Michael Hintze lecture

Mr Dennis Richardson, Secretary of the Department of Foreign Affairs

Sydney University

19 September 2012

I would like to acknowledge Michael Hintze for his generosity and vision.

Two disclaimers. First, I am giving this speech in my capacity as Secretary of the Department of Foreign Affairs and Trade. My next job is not relevant to it. Second, my remarks should be seen in their own right and not within the context of the White Paper on Australia in the Asian Century.

I want to say a few words about some of the broad changes in the world, with which I am sure you are familiar. I also want to say something about the United States, China and Australia and about Australia's broad approach to international challenges.

We have just lived through what the Head of the Office of National Assessments, Allan Gyngell, has described as the National Security Decade – a period in which most governments fundamentally revised their ideas of what national security is, who is responsible for it, and how it is done.

We now live in a world in which economic power – and all that flows from it in terms of strategic capability – is shifting from the Atlantic, where it has resided since the Industrial Revolution, back to Asia.

The reasons for the shift are complex, but boil down to the interconnected threads of the information revolution and the other technologies which drove the development of global supply chains and global finances, coupled with the shift in demographics.

This is the story of China's rise, which is now well known and documented.

China's rise was reinforced by the global financial crisis, and that crisis hasn't yet played itself out. Our biggest short term strategic uncertainty is the global economic outlook.

We are in unfamiliar territory. A world in which emerging economies are driving recovery while developed countries lag is one we haven't experienced before, and we don't know where it might lead.

We are also seeing big changes in the institutions the world uses to organise itself. Organisations like the UN and IMF are under structural pressure. And the WTO is struggling with paralysis in one of its pillars – trade liberalisation.

Newer forums like the G20 and proto-groups of the emerging powers like the BRICS reflect the changing order. But nothing is yet fixed and the system is in flux.

That leaves a gap in global leadership, with none of the new powers wanting to take on the sort of responsibilities for global stability and sustainability that have been mainly borne by the US since the Second World War. So we may need to adjust to a world where states end up competing less over who acts to shape the world, than over who manages to avoid the costs of doing so.

The Trans Pacific relationships involving the United States, China, Japan and India will play a big part in shaping the politico-strategic environment in which we, as a country, live.

The US-China relationship will be fundamental. The main point I would make here is that I believe many commentators in third countries underestimate the way in which China and the United States have managed to work together. There are obvious tensions between the two – that is inevitable – and we do see strategic rivalry. But neither Beijing nor Washington need to be told by others how important they are to each other and how important their relationship is to global and regional stability and prosperity. In recent years the US has developed a complexity of consultative machinery with China unmatched by any other country.

And where real difficulties and flash points have emerged both Washington and Beijing have been generally sensible, realistic and pragmatic in the way they have gone about seeking to manage their relationship.

This is not a statement designed to put an optimistic gloss on things – it is simply a statement of fact which is all too often overlooked.

We read a lot about Australia, China and the United States. In Australia, it is not uncommon to see discussion about the implications of the rise of China for our relationship with the United States. This often comes down to a discussion about the need for Australia to make a choice between our strategic relationship with the United States and our economic relationship with China.

I believe much of the discussion is simplistic and overstated. Our alliance with the United States is not up for sale. Since when does any country worth its salt auction its alliance to the highest bidder?

That aside, our relationship with the United States is much more than a defence and strategic alliance. The United States is our third largest trading partner, is our largest source of foreign investment and is the biggest destination for Australia's outward investment. Taking into account financial flows, technology transfers, academic and two way people movement, we probably have a broader and deeper relationship with the United States than with any other country but New Zealand.

Indeed, there is very much a three-way economic tie-up between the United States, Australia and China, with a portion of US investment and financial flows into Australia feeding into the development of our resources sector, which drives our main exports to China.

Equally, our relationship with China is more than the sum total of what we dig out of the ground and send to China to feed its urbanisation and development. It now encompasses growing two-way investment, educational and research links and people-to-people ties. And it encompasses developing defence ties, with the Australian navy one of the few to have conducted a live fire exercise with its Chinese counterpart.

Australia and China have extensive bilateral machinery involving over 30 forums covering both government and the private sector. However,the over-arching machinery remains underdone. That is something we are aware of and are seeking to remedy over time.

It is reasonable for commentators to think and speculate about choice articulated in the most stark terms. But that is not a basis for the execution of a country's foreign policy in the pursuit of its national interests. Interests may sometimes be able to be expressed in stark and unambiguous terms but the conduct of foreign policy is, inevitably in my view, pursued more often in colours of grey, than in black and white.

In my view, there has been a broad consistency in our policy approach to China since the establishment of diplomatic relations 40 years ago. Successive governments have sought to develop the relationship in all its dimensions.

Long before the term 'rise of China' became fashionable, Australian governments were actively thinking about it. When in the United States I would often remind audiences that as far back as 1989 the Australian government produced a watershed document by one of our most eminent economists and former Ambassador to China, Ross Garnaut. And the title of that document was bold and visionary:'Australia and the Northeast Asian Ascendency'

Today, there is a lot of public discussion about Chinese investment in Australia. But we should keep it in perspective. There are elements of the debate today that mirror the debate in the 1970s about multinationals (then largely American, British and European) and the debate in the 1980s about Japanese investment. I think the Chinese authorities understand that.

Australia has always been a country dependent on capital inflows for much of its development. That remains the case today. It is a national interest which normally wins out.

Being a friend doesn't mean you can't have differences of perspective. We have had, and continue to have, differences of perspective with China on human rights, some consular matters and some broader regional and global issues such as the South China Sea and Syria. We have robust exchanges with the Chinese on these and other matters, but the discussions are always mature and sensible. There is no requirement for us to change our perspectives, which are underpinned by a mix of values and interests, because of the depth of our economic relationship. I am not aware of other serious countries doing so. Why should we be any different?

Beyond China and closer to home, a country which matters much to us is Indonesia. Its transformation over the past 15 years has been remarkable. A big challenge for us over the next 10 or so years will be the psychological adjustment to a neighbour which, for the first time in our history will,in nominal terms, have a bigger economy than our own. At present, our political relationship with Indonesia far outstrips our economic relationship. That needs to change and constitutes a major challenge for us in both government and the private sector.

The rest of the region is also changing – I have not mentioned Japan, India, other countries in South-East Asia, Korea or the Pacific as my intention is not to do a tabulation of relationships.

The big question hanging off some of the global and regional changes to which I have referred is where do we stand and what are we doing about it.

The starting point is, I believe, a balanced sense of ourselves. We are not as small as we like to think of ourselves. It appears to be stuck in our psyche that we are a 'small country'. Compared to the United States and China and some of the other bigger players, yes; relative to many others no. Our challenge is not to punch above our weight, but to punch up to it.

Of the 193 countries that make up the UN, we are the sixth largest in land area, the 13th or14th largest economy and about the 50th most populous – in other words, of the 193 countries in the UN about 140 or so have a smaller population than Australia. We are in the top 20 in the world in terms of defence budgets and we are amongst the top ten aid donors in the world. We have a rich resource base, a highly educated population and an innovative private sector.

Challenges such as the current global economy and the high Australian dollar are well known. I am not seeking to diminish these and other challenges but simply seeking to highlight our underlying strengths. All too often, we underestimate our own strengths through our fixation on being 'small'.

How have we used our underlying strengths through the exercise of our diplomacy? In the broadest terms, we have sought to seek the establishment of global and regional machinery which bind in the really big players and which have us also at the table. The really big players often like to do things bilaterally as that is to their advantage. Countries like Australia don't like that and seek to bring them into a system in which we can also have a voice.

By and large, Australia's diplomacy has furthered our national interests pretty successfully. We have had failures along the way, but I think more often than not we have got it right.

Witness the role of the Chifley government in the establishment of the United Nations and the emergence of an independent Indonesia in the 1940s; the Menzies government and ANZUS, the Colombo Plan and the Treaty with Japan in the 1950s; the Whitlam government's establishment of diplomatic relations with China in 1972 and the establishment of our Dialogue relationship with ASEAN in 1974 – ASEAN's very first such relationship;the Fraser government's first Summit with ASEAN leaders in 1976; the Hawke government's modernisation of the relationship with the United States through AUSMIN in the 1980s, the formation of the Cairns Group in the context of the WTO, and the initiative on APEC in 1989; the Keating government's role in the establishment of the APEC Leaders' Meeting in the early 1990s and its Treaty with Indonesia in 1996; the Howard government's Treaty with Indonesia, East Timor, and its successful work on membership of the EAS; the Rudd government's role in the establishment of a G20 Leaders' Meeting in 2008 and the Gillard government's significant expansion of the relationship with India.

A common thread through some of these achievements is seen in our role in the formation of the UN, APEC, the EAS and the G20 Leaders' Meeting. That thread is about bringing bigger players around the same table, in forums in which we and others also have a voice.

The machinery so far established is still developing in our part of the world. Hence the differences over whether certain issues, such as the South China Sea, should even be discussed in forums such as the EAS. But the very purpose of bringing countries together in established forums should be to develop relationships, through both the positive exploration of new opportunities and, if necessary, exploration of disputes which have the potential to affect regional peace and prosperity. ASEAN is central to this.

The establishment of forums such as APEC, the EAS and the G20 Leaders' Meeting has also had the side benefit of giving Australia the opportunity to substantially develop some of its key bilateral relationships. Through these forums, Australian leaders are now at the same table a minimum of three times a year with each of the Leaders of the United States, China, Japan, Russia, Korea and Indonesia. Likewise we are now at the same table a minimum of twice a year with the Leader of India. For the first time Australian Leaders are now involved in meetings at least once a year with the Leaders of important emerging countries such as Brazil, Turkey and South Africa and with the Leaders of the UK, France, Germany and Italy.

All this has opened up new avenues for pursuing our national interests and to develop relationships which, in some cases, have hitherto been underdeveloped.

At its simplest, as an open economy and a middle sized power, Australia has an interest in a rules based international order broadly supportive of the free flow of ideas, goods and services. That, in broad terms, is what we seek through the UN, G20, APEC and the EAS.

Finally, I should put in a plug for our bid to win a seat on the UNSC, which I believe now has wide support across the spectrum.

As a body which we take seriously enough to provide the basis for our presence in Afghanistan and East Timor, and for our sanctions against Iran and the DPRK, it is only reasonable that we seek to take our share of responsibility on the UNSC from time to time.

I look forward to that vote on 18 October, the day I am due to start another job.

I am happy to take any questions on any matter relating to foreign policy, whether or not it has been covered in my address.

Thank you.