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Address to Trans-Tasman Business Circle: China and the Pacific - implications for Australia and New Zealand

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The Hon Julie Bishop, MP Shadow Minister for Foreign Affairs Deputy Leader of the Opposition Member for Curtin

Address to Trans-Tasman Business Circle: China and the Pacific - implications for Australia and New Zealand

Friday, 19 November 2010


Introductory comments re: Wallabies, All Blacks and AFL omitted.

I am really delighted to have this opportunity to talk to you today on a particularly interesting topic - China.

China is the flavour of the month. Indeed it has been the flavour of the month for probably every month of the last decade or more.

China has been explored by eminent commentators from every possible angle.

Nonetheless, during my remarks this afternoon I will try to add a few insights from the Coalition on the relationships between our two countries and our great neighbour to the north.

I don’t subscribe to the view that there is an inevitability about how our relations with China will develop over time.

There has certainly been no shortage of predictions about China.

In 2001, US author and respected China expert Gordon C. Chang wrote the book The Coming Collapse of China based on his assessment that the Chinese banking system was so fragile that it would collapse by 2005 thus plunging China into a terrible economic spiral.

Well, despite some valid observations about weaknesses in some aspects of Chinese finance, in contrast, China defied that prediction ploughing through 2005 and going on to weather the global financial crisis reasonably well and playing a major role in shielding Australia from its impact.

In 2005 The Cato Institute’s Ted Galen Carpenter wrote of America’s Coming War with China where he warned of a “collision course over Taiwan”.

In the event relations between Taiwan and China, while still apparent, are probably slightly better today than they have been in a number of years, commentators say that this is partly attributable to the fact that a large part of China’s profitable export industries are actually beneficially owned and directed by Taiwanese commercial concerns. However, this is not readily verifiable given the lack of transparency in official statistics.

Whatever the reason, tensions across the Taiwan Straits appear to be a little less tense today.

In a recent meeting with Taiwan officials it was pointed out to me that there are now more than 20 direct flights a week between China and Taiwan, with economic links growing rapidly. The Bank of China, for example, has a significant presence in Taipei.

This means that the tensions between China and the United States on this particular issue have also slightly eased as well. However, this situation could turn on a dime, as our US friends would say, as they have on occasion done in the years since 1949.

In his 2009 book entitled The Next 100 Years: A Forecast for the 21st Century George Friedman of Stratfor argues that by 2020 China will begin to fracture into fiefdoms reminiscent of the warlord regimes of the late 19th and 20th Centuries as it reverts back to its more “natural” fragmented condition.

He argues that in the long run China will not be a significant world power.

In contrast, in his book The Ascent of Money Harvard Professor Niall Ferguson argues that the United States is on a long-term decline due to its financial challenges and that by the 2020s China will rival the United States for hegemony in the Asia-Pacific.

So these are some of the expectations by experts.

But as Margaret Thatcher used to say, in politics the only thing that you can expect is the unexpected.

Indeed, how to deal with China and plan for future developments are a classic case of the policy dilemmas that are all too common in national politics.

With less than comprehensive information, contradictory commentary, and no crystal ball at hand to help foretell the future, international relations must rely on good judgement, and a good dose of common sense and pragmatism.

I will not repeat in too much detail the obvious “knowns” about China.

Suffice it to say that since the opening of its economy began in 1979 the country’s economic growth has been the equivalent of a new industrial revolution for the world.

It has now surpassed Japan as the second largest economy in the world in purchasing power parity terms, or number three in exchange rate calculations.

In 2009 it overtook Germany as the premier exporting country.

Nonetheless, China is far behind the US and the speculation that it will eclipse the US as the number one economy is unlikely to occur anytime soon.

But significantly for Australia, China is now Australia’s biggest trading partner.

Two way trade in goods and services was in the order of $85 billion in 2009 - that was a 15 percent increase over 2008 and a far cry from the $100 million of 30 years or so ago.

In October 2003 Australia and China signed a Trade and Economic Framework agreement that has provided closer economic relations between our two countries.

And since April 2005 Australia and China have been negotiating a Free Trade Agreement that has been, quite frankly, too slow in gestation and still has no end in sight.

In contrast to Australia, New Zealand entered into a Free Trade Agreement with China in October 2008 after just three years of negotiations. It is in fact the first and only OECD country to complete a Free Trade Agreement with China.

I am envious of that and quite intrigued as to how New Zealand was able to achieve it in such a short time! And as a consequence, China has become New Zealand’s second largest trading partner, after Australia, and is increasing in its importance.

Two way trade in goods reached $10 billion in 2009 with additional earnings from services.

So obviously, quite apparently, our two countries have a real interest in having a stable long term, productive relationship with China.

China’s increasing economic, political and strategic prominence presents opportunities and challenges for our two countries.

The Howard Government, of which I was a Cabinet Minister, showed that it was possible to have a strong relationship with China while managing differences over sensitive issues like human rights and Ministerial contact with the Dalai Lama and with Taiwan.

Indeed, the Howard Government was successful in negotiating a Ministerial level Human Rights Dialogue with China. Australia remains the only nation with which China has such a Dialogue at that level.

The Coalition believes that it is essential that Australia-China relations remain a strong and consistent partnership based on shared interests and mutual respect.

Without seeking to hector or lecture, I hope that we can assist the Chinese leadership to understand the enormous benefits to their country of a more open and transparent form of government and international relations that matches their open approach to the markets.

On the wider point about China and the Asia-Pacific region, I think it is work making a few comments about Professor Hugh White’s recent writings on the topic.

White is a former senior advisor to Kim Beazley and was also a senior Defence Department bureaucrat. As such he is an influential person in Government circles and it is timely to examine his recent advice.

White argues in his 74 page Quarterly Essay from September 2010 that China’s increasing economic and geopolitical strength is now rivalling that of the United States in the Asia-Pacific region.

He argues that the United States “primacy” in the region is now under serious challenge and that essentially it should retire gracefully from the scene and share power with China.

He argues that it is Australia’s role to use its good offices with the United States and convince it that this is inevitable and that it must accept a new situation, dare I say the new paradigm, as soon as possible to prevent future conflict.

The practical implications of this would be enormously significant.

White says that the United States, and presumably Australia, would have to be “much more circumspect about criticising [China’s] internal affairs. This means no more lecturing China about dissidents, Tibet or religious freedom”.

Interestingly, White accepts that his proposal is the equivalent of the “appeasement” policy of Neville Chamberlain’s Government in the 1930s. However, he has a different interpretation to most scholars on Chamberlain and the Munich Agreement and argues that his approach, which would lead to a Concert of Asia with power sharing between major Asian countries, would be like the Concert of Europe in the 1800s and would oversee an era of peace and cooperation.

White also questions whether Australia should maintain its strong commitment to the ANZUS alliance as a cornerstone of our foreign policy framework.

Now these are confronting propositions from a former key Labor Party insider.

Certainly not a proposition that the Coalition subscribes to either in its assumptions, nor its conclusions.

I note that the Government has to date remained quiet on the White thesis. I believe it should respond, lest its silence be taken as acquiescence.

Australia’s new Foreign Minister Kevin Rudd recently argued that Australia should have a “new, third way approach” in relation to China that avoids the extremes of conflict and kowtowing, as he put it.

This is a classic “straw man argument” and it is not apparent that any self respecting nation and certainly not Australia nor New Zealand has adopted either of these extreme foreign policy positions.

If anybody has actually swayed erratically in the area of relations with China it is probably worth the Foreign Minister looking in the mirror.

Question marks remain over the case mounted against Australian businessman Stern Hu and the transparency of his trial process. The then Rudd Government’s handling of the case left a lot to be desired with its apparent acceptance of questionable implementation of the rule of law and our entitlements under a Consular Agreement regarding Australian citizens.

And Mr Rudd’s hectoring of Chinese leaders on other occasions represents the other end of the spectrum.

The fact is that we need no new third way. Instead what we need is a return to the firm, quiet diplomacy provided by the Howard-Downer partnership over nearly 12 years.

If you want, you can call that pragmatic policy a “third way”, if you need a label. However, Mr Rudd’s so called “third way” is not new, is not innovative, and rather than talking about it the Foreign Minister should just get on and do it.

Let me now turn to one issue of increasing interest to both Australia and New Zealand, and that is China’s increasing presence in the Pacific.

There are concerns in a number of quarters that China’s involvement with Pacific Island nations will prove detrimental to Australia and New Zealand.

China has clearly been using “dollar diplomacy” in the region through its overseas aid program.

In only a few years its aid to the region has increased from around $33 million in 2005 to somewhere in the order of $150 million in 2008 - they are the latest figures available, but I know from discussions with leaders of Pacific nations that the increase in aid from China has been extraordinary.

In an article appropriately titled The Dragon in the Pacific, Fergus Hanson of the Lowy Institute argues that China’s primary motivation is actually to counter balance the lobbying by Taiwan for recognition from Pacific Island countries in various international forums.

In his article from 2008, Hanson doesn’t consider that China has any particular military related agenda.

Nonetheless as the biggest regional donors Australia (the biggest overall donor) and New Zealand (the fifth biggest behind Australia, the US, China and Japan) we both have a keen interest in what is happening in the Pacific.

Indeed there is little transparency of the Chinese overseas aid presence and it certainly would assist if Government was more open in disclosing what contributions it is making.

Now this would be helpful, not least because it may lead to more co-operation and joint projects between Australia, New Zealand and China in providing overseas aid in the region.

And I am mindful of Brian Anderson here today from the Australia Fiji Business Council and I think one area where transparency would be even more helpful is Fiji.

There has been an increased Chinese presence there in recent years, there is no doubt.

As a result, in the last couple of years in Australia there has been a debate going on in academic and think tank circles about precisely what are China’s goals are in Fiji.

Fiji has been the subject of sanctions from Australia, New Zealand and other like-minded countries like the United States and the members of the European Union since the military coup there by Commodore Frank Bainimarama in 2009.

Fiji has been evicted from the Commonwealth of Nations and the Pacific Islands Forum.

China, like many countries, is continuing to provide overseas aid to Fiji.

Academics Richard Herr and Anthony Bergin, who are both associated with the Australian Strategic Policy Institute, have argued in a number of articles on sanctions against actions that will “drive Fiji further”, as he puts it, “into China’s open arms”.

These academics have a particularly “defence-centric” point of view. In particular they bemoan the weakening in defence contacts between Australia and Fiji due to the autonomous sanctions regime. And they certainly raise some interesting points.

The Coalition remains supportive of the autonomous sanctions policy against Fiji that we put in place during the Howard Government and has been continued by the Rudd and Gillard Governments for we believe that a return to stable democracy is in the interests of Fiji.

Nonetheless we are watch with interest the debate on this issue and we will be informed by it.

In recent weeks, there have been comments by senior officials in Tokyo and the White House about the need to re-engage with Fiji, at least at the diplomatic level.

In fact, during the election campaign a couple of months ago, I raised the prospect of working with the Fiji regime to reform its electoral laws if that offered hope for a faster return to democracy.

I believe that Australia and New Zealand should look for ways to end the standoff with Fiji to enable the island to return to a stable and democratic country that is fully engaged in the region.

Let me conclude by acknowledging the continuing strong economic, social and cultural bonds between Australia and New Zealand.

Earlier this week I met with the New Zealand Foreign Minister Murray McCully and we had a chance to discuss a whole range of issues of mutual interest.

In particular I was pleased to receive a briefing on the recently signed Wellington Declaration. It has a key focus on the challenges facing the Pacific community with a particular focus on renewable energy and disaster response.

Tony Abbott and I were also able to briefly discuss the Declaration with the United States Secretary of State Hillary Clinton when she was recently in Australia and she expressed her delight that the US and New Zealand had engaged again at such a high level.

The Declaration between New Zealand and the United States heralds a new strategic partnership between Australia’s two closest allies and as such we were happy to see such a development.

It augurs well for the future of our respective countries.