Australia's environment, DFAT's challenges: National security lecture series
Thanks very much, Vice-Chancellor. It's a great pleasure to be here. I thought I might talk a little bit about Australia's global interests and some of the bigger changes going on there. I suspect a lot of what I say in that context won't be new, but it's worth saying.
I also want to talk a bit about the implications of those changes for Australia's interests and how DFAT pursues those interests. And in talking a bit about the latter, I want to give a few practical examples of how the Department of Foreign Affairs and Trade contributes to the pursuit of our national interest.
And at the end of it, very happy to take questions on anything at all. There's a lot that I'll leave out. There's a lot that I'll gloss over. And if you want to go into more detail or pursue any particular lines of inquiry that I've overlooked, then simply ask.
Australia's Global Environment
First of all, I'd like to address Australia's global environment.
The first feature here is one of which I think we're all aware: the major shifts afoot in world power dynamics. Global power is becoming more diffuse than at any time since the Second World War. Over the last 65 years, we've had 45 years of two superpowers and 20 years of a single superpower.
The power of the United States remains enormous. It will remain the world's leading power in total terms for the foreseeable future. Its economy, still the world's biggest, matches capital with technology, expertise and opportunity and it brings all of that together like no other country does or can. It has pervasive cultural institutions and it has global reach including through its many alliances and security partnerships.
But relativities have changed, are changing and will continue to change. And it's important to put some of that in historical context. At the end of the Second World War, US GDP constituted about half of the then global GDP, with much of Europe and much of Asia broken by the war.
By around 1990 the US share of GDP had become around 23, 24 per cent of global GDP. And it's interesting to note that, since the early '90s, it has moved from around 23, 24 per cent of GDP to about 20 per cent of GDP today. And looking ahead, obviously the US share of GDP, the Australian share of GDP, the West Europe share of GDP is going to continue to decline. That is a good thing, not a bad thing. Because our contribution to global GDP is declining, not because we're doing badly, but because other countries are coming up and that is good.
And the relativities are really going to change big time. Martin Wolf, in an article in The Financial Times of 2 February, noted that in PPP terms the IMF calculates that the rich world's share of GDP, which was 63 per cent of global GDP in 2000, had dropped to 53 per cent within a decade and would fall to below 50 per cent over the next – over the early part of the current decade between 2010 and 2020.
Behind the US and other traditional major powers which make up the G7, G8, are significant emerging economies which are also making their new power felt and will do more so in the coming decades. The most dynamic example of this historic shift is of course the shift of economic and strategic weight from the West to the East.
And the two best examples are the obvious ones and that is China and India. China's re-emergence is especially significant. By 2015, the IMF calculates that in the proceeding 25 years China will have grown its economy 25-fold. China is expected to rival the United States in terms of economic size within two decades measured within nominal GDP terms. Put in PPP terms, they will probably become larger than the US by 2020. In that time over the next 10 to 20 years, 200 million more Chinese will move to cities with implications for resource requirements, and productivity.
India is also well on the way to big economy status, though its path via a developed services sector and domestic demand is somewhat different to that being pursued by China's export driven growth.
In the coming 20-odd years, 250 million of India's people will move from the countryside to its cities.
So in India and China combined, over the next 20-odd years, 450 million people will move into cities, with the implications that that has for global demand, productivity and the like.
The global financial crisis only accelerated those trends. And, as Martin Wolf again noted in his article of 2 February, in the five years since 2005, that is in five years, the US economy grew an accumulated five per cent. The UK and Japanese economies grew an accumulated two per cent. The Euro zone grew an accumulated four per cent. India grew an accumulated 47 per cent and China grew an accumulated 69 per cent.
There will also be, when we look ahead over the next 10 to 20 years, other significant global growth centres, Latin America, especially Brazil, Turkey, the Gulf and Africa.
But the major centre of global growth will be Asia. While China and India will account for most of the growth, Indonesia, Vietnam and others will also expand significantly and Japan will remain one of the world's biggest economies. So don't overlook Japan.
Rising economic power will translate in time to rising military spending and power in our own region.
China spends five to six times what it did on defence 20 years ago. However, it still only spends around a fifth or so of what the US spends on defence, though China concentrates its spending in a more targeted local way, whereas US spending is more global. Other countries in our region will also increase their defence spending over the next couple of decades as their economy grows.
So our strategic circumstance is very different to that of most European countries. It is not intellectually credible to compare what we spend on defence as a percentage of GDP to what individual European countries spend on defence as a percentage of GDP or what Canada spends on defence as a percentage of GDP. Their circumstances are very different to ours.
I outline these changes to draw some implications for global power dynamics and global leadership. Asia's growth means that, during the course of this century, we will see for the first time in several hundred years economic weight centring on neither Europe and/or North America. It will centre on Asia and we haven't seen that for several hundred years.
We'll also see the United States exercising its leadership in new ways. The US will do more, as Secretary of State Clinton has said, to convene, to connect, to create partnerships aimed at solving shared global problems.
And this leads to the second feature of Australia's global environment: much more will need to be negotiated among major and middle powers in the twenty-first century.
The world faces significant security and economic challenges that require the input of a wider range of players than in the past. No one country can tackle on its own global terrorism, nuclear proliferation, climate change, and the like. No one country on its own can achieve the return of the world's financial system to health, nor global trade liberalisation, nor the fulfilment of the millennium development goals, nor set new globally recognised norms on, for instance, cyber space.
There will be a variety of forums in which the challenges of the twenty-first century will be negotiated.
The United Nations will remain fundamentally important. It remains the premier global body promoting a rules-based international order and some of its specific agencies do a lot of tremendous work which we often overlook, whether it's the UNHCR, whether it's UNICEF, or the like.
The UN Security Council despite its shortcomings remains vitally relevant. The UN Security Council sets the mandates under which Australia's 3000 men and women in uniform work and do their jobs in Afghanistan, East Timor, the Sudan, Egypt and Cyprus. And it is the UN Security Council that sets the sanctions that we must apply against Iran and North Korea.
But multilateralism is in flux. There is a need to address global challenges multilaterally more than ever before. But there is great difficulty in achieving results through major multilateral bodies, as we've seen in the UNFCCC with climate change and the WTO, both of which bodies have been grinding on slowly for a decade or more pursuing their very legitimate and proper goals.
The world is feeling its way forward somewhat on the global and regional institutions of governance that might emerge more significantly in this century.
In the economic sphere we've already had the rise of the G20.
It was formed following the Asian financial crisis in 1997/98, but did not come together as a leaders' forum until the global financial crisis in 2008, bringing to the table those countries and leaders that had to act to avert global economic catastrophe.
It embedded in the grouping other major emerging economies, such as China, India and Brazil, and to have their voice in global economic governance is obviously essential. It is no longer something which the G7, G8 can do either in strict economic terms or in terms of credibility and weight.
The G20, in becoming the premier forum for global economic governance, reflects the modern reality of global power shifts. The G20 represents 88 per cent of global GDP, 78 per cent of global trade-flows and almost two-thirds of the world's population. It brings together at leader level five from Europe, five from Asia, five from the Americas and five others. And of course also, just as Australia is in the "West European and Others" grouping in the UN, we're in the others grouping in the G20, along with Russia, Turkey, Saudi Arabia and South Africa.
The G20 is not perfect, but it's big enough to be broadly representative, provided its stays within its lane and recognises the proper role of the UN in various areas. But it's also small enough to be effective.
In our own region architecture is also evolving. Last year, in fact in November of last year, we saw the formal decision to bring the United States and Russia into the East Asia Summit and they attended that summit at foreign minister level. Australia, the US, Japan, China, Korea, India, Indonesia and the other ASEANs are now all in that one body.
But it's particularly important that it brings together the United States, Japan, China and India because the interaction between those four countries fundamentally determines the politico strategic environment in which we as a country live.
And that was the essence of the goal set by then Prime Minister Rudd in June of 2008 when he launched his Asia Pacific Community Initiative. Because it is the East Asia Summit which alone brings together those four countries with a mandate which enables it to pursue economic, political, security and strategic issues.
At the same time that global consensus on global challenges has been harder to achieve, globalisation itself has been connecting up the world more than ever.
And this comes to the third feature of the global environment looking ahead, and that is we're going to have vastly greater mobility of just about everything: mobility of goods, finances, information, skills and especially of people.
We think of the movement of people very often in terms of the ways we hear it presented in terms of immigration, illegal flows and the like. But the vast majority of flows that I'm talking about are legal movements of people. For instance, more Australians now travel, live, study, work and tour abroad than ever before, with now well over a million Australians doing that at any one time. In other words, at any one time we have five to seven per cent of Australians overseas.
However while much of Australia's global environment has and is changing, a lot of it isn't changing. And what is enduring is just as important as what is changing. For instance, the security and prosperity of our near neighbours is always a vital feature of any country's environment. And the most important constants in Australia's environment are our close neighbours; Indonesia, other countries in South-East Asia, New Zealand, Papua New Guinea, the Pacific Islands. A prosperous, stable Indonesia is of course critical.
We have a strategic partnership and the two countries are increasingly working together both regionally and globally. And in respect of the latter, for the first time the leaders of Australia and Indonesia sit around the table on a regular basis discussing global issues at the G20.
Obviously Australia has no closer partner than New Zealand and indeed it is more than a partner. As the Prime Minister said last week in her address to members of parliament in Wellington – that is before the tragic earthquake in Christchurch – she said Australia has many partnerships and friendships but New Zealand alone is family. And I think that's right.
A core interest for Australia is the stability, security and prosperity of the Pacific Island countries. We've stepped up engagement to assist the region with development goals and address climate change, humanitarian disasters, resource protection and also maritime security.
Pursuing Australia's Interests in the Global Environment
Now let me draw some implications from the broad changes and the broad enduring features of the global environment that I talked about. And let me weave in through that some examples of what DFAT does on a day to day basis.
And the first question for DFAT is this: what do we do to help ensure the changes we're talking about in relative power don't undermine the security of our own region? Because it is that security that underpins the prosperity that we've enjoyed for so long.
The past four decades have been good for Australia. We have benefited from globalisation and from Asia's growth. Two-thirds of our goods trade is now with Asia. Over three quarters of our goods exports and over half of our services exports go to Asia.
Regional growth has delivered a fundamental shift in our terms of trade. As Glenn Stevens has noted, five years ago a shipload of iron ore was worth 2200 flat screen television sets. Today a shipload of iron ore is worth about 22,000 flat screen TVs. That's partly due to the reduction in the price of flat screen TVs but it is also then due to an increase in the price of iron ore by a factor of six.
But but the power realities of the last 40 years won't of course be the power realities of the next 40 years. The big powers will need to work together in some way regionally and globally, in particular the US, China, Japan and India. Australia is in the front row of this, as this dynamic plays out. And our interests are closely engaged in a way in which we've not seen them engaged at any time in our history in respect of that dynamic.
And it's interesting to note that for the first time in our history, for the first time ever in our history, our top trading partner is neither an alliance partner nor is it a democracy. I don't draw any conclusions from that but it's simply a little fact worth noting. In the same way as China is the United States' second largest trading partner. So the dynamic between the United States and China is very, very different to the dynamics you saw between the United States and the Soviet Union between the end of the Second World War and the collapse of the Soviet Union in the early '90s.
However while all of this change and the change that lies ahead will pose a lot of challenges, we're not without some weight and influence of our own. I personally believe that as a country we tend to think of ourselves as small and we tend to often present ourselves as small.
Successive governments have been fond of talking about Australia punching above its weight which is code for saying well we do everything you could reasonably expect us to do, plus a lot more. Well I think it's an interesting issue whether we look at ourselves as punching above our weight, or whether we ask ourselves do we punch up to our weight.
Let me put it this way: there are 192 countries in the United Nations. We're the sixth largest country in the world in land area. When it comes to population, when you run this little test with most people and you say right 192 countries in the UN, this is how big we are in land area, where do we come in terms of population out of 192 countries. The majority of audiences that I've ever posed that question to put us somewhere between 100 to 120, somewhere like that.
Well of the 192 countries that make up the United Nations, only about 49 or 50 have a bigger population than Australia.
Most countries that make up the United Nations are smaller than Australia in population. And of the 192 countries that make up the United Nations we have a bigger economy than all but 12 of them.
We have the thirteenth or fourteenth largest defence budget in the world measured in absolute dollar terms, not in terms of relativities.
When you look at us compared to the United States, when you look at us compared to the very big powers, yes we're small. But the world is full of relativities and when you look at us relative to others we are not small.
When you add to that the fact that we're one of the world's leading suppliers of resources and energy, when you think about the fact that we have a lot of what the world will want, wants now and over the next 100 years. Whether it be food, whether it be resources, we produce amounts of that sufficient for export. About 70-75 per cent of our agricultural production goes overseas. In different ways we are an important partner to each of the United States, China, Japan and India.
All of this means that we're going to have to exercise skilful state craft and DFAT does have an important role there.
While our budget is tight and while we have to watch our pennies, we have a diplomatic and trade network of 95 posts in 77 countries.
We have the smallest diplomatic footprint of any of the G20 countries, but nonetheless we are represented in a good many countries. And DFAT has around 4000 Australian and locally engaged staff globally. And we're particularly strong in our own region, as you would expect.
Among our top priorities is maintaining a central alliance with the United States as it continues to play its role in the Asia Pacific. And for seven decades the United States has been the region's strategic guarantor, and it's been that guarantee that has provided the umbrella for the region to grow in the way it has.
We need of course to be developing and deepening security relationships and understandings with other key countries of the region.
And that's why on Tuesday of this week our High Commissioner in Delhi was hosting a lunch for India's Chief of the Air Force prior to his visit to Australia in late February. And it's the sort of activity that we're engaged in around the region the whole time.
So DFAT leads Australia's work with key partners to develop a lot of fruitful individual relationships but as the Foreign Minister said, we also need to do more. We need to work for common sense of rules-based, security cooperation in our region and a commonly agreed set of rules of the road in Asia.
We believe we need better regional architecture to help deliver that. Now that we've got the membership of the East Asia Summit right, we now need to work on the agenda.
We strongly support the current agenda including regional economic integration, financial sector capacity building and strengthening education cooperation.
The forward agenda will also need to encompass a capacity for leaders to have a substantive dialogue on security issues.
Beyond the realm of security and regional architecture we need to be building deeper political and economic relations with countries of significance to Australia.
We need to deploy diplomatic craft to achieve this: listening to what of importance is happening in countries where we operate; interpreting this for Canberra; looking for ways to advocate our policy interests; thinking of opportunities to take relations to a new level through high-level visits, bilateral agreements and other practical forms of cooperation.
That's why our Ambassador in Seoul, who is also our Ambassador in Mongolia, is this week accompanying the Prime Minister of Mongolia on a visit to Australia. He's here to advance economic and political ties. And the economic ties with Mongolia are particularly significant in the resource sector.
And that is why our Ambassador in Tokyo earlier this week hosted a lunch with a Japanese parliamentary senior vice minister to discuss the Australia-Japan FTA and the Trans-Pacific Partnership.
To do this well over the longer term, DFAT needs to develop officers who understand the countries to which they're posted and DFAT has done that very well over a long period of time. Officers who can think, advocate and persuade. And that is again why we've put a lot more over the last 12 months into foreign language training.
And that's why we've greatly expanded our diplomatic footprint in India over the past year, including opening new posts in the financial and commercial centres of Mumbai and Chennai. India is now Australia's third-biggest export market. A decade ago it was our thirteenth-biggest export market.
And we will need over time to expand our network and expertise to countries like Brazil, Turkey and others.
The image Australia has in big and emerging powers – not just in government circles but in the broader community – is also very significant. And building a positive image over the long term and responding to reputational risks is a job DFAT does.
Hence Australia's presence at the 2010 World Expo in Shanghai including the project to design, manage and fund Australia's pavilion. Australia spent in total $83 million on that pavilion, of which 72 million was taxpayers' money. So it's reasonable to ask, what did we get for that 72 million of taxpayers' money?
The pavilion attracted 8.2 million visitors. One in nine visitors to the World Expo visited Australia's pavilion; there were 245 other pavilions that people could choose to visit.
Australia's pavilion was rated among the top five pavilions by visitors. It was visited by five members of China's leadership group, including its President.
We held 219 high quality business events there for 16,000 guests – Chinese and Australian entrepreneurs and policymakers – with events including an Australian financial services summit, a China-Australia higher education forum, and an Australia-China youth dialogue.
The expo pavilion was the centrepiece of a year-long "Imagine Australia" campaign in China. Yesterday afternoon in Beijing our Ambassador opened a multimedia exhibition that continues that campaign.
As I've made clear, India is another country in which Australia needs to build its understanding, image and influence. But our image was badly damaged by attacks on Indian students in 2009 and 2010. And we have a three to five year project to rebuild Australia's image there. It will take that long.
And we're already planning a 2012 year of Australian culture in India. It's also why this week our High Commissioner in New Delhi will be speaking on Australia-India relations to students at the neighbouring university. Of course, all ambassadors do that on a regular basis.
And yesterday in Indonesia, our Ambassador visited a high school in West Nusa Tenggara, one of 47 schools in Indonesia partnering schools in Australia, to work together online on projects through the BRIDGE program, which is a program funded by the Australia-Indonesia Institute, by the Myer Foundation, and by AusAID.
Our Ambassador, when he was visiting that school in Nusa Tenggara, took part in a session on Skype between teachers and students from that school, and teachers and students from Mullumbimby High School in New South Wales. And that's going on all the time.
I spoke in the first part of my talk about how the world was facing more challenging, crosscutting issues that need multilateral cooperation more than at any other time in the past. And DFAT also plays a big role in that.
Take Afghanistan for example. As the Prime Minister has said, Australia has two vital national interests in Afghanistan: to make sure Afghanistan never again becomes a safe haven for terrorists; and, through our substantial contribution, further strengthen our alliance with the United States.
Our mission in Afghanistan is to train and mentor an Afghan National Army brigade in Uruzgan Province to assume responsibility for the province's security, to engage in training support for the Afghan National Police, to assist with civil policing functions in Uruzgan and to help improve the Afghan Government's capacity to deliver services and economic opportunities to its people, especially in Uruzgan.
DFAT has played and is playing an important role in this, for instance providing the civilian leadership for the Coalition in Uruzgan Province. And this week, our Ambassador in Kabul has met with the Commander of the International Security Assistance Force in Afghanistan with other ambassadors to discuss recommendations for starting the transition process agreed by the Lisbon Summit a few months ago.
He met the lead Afghan minister on reintegration to discuss possible visits by him to Uruzgan for a peace and reconciliation event in that province in March, and he met the Afghan Civil Service Commission to talk about how to get more public servants into Uruzgan.
The Government is committed to the United Nations as the premier global body promoting a rules-based international order that enhances our security. We lead a vigorous campaign for a non-permanent seat on the Security Council in 2013-14, and membership of that council not only is important in terms of Afghanistan, East Timor, it's also important in terms of Iran, Burma and North Korea. And we have national interest in all of that.
Negotiating trade deals that enhance Australia's prosperity and help keep it competitive is also an important job for DFAT. In the 20 years since the Department was negotiating the Uruguay Round, Australia's trade has grown almost four-fold. More than one in five, or 2.5 million Australian jobs are trade-related. Trade contributes up to $3900 to the budget of an average working family per year in Australia.
We know further gains can be realised, both through high quality bilateral FTAs and through the Doha Round in Geneva. And that is why on Monday of this week, our Ambassador in Geneva was at a meeting with the WTO Director-General and a small number of other ambassadors advancing that.
I mentioned earlier the environment and climate change. Our head of mission in Nairobi this week is leading an Australian delegation to the governing council of the UN Environment Program. And in South Africa today, our mission is assisting Mr Rudd with his visit to attend the UN Secretary-General's high level panel on global sustainability.
I've talked earlier about mobility. We issued 1.77 million passports last year. About 17 per cent of the total number of people employed in DFAT work on passports – something which is often overlooked.
We activate our consular crisis centre several times a year. Earlier this week, we had two crisis centres going simultaneously: one working on New Zealand; one working on Libya.
In the evacuation of citizens from Egypt earlier this month, DFAT crisis centre operated 24 hours a day from 29 January to 9 February. It involved 315 staff in Canberra. The centre fielded 4200 calls, and operators made a further 8200 calls to confirm the safety and welfare of Australians.
We deployed 39 additional officials to assist our embassy in Cairo and we deployed 12 additional officials to Frankfurt to help Australians with onward travel. We arranged two Qantas charter flights which evacuated 293 people and one member of staff in Cairo spent three days straight without a break and without a change of clothes at Cairo airport helping Australians get out.
But that is not a one-off. In Lebanon in 2006, 93 officers were sent to the region and assisted in the evacuation of 5164 people on planes, ferries and buses.
We plan ahead for those sort of eventualities where possible, and that is why yesterday in Ankara, our ambassador held an embassy-wide meeting on preparations for Anzac Day on Gallipoli, an event which attracts 10,000 Australians now a year and many VIPs.
And that's why our High Commissioner in Vanuatu used this week, when the country was hit by a cyclone, to meet with the CEO of a hotel, the head of the airport and core mission staff to update planning in the event of a consular crisis.
So, finally, DFAT pursues our security upstream. We work to advance Australia's global and regional environment, deepening understanding, cooperation and security with regional and global partners, participating with energy in global and regional forums, helping shape the emerging regional and global architecture and pursuing greater trade and economic integration and seeking to ensure, where possible, the safety and security of Australians abroad.
The themes of our work – political, trade, consular and security – are very much mutually reinforcing.
This is the policy agenda my Department seeks to pursue. Its overseas network of 95 posts enables immediate and authoritative input into the policy development process here in Canberra, touching national security and most other areas of domestic policy development.
It's a broad mandate and its range of activities is also broad globally, as I hope that I've helped demonstrate.
So thank you very much for that. I'm very happy to take any questions.