"The Evolving International Environment and Australia's National Interest"

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

Canberra, 26 November 2003 

I am delighted to have this opportunity to speak at the first conference organised by the Lowy Institute.

I should like to congratulate Frank Lowy for the vision, public-spiritedness and generosity he has demonstrated in establishing the Institute.

My purpose today is to describe from the perspective of a policy adviser what I see as the main characteristics of the contemporary international environment, and how these affect Australia’s interests.

I should also like to describe some of the strategies the Government has developed to respond to this fluid and challenging environment.

As a preliminary step, let me make some general observations about Australia’s interaction with the international environment.

First, I believe that successful execution of Australian foreign policy must start from a realistic view of how the world works, and of Australia’s place in it.

Secondly, I believe we need to recognise that there is a close interplay between Australia’s domestic strengths as a country and the success and effectiveness of our international policy.

Thirdly, I think it is important to recognise that the Australian national interest is something that is defined by the Australian Government and the Australian people.

The national interest is not static, nor can it be defined in a mechanical way.

It depends in part on prior strategic choices we have made, and is informed by the view we have of ourselves as a country, and by what we want to stand for.

Finally, I believe we need to recognise that Australia’s interests are global in scope and character, and that some of our interests are defined by geography and some are not.

The following examples help remind us of the spread of Australia’s interests around the world.

Australia has a long history of active political, military and economic engagement with Asia.

Currently, around 56 per cent of our merchandise exports go to Asia.

The United States is by far our most important defence and intelligence partner, and we see the United States' strategic presence in the Western Pacific as making a vital contribution to regional stability.

Australia’s top five two-way trading partners are the United States, Japan, China, the United Kingdom and New Zealand, in that order.

The top three direct investors into Australia are the United States, the United Kingdom and Japan.

And the top three overseas destinations for Australian direct investment are the United States, the United Kingdom and New Zealand.

Over the past five years, China has been our fastest-growing major country market, and the Middle East has been our fastest-growing regional market.

All these strands work together –and combine with other linkages and interests –to define our stake in the international system.

International Environment

In my view, one of the most important factors defining the contemporary international environment is globalisation of the world economy.

We all know there have been past periods of high levels of interdependence in terms of trade and investment flows, especially between Western Europe, the Americas, parts of Asia and Oceania.

The decade immediately before World War I is often cited as a previous peak of globalisation.

But by the year 2002, cross-border trade had reached 24 per cent of world output, compared with 18 per cent in 1914.

And international financial flows have never been bigger as shares of GDP.

Thanks to the computer-based revolution in information and communication technology, another thing that distinguishes the current period from past phases of globalisation is that we now have almost instantaneous flows of information about market conditions and political events around the world.

And the geographical spread of globalisation is now much greater as Russia, Central Europe and China become progressively integrated into the international trade and financial systems.

Faster and cheaper transport and communications and high levels of economic interdependence all combine to give a growing sense of connectedness between many countries in the world.

At the same time, the ongoing process of globalisation can have profound consequences for the international standing of countries.

Its disciplines of competition reward those with open policies and sound political, legal and economic institutions –and disadvantage those without.

There are no grounds for Australia to be complacent, but our strong economic performance over the past decade –in the face of the East Asian financial crisis and other international challenges –gives us confidence that we have the policy and institutional credentials to succeed in an era of globalisation.

The strategic implications of globalisation are complex and, in my view, warrant more careful analysis than they seem to receive.

There are several observations I should like to venture.

First, the unprecedentedly high levels of economic interdependence among all but the least developed countries of the world generate an increased shared stake in international stability and predictability.

This does not mean there will be no more wars between nation-states, as indeed we have been reminded this year in Iraq, but the likelihood of war between the vast majority of states that we might regard as being in the international mainstream is probably significantly reduced.

Secondly, greatly improved communications mean that international awareness of wars, civil strife, disorder, large-scale abuses of human rights, and natural disasters in even the most remote parts of the world is much greater than before.

In at least some cases, this increases the possibility of intervention by the wider international community.

Thirdly, globalisation tends to break down the traditional distinctions between foreign relations and domestic affairs.

For example, the European Union’s Common Agricultural Policy has been developed for domestic reasons, but has a profound impact on Australia’s agricultural trade interests.

And as protection recedes from the border, demand is growing to include domestic regulatory issues such as competition and investment in international trade agreements.

And fourthly, despite all the benefits that globalisation undoubtedly provides, the same process perversely increases, through its very openness, our vulnerability to terrorism and other transnational crimes, and provides easy access to technology and communications that increases the capabilities of the perpetrators of these crimes.

It should also be noted that, as a consequence, dealing with terrorism, people-smuggling and other transnational crimes is increasingly becoming part of core business in contemporary foreign policy.

Another important characteristic of the international environment is the economic and military pre-eminence of the United States in world affairs.

The United States accounts for around one-third of global output; its defence budget exceeds that of the next nine countries combined; and there is nothing to suggest that it will lose its technological edge any time soon.

This is hardly a new phenomenon, but the distance we have travelled since the end of the Cold War helps set United States ascendancy into sharper relief.

The terrorist attacks of 11 September 2001 have galvanised the United States into a much more assertive posture in responding to threats to its own and international security, as we have seen in the war on terrorism and the war in Iraq.

Given the prospect that the pre-eminent position of the United States is likely to hold for a long while into the future, it is not surprising that the outlook for strategic relations between the United States and other major powers is relatively stable and favourable.

There is still scope, of course, for serious diplomatic disputes and tension between the United States and other major powers.

We saw that earlier this year in the serious disagreement between the United States and the United Kingdom, on the one side, and France, Germany and Russia, on the other, over the question of how to deal with the challenge posed by Iraq.

But what distinguishes our times from the periods of strategic confrontation that characterised the Cold War is a relatively stable and favourable outlook for relations between the United States and other major powers at the basic strategic level.

A further characteristic of our times that I should like to highlight is China’s growing economic, political and strategic weight.

This has been rightly described as the single most important strategic trend in the Asia-Pacific region.

And, as the recent course of our bilateral relationship with China shows, this is clearly a positive development for Australia.

China’s accession to the WTO, its support for the war on terrorism and its key role in the North Korea six-party talks are all positive signs that it takes seriously its international responsibilities as a major power.

China also recognises that a constructive relationship and economic engagement with the United States are vital to its efforts to build its economy and international influence.

While China competes with the economies of South-East Asia for foreign direct investment, it is also becoming an increasingly important market for their exports.

On current trends, China will, in the next few years, overtake Japan as the world’s third largest trading nation.

Certainly the current, relatively favourable outlook for US-China relations provides an optimum context for the advancement of Australian interests in East Asia.

Some commentators have suggested that the United States and China are merely undergoing a pause in their strategic competition.

Time will tell whether competition will resume in a serious way, but for my part I have been impressed over the past several years by the commitment of both Washington and Beijing to manage their relationship responsibly and constructively, including with regard to the difficult issue of Taiwan.

Security Challenges

Set against these underlying positive trends in the international environment, there are three major challenges which are central to the Government’s current concerns:  international terrorism, the proliferation of weapons of mass destruction, and the instability and threats caused by weak and failing states.

Terrorism has, of course, been with us for a long time and has had many forms.

What distinguishes Al-Qaeda and associated groups motivated by Islamic extremism is their ruthlessness, the sophistication of some of their attacks, the international spread of their networks and activities, and the ambition of their apparent agendas.

The Al-Qaeda attacks on the United States on 11 September 2001 gave the fight against terrorism an urgency and prominence that it had long deserved, but had not received in the past –to our great and common misfortune.

The Bali terrorist attack in October last year removed any residual complacency that we or our region might somehow escape this threat.

And the recent appalling attacks in Istanbul demonstrate again the virulence of the terrorist threat and the indiscriminate nature of the death and suffering it causes.

There is strong international resolve to wage war on terrorism.

Globally, Al-Qaeda has been disrupted and diminished, but  not yet defeated.

It still has the capacity to finance, plan and launch attacks, either on its own or in support of surrogates.

In two years, over 3000 terrorist suspects have been detained in more than 90 countries, and nearly USD 200 million in terrorist assets have been frozen.

In our own region, cooperation with our neighbours has seen terror attacks prevented, terror networks disrupted and terrorists arrested and convicted –including many of those responsible for the Bali bombings.

But even though we have achieved this important progress, victory in the war against terrorism is going to require a sustained effort over a number of years.

And in South-East Asia in particular, disrupting the activities of regional terrorist groups like Jema’ah Islamiyah will be a long and difficult process.

Interest on the part of terrorists in acquiring weapons of mass destruction has also given the cause of non-proliferation a new urgency.

In Australian foreign policy, contributing to the international effort to check the spread of weapons of mass destruction has been a long-standing priority.

We have recognised all along that the more states there are that acquire these weapons, the greater the incentive for others to acquire them, and the greater the likelihood that they will eventually be used, including by terrorists.

An overriding objective of Australian policy has been to do everything possible to avoid the introduction of weapons of mass destruction into our immediate region.

We recognise, of course, that proliferation, like terrorism pays no respect to international or regional borders.

These considerations have led Australia to be an active and consistent supporter of multilateral non-proliferation regimes, underlined by the singular contributions we have made over the years in support of critical normative instruments such as the Comprehensive Test Ban Treaty, Chemical and Biological Weapons Conventions, and the Nuclear Non-Proliferation Treaty.

It was against this background that we strongly supported the UN Security Council’s 12-year effort to remove and verify the removal of Iraq’s weapons of mass destruction.

When the UN effort faltered, we joined the war in Iraq to remove the proliferation threat.

Similarly, Australia has been active in supporting diplomatic efforts to address international concerns about the nuclear programs of North Korea and Iran.

And we are a leading participant in the Proliferation Security Initiative which is designed to check illicit trade in weapons of mass destruction technology and materials, and in the missiles that deliver them.

Another bitter lesson from 11 September 2001 is that the economically developed world neglects at its own peril the impact that failed and failing states can have on international security.

Afghanistan demonstrated the key role that such states can play in providing shelter and support for terrorist networks.

But terrorists are not the only groups that find a home in failed or failing states.

The smuggling of people, the laundering of money and the trafficking of drugs and weapons are all made easier in states whose legal and political systems have ceased to operate.

And even in cases where states are not on the verge of failure, weak governance and institutions can have an impact on neighbouring countries and regional security.

Australia’s Policy Strategies

Let me now describe briefly some of the main strategies with which the Government is seeking to advance and protect Australia’s interests in the context of this environment.

The Government is making the most of the unprecedently close relations we have with the United States to build the basis for an even stronger and more vibrant partnership in the future.

Part of this effort involves steps to strengthen further the close intelligence partnership we enjoy with the United States.

We also attach high priority to strengthening the inter-operability of our defence forces with those of the United States, to enhancing ADF capabilities through exercises and training with US forces, and to ensuring Australian access to highly sophisticated US military technology.

At the same time, Australia and the United States are engaged in the negotiation of a free trade agreement, which is one of the most significant policy initiatives we have undertaken during the past decade.

If successfully concluded, the FTA will provide improved access and greater certainty in the US market to Australian exporters, including agricultural producers.

It will make Australia a more attractive destination for US investment, and stimulate closer business alliances and synergies.

The Government is also active in looking for ways to further strengthen our excellent relations with Japan, China and the Republic of Korea.

Japan remains our largest export market, and is a key interlocutor in our diplomacy.

Last July, in Tokyo, Prime Ministers Howard and Koizumi signed a Trade and Economic Framework which charts a course for the future development of our trade and economic ties with Japan.

We welcome the responsible and more active contribution Japan is making to international security, especially in East Timor and in the war on terrorism.

Last month’s visit to Australia by Chinese President Hu Jintao confirmed the very positive outlook for the bilateral relationship with China.

During the visit the two Governments signed a trade and economic framework which includes the significant undertaking to conduct a joint feasibility study into a bilateral free trade agreement.

Meanwhile, the Government is giving particular priority to supporting the Australian LNG industry’s effort to expand its exports to all three major North Asian economies.

Australia has major security, economic and diplomatic interests in South-East Asia.

This considerable stake in South-East Asia’s future stability and prosperity is heightened by our interest in doing all we reasonably can to help our neighbours defeat the scourge of terrorism.

Since February 2002 we have put in place a network of bilateral counter-terrorism arrangements that have strengthened practical cooperation with regional partners including Indonesia, Malaysia, Thailand, the Philippines and Cambodia.

In February next year, Foreign Minister Downer will co-host with his Indonesian counterpart, Hassan Wirajuda, in Bali a regional ministerial conference on counter-terrorism.

This conference will follow the excellent precedent set by the two ministerial conferences on people-smuggling that were co-hosted by Australia and Indonesia in 2002 and 2003.

More broadly in our bilateral relationships with South-East Asian partners, we place priority on consolidating a positive and mutually beneficial relationship with Indonesia, and developing further the strong links we already enjoy with Singapore and Thailand, as evidenced by the free trade agreements we have recently concluded with each of them.

Considered as a single entity, the European Union is Australia’s biggest trading partner and second biggest investment partner.

Recognising the increasing importance of the European Union in terms of its total political and economic weight and its ability to influence the multilateral agenda, we attach priority to strengthening our policy dialogue with Brussels and the major national capitals on a range of international security, foreign policy, trade and economic, and regulatory issues.

One motivation of this dialogue is to find ways of developing more influence on European decision-making on issues that directly affect Australian interests.

There are two aspects of our policy towards the Middle East worth highlighting.

The first is our contribution to the continuing effort to stabilise and rehabilitate Iraq after years of oppression and dislocation.

The difficult security situation obviously poses major constraints, but the work of our military personnel and civilian experts in various fields is significant and worthwhile.

The second is the priority we attach to expanding Australia’s already substantial commercial relations with the region, especially the Gulf countries.

The most prominent example of Australia’s effort to address the prospect of state failure and institutional weakness in the South Pacific is the leading role we are playing in the Regional Assistance Mission to the Solomon Islands.

This mission, which responds to a request from the Solomon Islands Government earlier this year, is designed to restore law and order and a better level of governance to that troubled country.

The early months of the operation have been highly successful, but we do not underestimate the difficulty of some of the tasks that still lie ahead.

The Government is also making a major effort with Papua New Guinea to improve its law and order situation, governance and financial management.

And more broadly in the South Pacific, we are actively supporting efforts to strengthen regional institutions including, where appropriate, promoting the pooling of resources, to ensure services are both deliverable and sustainable.

Reflecting in part significant changes in the overall international trade policy environment, Australia is now engaged on the most active and ambitious trade policy agenda in our history.

Compared with the commencement of the Uruguay Round in 1986 when the GATT had 92 members, its successor, the World Trade Organisation, now has 148 members.

Because most of these new members are developing countries, the current Doha Round of multilateral trade negotiations quite naturally gives greater prominence to developing country concerns and interests than did the Uruguay Round.

The dynamics of the negotiations have become more complex with such a marked increase in membership, and the agenda is further complicated by the introduction of relatively new issues such as competition policy and trade and investment.

In Australia’s trade policy, we accord primacy to the WTO multilateral process because it has the capacity to deliver the biggest and widest gains for international market access over time, and because it is the only means by which to tackle the damaging farm subsidies of Europe and the United States.

And, of course, the system of rules and disciplines that the WTO provides for the global trading system is simply indispensable protection for a country like Australia.

We are currently working hard with others in Geneva to achieve a positive outcome in the Doha Round, particularly on agriculture, despite the major setback at the September Ministerial Meeting in Cancun.

Past experience tells us that perseverance and commitment are necessary.

In line with a broader international trend, Australia is also pursuing bilateral free trade agreements with selected partners where these offer the prospect of significant gains ahead of what will be achievable in the WTO process.

As already mentioned, we have recently concluded high-quality and comprehensive FTAs with Singapore and Thailand, we are deeply engaged in the negotiation of an FTA with the United States, and we shall soon commence a joint study into the feasibility of an FTA with China.

APEC is another area of our trade policy activity which has evolved in new directions.

The annual Leaders’Meeting has acquired considerable vibrancy as a high-level forum for addressing current issues with an increasing focus on terrorism and other security matters.

The Bangkok Declaration issued at the end of the last Leaders’Meeting in October contained calls to defeat transnational terrorist groups, contain the proliferation of weapons of mass destruction, and confront other threats to regional security including bio-terrorism.

The Bogor Goals for trade and investment liberalisation are still important organising principles for APEC, but negotiations to achieve the goals need to take place in the WTO or through bilateral channels.

The organisation does valuable work in promoting trade facilitation and in supporting open markets and capacity building.

In terms of regional architecture, a tacit complementarity is developing between APEC and the ASEAN Regional Forum which have broader membership including the United States, Canada, Australia and New Zealand, on the one hand, and the ASEAN+3 grouping which is confined to East Asian membership, on the other.

Criss-crossing these groupings are trading arrangements such as that China is promoting between itself and the ASEAN countries, the free trade agreements that the United States has concluded with Singapore and is about to begin negotiating with Thailand, the trade agreement that Japan and Thailand are seeking to negotiate, and the various comprehensive free trade agreements that Australia has in place or is pursuing.

Conclusion

In conclusion, let me say that I think Australia’s international standing is currently high.

This reflects a combination of factors including a strong economic performance over the past decade, our leadership role in East Timor, highly professional contributions by our military personnel in the war on terrorism and the war in Iraq, our active trade policy agenda, and the regional intervention we are leading in the Solomon Islands.

Underpinning these particular outcomes are institutional and organisational strengths which I believe give Australia a comparative advantage in responding to a fluid international environment.

As I have already noted, we have the policy and institutional attributes to succeed in an era of globalisation.

So-called whole-of-government coordination is much better than it used to be, and we have made considerable progress in improving government-private sector collaboration on international issues.

A further step in building Australia’s institutional capacity is the establishment of the Lowy Institute.

I wish you every success in your work.

Thank you.