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Address by Dr John Hewson, MP Leader of the Opposition to the Commonwealth Club of Northern California San Francisco



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Leader of the Opposition

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ADDRESS BY

DR JOHN HEWSON, MP LEADER OF THE OPPOSITION

TO

THE COMMONWEALTH CLUB OF NORTHERN CALIFORNIA SAN FRANCISCO

MONDAY, 1 JULY 1991

Parliament House, Canberra, A.C.T. 2600 Phone 2774022 COMMONWEALTH PARLIAMENTARY LIBRARY MICAH

It is certainly a great pleasure to be back in the.United States and to return once again to one of my favourite American cities, San Francisco. It is a special honour on this occasion to have the opportunity of addressing members of this Club, and I am grateful for the warmth of your welcome.

I had the good fortune to live and work in the United States for five years between 1969 and 1974. In the intervening period I have returned to this country many times as an academic

economist, as a leader of business delegations, as a banker, and now as a political leader.

This visit is my first to the United States as Leader of the

Opposition in Australia. "The Opposition" may be a term that sounds to an American ear to have an unduly negative ring to it. But an "Opposition" in my thinking is not constituted by a

political party, or parties, that oppose the government of the day on everything.

An Opposition will only succeed in its purpose if it:

. supports those actions of the government that are rational and sensible;

. opposes those that are contrary to its principles or to

what it sees as the national interest; and

. spells out a clear alternative vision for the future and a means of achieving it.

Since becoming Leader of the Opposition in April last year, I have very deliberately pursued those three objectives:

. we have supported the Government on some vitally important decisions (eg. Australian military involvement in the Gulf War);

. we have opposed the Government on a range of domestic

economic reform issues;

. we are spelling out a clear alternative vision for the

future of Australia based on individual enterprise, tax reform, reducing the size of government by cutting

government expenditure and a major program of privatising non-efficient government business enterprises, deregulation of the labour market, injecting genuine competition into a host of industries by eliminating major cost disadvantages

in transport, communication and the waterfront, and elimination of tariff protection by the year 2000.

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The purpose of my visit to the United States is to meet with

senior members of the Administration and the Congress in

Washington and to exchange views on a range of issues,

particularly those affecting our common interests in the Asia- Pacific region.

I am also particularly keen, during calls I will be making over the next week here in San Francisco, as well as in Los Angeles, Chicago and New York, to gain a first-hand assessment of American business leaders on the prospects for the international economy,

in general, and for the Asia-Pacific economic outlook, in particular.

One of the most important reasons that I have come to the United States is to reinforce the importance which the Opposition Parties in Australia attach to the Australia-US relations. We firmly believe that this relationship is enhanced, rather than

diminished, by the rapid pace of international change over recent years.

In emphasising the importance of the relationship, however, I will be pointing to its enduring strengths and relevance, as well as to the challenges it is currently facing.

Utilike many relationships between two countries* the ties that bind Australia and the United States reflect a natural

association of history, values and national interests.

As governments, we share a common and long-standing commitment to the values of individual liberty, equality before the law, and the ultimate authority of our people over their elected

representatives.

As people, Americans and Australians share an easy, familiarity. We both draw on the rich legacy of a pioneering spirit. We are two of the world's most truly multicultural societies. In peace and war (typified most recently in the Persian Gulf), we share

a proud record of co-operation and common purpose.

All these similarities bind us in a special, natural way that most other countries find elusive.

A 'natural' alliance, however, is not an unchanging one nor one that should be taken for granted.

I strongly believe that the relationship between Australia and the United States continues to develop in its strength, maturity, relevance and importance. But the relationship is also facing what I believe are two historic challenges.

The first challenge is to ensure the relevance of the

relationship to the national interest of each country at a time when old international rivalries are breaking down and new associations of interest are taking their place.

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The second challenge is to be realistic about the difficulties that exist in the relationship at the current time, particularly on trade issues, and to work at resolving them in a way that

respects the legitimate concerns of both countries.

In that context, I would like to direct my remarks today to two major themes.

The first is the nature of the new era in international relations which the world is entering.

And the second is the implications of this new era for the

management of relationships, such as that between Australia and the United States, which were forged in an international security and economic climate quite different to that which prevails today.

A New Era in International Relations

Many years ago, the doyen of American journalists, Walter Lippman, wrote that a coherent foreign policy is established only when a country's commitments and capabilities have been brought into balance.

With the end of the Cold War, many nations are currently

reassessing their perceptions of that balance between their international commitments and their capabilities.

Many of the old rules are being re-written.

New forms of competition are emerging; new patterns of co­ operation are being developed; new balances of power are being forged. '

Just one year ago, for example, in this very city President Roh of South Korea held an historic meeting with President Gorbachev paving the way for diplomatic and increased economic relations between the Soviet Union and South Korea.

China's restored relations with the Soviet Union and Indonesia provide another example of rapidly changing alignments as do Taiwan's developing economic relationship with many regional countries.

My point here is that the issues that will dominate the post-Cold War world will be fundamentally different to those that

characterised the 1970s and 1980s.

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There will be obvious changes such as Japan's continuing growth, as a global economic power, the emergence of a new economic architecture in Europe, the increasing dynamism of the Asia- Pacific economies, the expansion of "managed", as opposed to

"free" trade, and the consequences of sustained high and rising debt levels in the Third World.

These developments are vitally important in their own right. But they also need to be seen in their wider context. They are the outcome of a new set of priorities that will dominate the

international economic and security debate in the 1990s.

What the end of the Cold War has created is nothing less than a new inter-relationship between technology, wealth and power.

New indices for measuring power and influence are becoming apparent.

The steady globalisation of industry, finance and technology, together with the easing of superpower tensions over security issues, have changed the very nature of what "security" and "power" mean in international affairs, and how they can be enhanced.

Factors such as technology, education and economic growth are becoming more significant in terms of international "power" and "security", while geography, population and many raw materials are becoming relatively less important.

Revolutions in communications and transportation have now created truly global markets for goods, services and capital.

The role and power of the nation state is being increasingly diffused among private transnational actors, such as banks, multinational corporations and internationalised special interest lobby groups.

It would be as misleading, however, to pretend that everything has suddenly changed as to insist that nothing has changed.

There is no guarantee 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 power and national interest have not been suddenly made obsolete. As the Gulf War demonstrated, there are still blatant aggressors and the use of military force, particularly by the major powers, can still be decisive and

necessary. At the same time, the potential for instability is likely to increase as more and more countries acquire the

capacity for high technology weapons development,

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The major issue, therefore, for international politics in the 1990s is not whether the relevance of a military balance of power will be totally overtaken by other factors such as the

consequences of economic interdependence.

The real issue will be how states and transnational organisations will respond to the new dimensions of security that are now apparent and to the new balance between co-operation and

competition in international affairs that is emerging.

Implications for Australla-PS Relations

Let me turn to a second and related theme that I wish to address today. What do the international changes I have been referring to mean for the Australian-US relationship and for the interests

of both our countries in the Asia-Pacific region?

I believe there will be four crucial policy areas where the direction of Australian and American policy will determine the kind of bilateral relationship we will have in the 1990s.

The first concerns security and defence issues. In this respect, I believe that the prospects for the continuing strength of our alliance relationship under the ANZUS Treaty are particularly strong.

The ANZUS Treaty remains fundamentally important for Australia's strategic interests and has significant practical benefits for the United States. I believe that the national interest of both our countries will be advanced by enhancing the quality of

defence co-operation under the Treaty.

I make that statement not in expectation of an easy ride or a cheap option for Australia on defence - that would not be

consistent with Australia's record as an ally which accepts responsibility for its own defence and pays its own way; nor would it be an option that is even possible in the years ahead, given the emphasis in current American policy on the need for its allies to accept a greater share of defence costs and

responsibilities.

I reaffirm the commitment to the ANZUS Treaty for quite different reasons: because it has served Australian and American security interests well in the past and continues to do so, and because

it has enhanced regional stability and security;>

I am firmly of the view that there will be no adequate substitute in the immediate future for the Australia-United States defence alliance and for America's other bilateral alliances in the Asia- Pacific region.

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There has been some recent speculation about an alternative security system that could emerge in the Asia-Pacific region - one that could supplant the alliances, such as ANZUS, which were forged in the post-world War II period, one that would be based on the notion of what is called "common security", and one that would pursue regional arms reductions through mechanisms similar to those that operate in Europe.

I believe that such speculation has been ill-informed and that it takes inadequate account of regional realities.

The best way to enhance stability and to guard against an arms race in the Asia-Pacific region is to make existing alliance structures in the region work more effectively in the changing circumstances, to ensure that regional alliance partners accept a fair share of defence costs and responsibilities, and to maintain a continuing and active, even if somewhat reduced,

American security involvement in the region.

I believe that there is now a good deal of common ground between Australia and the United States on these issues and that our co­ operation on regional defence and security issues will continue on the basis of the close co-operation that it has in the past.

The second major policy issue that will vitally affect the character of Australia-United States relations in the 1990s relates to developments in international trade.

In this context, the choice for the international community is clear. It is a choice between, on the one hand, a continuing commitment to the GATT principles of openness and non­

discrimination and, on the other, an increasing resort to "managed" trade, to bilateral deals and to trading blocs.

In practical terms, the choice is between ensuring a successful outcome of the current Uruguay Round of trade negotiations or retreating into a world of rising protectionism and competing regional economies.

Of course, as major exporting countries, Australia and the United States share important common interests in ensuring that the open system of international trade is preserved and strengthened. And the role which the United states has played, particularly over

recent months, in seeking to promote a successful outcome of the Uruguay Round has been a very welcome and constructive one.

At the same time, I must say that many Australians are puzzled, and often angered, by the gap between American rhetoric about free trade and American actions such as its subsidisation of its agricultural exports which often affect directly the interests

of Australia's efficient, unsubsidised producers.

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A recent example of this situation has been the decision by the United States to sell subsidised wheat to Kuwait. The rationale for doing so is to pre-empt the sale of subsidised wheat from the European Community. But an inevitable result of such American action will be to distort the market price for wheat in the

Middle East generally. And the Middle East is one of the major wheat export markets for Australia's efficient and unsubsidised producers.

Let me be quite clear on this point. I am not asking for special favours or special deals for Australia in its export trade. All I am asking for is a "fair go" and an international trade system that does not disadvantage efficient producers who do not have government subsidies.

Australian political leaders should help to ensure that America's trade policy is seen by Australians in its proper perspective.

But there is also an obligation on American political leaders - an obligation that, in protecting its own national economic interests, it gives due weight to the interests of its smaller friends and allies.

American export subsidies are rationalised on the grounds that they are necessary over the short term to counter the

protectionist practices of the EC and others. But the fact is that such US subsidies are part of the problem, not part of a solution.

Our current Prime Minister put it well some years ago when he said that:

"Australians must not be given reason to believe that, while we are first class allies, we are, in trade, second class friends."

That is why it is vitally important that the Uruguay Round

succeed and that the open international trade system be

strengthened.

That is why it is so important that the Single European Market after 1992 and the emerging North American free trade area remain genuinely open and consistent with GATT principles.

And that is why it is so vital that the G7 meeting in London in two weeks time with the leaders of the world's major industrial economies make a minimum commitment to eliminate those government subsidies that distort world market prices, particularly for agricultural goods.

The third test for Australia-US relations in the 1990s will be the relationship with Japan.

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Japan is Australia's largest single country export market, particularly for our raw material exports.

The United States has its own enormous two-way trade with Japan. It also has significant imbalances in that trade which the United States sees as the result of unfair Japanese trading practices such as the protection of its local market from imports and the promotion of certain sectors for export-led growth.

Various US-Japan initiatives, such as the Structural Impediments Initiative, have been undertaken to address this situation. And they have achieved practical results in reducing the trade imbalance.

But there are those in this country and elsewhere who argue that only through reciprocal trade deals and a "results-oriented" approach will a genuine trade balance with Japan be achieved.

I believe that such an approach is fundamentally flawed.

It neglects the real underlying reason for the imbalance in US- Japan trade which relate to trade practices and economic policies within both countries.

I believe that any attempt to achieve a balance in Japan-US trade by reciprocal "results-oriented" deals will only serve to rekindle the fires of trade protectionism around the world, will disadvantage consumers in both countries and, in terms of Australian-US relations, will have a disproportionately negative effect given the traditional importance of the Japanese market

to Australian exporters.

The only way to achieve genuine market opening reforms in Japan that will endure is through sustained international pressure for market opening on a global basis. The sustained pressure on Japan, for example, over its rice import ban is finally having

some real effect.

It is right of course to highlight what are seen as unfair market practices in Japan. But to seek their reform through short-term arrangements that benefit a particular bilateral trade balance will only make such unfair trade practices harder to eradicate

on a general basis over the longer term.

A fourth issue which will vitally affect Australia-US relations in the 1990s concerns our relations with the other major

economies of the Asia-Pacific region.

I have taken the clear view that Australian's economic future lies in the Asia-Pacific region - a region which I believe offers the greatest growth prospects in the world for the next 40 or 50 years at least and the greatest opportunities to Australia across the board.

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Indeed, it will be a strategic objective of my government to make Australia a major economic and political force in the Asia- Pacific region by the Year 2000.

In saying that, I do not seek to diminish the significance of Australia's trading relationships with regions such as Europe or the United States. Those relationships are, and-will remain, very important to us.

But, for reasons of geography and growth potential, the other markets of the Asia-Pacific region offer a special challenge and opportunity for Australia - as they do for the United States.

While my definition of the Asia-Pacific region includes the United States, I sometimes wonder whether Americans themselves see their economy in that way or whether they tend to see it as part of an economy centred on the Americas.

I believe not only that the United States is a dynamic element of the Asia-Pacific economy but that it has a crucial role to play in enhancing co-operation within it.

In particular, I believe that there is considerable scope for Australia-US co-operation in promoting greater and freer economic interaction in the Asia-Pacific economy. I believe that the Asia-Pacific Economic Co-operation (APEC) forum offers the best

focus for such co-operation. .

The Secretary of State, Mr James Baker, came to Australia when the APEC initiative was launched in November 1989. APEC

membership currently includes Japan, the United States, Australia, New Zealand, the ASEAN states and other regional economies. ·

APEC offers what I believe is the best regional forum for

liberalising regional trade and for realising the opportunties which the region's economic dynamism offers. ■

In seeking to make APEC work as effectively as possible, I

believe that the United States and Australia can co-operate on three specific aspects:

. to expand APEC's membership to include the three Chinas

(the People's Republic of China, Taiwan and Hong Kong);

. to expand APEC's operations from government to include

private sector business interests;

. to use APEC as a foundation to build a non-discriminatory free trade area in the Asia-Pacific region:

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- not a trade bloc, but an association of interests that is aimed at reducing regional levels of tariff and non-tariff barriers and that is consistent with the GATT rules of non-discrimination, openness and

fairness.

This latter objective is not one which is likely to be achieved soon / but it is one which I believe Australia and US policy

makers should have clearly in mind as their objective.

Conclusion

In all the challenges which I have identified for Australia-US relations in the 1990s, I am an out-and-out optimist.

I believe firmly that our bilateral relations will continue to grow in strength and importance in the years ahead. I say that not for reasons of sentiment or geography, but because I believe that such a relationship is clearly in the national interest of both our countries.

Almost a quarter of a century ago, Robert Kennedy wrote that America's destiny is determined by 'neither fate nor nature nor the irresistible tides of history but by the work of our own hands matched to reason and principle1.

Reason and principle are virtues that both our countries have brought to managing our alliance relationship, for over four decades. They explain why the relationship has remained so strong and why it is now more important than ever. It can only

be diminished if either of us substitute emotion for reason or expediency for principle in our management of our relationship.

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