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Australia, China and the United States: Foreign policy challenges for the 21st Century: an Address by Kevin Rudd, MP to the China Institute for Contemporary International Relations :21 October 2005, Beijing, China.



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AUSTRALIA, CHINA AND THE UNITED STATES

: Foreign policy challenges for the 21st Century

An Address by Kevin Rudd, MP

Shadow Minister for Foreign Affairs, Trade and International Security

to the

China Institute for Contemporary International Relations

21 October 2005 Beijing, China

Thank you for your kind invitation to address the Chinese Institute for Contemporary International Relations.

Last year I was also in Beijing delivering an address to the Central Party School of the Communist Party of China.

On that occasion, I spoke about the future challenges of the bilateral relationship between China and Australia.

On this occasion, I wish to broaden my remarks to address the future foreign policy challenges facing China, the United States and Australia.

My remarks on this occasion, as in the past, are framed as a long-standing friend of China. My remarks today draw extensively from addresses I have made recently in the United States, China and Australia.

I began my studies of China back in 1976 when I enrolled as an undergraduate in the Department of Chinese at the Australian National University.

Little did I know then that 1976 would prove to be such a momentous year in modern Chinese history. The death of Zhou Enlai. The death of Mao Zedong. The purge of the Gang of Four.

The course that I studied combined modern Chinese, classical Chinese, Chinese history, Chinese philosophy and Chinese literature.

It took five years. When I began, we studied “Da Zhai” and “Da Qing”. By third year we were studying Deng Xiaoping’s dictum “seek truth from facts” and “practice is the only criterion for truth”. And by the time I graduated, we had advanced to critical discussions of “the reform of the economic system”. It was, indeed, an interesting time to be studying China.

When I came to China to work for the first time twenty years ago, back in 1984, the Party was preparing for the third plenum of the twelfth Central Committee - the plenum which took reforms in agriculture and applied the principles of reform to the entire economic system. These were courageous and far-sighted decisions taken by the Party’s leadership at a time when the country was still throwing off the ideological shackles of the Cultural Revolution.

In the intervening twenty years, I’ve been back to China many, many times - as a diplomat, as a state government official, as a businessman, as a Member of Parliament, now as the alternative Foreign Minister of Australia.

The fundamental challenge is this: unless the Asia Pacific region is able to enjoy long-term peace, economic cooperation and strategic stability between China and the United States, then the future hopes for all our peoples may well come to nothing.

It is cardinal principle of Australia’s approach to foreign policy that all our diplomatic energies should be directed towards reducing the prospects of conflict between China and the United States on the one hand and promoting the common interests of both countries in shaping the future rules of the international order on the other.

Cooperation, rather than conflict, is the only reliable path capable of securing the long-term interests of all the peoples of our region.

The Rise of China

Much has been written in recent years about the rise of China.

I do not believe this is simply a fad or a passing phase. What we are witnessing at present is the greatest single geo-strategic and global economic shift since the rise of the United States as a global power more than a century before.

Writing in August’s Foreign Affairs magazine, Zheng Bijian, Chair of the China Reform Forum, entitled his chapter: China’s ‘Peaceful Rise’ to Great Power Status. The term ‘Peaceful Rise’ was placed in inverted commas. I don’t know whether this was Zheng Bijian’s idea or whether it was the editorial team of the US Council for Foreign Relations who edit Foreign Affairs. Perhaps that is a story in itself.

Zheng puts China’s case starkly:

“Some emerging powers in modern history have plundered other countries’ resources through invasion, colonisation, expansion, or even large scale wars of aggression. China’s emergence thus far has been driven by capital, technology and resources acquired through peaceful means.”

The truth is that this claim is absolutely correct. China has not sought to emulate Imperial Japan, the Germany of the first and second world wars, or the European imperial powers of the preceding four centuries.

However, the sheer impact of China’s arrival on the global political, economic and strategic stage is of such an order of magnitude that deep questions are being asked about where all of this will lead.

Questions such as:

• What drives China’s long-term economic ambitions?

• What are China’s long-term plans for meeting its energy and resource requirements?

• How will Chinese foreign policy power be projected into the region?

• What are China’s long-term interests in terms of the continued strategic presence of the US in East Asia and the West Pacific?

• And then there is the big one, what are the prospects of China evolving into a democracy?

• And will this in turn shape the pattern of China’s broader political engagement with the region and the world?

On balance, I am an optimist, in terms of China’s long-term impact on the region and the world - and that is not simply an optimism driven by Australian national economic self-interest. It is an optimism also driven by the belief that Australia, China and the United States can work cooperatively over the next quarter century across the range of economic policy, foreign policy, strategic

policy and environmental policy challenges.

Australian Labor Party Policy Towards China

The Australian Labor movement is made up of two wings: the Australian Labor Party and the Australian Trade Union movement.

The Australian trade union movement first became engaged with China’s cause back in the 1930s and 40s following the Japanese invasion of Manchuria. It was during this period that Australia’s representatives on the International Labor Organisation in Geneva led a campaign of international industrial action against Japanese shipping around the world - in protest against Japanese aggression in China.

In 1949, when the Peoples’ Republic of China (PRC) was proclaimed, the Australian Labor Party was in power in Canberra under Labor Prime Minister Chifley. The then Australian Labor Government made preparations to extend diplomatic recognition of the new government of China towards the end of 1949. Unfortunately, during the general elections of November 1949, the Labor Party was defeated - and remained out of office for the next 23 years.

For the following 23 years, successive conservative governments of Australia maintained diplomatic relations with the Nationalist government on Taiwan - until 1972 when the Australian Labor Party was finally returned to political power. In one of its first decisions, Labor Prime Minister Whitlam extended diplomatic political recognition to the PRC - diplomatic recognition based on a firm commitment to the principle of the One China policy.

During the 1980s, the Hawke Labor Government developed a closer relationship with the China at multiple levels. It was during this period that Prime Minister

Hawke and his Chinese counterparts brought about the first Chinese resource investment abroad - the Channar Iron Ore mine in Western Australia.

Back in the 1980s, Labor Prime Minister Hawke began outlining a long-term vision for the future of the Australia-China relationship based on the strongest levels of economic cooperation between the two countries.

This vision was sustained during the 1990s under Labor Prime Minister Keating who sought to deepen and broaden Australia’s bilateral relationship with China - as well as enhance China’s multilateral engagement with the region through APEC.

As a party, therefore, the Australian Labor Party has always placed a strong priority on Australia’s relationship with China. It has a long history. We also believe it will have a long future.

What therefore are the key elements that should characterise Australia’s long-term relationship with China - as China rises to become a great power?

In my address to the Committee for Economic Development of Australia in May this year, I outlined the framework for an Australia-China 2025 Strategy around seven basic points.

1. A Strategic Economic Relationship

Australia and China must define what we mean by having a strategic economic relationship. At present our relationship is dominated by the energy and resources sector, which from Australia’s perspective is no bad thing given our

comparative economic advantage.

But within those parameters, Australia and China must also resolve how we are going to deal with potentially difficult, diplomatically sensitive and commercially significant factors including long-term pricing, security of supply and resource ownership.

Beyond the energy and resources sector, Australia also has a clear interest in a strategic economic relationship which includes elaborately transformed manufactures, the new technology industries (particularly biotechnology) as well as burgeoning demand in the services sector - including financial and legal services, education and tourism.

Plainly, these are some of the sectors that are of interest to Australia. China, of course, will have other sectors as well. But if we are to advance confidently into

the 21st Century, our economic relationship must be based on mutual advantage and common prosperity. And that will require clear-headed and far-sighted leadership on the part of both of our countries.

2. Australia’s Relationship with the United States

It is clear to all that Australia’s strategic relationship with the United States is likely to continue to be a source of difficulty and discomfort in the prosecution of our relationship with China.

But it is important for Australia to be honest and clear-cut with our friends here in China that we will not be shifting in any way in its half century alliance with Washington under the ANZUS Treaty.

This is a matter of bipartisan consensus in Australia.

It will remain so.

And we should be absolutely clear-cut about that in our dealings with Beijing.

The challenge for Australia, however, is not to convey to China, or the rest of the region for that matter, that Australian foreign policy is simply a sub-set of US foreign policy.

We on our side of politics have never had that view. The Australian Labor Party supports our alliance with the United States (after all we helped frame it back in 1941), but we have never believed that an alliance mandates compliance on every aspect of foreign policy. We on our side of politics have begged to differ with the United States on Vietnam and most recently we have begged to differ on the second Iraq War.

Nonetheless our view remains that continuing US engagement in East Asia and the West Pacific underpins the overall stability of the region - and has done much to create the strategic conditions necessary for the region’s peace and economic development over the last quarter century. We do not see that equation fundamentally changing.

3. Avoiding Conflict over Taiwan

A core objective of Australia’s long-term relationship with China must be to avoid conflict across the Taiwan Straits.

This audience knows only too well what the consequences for China, Taiwan and the wider region would be if the unthinkable were to happen.

If the Taiwan matter was to go radically wrong, the consequences for Australia, and the wider region would be acute.

Because our vital interests are at stake, Australia should not be a passive bystander on this. It is critical that we be actively and effectively engaged.

Australia welcomes recent visits to China by Lien Chan of the KMT and James Soong of the KMT’s coalition partner which appear to have taken the edge out of cross-Strait tensions. But for those of us who have studied the Taiwan Straits

over a couple of decades, one swallow doth not a summer make. And Australia remains actively engaged on this point.

4. Shaping the agenda of the East Asian Summit

This year in Kuala Lumpur there will be convened an inaugural East Asian Summit. In time this Summit may evolve in the direction of an East Asian Economic Community - and in an even longer time frame, evolve into an East Asian Community broader than a purely economic engagement across the region.

Attending the Summit will be the ASEANs, China, Japan, Korea, India, Australia and New Zealand.

Australia’s challenge, together with its Summit partners in ASEAN and with China, Japan and India in particular, will be to shape the agenda, institutional structure and long term policy scope of this emerging element of East Asian regional architecture.

For Australia this will require a wholly pro-active regional diplomacy in order to put early runs on the board as well as to avoid policy overlap with APEC and other regional and global institutions.

Australia and China should work together early on to identify where this project is likely to proceed so that we can work cooperatively on enhancing pan-regional respect for a rules-based order.

5. Engaging China on Human Rights, Labour Standards and the Environment

The Australia-China relationship must be strong enough, mature enough and broad enough to also sustain a continuing dialogue on sensitive questions such as human rights, labour standards and environmental standards.

Australia makes no apology for the fact that it is a robust political democracy with a continuing interest in upholding international human rights standards. We must always be prepared to take these arguments up with our Chinese friends.

Australia and other countries also have a deep interest in China adopting the International Labour Organisation’s standards for its workforce. This would be an important step forward in responding to the concerns of international organised labour on the question of the future direction of our global trading system.

Similarly on the environment, China by definition is becoming one of the single most important factors in the global policy debate on climate change. Australia and China must also engage in dialogue, cooperation and effective commercial engagement in the area of energy policy to ensure that our common environmental objectives are also being met.

6. Australia Must become a China-Literate Nation

Ten years ago, the then Australian Labor Government launched the National Asian Languages and Studies Strategy for Australian Schools (NALSAS).

Numerous governments, both Labor and Liberal, Federal and State, funded a half billion dollar program over eight years, to increase dramatically the number of Australian school children studying the principal languages of our region, Chinese, Japanese, Indonesian and Korean.

By 2003, we had approximately 750,000 Australian school students studying one or other of these priority Asian languages.

Australia must continue to move towards the long-term objective of an increasingly Asia-literate (and within that an increasingly China-literate) Australia to meet the great challenges of the Asia Century and what may well become the China Century.

7. Accelerated Political Engagement

The long-term engine room of the Australia-China bilateral relationship is the political relationship. Irrespective of whether the government in Canberra is

Labor or Liberal, we have a long-term bipartisan interest in ensuring that the political relationship is kept in first class working order.

Australia and China should expand significantly the dimensions of our political exchange program between politicians, bureaucrats, business leaders, journalists, students and artists to ensure that there is a strong, robust, human dimension to

the our relationship into the future.

Put simply, when things are in danger of going off the rails it is important to know that there are people in both capitals that you can call upon for help.

This is the outline of the broadest elements of an effective engagement strategy between our two countries.

Future Directions in US-China Relations

I have spoken thus far about the implications for Australia arising from the rise of China. But what about Australia’s principal ally, the United States?

As a long-standing friend of the United States, I must confess to being a little concerned about what appears to be a rising tide of anti-Chinese sentiment in various parts of America. I am equally concerned that there exist elements of anti-US sentiment in China.

1. US Trade Deficit

From the economic and trade perspective, it is apparent that there is a great deal of concern within the US Congress and the manufacturing states about the impact of Chinese competition on American industry, jobs and the size of the US trade deficit with China.

Specifically, there was a great deal of pressure emanating from the US on China to adopt a more flexible currency arrangement in response to accusations China was benefiting from an unfair advantage.

Of course there is some scepticism about the precise connection between China’s currency regime on the one hand and the magnitude of the US deficit on the other.

As US Federal Reserve Chairman Greenspan told a Senate Committee in June of this year:

“…some observers mistakenly believe that a marked increase in the exchange value of the Chinese renminbi relative to the US dollar would significantly increase manufacturing activity and jobs in the United States…I am aware of no credible evidence that supports such a conclusion”

Whether because of, or in spite of, the rising tide of anti-Chinese sentiment in the US Congress, China introduced a ‘managed floating exchange rate regime’ on 21 July. The extent to which the new arrangement impacts on the US trade deficit with China remains to be seen.

2. China’s Foreign Reserves

A further key indicator of China’s economic success to date and its strong trading performance has been the build up in its foreign reserves now estimated at more than $700 billion.

Of that $US700 billion, nearly $US500 billion is held in US treasury bonds and other American securities.

China is therefore playing a crucial role in maintaining US economic growth, particularly through the US housing and consumer boom made possible by Chairman Greenspan’s interest rate policy.

A switch of Chinese foreign reserves to euros or yen - or a big revaluation of the renminbi - could well have a significant impact on US interest rates and further economic expansion.

It is also indicative of how inter-dependent the US and Chinese economies are and why it can be dangerous to lose sight of this inter-dependence if the relationship is overshadowed by the size of the trade deficit.

3. China’s Resource Acquisitions

Then there is the question of how to feed China’s long-term growth requirements.

Its ability to continue growing at the rapid rate of more than 9 per cent will be very much determined by its capacity to access supply of much needed energy resources.

Twenty years ago, China was East Asia’s largest oil exporter. Now it is the world’s second largest importer - last year alone it accounted for 31 per cent of global growth in oil demand.

There is little sign of China’s appetite for energy imports abating, hence its search for exploration and supply agreements with states that produce oil, gas and other resources - as well as its investment in or attempted take-over of foreign energy companies.

In this context, the recent attempted take-over of Unocal by CNOOC met with a decisively negative response in the United States.

Members of the House Armed Services Committee said that:

“An acquisition of Unocal by CNOOC would give Beijing access to a strategically vital asset and should be blocked.”

On 30 June 2005 the US House of Representatives adopted a non-binding resolution (398 votes to 15) urging the Bush Administration to block CNOOC’s bid as a threat to national security.

This was an interesting approach given that Unocal’s assets equate to 0.8 per cent of US production from petroleum liquids and 0.3 per cent of US petroleum consumption.

4. US Foreign Policy Towards China

Thus far, I have spoken in part about the economic implications for the US. Of course the wider debate in the US involves other foreign policy and strategic policy considerations as well.

The broader debate on US policy towards China is often framed as a debate between ‘containment’ on the one hand and ‘engagement’ on the other.

Containment, in my view, is neither possible nor desirable.

In fact, the active prosecution of any US containment strategy against China is likely to be both counter productive and potentially destabilising. After all, if the US welcomed China into the world economy initially, it makes little sense to then say China is now no longer welcome.

Engagement is a far better option than containment.

Australia would argue that the United States and China should engage cooperatively on the central question of shaping the rules, standards and norms for the unfolding political and economic architecture of the region and beyond.

Engaging China cooperatively on the future construction of the global and regional rules-based order makes good sense.

For its part, China has a great national economic self interest in ensuring the predictability of that order.

And for America’s part, and for Australia’s part, China’s regional and global economic and political interests are now so large that we cannot avoid engaging one another on the broader question of the norms of engagement.

Obviously much work is currently underway on this score on the economic front both bilaterally as well as within the complex framework of the World Trade Organisation - including sensitive areas such as the protection of intellectual

property.

But engaging China in the development of the region’s architecture beyond the simply economic is equally important. For example:

• What norms should be applied to external economic relationships with states like Zimbabwe?

• Is the ASEAN Regional Forum an adequate security policy framework for our region - or can we do much better given the complexity of many of the unresolved security policy challenges in the region?

• What of the future of APEC and how will this relate to the emerging East Asian Summit - and what values, norms and standards will be applied to the future members of any emerging East Asian Community?

On the question of APEC, my own view is that we should collectively use the upcoming APEC Leaders’ Summit in the Republic of Korea to reinject that organisation with much needed political momentum.

Given the severity of the challenge which Avian Influenza (AI) represents to the region and beyond, I could think of no better way to rekindle the relevance of APEC to the challenges that regional states are likely to face in the year or so ahead.

In fact given the severity of the AI challenge, I would argue that we should use the APEC Summit to help build the networks, institutions and norms across the Asia Pacific region that will become critically relevant to the effective handling of any Avian Flu pandemic.

A key element in this respect of course is transparency. Early identification and verification of an outbreak of a flu pandemic is absolutely critical to the prospects of an effective containment response.

Taking the Debate Forward

The recent China-US Dialogue established by US Deputy Secretary of State Bob Zoellick provides a welcome platform for the development of a properly integrated framework for the future of the US-China relationship.

Lat month, Deputy Secretary Zoellick added to this Dialogue in his address to the National Committee on US-China relations. In it, Ambassador Zoellick eloquently contrasted US policies towards the Soviet Union on the one hand and those towards China on the other. Specifically, Ambassador Zoellick said:

“For fifty years, our policy was to fence in the Soviet Union while its own internal contradictions undermined it. For thirty years, our policy has been to draw out the People’s Republic of China. As a result, the China of today is simply not the Soviet Union of the late 1940s:

• It does not seek to spread radical, anti-American ideologies. • While not yet democratic, it does not see itself in a twilight conflict against democracy around the globe. • While at times mercantilist, it does not see itself in a death struggle with

capitalism. • And most importantly, China does not believe that its future depends on overturning the fundamental order of the international system. In fact, quite

the reverse: Chinese leaders have decided that their success depends on being networked with the modern world.”

There are many aspects of Ambassador Zoellick’s speech which members of this audience might not particularly appreciate. The United States has not in the past, nor does it at present, have any particular monopoly on foreign policy wisdom.

Nonetheless the speech candidly recognises what it describes as a “gulf in perceptions” on both sides. It explicitly acknowledges that in the United States “there is a cauldron of anxiety about China” - going on to note the gradual erosion of business, union and political constituency support for China within the United States.

Importantly, however, the speech seeks to chart a path ahead by challenging both countries to work cooperatively together on shaping the future international system. Ambassador Zoellick issues the challenge in the following terms:

“China has a responsibility to strengthen the international system that has enabled its success. In doing so, China could achieve the objective identified by Mr. Zheng Bijain: ‘to transcend the traditional ways for great powers to

emerge.’”

Let us hope in next month’s visit to China by US President George W Bush that both countries can take this challenge one step further towards a concrete program of action.

Conclusion

These then are some of the challenges which our three countries face in the 21st century.

These challenges are of course complicated by continuing tensions between China and Japan, arising from Japan’s official attitude to various matters relating to the Second World War.

While this is a matter for both countries ultimately to resolve, my view is that it is a matter of great importance that Japan comprehensively takes responsibility for its actions during the period 1937-1945.

Any objective student of history would conclude that Japan inflicted enormous suffering and destruction on China during that period, as it did on other countries in East Asia.

Australian cities too were bombed by Japan during the war - and tens of thousands of Australian servicemen and women were killed or injured in seeking to repel the Japanese invasion of Australia.

These are historical facts which cannot be altered. And if we are to move forward into the future, we cannot afford to continue to be encumbered by the past.

I have suggested before that an appropriate international panel of scholars should be appointed to cooperatively research and resolve any outstanding matters in these areas.

The strategic, economic and social challenges facing our East Asian hemisphere for the century ahead are huge.

But if we adopt a common posture of cooperation, recognising the common

interests and values of all our peoples, we can in fact work together to construct a truly “Pacific Century” - with greater prosperity and freedom for all our peoples.