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Australia and Asia: six challenges for the 1990's and beyond



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. A D DR ESS TO TH E

ASIA-AUSTRALIA INSTITUTE

A SIA LECTURE SERIES

"Australia and A s ia ; Sis: Challenges for tlie 1990‘s and Beyond*

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COM M O NW EALTH PARLIAMENTARY LIBRARY M ICA H

Mr Justice Samuels Professor Birt Professor Fitzgerald Distinguished Guests Ladies and Gentlemen

I am delighted to be with you this evening to participate in the Asia Lecture Series and I am very appreciative of the warmth of your welcome.

In his characteristically persuasive way, Stephen Fitzgerald invited me some time ago to give this Lecture:

- in fact, he needed little of his persuasive power:

- I was delighted to accept the invitation and to

support the work of the Asia-Australia Institute, in which Stephen himself plays such an important role.

In any society, the quality of the debate over new ideas and new ways of thinking is an important indicator of that society's vitality and capacity for growth:

- in Australia, there is no more important focus for the public debate on ideas than the future of our

relations with Asia.

This Institute is making an invaluable contribution to the quality of that debate:

- by making us all think harder and longer about the

future of Asia, and Australia's place in it, the .'Institute is contributing not just to the policy process but to community understanding generally?

- I am delighted to be able to be involved in that

process and I wish the Institute continuing success.

I am also delighted to return to ray old University where I spent nearly ten years as Professor of Economics:

- the University's support for the Institute is

important and welcome, and I express my appreciation to the Chancellor, in particular, for his presence this evening.

I wish to take the opportunity you have given me this

evening to focus on Australia's opportunities and

challenges in the Asia-Pacific region:

- in particular, I wish to highlight what I see as six

major challenges which Australia needs to meet if it is to maximise the great potential of its interaction in, and with, Asia in the 1990's.

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The first challenge for Australia is to think strategically in a hard-headed way about our role in the Asia-Pacific region:

- we have not done so in the recent past;

- we have too often preferred reactive diplomacy based on grandstanding and emotion;

- other countries in Asia have shown with great success the benefits of hard-headed, strategic thinking designed to advance their interests in the region:

: Japan and Singapore led the way in that regard;

: countries like Thailand, Indonesia, Malaysia, Taiwan and others have now done the same;

: it is high time Australia did likewise;

: that is the only way that we can constructively interact with the region in a way that advances our own interests.

For too long official Australian rhetoric about our

relations with Asia has far exceeded Australia's

achievements in practice:

- I have long believed that the time is well overdue for that rhetoric to be given much greater substance.

We have heard for decades now Australian politicians - from all sides - repeating those familiar cliches:

- that "Australia's future lies in Asia";

- that Australia is "part of Asia";

- that we need to "enmesh ourselves with Asia";

- that we live on "the edge of the dynamic economies of Asia", with all the opportunities that brings;

- or that we need to "adapt our attitudes and policies

to the reality of our Asian environment".

Like most cliches, they have an important element of truth:

- for a long time, my concern has not been whether

Australia's economic future lies in Asia: I have long been convinced that it does;

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- equally, my concern is not with endless rhetorical debates about the importance of Australia interacting more productively with Asia: the importance of that is something which I have long taken to be self-

evident ;

- my real concern has been, and remains, that we have

been saying the right things for years but that our practical achievements have not been commensurate with that rhetoric:

: we have talked mightily but achieved

disappointingly little.

Instead of becoming more "economically enmeshed" with Asia, I believe that Australia has barely scratched the surface of its economic potential in the region.

Instead of increasing our capacity for constructively influencing economic and diplomatic developments in Asia, I believe that Australia's role and influence are becoming increasingly marginalised.

Instead of anticipating the real forces of change in Asia and instead of adapting creatively to them, I believe that too much of Australian thinking still lies trapped in Asian stereotypes that became outdated a long time ago.

And instead of articulating those priorities that are clearly in Australia's "enlightened self-interest" as far as our relations with Asia go, we have become too obsessed with'grand visions and too blinded by delusions about our

real capacities.

My own personal involvement with Asia goes back many years:

- as an academic economist from this University, as a

banker, as a leader of many business delegations, and now as a politician, I have been intensely interested in promoting a more productive interaction between Australia and Asia.

Very soon after I became Leader of the Opposition in April last year, I made it very clear that the strategic

objective of the Coalition Parties under my leadership would be to make Australia a major economic and political player in the Asia-Pacific region by the Year 2000.

I have reaffirmed that objective on countless occasions over the past sixteen months.

I have done so for many reasons, but two of which are

paramount:

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- first, because the Coalition Parties firmly believe that such an objective is vitally important in giving a sense of strategic direction to our policymaking;

- and second, because we firmly believe that the

objective is in the best long-term interests of all Australians:

: the Asia-Pacific region will offer the greatest growth prospects in the world for the next four to five decades at least and the greatest

opportunities for Australian exporters:

: that is not to say that we should become

"regional isolationists" in an economic or security context:

: clearly, we need not, and should not, focus on

Asia to the exclusion of opportunities in Europe or the Americas or wherever:

: but in terms of the size of the market and what

it needs, the Asia-Pacific region offers

Australia special opportunities.

A number of consequences have flowed from our commitment to making Australia a major economic and diplomatic player in the Asia-Pacific region by the Year 2000:

- at a policy level, our ordering of priorities and our sense of purpose have been. directly related back to - that overriding objective of becoming more relevant and significant in the Asia-Pacific region:

: that applies not just to our defence and security policies, but to our program of domestic economic reform which we see as fundamental to a more

productive overall relationship with our region;

: and I shall return to that policy perspective in more depth later;

- at a person-to-person level, Shadow Ministers have made a concerted effort to establish direct

relationships with counterparts in Asia and the Pacific, and to make our deep commitment to the region more clearly understood:

: for my own part, all my overseas travel in my

first year as Leader was to Asia;

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: I visited Japan (twice), the People's Republic of China, Taiwan, Hong Kong (three times), the Philippines, the Republic of Korea, Thailand, Malaysia, Singapore, Indonesia and Papua New Guinea;

$ not all those visits, particularly to Taiwan and the PRC, were welcomed by the Australian

Government:

- but we strongly believe that no Australian interests are served by refusing to talk with people, whatever political differences we may have with them;

: more recently, I had the opportunity for

discussions with President Bush and other senior members of his Administration when I visited the United States: a nation which, I should note, I most definitely classify as a country of the Asia-Pacific region.

The high-level consultations which I have been able to have with political and business leaders in all the countries I have visited have been directly relevant to our task of giving policy substance to our objectives of making Australia more dynamic and relevant in the Asia-Pacific

region.

My point here is that without an overriding strategic objective to guide and direct policy formulation, and without that objective being pursued consciously and rigorously, no Government or Opposition can serve

Australia's real interests:

- the Coalition Parties have clearly committed

themselves to such an objective;

- it is an objective focussed on our relations with

Asia;

- it is an objective which, if realised, will be to the

benefit of all Australians;

- and it is an objective which we have applied, and will continue to apply, across the board to our policy development.

A second challenge which Australia has to meet if our

relations with Asia are to realise their potential is to recognise that geographic proximity guarantees neither economic access nor diplomatic influence:

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- "being thereH just isn't enough.

For too long, politicians have made our geographic

proximity to Asia into some kind of cargo cult mentality:

- as if, somehow, by just being where we are we can

overcome all the consequences of our domestic economic mismanagement by tapping into - or, in the official jargon, M enmeshing" ourselves with - the dynamic economies of our neighbours.

It is too often mistakenly portrayed as a new chapter in the story of "the lucky country":

- just as "our luck" as a country has been served in

hard economic times in the past by a boom in commodity prices or by growth in the world economy, so - some contend - our current economic difficulties will be overcome because we happen to be adjacent to the

world's most dynamic economies and can "enmesh" with them.

My concern is not that we should avoid involving ourselves more with Asia: the clear purpose of our policymaking is that we should do so wholeheartedly:

- but my real concern is that too many Australians, both in and out of Government, believe that it will just "happen" because of our "lucky" geographic location.

My argument to you tonight is that a more productive and more * · broad-based relationship with Asia will not just happen because of geography:

- it will only happen if a concerted program of economic reform and public awareness in Australia makes it happen.

One need look no further than the recent past to see that our geography alone ensures nothing in terms of an

expanding trade relationship with Asia.

Despite the fact that the Asia-Pacific region took 52% of Australia's total exports in 1989/90 and has been our fastest growing market for over two decades, the fact is that our economic performance in the region has been

comparatively poor;

- we continue to lose market share in the region because we have not produced, and still do not produce, what the region demands.

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Put simply, Australia has only barely scratched the surface of the dynamic commercial opportunities that have been available in Asia over the past twenty years:

- let me give just one example which a recent AMZ Bank

Report highlighted;

- the largest and most rapidly growing market in the

Asia-Pacific region is for capital and investment goods with an increasingly higher technological content:

: but only some 19% of Australia's current exports to the region fit into that category and much of that is comprised of low value-added products;

- Australia's regional market share in Asia has

continued to decline because our exports remain disproportionately concentrated on primary products.

Our trading relationship with Indonesia gives us another dimension on our comparatively poor regional economic performance;

- Indonesia, a nation of nearly 180 million people on

our doorstep, should be a natural focus of our trading activity;

- in 1985 - the year when the Indonesian economy began

to internationalise and when Indonesia's current period of sustained economic growth began - our -exports to Indonesia accounted for 5% of total

Indonesian imports;

- by 1990 our exports still accounted for the same

percentages

: we have simply been left behind by others;

i Australian politicians and others often plead the excuse that "our market is too small"; and yet we have allowed a golden opportunity right on our doorstep to go largely undeveloped.

The growth areas for trade in Asia in the 1990's lie not only in our traditional exports of primary products and raw materials but also, and increasingly, in construction, communications, transport and services generally, particularly education, tourism, medicine and finance.

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But whether Australia can take advantage of these growth areas, diversify its trade with Asia and increase its market share will depend crucially upon what reforms are undertaken within Australia:

- in short, we need to internationalise the Australian economy and we need to do so as a matter of urgency:

: we need to match best international practice

across the board;

: that is the only way that our export industries will be able to compete in Asia, and elsewhere in the world, to the benefit of all Australians.

We will not fulfil our economic potential in Asia if we do not convince Asian countries that our trade unions are under control and if we do not reform our labour-market arrangements so that productivity and wages are more directly linked at the workplace level:

- we will not fulfil our economic potential in Asia if

our inefficient tax system, with its specific

disincentives for work, exporting and saving, is not reformed;

- we will not fulfil our economic potential in Asia if

there is not an urgent program of major reform to

remove the cost disadvantages imposed on Australian exporters because of inefficiencies on our waterfront, in our land transport, in our telecommunications and -'in many other sectors of our economic infrastructure;

- we will not fulfil our economic potential in Asia

unless Australia commits itself, as the Coalition Parties have, to a clear goal such as zero protection by the year 2000 in the context of the microeconomic reform to which I have referred;

- we will not fulfil our economic potential in Asia if

we do not promote effective competition in Australian industry, and not just phoney or limited competition;

- we will not fulfil our economic potential in Asia if

we continue to allow sleepy Government-owned

monopolies to corner important areas of production and service in the economy;

- we will not fulfil our economic potential in Asia if

our education system remains so unrelated to the pursuit of excellence and to regional possibilities?

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- we will not achieve our economic potential in Asia if we do not achieve a more pro-development stance by bringing environmental and development interests into a more sensible and predictable balance as opposed to

their cynical political manipulation over recent years.

We in the Coalition Parties firmly believe that these failures in economic management over recent years lie at the heart of Australia's current and very serious economic difficulties, and of the unproductiveness of much of our

foreign policy.

We also believe that Australia's poor economic performance over recent years has not only meant that substantial trading opportunities in Asia have been missed:

- it has also affected Australia's general standing in the region.

There is no doubt that this fact is also due to the

ineptitude of recent Australian regional diplomacy:

- our diplomacy is now playing clean-up and catch-up

after events have passed it by;

- one need look no further than Australia's relations with Fiji, or Malaysia, or India, or PNG, or the South Pacific Island countries to see the evidence of our diplomatic ineptitude;

- 'and this is especially so when our Asian neighbours consider most of these countries as logically our first foreign policy priorities;

- our diplomacy is seen too often in Asia as either

indifferent or intrusive to enable it to be genuinely effective.

But, despite the headlines that such diplomatic ineptitude attracts, the underlying reason for our marginalisation in Asia should not be obscured.

In an era of international relations, in which economic interdependence will be a determining influence,

Australia's economic difficulties and mismanagement have had an important impact on our foreign policy generally and are fundamentally important to perceptions of us as a nation within Asia:

- there should be no dispute: Australia's economic

situation has significantly marginalised our influence in Asia and made us less relevant to the region's

dynamic economies.

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The corollary of such an assessment is that only when

Australia gets its own economic house in order and only when we make Australia once more a dynamic and expanding economy will our regional influence, both economic and diplomatic, have any chance of being restored.

We in the Coalition Parties believe that such a process of economic revival in Australia, and the renewal of our role in the region, is possible but only if a program of

fundamental reform is pursued as a matter of priority:

- and that is why all our reform agenda - of tax reform,

labour market reform, infrastructure reform, zero protection, privatisation and much more - is directly related to our strategic objective of making Australia a major economic and diplomatic player in the Asia-

Pacific region by the Year 2000.

A third challenge to be met if Australia is to expand its constructive relationship with Asia is to recognise the urgency of the task we face.

The forces of change within Asia have the potential for historic changes in the way in which Asia views itself and how Asia interacts with the rest of the world:

- those forces of change also have the potential to

marginalise Australia's role in Asia even more.

The end of the Cold War has focussed international

attention on the end of the security system established in Europe in the years immediately following the Second World War:

- there is no doubt that the changes in Europe have been fundamental and irreversible?

- but they have not been confined to Europe?

Historic changes are also at hand in Asia:

- some are responses to the changes in Europe and in

US-Soviet relations;

- others are related to internal dynamics within Asia.

Both kinds of change have very real implications for

Australia.

Let me focus on two of the more important aspects of the forces of economic change currently at work in Asia - one short-term, namely the crisis in international trade negotiations, and the other longer-term, namely the changing balance of economic interests in North Asia.

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The stalled negotiations in the Uruguay Round, the movement towards a Single European Market by 1992 and the prospect of the North American free trade area being extended

southwards are all developments that have had a significant impact on thinking about the potential for a "trade bloc" in the Asia-Pacific region.

There is little, if any, enthusiasm for an exclusive "trade bloc" in Asia:

- the success of economies in East Asia has been built

on trade access to industrial countries;

- trade among East Asian countries has built up over

recent years, but they still rely heavily on access to OECD markets:

: for example, 44% of the export trade of ASEAN

countries in 1990 was with Japan and East Asia but 38% was with the United States and Western Europe;

: similarly, 54% of Japan's export trade in 1990 was with the United States and Western Europe;

: Japan's direct investment in Asia is large (a

cumulative total of $US47.5 billion in March 1991) but the figure pales against the $US130.5 billion which Japan has invested in the United States and the $US59.3 billion it has invested in Europe.

An exclusive, discriminatory trading bloc in the Asia- Pacific region is, therefore, clearly not in the region's own economic self-interest and would significantly reduce trading opportunities for regional countries.

Most regional countries openly recognise this reality

But, within that context, there are winds of change blowing on the issue of which particular associations of trading interest would most benefit Asia's dynamic economies:

- there are those who believe that an all-embracing

organisation such as the Asia-Pacific Economic Co-operation forum (APEC) best reflects regional realities;

- there are others, however, who see a more particular grouping as reflecting their own real interests in regional trade.

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There are various proposals reflecting the latter, more particular approach!

- one is the East Asia Economic Group (EAEG) proposal

put forward by Malaysia's Prime Minister, Dr Mahathir, and which does not include Canada, the United States, Australia or New Zealand;

- another is the proposal that ASEAN countries move

toward a free trade area among themselves by the turn of the century: a proposal which the recent ASEAN Ministerial Meeting in Kuala Lumpur welcomed in its Joint Communique as "a matter for serious

consideration"?

- another is the active discussion within ASEAN of the idea of an economic treaty between member countries.

Such proposals are put forward in the context of enhancing, not undermining, the open system of international trade.

But they clearly reflect a belief in some Asian countries that sub-regional interests are not being adequately represented in wider regional and international

organisations.

The proposals also indicate the extent to which Asia's dynamically successful economies are reassessing where their real economic interests lie in the changing contours of international trade.

Any Australian who dismisses such proposals as either mere rhetoric or lacking support of any kind within Asia is basically misreading the forces of change within the region.

What is becoming apparent is a new kind of Asian

nationalism, a new awareness of Asia's own identity;

- some analysts have described this process as the

"Asianisation" of Asia and identified a growing network of economic, political, cultural and security ties within the region;

- others, particularly in Japan, have called it a Pan- Asian development with a "soft" economic regionalism in both North and South Bast Asia.

There are considerable doubts about where and how Australia will be involved in this process!

- there are recent signs that we are involved at the

margin, not at the centre:

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t the Mahathir and recent ASEAN proposals for

regional trade linkages are evidence of this fact;

- but there is nothing inevitable about this situation:

: it relates primarily to our recent poor economic performance and the way the region views it;

: we can be part of the dynamic processes of

economic change in Asia but only if we lift our economic game and pursue a more effective

diplomacy.

in the light of changes taking place within Asia about where its real economic interests lie, the appropriate Australian response is clear:

- we need to do something about our recent economic

performance along the lines I have indicated;

- we also need to undertake a major program of community awareness about Asia, on which I will say more later;

- we need to do even more to reinforce the view that the

best solution for all trading countries is a

successful outcome for the Uruguay Round;

- and we need to maintain maximum pressure for trade

liberalisation within our own region.

In terms of the process of regional trade liberalisation, the Coalition Parties have expressed concern about APEC:

- we supported the APEC initiative when it was launched, and we continue to do so:

: but we believe it is beginning to drift and risks becoming simply another "talk shop";

: we sense that the real momentum for regional

economic change is being generated elsewhere;

- we believe that APEC needs to be given some specific

targets and deadlines against which its performance can be measured:

- we believe that the three Chinas need to be

accommodated within APEC as a matter of urgency;

- we believe that APEC needs to involve private sector business interests as well as governments;

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- and, most importantly, we believe that APEC should

become a forum for pursuing the objective of a free trade area in the Asia-Pacific region:

: not in any exclusive or discriminatory manner, but as a GATT-consistent means of reducing tariff and other trade barriers.

Looking to the longer term, there are other forces of

change in Asia which have the potential to greatly affect Australia's traditional trading interests:

- the possibility of a North East Asian variant of ASEAN is one such potential element of change.

The rapidly changing nature of relations among the

countries of North Asia is creating the basis for a longer- term realignment of economic interests:

- Japan is broadening its contacts with North Korea;

- Japan and the Soviet Union are at least negotiating on issues that divide them, such as the Northern

Territories;

- South Korea and China are developing economic

relations;

- Japan's economic relationship with China is rapidly gathering pace;

- /the Soviet Union and China are building on their

normalised diplomatic relations;

- South Korea and the Soviet Union last year established diplomatic relations to underpin their economic interaction;

- China is broadening its regional diplomatic and

economic ties, particularly with Singapore and Indonesia;

- even some of the old walls between the People's

Republic of China and Taiwan are beginning to break down under the weight of economic realities.

What is being established is the potential for a pragmatic association of economic interest in North Asia,

particularly between the Soviet Union, China, Taiwan, the Koreas and Japan.

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No one is suggesting that it would be an exclusive bloc;

- nor that countries like Japan would unduly narrow its global trade and economic contacts.

Furthermore, it is unlikely to materialise quickly:

- there are considerable difficulties, like the Northern Territories issue.

But it would be a mistake if Australia failed to appreciate the long-term economic significance of developments taking place in North Asia:

- there would, for example, be major implications for Australia if, over the course of the next decade, Japan, South Korea and Taiwan were to find other new major suppliers of raw materials and resources closer

to their own geographic area.

A fourth challenge which Australia needs to meet in order to maximise its relations with Asia is to recognise that the pursuit of Australian economic and security interests cannot be one dimensional.

There are those who contend that economic and security interests have become interchangeable:

- and it is, true that we are living in an era when

economic strength is an increasingly important index of national power;

- it is also true that the processes of technological

change and the improvement in superpower relations have meant that the balance of importance between military and economic power has shifted, not just in Europe but in Asia as well.

But it is as inaccurate to argue that everything has

changed as it is to pretend that nothing has changed.

There is no guarantee, for example, that the new era in international affairs which we are entering will inevitably be a less dangerous one than that which preceded it.

Traditional concerns about military power and national interest have not suddenly been made obsolete.

The potential for instability is likely to increase as more and more countries acquire the capacity for high technology weapons development.

16

These concerns particularly apply to Asia today:

- there are uncertainties created by the drawdown of US military forces in the Asia-Pacific region,

particularly its recent decision to close Clark Air Base in the Philippines;

- there are continuing tensions among regional countries over competing claims to disputed territories such as the Northern Territories and the Spratly and Paracel Islands;

- despite the recent hopeful signs of progress, there is the unresolved conflict of interests in Cambodia;

- there are the uncertain consequences of the changing American policy in relation to Indochina;

- there is rising concern about North Korea's nuclear activity;

- and, with escalating regional defence budgets, there is a wider concern about the prospects for a

destabilising arms race within the Asian region.

In these circumstances, I believe the priorities for Australia are clear.

We need to recognise that Australia's interests lie in strengthening and adapting existing alliance frameworks and regional arrangements:

- they do not lie in pretending that somehow everything has changed to the point that those alliances and security arrangements have become nothing more than "transitional arrangements" on the road to some brave, new world of regional security.

Host of the regional alliances in question are bilateral, with the United States playing a linking role:

- the Australia-US alliance is one of them;

- they are alliances that have worked well for decades;

- they are alliances that continue to serve the central security interest of most Asian countries: namely to keep the United States actively and effectively involved in regional security matters, while accepting ' their own expanding responsibilities in the defence

area.

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The fact is that the US military presence in the Asia-

Pacific region is not a source of major tension:

- on the contrary, most regional countries support and encourage its continuation.

Furthermore, as the current regional security situation and regional responses to the Gulf War demonstrate, the notion that some kind of "common security" already exists in Asia is clearly inaccurate.

In this context, pressure for some new institutional framework for regional security is both misplaced and premature:

- that is not to say that the network of US alliances in

Asia and the Pacific does not need to be updated and modified to accommodate recent strategic changes;

- nor does it mean that an expanded or more open

security dialogue between regional states would not be appropriate:

: regional states have always maintained an

effective, exchange of views on regional

security, and they will continue to do;

: a more open exchange of views could, in fact, be useful in building upon, rather than undermining, existing security arrangements by creating a new mix of leadership and responsibility among US

allies;

- but what is both unnecessary and undesirable in

current circumstances is a new institutionalised form of security dialogue leading to some alternative view of collective security:

: such proposals would seem to have more to do with individuals trying to build monuments to

themselves than in dealing constructively with the realities of regional security.

A fifth challenge which Australia must recognise in its interaction with Asia is that the focal point of its

regional economic and security interests comes together in the US-Japan relationship: -

- Japan plays an important economic leadership role in Asia;

- the United States plays a critical leadership role in regional security;

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- the two roles are far from mutually exclusive, but

they are each clearly identifiable.

For Australia, the reality is that a "triangle of

interests" exists at the core of our regional involvement:

- one leg of the triangle is our relationship with

Japan;

- another is our relationship with the United States;

- the third is the US-Japan relationship.

For the region generally, the future of the US-Japan

relationship is also the single most important factor in both the economic and security outlook of the Asian region:

- most regional states have long recognised that fact.

I do not subscribe to scenarios along the lines put forward in a recent book by two American authors, titled "The

Coming War with Japan".

It is quite possible that the interests of Japan and the United States may diverge more in the years ahead than they have in the past:

- with the rise of what has been called

"technonationalism" in Japan and the United States, it is even possible that their partnership may, in fact, become one of more open rivalry;

- but a rupture or major breakdown in US-Japan relations is most improbable:

: the American and Japanese economies are already highly integrated, and that process is set to continue;

: in particular, the Japanese stake in the health of the US economy is growing;

: at an international level, Japan's focus is on its leading role in East Asia's economic

integration;

: it has neither the need nor the desire to become an independent military power, and most regional countries would be particularly disturbed at any such prospect;

19

: like most other Asian nations, Japan sees a

continued US military role in the Asia-Pacific region as essential to its own national

interests, and that of the region generally.

Of course, the US-Japan partnership is currently facing a critical test.

The goal of preserving a close, effective US-Japan

political relationship requires a delicate balance:

- on the one hand, there is the need to maintain

justified pressure against Japan on some of its

particular trade practices;

- on the other, there is the need on the American side

to face up to issues of American domestic economic management which have contributed so greatly to the current US-Japan economic imbalance.

For Australia, our interests in the future of US-Japan relations are vitally important even though our capacity to influence the direction which that relationship takes is limited.

We have a fundamental security interest, of course, in the maintenance of a strong Japan-US alliance:

- that alliance continues to serve the interests of

Japan, the United States and the wider region, and the pressures for major changes to it seem limited.

We also have a fundamental economic interest in a

constructive and open economic relationship between the United States and Japan:

- as I have indicated, I believe that, despite current difficulties, the long-term basis of that economic relationship is strong;

- for Australia, the greatest potential danger appears to lie in the pressures that continue to build within the US Congress and among US exporters for some kind of "results-oriented" managed trade agreements with

Japan:

: neither Australia, nor the region, nor, in fact the open international trade system itself, can afford bilateral deals of that kind to fix market impediments - deals that will only further

compound the task of progress in multilateral trade negotiations;

20

i this pressure in the United States seems set to

increase, particularly if the economic

integration of East Asia continues along the lines I have discussed.

My point here is that the likelihood of major changes in the US-Japan relationship seem to be greater in the

economic area than in the security area;

- much will depend on the outcome of the current Uruguay Round;

- but there is no doubt that the pressures for economic change are building.

That reality has important implications for Australia's priorities in its regional diplomacy:

- I do not believe that such priorities are reflected in current Australian Government policy.

Finally, a sixth challenge for Australia if it is to make the most of its relations with Asia is that the development of a broad-based community awareness and commitment is fundamental;

- Australians need to be made aware of the economic and other potential that exists in its relations with Asia;

- they need to be made aware of how much of that

potential remains unfulfilled;

- they need to understand why so many countries from

Europe, North America and elsewhere are out-performing Australia in Asia;

- and they need to be involved in strategies to turn the situation around.

I believe that an initiative such as a "Year of Asia" in Australia is needed to promote those objectives:

- it would not be any kind of one-off gimmick;

- it would involve not only government, but a wide range of individuals, business groups, trade unions, community organisations and, I very much hope, this Institute itself;

- it would be aimed at initiating and co-ordinating a

long-term program to stimulate and focus community interest in Asia;

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- it would aim to utilise more effectively the

attributes of the many migrants who have come to

Australia from Asia;

- it would aim to promote, at an industry and

educational level, the kind of skills and products we need to fulfil our economic potential and to enhance our cultural exchanges with Asia;

- it would aim, at a government level, to establish

mechanisms that would give practical effect to our strategic objective of making Australia a major economic and diplomatic player in the Asian region by the Year 2000.

I believe that an initiative such as a "Year of Asia" is long overdue in Australia:

- it will be an important initiative for a Coalition

Government given the strategic objective we have set for our policy-making.

Conclusion

I want to leave you tonight with a message of optimism and hope:

- there is nothing in the challenges that I have

highlighted tonight which should give us cause for despondency or despair.

Australia has so much to gain from all aspects of its

interaction with Asia:

- but we need to face up squarely to the scale, the

urgency and the importance of the challenges ahead of us;

- we need to develop a clear strategy, at a government

and community level, to meet those challenges;

- and we need to pursue that strategy consistently over time.

If that is done, then I have no doubt that Australia has the people, the skills and the resources to maximise its expanding opportunities in the Asian region.

Meeting the six challenges that I have identified this evening will not be easy:

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- it calls for strategic and hard-headed thinking about what our real interests in Asia actually are;

- it calls for a re-orientation of many of our basic

assumptions and attitudes;

- it calls for courage and consistency in policymaking;

- it calls for policy inter linkages and an end to the

artificial separation of foreign, defence,

immigration, education, economic and other policies that has for too long characterised Australian public policy.

We need to understand the scale of these tasks before us.

But, we also need to accept that meeting the challenges I have outlined this evening is both necessary and right for Australia:

- the Coalition Parties are committed to doing all we

can to ensure that this objective is achieved.

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