Secretary's Speech: Australia's Foreign and Trade Policy Agenda

Sydney, 10 September, 2002

Address by Dr Ashton Calvert, Secretary, Department of Foreign Affairs and Trade, to the Sydney Institute

Introduction

I am delighted to have the opportunity to speak this evening at the Sydney Institute on Australia's foreign and trade policy agenda.

At the outset, I should like to congratulate Gerard Henderson, his wife Anne and their colleagues for their success in developing the Sydney Institute into one of our country's leading forums for public policy discussion and debate.

The Institute is widely admired for the quality and independence of its contribution to policy thinking in Australia.

International Environment

Before discussing some of the major themes in Australia's current external policy, let me provide a context for my remarks by highlighting some of the characteristics of the contemporary international environment, and by making some observations about Australia's place in the international system.

I think the best way to describe the international security outlook is to say that it is fluid and uncertain.

Tomorrow is September 11th - the anniversary of the horrific terrorist attacks on the United States that have changed our security environment in important ways.

The attacks underlined in forceful terms that threats to Australia's security can be global as well as regional, and that they can be facilitated, perversely, by the ease of communications and transport that has come with globalisation.

We are sobered in particular by the knowledge that links with terrorist organisations have been identified in South-East Asia and Australia itself.

The attacks of 11 September have galvanised the United States into a much more active and determined posture against terrorism and other threats.

And, as you know, Australian special forces are playing a valuable role serving alongside United States forces in the war against terrorism in Afghanistan.

Together with international terrorism, the spread of weapons of mass destruction, the intractable nature of the Israeli – Palestinian conflict, the risk of miscalculation by India and Pakistan in relation to Kashmir, and the potential for escalating tension on the Korean Peninsula or in the Taiwan Strait are all issues of serious concern.

Prominent among these concerns, of course, is Iraq's persistent defiance of the United Nations Security Council demand that it permanently eliminate its weapons of mass destruction.

Set against these negative factors, there are important entries on the positive side of the ledger.

Relations between the major powers are now, overall, more stable and harmonious than they have been for many years.

Part of this is a positive legacy of the end of the Cold War, and part of it reflects the pre-eminent position of the United States in world affairs.

It is instructive to note, for example, that the United States accounted for 33 per cent of world GDP in 2001 compared with 24 per cent in 1991, and that its defence spending now exceeds the defence budgets of the next eight countries combined.

These circumstances give the United States great capacity to shape the global strategic environment, and provide strong incentive for other major powers not to risk serious confrontation with it.

Russia's strategic cooperation with the United States and its progressive integration into European structures is a historic and positive shift.

In Asia, relations among the major powers are stable.

China's growing economic, political and strategic weight is the single most important trend in the East Asian region.

Overlaying and interacting with these security trends is the pervasive impact of the globalisation of the world economy, which has continued apace during the past decade.

Globalisation offers the possibility of great benefits to most countries.

But it also carries its own pressures and disciplines on governance and institutions, as we saw during the East Asian financial crisis of 1997-98.

Indeed, it is no exaggeration to say that the quality of a country's institutions and governance plays a large part in determining how well it succeeds in an era of globalisation.

Australia's place in the International System

Australia's place in the international system is a subject that regularly attracts lively debate among commentators.

And, overseas too, foreign governments and commentators find it difficult to classify Australia into any of the readily available groups.

This question will be taken up directly in the new White Paper on Foreign and Trade Policy, entitled “Advancing the National Interest”, that the Government intends publishing later this year.

In my view, it is important that we address this issue in confident, realistic and clear-sighted terms that encourage a mature and balanced view of Australia's place in world affairs.

The formulations we use also need to ring true to the wider Australian public.

The starting point, I suggest, is to recognize that the overall framework for Australian foreign and trade policy is global, reflecting the wide spread of our interests and relationships.

Some of our interests are defined by geography, others are not. 

Australia is comprehensively engaged with the countries of Asia because of shared interests.

Japan is our biggest export market overall, and East Asian countries account for seven of our ten largest merchandise export markets. 

We share with Asian countries a fundamental interest in the security and stability of the region, and collaborate closely with them on important strategic and foreign policy objectives.

In addition, Asian countries are important sources of investment and tourism for Australia, and a growing source of skilled migrants.

Australia is a leading destination for Asian students studying overseas.

So, quite naturally, close engagement with Asia is an abiding priority in Australian external policy.

We have important associations beyond Asia.

Our most significant alliance and security ties are with the United States, and our most important intelligence links are with the United States and Britain.

We share with the United States political values and cultural affinities.

Counting goods and services together, the United States is our biggest two-way trading partner.

It is also the most important source of investment into Australia, and the most important destination of Australian overseas investment.

But, if we want to consider the European Union as a single entity, it is our biggest two-way trade partner and our second biggest investment partner.

We have close people-to-people links and other significant affinities with many countries in Europe.

We have shared formative parts of our history with the peoples of Europe, the United States, New Zealand and Canada - experiences which remain assets in our international relations.

Maintaining a productive interplay between these two things – the imperative of close engagement with Asia, on the one hand, and the basic Western make-up of Australian society and its institutions and our wider international associations, on the other – lies at the heart of Australian foreign policy.

All these things are authentic elements of Australia's place in the international system.

A mature and creative approach to foreign policy should set as its objective maximising our interests in all of our significant relationships around the world.

I believe that the outward-looking nature of Australian society, the strength of our economy, the quality of our institutions and our diverse international linkages equip us well to succeed in a period of economic globalisation and international uncertainty.

Relationships with Asia

In line with the priority accorded Asia that I described earlier, relations with North Asia are very much at the forefront of Australian foreign and trade policy.

More than 40 per cent of Australia's merchandise exports go to North Asia, and the region is a locus of intersection of the strategic interests of the United States and other major powers.

Australia enjoys a longstanding and successful economic and diplomatic partnership with Japan. 

Even during the past decade – a period of economic and political drift in Japan – Australian exports to Japan grew by 65 per cent and account for four per cent of Australia's GDP.

Despite the continuing malaise in Japan's economy, its importance for Australian interests remains.

Japan is the world's second-largest economy and the largest in Asia by several magnitudes.

No country in Asia will supplant Japan's importance to Australia's prosperity for at least another decade.

During the visit to Australia earlier this year by Prime Minister Koizumi, he and Prime Minister Howard agreed that the two Governments should work together to identify opportunities to strengthen and inject new vigour and dynamism into our economic links.

In this process, Australia's objective is to conclude, if possible, a new trade and economic agreement with Japan.

Australia's security links with Japan are also becoming more important as the constitutional and political constraints on Japan's security policies are gradually loosened.

The Government is interested in strengthening our strategic dialogue and defence cooperation with Japan at a pace that the Japanese side is comfortable with and that takes account of continuing constraints.

Two weeks ago in Tokyo I led the Australian delegation to the first meeting of a trilateral security dialogue between the United States, Japan and Australia.

This meeting was further demonstration of the maturity and mutual confidence that characterises our relationship with Japan. 

The increasing importance of Australia's relations with China reflects China's steady economic advancement, and increasing standing in regional and international affairs.

This year we celebrate the 30th anniversary of the normalisation of diplomatic relations between Australia and the People's Republic of China – a period that has seen remarkable growth in all dimensions of the relationship.

Australian merchandise exports to China have doubled over the last five years to reach $7.8 billion.

China is Australia's fifth biggest two-way trading partner.

Our investment ties are relatively modest, but the strong complementaries between the two economies and China's accession to the World Trade Organisation should provide a sound basis for the steady expansion of both trade and investment links.

The Government is working with China at the highest levels to build a shared understanding of how we can manage relations in a way that makes the most of our shared interests, while acknowledging our differences in areas such as human rights and weapon-technology proliferation.

During the Prime Minister's visit to Beijing in May, he agreed with the Chinese leaders to promote the development of economic ties through a framework agreement to strengthen the long-term trade and investment relationship.

The successful tender to supply liquefied natural gas to China's first LNG project in Guangdong Province is a significant step towards establishing a long-term strategic partnership with China in the energy area.

This outcome is a particularly pleasing development in the relationship.

It is the result of a sustained joint government - industry advocacy effort led by the Prime Minister himself.

Our other major partnership in North Asia is that with the Republic of Korea, with which country we share well-developed economic ties and important security interests.

Korea's determined response to the East Asian financial crisis has revived the vitality of its economy, and sustained its place as our third-largest merchandise export market.

Australia supports the Republic of Korea's policy of engagement with North Korea.

A few weeks ago, a new Ambassador of the Democratic People's Republic of Korea presented his credentials to the Governor-General in Canberra.

In the period ahead, the Government will give consideration as to whether we shall re-establish an Australian Embassy in Pyongyang.

Another important Asian relationship which warrants particular emphasis is that with Indonesia.

The Republic of Indonesia's transition to a modern, inclusive and decentralized democracy – after 30 years of autocratic rule – is one of the most significant post-Cold War developments.

It is very much in Australia's interests to support this process.

We have a fundamental national interest in Indonesia's stability, unity and territorial integrity.

During the past two years, the two Governments have achieved considerable progress in overcoming the strains generated by the 1999 East Timor crisis, and in re-establishing a cordial and businesslike relationship.

The Prime Minister visited Jakarta last year, and again this February.

During the latter visit, the two Governments signed a Memorandum of Understanding on Combating Terrorism, which set a model for similar agreements that Australia has now negotiated with Malaysia and Thailand.

In late February, Foreign Minister Alexander Downer and his Indonesian counterpart, Hassan Wirajuda, co-chaired in Bali an important regional conference on people smuggling and related transnational crimes.

The conference involved ministers from 36 countries.

A further ministerial conference on people smuggling, again co-chaired by Australia and Indonesia, is planned for the first half of next year.

Next month, Australia, Indonesia and East Timor will join other neighbours in the inaugural ministerial-level meeting of the South-West Pacific Dialogue, which is a new forum for sub-regional cooperation.

The process of consolidating our important relationship with Indonesia has been assisted by strong commercial and people-to-people ties which continued to flourish despite a period of political difficulty.

Indonesia is our tenth-largest merchandise export market, and in 2000 was the largest source of foreign students in Australia.

Trade Policy Agenda

The trade and economic framework agreements that Australia is seeking to conclude with Japan and China are part of a broad-ranging trade policy agenda which is the most ambitious we have been engaged in at any time in our history.

At the centre of this agenda is our participation in the Doha Round of WTO multilateral trade negotiations.

Multilateral negotiations are accorded primacy in our trade policy agenda because they offer the best hope for better access for Australian goods and services to global markets.

The Doha Round is crucial for the liberalisation of trade in agriculture and food, which is still the most protected area of global trade.

An outcome on agriculture that meets the needs of Australia and other agricultural exporters, particularly developing countries, is crucial for the success of the round.

The complex agenda of the Doha Round goes beyond that of any previous round of negotiations, and the greatly expanded membership of the WTO will make the negotiations difficult.

As Chair of the Cairns group of agriculture exporting nations, the Doha Round will call for skilful and tenacious diplomacy from Australia.

The Government will be alert to opportunities to work with others, forming different coalitions on different issues.

Australia will play a significant role in helping drive forward the Doha Round by hosting on 14 and 15 November an informal meeting of Trade Ministers from around 25 countries representing a broad cross-section of the WTO membership.

The meeting will be chaired by Trade Minister Mark Vaile.  

He will work closely with his Mexican counterpart,

Dr Luis Derbez, who will host the fifth WTO Ministerial Conference in Cancun in September 2003. 

We expect that the November informal ministerial meeting will focus on developing country concerns - in particular the way in which Uruguay Round commitments have been implemented - as well as market access issues and the road to Cancun.

While the greatest trade benefits come from multilateral liberalisation, progress in the Doha Round and the implementation of its results could be slow.

The Government is, therefore, determined to pursue pragmatically the advantages that free trade agreements or other arrangements can offer Australia in parallel with our active participation in the Doha Round.

Such agreements can deliver market access gains faster than a multilateral round, and it is also possible for them to go deeper and further than the WTO.

Australia and Singapore are well advanced in negotiating a bilateral free trade agreement, which we hope to conclude before the end of the year. 

We have also recently commenced negotiations on an FTA with Thailand.

In parallel with these bilateral initiatives, Mr Vaile will sign later this week in Brunei a Closer Economic Partnership between ASEAN and Australia and New Zealand that will remove impediments to our trade and investment with the markets of South-East Asia.

And in APEC, we are developing new mechanisms to allow those economies which are prepared to move faster than others on trade facilitation and liberalisation to do so.

The other big item in our trade policy agenda is the proposed free trade agreement with the United States.

This is now a major policy objective for the Government.

The prospects of launching negotiations in the near future have become much clearer since the Bush Administration's success last month in obtaining approval by Congress of Trade Promotion Authority.

An FTA with the United States offers important gains to the Australian economy and exporters.

The Centre for Independent Economics has calculated that the benefit of increased access to the world's largest market and the removal of trade barriers would be worth up to $4 billion a year for the Australian economy.

More important over time would be the attraction of new investment, the intensification of commercial links, and the scope for greater business integration in areas such as innovation, research and development, marketing, and information technology.

An FTA with the United States could also have an important demonstration effect for other trade negotiations, particularly at the WTO, as part of what US Trade Representative Bob Zoellick has described as “competitive liberalisation”.

An FTA could be important, inter alia, as a defensive strategy to minimise any competitive disadvantage we could face as a result of US agreements with third countries, for example, in South America.

Finally, as Alexander Downer has argued in a recent speech, an FTA could help place our economic relations with the United States on the same footing as our political and security relations, including a structure to guide and manage potential problems and actual disputes, when they arise.

One criticism that is sometimes made against the proposed FTA with the United States is that it would mean we were turning our back on Asia.

With due respect to those people who advance this argument, I have to say that I think it is confused and mistaken.

An important point to note is that Australia has been pursuing free trade agreements with South-East Asian countries both collectively and bilaterally from well before we started the same process in earnest with the United States.

In 2000, the ASEAN countries – influenced by reservations by Malaysia – decided not to proceed with an FTA with Australia and New Zealand despite very positive recommendations from a feasibility study that we had all participated in.

Instead, it was agreed that we would conclude a more broad-gauged Closer Economic Partnership, which as I said earlier will be signed this week.

As already mentioned, bilateral FTA negotiations with Singapore and Thailand are currently under way.

And we would be delighted to negotiate FTAs with Japan and Korea if they ever showed any willingness to consider dismantling their protectionist barriers against agricultural imports.

So, it is totally unreasonable to expect Australia to hold back from concluding an FTA with the United States just because some partners in East Asia are not yet ready to do one with us.

Rather than turning our back on Asia, we are keen to conclude arrangements for freer trade and investment links just as soon as Asian partners are ready to join us.

The more basic response to this line of criticism is simply that, as I argued earlier, Australia – or for that matter any other country – will always want to make the most of each of its significant relationships around the world.

Singapore, for example, is well advanced in negotiating an FTA with the United States, and Japan is seriously contemplating one with Mexico.

The conduct of international relations should never be conceived of as some sort of zero-sum game.

Current Issues

My comments this evening have covered a sample of the mainstream business of Australia's foreign and trade policy.

The ground covered is in no sense intended to be comprehensive or even representative.

Time does not allow me to take up in detail the close and highly productive partnership that we enjoy with New Zealand, the more dynamic and forward-looking relationship that we are seeking to develop with India, the efforts that we and Brussels are making to develop a wider and deeper basis for cooperation with the European Union, our rapidly expanding commercial links with the Middle East, or our valuable bilateral and multilateral interaction with Latin American countries.

Before concluding, however, I should like to mention three subjects which will have particular salience in our external policy over the coming months.

The first is the challenge that Iraq poses to the international community by its persistent defiance of the UN Security Council.

The Bush Administration has made clear its position that doing nothing in response to Saddam Hussein's efforts to develop and deploy weapons of mass destruction is simply not an acceptable option.

This week, the United States will step up its effort to re-engage the UN Security Council and the wider international community on the question of how to respond credibly and effectively to Iraq.

Australia believes firmly that the issue is one for the UN Security Council to address and that that process should be tested thoroughly before military action is contemplated.

Foreign Minister Downer left today for New York where he will join the efforts of the United States and others to underline the seriousness of the situation.

The second issue is Zimbabwe, which has added significance in Australian diplomacy because the Prime Minister is currently the Chair of the Commonwealth.

The Government of Zimbabwe has rebuffed the Commonwealth, rejecting the independent report of the Commonwealth Observer Group on the March elections, and refusing to address crippling economic and social issues.

Australia has been at the forefront of countries pressing Zimbabwe for reconciliation and reform – so far to little avail.

As a result, the Prime Minister has said the Government may need to consider imposing sanctions against Zimbabwe in the foreseeable future.

The third subject I should like to flag for your attention is the South Pacific.

Many South Pacific countries face a difficult future.

The demands generated by ethnic and social tensions and rapid population growth are outstripping patchy economic progress.

In a number of countries, governance is poor.

The Government is now engaged with the new Papua New Guinea Government led by Sir Michael Somare, and will seek to encourage a realistic and effective response to the serious budgetary and other pressures that PNG faces.

We will also continue our efforts to help the Government of the Solomon Islands to establish better authority over a situation of lawlessness, and deal more effectively with chronic budget imbalances.

Australia will not turn its back on the South Pacific.

But we can only help effectively those governments which are ready to help themselves by tackling the problems of poor governance and economic underperformance.

Finally, in conclusion, let me mention again the new White Paper on Foreign and Trade Policy that the Government plans to publish around November.

The White Paper aims to present a confident and realistic articulation of Australia's place in the international system, and to explain the main strategic directions of our country's foreign and trade policy.

When the time comes, I commend it to your attention.

Thank you.