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Australia, Europe and Asia: approaching the 21st Century: address to the Royal Institute for International Affairs (RIIA), Chatham House, London, 5 February 1997

The Australian Government sees Australia in the 21st Century as a cooperative, economically competitive and secure nation, fully engaged with the East Asian region, while maintaining and strengthening important links with countries beyond the region.

The Government has been working determinedly since its election in March 1996 - with a good measure of success I might add - to make that vision a practical reality in our foreign policy priorities and initiatives.

Australia's highest foreign policy priority is closer engagement with Asia. But an Asia first policy does not mean Asia only. On the contrary, Australia, like Europe, knows that it is not enough to focus on our own region alone - we realise that our economic interests and our security can be tied up with events well beyond our immediate region.

Australia's relations with Europe are longstanding and include some of Australia's most important economic and political interests. Our ties also cover a wide and richly diverse range of cultural and people- to- people links.

So, just as Australia would urge Europe not to be narrowly Euro- centric, the Australian Government will not make the mistake of being exclusively concerned with our immediate region.

Australia's relationship with Europe contributes a great deal to

Australia's engagement with its Asia Pacific neighbours in the same way that our links with Asian countries add value to our relations with Europe.

The touchstone of the Australian Government's approach to its relationships with key partners in both Asia and Europe is a spirit of initiative and cooperativeness, and a commitment to achieving practical results.

With this in mind I would today like to set out four important aspects of Australia's foreign policy. They are

. a commitment to strengthening Australia's engagement in the Asia Pacific region;

. a determination to enhance Australia's security, especially in the context of developments in the Asia Pacific;

. an undertaking to strengthen Australia's broader, global links in a more productive way, especially in Europe; and

. an insistence on a humane and principled approach to regional and global challenges.

PART ONE: AUSTRALIA IN THE ASIA PACIFIC REGION

The Australian Government's approach of making closer engagement with the region our highest foreign policy priority is unsurprising and indeed is nothing new. In the post- World War 2 era, Australian Governments from both sides of Australian politics have acknowledged the centrality of Asia to Australia's national interests.

The Asia Pacific region is the vital sphere of Australia's economic and strategic interests.

Almost two thirds of Australia's exports are to APEC countries and a growing percentage of these are manufactured products and skilled services.

Over half of Australia's total foreign direct investment goes to APEC countries.

Eight of Australia's top ten trading partners are now located in the Asia Pacific region.

Dramatic economic and political change throughout East Asia over the past ten to fifteen years have made strengthened Australian engagement with Asia even more imperative. Put simply, Asia is on the move and it is moving forward at a pace and with a force that is unparalleled in recent history.

The defining dynamic in the region continues to be strong economic growth.

World Bank predictions have East Asia growing at over 7 per cent a year to the year 2004. That's two and half times faster than the rest of the world.

Even if the maturing economies of Korea, Hong Kong and Singapore slow down somewhat, the huge potential in economies like China, Indonesia and India leaves plenty of fuel for sustained high- speed regional growth.

By 2020, four of the world's ten largest economies will be in Asia - Japan, China, Korea and India. Indonesia will be near the top of the next ten, which will also include Thailand and Australia.

Over the same period of time, Asia's share of world Gross Domestic Product will increase - probably to about 35 per cent, compared with around 28 per cent now. Even more than now, East Asia will be a key locomotive of the world economy.

For Australian producers, and for producers in the United Kingdom and Europe, the opportunities presented by the region's sustained growth and its rapid increase in wealth are immense. But there are also major challenges associated with the new dynamics of Asia, and Australia is working closely with its partners in the region to meet them.

Sustained growth in East Asia, and the opportunities that it gives rise to, will only be possible so long as the barriers to the movement of goods, capital and ideas continue to fall and so long as governments continue on the path of reform and deregulation.

It is the liberalisation of trade and investment that provides the key to creating the regional and global conditions for growth. In the Asia Pacific, the current favourable outlook for growth simply will not be realised unless the process of economic liberalisation continues.

The Australian Government is giving substance to its commitment to engage more closely with Asia through its pursuit of an ambitious trade

liberalisation agenda, most particularly through the APEC process.

Last year, the Australian Government put in a significant effort, in cooperation with its APEC partners, to ensure that the task of implementing APEC's trade liberalisation agenda got off to a positive start.

We believe that this does indeed constitute a useful beginning. APEC economies have delivered a credible set of Individual Action Plans (or IAPs) which set out initial road maps to the goal of free trade, and open trade and investment.

The IAPs reflect the strong existing momentum of trade liberalisation in the region, but they also include new, positive commitments. China, for example, is reducing its simple average tariff from the current 23 per cent to 15 per cent 2000. Singapore and Hong Kong have tabled plans to bind tariffs progressively to zero in the World Trade Organisation (WTO).

The task before us now is to develop these initial efforts, including by making further improvements to IAPs in consultation with business.

The Australian Government, for its part, will be making a strong

contribution to these tasks.

Our approach to trade and investment liberalisation through the APEC process reflects our conviction that liberalisation is vital for the region's future.

It will enable more efficient exploitation of comparative advantage in the region.

It will enable greater economies of scale.

It will improve resource allocation and, most importantly, it will improve the quality of life for millions of citizens throughout the region.

The benefits of trade liberalisation are already manifest in the Asia Pacific.

For example, over the last five years, Japan gradually has opened certain sectors of its enormous market for food. Japan's food imports have tripled over the last decade and now total more than US$50 billion. This has been important for the world food exporters like Australia, Thailand and China, and it has also given Japanese consumers much greater access to less expensive and more varied food products.

APEC is also delivering benefits to non- member economies, including the countries of the European Union. Because APEC is liberalising on the basis of open regionalism, improvements in access as tariffs fall will be shared by all suppliers, provided they remain competitive. The stimulus to growth which flows from liberalisation will similarly increase imports from all regions.

Australia encourages European companies to look closely at Asia Pacific markets, and indeed Australia is already playing an important role as a base for international companies looking to expand their operations in Asia. Over the last three years, more than 160 international companies have established regional headquarters in Australia.

British companies have been leading the way in this trend of utilising Australia as a base for Asia Pacific operations. These companies have recognised Australia's attractions as a location for export operations, joint ventures and regional research and development activities.

Australia's workforce is well educated. Commercial and residential accommodation and other business overheads are cheaper in Australia than in many other regional capitals.

Australia's reliable legal system and business environment, its lifestyle, its high quality education system, increasing Asia expertise - including language skills - and the benefits to be derived from Australia's first- rate telecommunications and information technology systems are strong incentives.

At the global level, the recently concluded inaugural WTO Ministerial Meeting provides the basis for continued global trade liberalisation. It endorsed a post- Uruguay Round agenda for the multilateral trading system and further global trade liberalisation. This reinforces effective implementation of Uruguay Round outcomes and extends the mandate of the WTO into new areas, such as trade and competition policy. It also prepares the groundwork for further sectoral trade liberalisation.

The commitment to conclude an agreement to eliminate tariffs in information technology and telecommunication products early in 1997 was a key outcome. Australia expects this agreement will add to the momentum for further WTO liberalisation in other sectors.

While Australia was in general very pleased with the Singapore Ministerial, we thought the Conference could have adopted a stronger statement on the need to slow the growth of discriminatory trading blocs. Australia has a strong interest in the new WTO Committee on Regional Trade Agreements developing into an effective instrument for ensuring that preferential trading arrangements are subject to rigorous examination. We are also interested in ensuring that the WTO's rules on customs unions and free- trade areas are followed comprehensively. The Australian Government believes that the WTO should be at least as ambitious in its trade liberalisation efforts as regional arrangements such as APEC.

These steps are all part of a broader process of comprehensive engagement with the region. Our approach includes a stronger focus on Australia's key bilateral relationships. Apart from strengthening Australia's bilateral commercial relations in the region, the Government is working to develop science and technology links, research cooperation, cultural ties and people- to- people links with our partners throughout the Asia Pacific.

All our efforts are based on a straight- forward recognition that the Asia Pacific is a fundamental part of Australia's future.

PART TWO: ENHANCING AUSTRALIA'S SECURITY

A second major pillar of the Australian Government's foreign policy - which is also intimately related to strengthening Australia's engagement in the Asia Pacific region - is a commitment to strengthening cooperative security.

The post- Cold War era has brought as many challenges as it has

opportunities, and this is especially the case in the Asia Pacific.

In North East Asia, for example, it would have been impossible only a few years ago to imagine the rapidly developing relationship we now see between China and South Korea. This is very encouraging in terms of finding a solution to hitherto intractable security problems on the Korean Peninsula. Nevertheless, security on the Peninsula still represents a massive challenge not just for regional countries but for the international community as a whole.

Beyond these core security concerns, a range of other security issues such as the potential proliferation of weapons of mass destruction, terrorism, drug trafficking and international crime have added extra layers of complexity to the regional security environment.

The answer to these problems lies in building cooperative linkages. You cannot just put up the shutters and hope the difficult issues will go away. In the Asia Pacific, regional countries need to take advantage of the window of opportunity presented by the current relatively benign strategic environment to strengthen cooperation so that difficult issues can be dealt with as they arise.

That means building a wider and stronger network of linkages at bilateral, sub- regional, regional and multilateral levels. In this way, we can contribute to the core task facing the Asia Pacific: building a sense of trust, a sense of shared interests and a sense of shared responsibility for the region's future.

For its part, Australia has been working at all four levels to help in the development of an international security environment which

. forestalls resort to force in international disputes;

. prevents the proliferation of weapons of mass destruction; and

. encourages cooperation to enhance security in the Asia Pacific region.

At the bilateral level, there is growing acceptance that strong, confident relationships provide the underpinning for regional stability and effective multilateral activity.

Australia has been extending its linkages throughout the Asia Pacific at this level - under the rubric of "practical bilateralism". We make practical contributions to the region's security through our Security Agreements with Indonesia, Papua New Guinea and New Zealand.

The Government sees its alliance with the United States in the same light. Indeed the US presence in the Asia Pacific and its alliances with key partners are a major element of the region's current stability. Australia itself gave new vigour to the ANZUS alliance through the Joint Declaration on Security which was announced during the Australia- US Ministerial Talks (AUSMIN) in July. The central focus of the Declaration was the contribution the alliance makes to regional security.

In addition to these linkages based on formal arrangements, Australia has a range of other strong and growing bilateral defence and security ties with South East Asian countries.

Australia is also strengthening its bilateral security links with North East Asian countries.

The Australian Government held inaugural political- military talks with South Korea in July last year and, earlier in 1996, we held inaugural pol- mil talks with Japan.

In August, we also reached agreement on official discussions with China on regional security.

China needs to be involved and integrated into the emerging regional security community. It will be an increasingly significant player in the security and prosperity of the Asia Pacific region, and I am convinced of the benefits of working cooperatively with it - both bilaterally and in regional security processes and dialogues.

At the sub- regional level, the Five Powers Defence Arrangements, which joins Australia and The United Kingdom with Singapore, New Zealand and Malaysia, provide for similar cooperation and continue to make a

significant contribution to regional security.

At the regional level, the three year old ASEAN Regional Forum, or ARF, is characterised by minimal institutionalisation, consensus decision- making, an evolutionary approach to objectives and the use of second track diplomacy.

Observers brought up in the tradition of European statecraft sometimes question the value of the ARF because it is not itself able at this stage to resolve conflicts and regulate security affairs.

It must be remembered, however, that unlike Europe, the Asia Pacific has no tradition of inclusive multilateral approaches to security or defence.

It will take time to build trust and confidence between those ARF countries which have no tradition of discussing security concerns and approaches to national security.

Australia is working with its partners in the region to ensure that the ARF develops as a key regional process for promoting peace and stability in the East Asia/Pacific region.

Preventive diplomacy - the second stage of the ARF's activities - is already showing good potential. At the third ARF meeting in July last year, for example, the Indonesian Foreign Minister, Ali Alatas, used his good offices as chairman to convey ARF members' concerns about the situation in Burma to the Burmese Foreign Minister.

I am proud to say that Australia played an instrumental role in this initiative.

Success with the ARF's confidence- building and preventive diplomacy stages may lead in future to a third stage - the resolution of conflict through agreed mechanisms.

How and when that could happen is not yet clear, as there are some sensitivities, but I am keen to see the ARF make an early start on dispute resolution and conflict avoidance.

The Australian Government also takes a strong interest in security issues beyond its own region, in particular global arms control and disarmament regimes. Australia is deeply committed to the maintenance of international peace and security through multilateral instruments.

Australia's initiative to secure the adoption of the CTBT last year allowed for a genuine step forward in the non- proliferation and disarmament agenda. That is something of which the Australian Government is justifiably proud.

Australia is also strongly committed to working to rid the world of anti- personnel landmines. The Australian Government's decision in April to suspend operational use of anti- personnel landmines by the Australian Defence Force and to support a global ban on the production, stockpiling, use and transfer of anti- personnel landmines was a clear indication of our determination to work for the elimination of these weapons.

Australia also proposed during this year's General Assembly the formation of a technology working group on landmine clearance. Our commitment of $12 million over three years to help de- mining in Cambodia and Laos gives a practical edge to this proposal. It is, I think, an important step in redressing the humanitarian and economic crisis caused by landmines.

PART THREE: UTILISING AUSTRALIA'S BROADER GLOBAL LINKS

The third key aspect of the Australian Government's foreign policy has been to enhance Australia's broader global links.

The Australian Government regards Australia's links with other countries beyond the Asia Pacific region as major assets. We have also made clear that Australia not only has substantial political and economic interests with European countries but can offer them a competitive commercial base from which they can become increasingly active in the Asia Pacific region.

Europe is a global pillar of stability and prosperity. Australia suffered directly this century when European conflicts became global conflicts. We therefore have a fundamental interest in Europe's successfully managing the great challenge of developing political, economic and security institutions appropriate to the changed realities of the past decade.

To focus on just one dimension of Australia's relationship with Europe, my Department last year published the first comprehensive study on Australia's trade and investment relations with the European Union. It sets out the active agenda Australia will pursue to enhance our links with Europe.

In this context, it is perhaps worth noting a couple of statistics.

The European Union is Australia's largest source of and host for foreign investment, including foreign direct investment. It is Australia's largest source of imports, including capital goods which are fundamental to Australia's technology base and economic growth. The EU as a whole is Australia's second largest market for exports of both goods and services.

The commercial relationship clearly is a strong one, and there is great potential for further growth. Nevertheless, there are also challenges in the trade and investment relationship which must be addressed. Above all, for Australia, is the deterioration that has occurred in Australia's balance of trade with the EU over the last six years - Australia's trade deficit with the EU has doubled since 1990.

There are, of course, a number of reasons for this problem, including a slowdown in Europe's economic growth rates and structural problems in European industries that consume Australian raw materials. But it is also clear that the remaining EU impediments to Australian exports are also a significant contributing factor.

For the Australian Government, improving Australia's access to European markets - especially in the agriculture and coal sectors - is a

particularly high priority.

The Australian Government is also working to strengthen relations with key partner countries within the European Union.

The revitalisation of Australia's relationship with France, following the end of French nuclear tests in the Pacific, and support for the CTBT, led France's Prime Minister Juppe to comment that "we have a new basis for a new relationship between Australia and France".

The French Foreign Minister Herve de Charette said the relationship was now at a stage which "allows us to turn the page and write new ones". Most recently, the courage and professionalism displayed by the Australian Defence Forces in the rescue of the stricken French yachtsman, Thierry Dubois, has given another boost to the close ties between the two countries.

This spirit of renewal augurs well for the future and has already led to the commencement of negotiations for visa free travel for Australian tourists and business people to France. The fact that there was such strong cooperation between the two countries in preparation for the General Assembly vote on the Comprehensive Test Ban Treaty Resolution was a particularly potent symbol of the new relationship.

Australia's Coalition Government has also established pol- mil talks with Germany and launched the "Partnership 2000 Action Plan". This is designed in particular to enhance the commercial relationship between Australia and Germany. Already business leaders' groups in Germany have been established to oversee and assist with its implementation.

My visit to Italy tomorrow is the first by an Australian Foreign Minister in almost nine years. The visit's objective is to help revitalise the bilateral political and commercial relationship between Italy and Australia. In Rome, together with my Italian counterpart, Foreign Minister Dini, I will be announcing a detailed strategy to achieve this aim.

Of course, Australia and the United Kingdom already have a very strong relationship. In economic terms, the UK is Australia's third- largest trading partner and Australia's main market in Europe. The UK is the second- largest foreign investor in Australia and could well become the largest in the next five years. On the other side of the ledger, Australia is Britain's third- largest foreign investor, with Australians investing more in the UK than, for example, Germany or Japan.

This morning, Foreign Secretary Rifkind and I launched a major bilateral trade and cultural promotion entitled "New Images" on an Australian- built fast ferry in the Thames. The year- long promotion aims to remove outdated stereotypes of each other and highlight the modern and dynamic relationship between us.

"New Images" will, I think, presage a new era in what is already one of the strongest relationships between any two countries in the world.

PART FOUR: A HUMANE AND PRINCIPLED FOREIGN POLICY

A fourth pillar of Australia's approach to its international relationships is a focus on a humane and principled foreign policy.

Australian foreign policy is vitally concerned with upholding

internationally recognised standards of human rights and looking for practical ways to enhance individual dignity and freedom and promote democracy internationally.

This area of policy involves two major elements: public diplomacy and constructive initiatives.

With regard to the first area of public human rights diplomacy, Australia has continued to make strong representations to the Government of Burma on specific human rights cases and is maintaining regular contact with opposition spokespeople, including Daw Aung San Suu Kyi.

We are also maintaining pressure on Burma's SLORC regime. Late last year, Australia co- sponsored a human rights resolution on Burma in the United Nations General Assembly, which sent a clear message to the Burmese Government about the urgent need for improvements in the human rights and political situation there.

The leader of the Burmese opposition in exile, Dr Sein Win, specifically singled out Australia and a small number of other countries for our "special efforts" in ensuring that the resolution was representative of the current crisis in Burma.

Elsewhere, the Australian Government has committed $16 million to the restoration and rebuilding process on Bougainville. This funding would help to restore basic social services and infrastructure to an island which has been ravaged by conflict for over eight years. Restoration of the Bougainvillean economy would provide a clear peace dividend for all Papua New Guineans.

By way of practical initiatives in other areas, the Government has already given a contribution of $300,000 for the International Committee of the Red Cross (ICRC) to continue its human rights monitoring work in East Timor. This is in addition to Australia's continuing development assistance program to East Timor.

I also made it clear in Jakarta in April last year that Australia will continue to lend whatever support it can to the two streams of dialogue on East Timor held under the auspices of the United Nations, and to help in reducing the dramatic unemployment problem in East Timor. Most recently, the Government provided around $25,000 to meet costs associated with the All- Inclusive Intra- East Timorese talks in Austria in March 1996.

In looking to the future, the Australian Government is involved in three initiatives which will make practical, long term contributions to human rights and democracy at a structural level.

First, the Australian Government is supporting the development of Asia- Pacific human rights arrangements. This is important because the establishment of a human rights framework and institutional infrastructure will bring our region into line with Europe, the Americas and Africa.

Our support is being developed through the informal Asia Pacific Forum of National Human Rights Institutions which was established last June, and the Australian Government is providing $225,000 so that the new Forum has a properly functioning secretariat.

The second Government initiative is the proposal to establish a new Centre for Democratic Institutions which will focus on the promotion of democracy and democratic change internationally. My Department is currently developing detailed proposals for the Centre in conjunction with

Non- Government Organisations. Yesterday, I discussed the initiative with Sir James Spicer, the Chairman of the Westminster Foundation for Democracy, and we looked at how we might take this proposal forward.

A third initiative to which I have lent my strong personal backing is the establishment of an International Criminal Court.

I believe an International Criminal Court would be an important step forward for the international community in dealing with the most serious crimes of international concern such as genocide, war crimes, and crimes against humanity. Its establishment will be one of the Australian Government's prime multilateral and human rights objectives in the next two years. The world needs an International Criminal Court and Australia will work assiduously in helping to deliver it.

Conclusion

Let me conclude by noting that Australia's approach to these foreign policy issues has important implications for our partners in Europe. Because the Asia Pacific is the fastest growing and most dynamic region in the world, European countries are increasingly looking to heighten their presence in Australia's part of the world. The potential for growth through

strengthened trade and investment ties is immense.

Beyond immediate economic interests, in an increasingly integrated world, the long- term stability and development of the Asia Pacific will also have a progressively greater impact on Europe's prospects. So it is in Europe's interest to work with regional countries like Australia across a range of economic and strategic issues of mutual interest.

The Australian Government is bringing Australia closer to its region. It is enhancing Australia's security, working to make Australia's ties outside the Asia Pacific region more productive, and maintaining a humane and principled approach to foreign policy issues.

We are, in other words, preparing Australia in the best possible way to meet the challenges of the 21st century.