The Indo-Pacific: a WA Perspective
Thank you Gordon for that kind introduction.
Let me first acknowledge the traditional custodians of the land on which we meet, the Noongar people, and to pay my respects to their elders past, present and emerging.
It's great to be back in Perth, Australia's Indian Ocean capital, and to be working once again with the Perth USAsia Centre.
I acknowledge Gordon Flake's impressively active leadership and focus on the big issues.
The Centre has a lively intellectual home at the University of Western Australia, ably overseen by board member and Vice Chancellor Professor Dawn Freshwater.
Also on the Board of course is the new Governor of Western Australia, His Excellency Kim Beazley AC, a true Perth native who has an unparalleled career in public service, at least in modern times.
After a rich life in politics that saw him at the centre of Australia's international and domestic policy through one of our most tumultuous and ultimately successful decades, and later as Opposition leader in the Howard years, Kim gave Australia another six years as one of our most influential Ambassadors to the United States.
Now, he is serving again – this time as WA's Governor – a role to which he brings, as always, his trademark intelligence and his gentle decency.
I acknowledge Perth USAsia Centre Board members The Hon John Olsen AO, who also chairs the American Australian Association, and Professor Stephen Smith, former Australian Minister for Foreign Affairs and Minister for Defence.
Thanks to Gordon and his capable team who make the Centre hum, Australia has a genuinely Indo-Pacific foreign policy debate, a debate also championed by Foreign Minister Julie Bishop, a strong supporter of the Centre.
Western Australia has a long history of forging its own way in the Indo-Pacific, whatever those of us back east were doing.
In the 1840s, Western Australia was already exporting sandalwood to China through Singapore. Exports of jarrah to India followed.
When this much-loved building opened to the public in 1870, it became the centre of Perth's vibrant civic life – while for another couple of generations, sheep had the run of the paddocks, 1,900 miles to the east, that would become the nation's capital.
It is no exaggeration to say that in the 19th century, Western Australia led in transformative infrastructure for engaging with the world.
Under C.Y. O'Connor's leadership, Western Australians built Fremantle's Inner Harbour – this continent's best connection to Singapore, the Middle East, Europe and Africa.
No wonder Western Australians seriously considered going it alone.
In 1900, in this very building, a Mrs Bateson compared the prospect of Federation to the rabbit plague – both would bring pests that were better kept out, she warned.
However, "a continent for a nation and a nation for a continent" had an irresistible logic.
While Federation has always had its Westralian critics, this state has got on with making a success of Australia and Australia in the world.
We've seen that under governments of both stripes –
- Bob Hawke and Hu Yaobang in 1987 sealing China's first major overseas investment deal at Mt Channar
- the Gorgon LNG project, the largest single resource project in Australia's history
- the Ichthys project with INPEX of Japan – the largest discovery of hydrocarbon liquids in Australia in 40 years, with the world's largest semi-submersible platform, of which Foreign Minister Julie Bishop is the official godmother.
WA has been there at the heart of our engagement with the Indo-Pacific for decades.
Consider the grip you have had on foreign affairs, thanks to Stephen Smith and now Julie Bishop, who between them have served as Foreign Minister for seven and a half of the past 10 years.
Perhaps it's no coincidence that these have been the years when Australia actively broadened its central foreign-policy focus from the Asia-Pacific to the Indo-Pacific.
In our Foreign Policy White Paper, published last November, the Australian Government explained the trends that are shaping the Indo-Pacific and indeed the world.
These trends have accelerated visibly in recent months.
This year, China has made it very clear, if it was not so already, that it will pursue a unique political and economic trajectory, with new authority concentrated in the hands of President and General Secretary Xi Jinping.
China continues to demonstrate its determination and ability to influence our region.
But it is not the only mover – and indeed shaker.
As the Foreign Minister said last month at Chatham House in London, the United States, "is now favouring a more disruptive, often unilateral, foreign and trade policy that has heightened anxieties about its commitment to the rules-based order that it established, protected and guaranteed".
Of course, Australia is not alone in recognising and responding to these major strategic shifts.
Japan and India are pursuing their own Indo-Pacific strategies with a view to maximising their influence at this pivotal time.
The next 10 years will be vital ones for Australia and our region.
International norms and rules that have served us well are under pressure.
The Australian Government will continue to speak up in defence of a rules-based order.
We will engage in that order and seek to ensure that it serves our interests.
We will also promote and support reform and modernisation of international institutions where that is warranted.
We are confident, but not complacent, in this task.
Many nations agree with our central proposition, that the formula of a rules-based order, the peaceful settlement of disputes, and open markets has proven its worth.
These remain the principles that most nations want to entrench in the Indo-Pacific.
They are the principles that guide us as we develop mutually beneficial relations with our partners in the region.
I'd like to speak about relations with the United States and China.
At this time of change, there is much in Australia's relations with the United States that provides reassurance.
Last month, Australia's Foreign and Defence Ministers met their U.S. counterparts in Palo Alto on the U.S. Pacific coast.
It was the 28th of these annual meetings, which began in 1985 with Paul Hayden, Kim Beazley, George Shultz and Admiral Crowe at the table in Canberra. This time it was Julie Bishop, Marise Payne, Jim Mattis and Mike Pompeo.
The consistency and longevity of AUSMIN says a lot about the priority both sides place on the relationship.
The list of outcomes this year was broad and activist – our leaders agreed to work closely on many of the most pressing concerns facing our Indo-Pacific region.
A few days later, Secretary of State Pompeo, gave a speech entitled "America's Indo-Pacific vision".
He said that business engagement is at the centre of the U.S. vision for the region; that the U.S. Government does not tell business what to do, but that if you open a map of the Indo-Pacific today, "it is dotted with U.S. public and private efforts to foster self-reliance, build institutions, and promote private sector growth".
Mr Pompeo's speech reinforced themes that Defence Secretary Mattis set out at the Shangri-La Dialogue in Singapore in June. Both underlined the fact that the United States seeks to uphold the sovereignty and independence of all nations, large or small, in our region.
It is one of Australia's great strategic assets that the world's major power shares many of our fundamental values, is a close military ally, and our foremost investment partner by a wide margin.
Now, it has to be said that there are some important issues on which we have made our disagreement very clear to the United States Government – including major international agreements on trade and climate.
Even because we can disagree openly, our strong partnership with the United States is a cornerstone of our foreign policy.
At the same time, our relations with China are increasingly prominent, given the range and significance of our interests, and their growth over the past decade.
Western Australians will be keenly aware of the trade and investment links in resources.
The economic relationship is now broadening to agribusiness, tourism and other sectors.
But China's beneficial impact on Australia goes beyond commerce.
The flow into Australia of students, tourists and migrants from China is a brain drain in Australia's favour.
The education relationship is one of Australia's outstanding opportunities, as the Prime Minister said in a speech at UNSW today.
Increasing numbers of Chinese students have been choosing to live and study in Western Australia in recent years – there was a jump in enrolments of over 10 per cent in 2017.
Some five per cent of Australia's population, about 1.2 million Australians, are of Chinese heritage, of whom 500,000 were born in mainland China.
But we have other fundamental interests in the relationship with China, including maintaining political dialogue, and working to uphold regional stability.
We work with China on strengthening the international trading system, through the World Trade Organization; on international cooperation to mitigate climate change; on limiting and reversing the proliferation of weapons, including nuclear weapons.
There are many facets to our relationship with China, and many stakeholders in our institutions and community.
The business community has particular interests, but also particular insights into the relationship.
As DFAT Secretary, I am committed to developing dialogue between business and government that takes forward our mutual interests in security and commerce – it is important that we bring these perspectives together.
I welcome the Western Australian Government's work to expand its trade and investment links with China, promoting sister state ties with Chinese provinces and encouraging direct air services.
Ultimately, the Australian Government must manage all our interests in our relationship with China in a coherent manner.
Unsurprisingly, there are areas where Australia and China do not see eye to eye – we are up front about these, and about promoting our interests.
We do so in a straightforward and respectful manner.
The foundation of the relationship remains shared interests in stability and prosperity, and the extensive mutual benefit from our interactions.
Australia and China have a genuine partnership with strong potential for growth across the board.
Let me now turn to the developments and the international trading system.
The Australian Government is concerned about the direction of trade relations between China and the United States.
We encourage the United States and China to resolve differences on trade through the World Trade Organization.
Under the Trump Administration, the United States has changed tack on trade policy, withdrawing or threatening to withdraw from liberalising trade deals, and adopting protectionist measures aimed at China.
But it's important to keep this in perspective.
U.S. firms will continue to have a welcome influence across the Indo-Pacific, as will U.S.-backed international economic institutions such as the World Bank and the International Monetary Fund.
U.S. economic activity will continue to benefit the Indo-Pacific region, through the normal market operations, and without any government branding or grandstanding.
As Mr Pompeo said in setting out the U.S. vision for the Indo-Pacific, "in Southeast Asia, the U.S. is the single largest source of cumulative foreign investment – larger than China, Japan and the European Union".
The Australian Government has made it clear that we believe that open, liberal trade and investment settings best serve regional prosperity.
Australia has succeeded in harnessing the benefits of trade and investment, and distributing them so that people in all five income bands have seen their real incomes rise between 19 and 27 per cent in the 10 years since 2015-16.
As Trade, Tourism and Investment Minster Steve Ciobo said in Melbourne last month, free trade agreements currently in force or concluded cover more than two-thirds of our trade today.
Once we have concluded negotiations currently underway, 90 per cent of our trade will be covered by free trade rules and commitments.
The 11-country Trans Pacific Partnership was a major step forward.
It demonstrated the breadth of support for a progressive free trade agenda in our region.
Not only did the 11 countries agree to lower tariffs, they also agreed rules for digital trade, and contemporary arrangements for competition, including with respect to state-owned enterprises.
We are working now on bringing the agreement into force.
Looking further ahead, we are intensifying efforts to conclude the Regional Comprehensive Economic Partnership, which covers 16 Indo-Pacific economies, including 10 of Australia's top 15 trading partners.
The Australian Government will continue to pursue and achieve liberalising trade agreements in our region and beyond, with that ultimate goal of a region-wide, open free trade area.
For good reason, we are working harder than ever on trade integration with Indian Ocean partners.
Business and the general public have, I think, fully factored in the very large economic growth we expect from China in the next decade or so.
I am not sure that as a nation we have yet fully grasped the implications of India and Indonesia's growth trajectories, even a decade after Stephen Smith repeatedly drew the nation's attention to it.
We must do more to engage with our rising Indian Ocean partners, and we are.
WA's CBH Group is showing the way in Indonesia.
Through its joint venture with Indonesia's Interfoods, CBH operates flour mills in Indonesia, Vietnam, Malaysia and Turkey; a grain port terminal in Vietnam; and a malting house in Vietnam.
The Government is working hard to conclude negotiations on a free trade agreement with Indonesia: the Indonesia-Australia Comprehensive Economic Partnership Agreement.
Western Australia is Australia's largest exporter to Indonesia – so our trade negotiators can thank Western Australia farmers for demonstrating the mutual benefits of trade between our two countries.
Looking west and further north, there is a great deal that governments can do to increase economic relations with India, even before India is ready to conclude negotiations for a trade agreement.
Last month the Prime Minister released Australia's India Economic Strategy, an independent report by Peter Varghese, my predecessor as DFAT Secretary, and a former High Commissioner to India.
The report judges that no single market over the next 20 years will offer more growth opportunities for Australia than India.
It identifies 10 priority states for Australian engagement.
Western Australia was the first Australian state to open a trade and investment office in India in Mumbai in 1996 – a city that is now home to more than 46,000 millionaires in India's most economically advanced state, Maharashtra.
In 2016, WA established its sister-state relationships with Andhra Pradesh, which leads India's 'ease of doing business' rankings.
The resources and energy sector in Andhra Pradesh is a strong match for Australian capabilities in mining, METS and renewable energy.
Across the Australian Government we continue to build our presence in India. In May, the Foreign Minister announced that we'll open a new diplomatic post in Kolkata – a hub for India's mineral-rich eastern states, and likely to be in the top 10 fastest growing cities in Asia out to 2021.
As Mr Ciobo said in Melbourne last week, it's time for these states, and the others in the Strategy's top 10, to become household names in Australia.
The Strategy also identifies the top 10 sectors where Australia has a competitive advantage, including education, agribusiness, resources and tourism.
India is a diverse and in some ways difficult market, but there are profound complementarities for Australia, and the Strategy points the way.
It also conveys the urgency of the challenge: Australian business will have to compete to be part of India's rise, and there will be advantages in moving sooner rather than later.
Looking still further west, this city and this state are leading the way in engaging that continent of opportunity and promise, Africa.
Perth's Australia-Africa Week is our premier engagement with Africa, with the Africa Down Under mining conference its cornerstone.
Assistant Minister for Trade, Tourism and Investment, Mark Coulton, is looking forward to taking part later this month.
Clearly, the Indo-Pacific is a dynamic region offering Australia very significant opportunities.
Our Indo-Pacific framing is also, of course, about the security and stability that underpins opportunity.
As the White Paper says, "open sea lanes link the Pacific and Indian oceans, enabling trade in goods and energy that fuels the region's growth.
Over 80 per cent of China's crude oil imports and up to 90 per cent of Japan's oil imports are shipped through the Indian Ocean.
These economies will seek the strongest possible guarantee of their access to their energy supplies.
It is very much in Australia's interests that they find such a guarantee in robust cooperative arrangements for freedom of navigation, backed by international law.
This is the norm we seek to establish in the Indian Ocean, and to protect in the Pacific Ocean.
The conciliation process we successfully concluded with Timor Leste on our common maritime boundary is an example for the international community of how international law reinforces stability, and enables countries to resolve their disputes peacefully.
Indian Ocean littoral states are united in their desire to establish this norm strongly, as was evident in the Indian Ocean conference I attended last year.
The will is there, but the institutional arrangements are not yet where they need to be.
Australia has worked intensively with Indonesia and India over the last six years to build the capacity and sharpen the strategic focus of the Indian Ocean Rim Association.
Countries of the Indian Ocean can learn lessons from ASEAN's success.
Australia is pushing ahead with this strategic agenda, including through cooperation with Indian Ocean countries to combat illegal fishing and transnational crime, and to increase maritime security capacity of navies and coast guards.
We have also established a network of minilateral dialogues, including with Indonesia and India and, separately, India and France, aimed at building architecture and cooperation in the Indian Ocean region.
As always, we pursue our positive agenda with all the strength and skill and resourcefulness we can muster, while also preparing for less positive outcomes.
The Indo-Pacific is full of opportunity, but not without risk.
As the Prime Minister said in launching the Foreign Policy White Paper, at this time of change, "more than ever, Australia must be sovereign, not reliant".
"We must take responsibility for our own security and prosperity while recognising that we are stronger when sharing the burden of leadership with trusted partners and friends."
WA defence establishments, in particular Australia's largest naval base, HMAS Stirling on Garden Island, make an important contribution.
I note also our important and successful Pacific Patrol Boat Program, supplied by Perth's own Austal shipbuilders.
Our Defence Exports Strategy will help Australian defence suppliers access new markets and, importantly, generate a portfolio of work that will support their growth through the peaks and troughs of Australia's own defence supply needs.
As always, strict controls will be in place to ensure all our defence activity meets international obligations and serves our national interest.
Finally, a word on our strength as a nation.
Our domestic policies and debate matter a great deal for our foreign policy.
Western Australia plays a crucial, leading role.
If I may generalise, Western Australians understand Asia and its increasing importance to us, you understand that Australia still needs trade and investment if we're to fulfil our potential.
Western Australia surely wins the prize of being our most outwardly focused state – the trade statistics would certainly support this claim.
This state's contributions during White Paper consultations, including in Geraldton, were invaluable.
It's an ongoing conversation, which Western Australian voices should lead.
It's an asset to have our Pacific and Indian Ocean U.S. Centres adding their different perspectives to the national debate that is so important in shaping Australia's Indo-Pacific strategy, and in enabling us to seize the opportunities before us.