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Reclaiming Australia's role in Asia, Asia Society Australasia Centre, Sydney.



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RECLAIMING

AUSTRALIA’S ROLE IN

ASIA

Senator the Hon Peter Cook

Deputy Leader of the Opposition in the Australian Senate

Shadow Minister for Trade

Asia Society Australasia Centre

Sydney, 24 August 2001

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It is a great pleasure to be here today. The Asia Society has earned a highly respected place

in the national dialogue about Australia’s role in the region.

I would like to use this address to set out some ideas on Australia’s engagement with the

Asia-Pacific region and what Labor has in mind for improving our standing. Australia’s

relations with Asia invoke an important set of issues. Unfortunately, and to the national

detriment, we have not had sufficient debate about them.

It is an inescapable fact that Australia’s economic and political destiny is shaped in an

international community of which East Asia is now a large and growing part.

There has been a serious drift in our relations in the region over the last half-decade or so and

reclaiming Australia’s role in East Asia is a central national task in the decade ahead.

Our key economic relationships in East Asia - with Japan, China, Korea and the ASEAN

countries - are marked by neglect and confusion. There have been few Prime Ministerial

visits and they have been embarrassingly cut short. The important Ministerial Meetings that

are supposed to occur annually with Japan have not taken place for years.

There has been a retreat from economic and commercial initiative, with government

abdicating its responsibilities of leadership, leaving business without the support it needs in

the region.

East Asia is doing it tough at the moment. The current weakness of the US economy is

having a damaging effect as the miracle of export-led growth fades. This should not blind us

to the underlying reality that Asia’s prospects are still bright, and whatever the temporary

setbacks it can be expected to rebound. Australia should not only express its honest

confidence in the future of the region but remember the fundamental geographic truth: this is

our part of the world and whatever its fortunes, we have to play an active and positive role to

promote its wellbeing.

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A lingering image of Deputy Sheriff is not for us. We cannot travel on anyone else’s coat-tails. Australia must stand in its own right and make a long, strong, enduring commitment to

the economic development of the region.

Despite the urgency, this is a realistic and achievable ambition. When we worked together

with the Japanese and the Koreans, and engaged Indonesia and even China back in the 1980s

in laying the foundations for APEC, we rightly assumed our role as inside players in the

development of policy strategies that united regional interests with our own deep national

interest.

Now we have let ourselves become outsiders in our own neighbourhood, losing the influence

we need to protect our national interests where they matter most.

Countries such as the United States have economic and military power to protect their

national interests in the world. Australia’s most important asset is its capacity for intelligent

positioning.

How should we be positioning ourselves in the Asia Pacific today?

The answer to this question needs to be informed by a clear understanding of where East

Asia has come from and where it is headed.

East Asia’s economic and political ambitions are ordered critically around the goal of

modernisation. Japan was the first economy to achieve that goal. But most of Australia’s

and Japan’s neighbours in the region are still `catching up’, and `catching up’ economies

have a profound stake in a trade and economic regime that doesn’t discriminate. They need

free and open markets.

Although the East Asian economy is getting bigger, East Asia itself cannot provide an outlet

for all of its own exports. Around 30 per cent of East Asia’s trade is with the United States.

But moreso than Europe or even North America, East Asia trades with the world. East Asian

intra-regional trade has been growing steadily, and it will continue to grow, but the

geographical compass of East Asia’s trading interests remains truly global.

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In short, the circumstances that drove Europe into the Common Market or encouraged the

United States to commit to NAFTA are not evident in East Asia, and preferential trade

arrangements of the style that evolved in Europe or North America do not suit East Asia’s

circumstance or interest.

There are those in East Asia who dream of European or North American solutions to East

Asian problems but surely the truth is that East Asia’s challenges can only be met with East

Asian solutions.

This understanding encouraged the formation of APEC, a regional arrangement uniquely

suited to promoting East Asia’s trade and economic objectives in their global setting. APEC,

for all its weaknesses and limitations, remains a principal theatre in which to craft the play of

our regional strategic interests - a theatre where, in Shanghai in October, for example,

President Bush will meet President Jiang for the first time, providing in an APEC setting, the

opportunity to address not only economic issues, but those issues which form the wider

agenda.

It is time to consider new ways in which APEC can galvanise economic growth in the

region. It is the issues that relate to economic growth - monetary policy, the mix of public

and private investment, infrastructure development and governance - that are the central

conundrum for all the APEC economies: from NAFTA to ASEAN.

One way to do this may be to consider a wider brief for APEC, a brief that would have it

play the same sort of role that the OECD played for both the old and newly industrialising

economies in the post-WWII period.

Of course, an APEC OECD would be very different from the original - both the

circumstances and the participants are different - but its potential is tremendous given the

common challenge APEC’s member economies face: how to deal with the obstacles to

economic development. The APEC agenda includes some of these issues, but as spin-offs

from the trade debate rather than as a central economic focus.

It is time to promote the idea of an Asia-Pacific wide dialogue on all the issues that will

ultimately determine the economic prosperity of the region. Globalisation obliges both

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governments and business communities to find ways to ensure that people everywhere

benefit from the closer integration of their economies.

The late 1990s saw the beginnings of a new regionalism in East Asia, a natural response to

the financial crisis. This is a process from which Australia could ill afford to stand back.

But, despite our instinctively right response to the crisis itself including the financial support

we gave to Thailand, Indonesia and Korea, this is precisely what we have done.

Fortunately for Australia, the process of finding new ways forward on regional cooperation

is by no means at an end.

One development was the emergence of the ASEAN + 3 group. At this stage, ASEAN + 3 is

not a regional trading arrangement, and it cannot easily become one, but rather seeks to

provide a framework for demonstrating East Asian leadership and influence in regional and

international affairs. The focus is on financial cooperation through the development of swap

arrangements among central banks to meet the contingency of future financial crisis.

What is on the ASEAN + 3 table so far is limited, but it is the start of an important new

political process. China and Japan have come together politically in this arrangement, and

this is a very important and positive development. Despite our problems with Malaysia, and

earlier with Indonesia, there is no reason why Australia should not have positioned itself

with Japan and other countries as an insider in this arrangement, rather than identifying itself

as an outsider. Particularly in the area of regional financial cooperation we have a great deal

to contribute that will be helpful to Japan, China, Korea, Singapore and Hong Kong.

It is simply unsatisfactory that Australia is not part of a regional dialogue addressing the

sorts of issues that came to light during the Asian financial crisis. Those issues include, but

are not necessarily limited to, short-term capital flows, monetary policy settings and long-term investment facilitation.

And, there are other ways to capture the opportunities for closer integration, and to promote

business within East Asia and the Pacific, without the costs of trade discrimination.

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Many of the so-called closer economic partnerships under consideration (such as that

between Japan and Singapore or, for that matter, between Singapore and Australia) are not

primarily about border barriers to trade (that is, tariffs and quotas on goods) at all. The

primary objective of these arrangements is to facilitate trade and investment through a range

of initiatives that goes well beyond border liberalisation to deal with issues like financial

regulation, regulatory transparency, competition policy, standards, education and scientific

exchanges.

The hard issues of trade policy, like agriculture, textiles and automobiles, are best negotiated

multilaterally, and any progress we can make with Japan, China or the United States has to

be tied tightly to negotiations in the WTO.

Professor Peter Drysdale has suggested that the negotiation of a comprehensive Trade and

Investment Facilitation Agreement (TIFA), for example, is the best way forward in the

relationship with Japan.

A TIFA would not involve border discrimination in trade, and can be negotiated in a way

that does not preclude others from signing on to the same arrangements (in whole or in part).

Hence it could serve as a vehicle for extending economic integration among those ready to

sign on in the region, for example, Singapore, Hong Kong and Korea, as well as Japan and

New Zealand. It could also define the approach to negotiating the agreement that has been

proposed with the United States - a subject I will return to shortly.

An agreement with Japan that reinforces non-discrimination and openness towards other

countries in the region, galvanising political interest and drawing business attention to new

opportunities in the relationship, would provide an innovative model on which to build

deeper integration with all our partners in East Asia and the Pacific.

Other priorities for Australia should be to fix our under-developed relationships with China

and India. Australia has had a consistent policy of supporting China’s accession to the

WTO. There are good reasons for this - both Australia and the broader region can only

benefit from a process that sees China formally become a member of the global trading

system.

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But Australia can do more than simply cheer from the sidelines for China’s WTO accession.

The broader issue of China’s peaceful economic development is one of the most important

facing the region and the world - we should not be bystanders.

Labor will promote the substance of our trade and economic relationship with China through

a trade treaty. This would not be a formal free trade agreement but a framework allowing

Australia to take advantage of opportunities in the Chinese market while contributing to

China’s own national economic goals.

We are under no illusion as to the magnitude of the challenge of positioning Australia better

in the Chinese market. But governments cannot put the national interest in the too hard

basket. Through its Treaty proposal Labor will pursue a comprehensive strategy of

economic engagement with China that we believe will yield significant benefits to both

Australia and China and to the broader region.

Currently Australian business perceptions are that China is a hard market to get a fair return

from. I understand that view. Closer economic engagement will allow us to address that

issue at Government to Government level.

Australia’s relationship with India is also woefully underdeveloped. It is disappointing that

the Prime Minister neglected even to mention India in his speech on foreign policy this

week.

India is an emerging power undergoing comprehensive economic reform, the outcome of

which should ensure it plays a more prominent role in regional and global affairs. But

despite cultural and sporting affinity, the bilateral relationship lacks an economic focus and

the right type of support from governments.

We believe that there are substantial synergies to be taken advantage of in the areas of, for

instance, infrastructure development, information technology and education services. But

the government-to-government relationship needs to be brought to bear to the task of tapping

into those opportunities.

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Before the Federal election this year Labor will be releasing a comprehensive `India

Initiative’ that will encompass ideas for lifting the Australia-India relationship across the

board.

These are ambitious proposals. But reinvigorating our relationships in Asia requires nothing

less. Promoting an OECD-style role for APEC, negotiating bilateral trade and investment

facilitation and repositioning Australia vis-à-vis ASEAN + 3 will require careful and patient

diplomacy over the next several years, avoiding the quick-fix that has too often passed for

diplomatic initiative in the past few years.

Australia can and should be at the forefront of innovative approaches to regional economic

integration in the years ahead, consistent with our and East Asia’s global interests.

Australia’s challenge now is to recapture its rightful place on the East Asian radar screen,

and to set a new course of engagement with our partners in East Asia and the Pacific.

*****************************************

I’ve been asked to say a few words about a topical trade matter, the question of a proposed

free trade agreement between Australia and the United States.

Labor values Australia’s relationship with the United States very highly. We prize the

famous World War II declaration by Labor Prime Minister John Curtin, linking us to the

United States. It was under Kim Beazley’s guidance as Australia’s most successful Defence

Minister that the ANZUS Alliance was reinvigorated in Australian eyes. And I, along with

my Labor colleagues who also served as trade minister, had the pleasure of working closely

and productively with successive US Administrations on the Uruguay Round and on APEC

in its formative years.

It is our intention to deepen and broaden the Australia-US relationship and to fully explore

mechanisms for doing so. The United States is the world’s biggest and most dynamic

economy. Our trade relationship is strong because we are both largely free trade economies.

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It is in this context that as shadow trade spokesman I have been simply astounded at how the

Howard Government has gone about handling the FTA issue. Some of the facts are worth

setting out.

The Federal Cabinet apparently decided in November last year to propose to the incoming

US Administration that the two countries seek a free trade agreement. It is not clear what

other options Cabinet considered. But the decision was to seek an FTA: not a P5 trade

agreement, not closer trade and investment relations, but a bilateral FTA, which, as you

know, is under GATT/WTO the most comprehensive free trade undertaking possible. With

ingrained US agricultural protection a problem, this is a very tough standard to meet.

We should be clear - this was a momentous decision by the Howard Government. Australia

has a long history of commitment to the multilateral trading system and a more recent history

of engagement with our own Asian region. Now Cabinet had decided to pursue what is a

preferential trade agreement. Because of the premium we put on the relationship Labor gave

the idea positive but conditional support.

Yet everything that has happened in the nine months since this Cabinet decision gives the lie

to the gravity of this issue. The Government has simply refused to provide any leadership.

There have been no public statements of intent or explanation, either inside Parliament or

outside it. No consultation process with industry groups or interested representatives of the

broader community. And no canvassing of the broader options for pursuing our economic

relations with the United States.

Even now, on the eve of going to the United States with a view to signing Australia up to the

FTA proposition, the Prime Minister offers us no serious rationale for pursuing it.

This is not good enough. If there is a lesson from the anti-globalisation protests it is that

Governments have to communicate what the trade and economic advantages are. Abdicating

before the argument is joined is exactly the wrong way to proceed.

Mr Howard’s international priorities will become clearer as the year goes on. We know that

despite planning to spend up to 10 days in the US next month, he has not confirmed he will

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attend the APEC meeting in Shanghai in October, which seems unlikely now that the calling

of the election will probably be delayed until after the Queen’s visit to Australia.

There is also doubt that the Prime Minister will send a minister to the November WTO

meeting in Doha, at which it is hoped we can launch a new global trading round. We know

already, of course, that he didn’t go to the South Pacific Forum meeting.

The unfortunate truth is that Mr Howard seems utterly preoccupied with ANZUS

commemoration and it is the prism through which he sees the entire Australia-US

relationship.

Frankness is called for with regard to the FTA proposal: its handling has been utterly

botched by the Howard Government.

What has happened is that the hard truths behind the broad proposal have emerged piecemeal

and in a way entirely unsatisfactory for our national interests.

One of these truths is that there is no way that a bilateral FTA process will not change the

way Australia is regarded in Asia. We can be certain that it will send another negative signal

to the region, and - because bilateral FTAs are in fact preferential trading arrangements - it

will result in discrimination against our other trading partners.

The latter point is underscored by the Howard Government’s own econometric work, which

makes clear that removing bilateral trade barriers in the passenger motor vehicle sector, to

take just one example, will divert existing Australian trade from Japan to the United States,

to the tune of at least $350 million.

The result of the Howard Government’s mismanagement of this proposal is that instead of

having a proper debate about Australia’s economic relationship with the United States we are

already beginning to be bogged down in unproductive argy bargy over sensitive market

access issues on both sides.

Do not get me wrong. As I noted earlier, a new economic agreement with the United States

- which comprehends trade, investment, financial and taxation issues - should be a major

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objective for Australia’s foreign economic diplomacy. But we will do our most important

alliance partner, the United States, no service by seeking to press upon it an arrangement that

would be damaging to our economic relationships in East Asia and therefore to America’s

own strategic interests in the region.