular issues, many other sectors in South Korea’s agricultural market remain closed to Australian farmers.

Figure 9. Australia’s merchandise trade with the Republic of Korea

Economic analysis

The department provided ministers and companies with comprehensive briefings on the Japanese, Chinese and Korean economies, examining their specific features and regional economic linkages. This analysis focused on market opportunities for Australian companies. We traced Japan’s emergence from a mild recession and the ROK’s remarkable recovery following the East Asian financial crisis, paying particular attention to its energy and resources sectors where ambitious restructuring and privatisation plans will affect major Australian exporters.

Analysis of reform programs in all three major economies underscored new opportunities for Australian services providers. Our assessments explained China’s continued economic growth and its decision not to devalue its currency. An analytical paper for Mr Downer and Mr Vaile outlined price and volume developments in our iron and coal trade with North Asia, highlighting the changes flowing from restructuring policies in all the major economies. Another assessment analysed the North Asian liquefied natural gas market from a strategic perspective, identifying our prospects for winning new contracts in China, Japan, the ROK and Taiwan (see also output 3.1, East Asia Analytical Unit).

Reporting against quality and quantity indicators and administered items commences on page 100.