I am delighted to have the opportunity to speak this evening at the Sydney
Institute on Australia's foreign and trade policy agenda.
At the outset, I should like to congratulate Gerard Henderson, his wife Anne
and their colleagues for their success in developing the Sydney Institute
into one of our country's leading forums for public policy discussion and
The Institute is widely admired for the quality and independence of its contribution
to policy thinking in Australia.
Before discussing some of the major themes in Australia's current external
policy, let me provide a context for my remarks by highlighting some of the
characteristics of the contemporary international environment, and by making
some observations about Australia's place in the international system.
I think the best way to describe the international security outlook is to
say that it is fluid and uncertain.
Tomorrow is September 11th - the anniversary of the horrific terrorist
attacks on the United States that have changed our security environment in
The attacks underlined in forceful terms that threats to Australia's security
can be global as well as regional, and that they can be facilitated, perversely,
by the ease of communications and transport that has come with globalisation.
We are sobered in particular by the knowledge that links with terrorist organisations
have been identified in South-East Asia and Australia itself.
The attacks of 11 September have galvanised the United States into a much
more active and determined posture against terrorism and other threats.
And, as you know, Australian special forces are playing a valuable role serving
alongside United States forces in the war against terrorism in Afghanistan.
Together with international terrorism, the spread of weapons of mass destruction,
the intractable nature of the Israeli � Palestinian conflict, the risk of
miscalculation by India and Pakistan in relation to Kashmir, and the potential
for escalating tension on the Korean Peninsula or in the Taiwan Strait are
all issues of serious concern.
Prominent among these concerns, of course, is Iraq's persistent defiance
of the United Nations Security Council demand that it permanently eliminate
its weapons of mass destruction.
Set against these negative factors, there are important entries on the positive
side of the ledger.
Relations between the major powers are now, overall, more stable and harmonious
than they have been for many years.
Part of this is a positive legacy of the end of the Cold War, and part of
it reflects the pre-eminent position of the United States in world affairs.
It is instructive to note, for example, that the United States accounted
for 33 per cent of world GDP in 2001 compared with 24 per cent in 1991, and
that its defence spending now exceeds the defence budgets of the next eight
These circumstances give the United States great capacity to shape the global
strategic environment, and provide strong incentive for other major powers
not to risk serious confrontation with it.
Russia's strategic cooperation with the United States and its progressive
integration into European structures is a historic and positive shift.
In Asia, relations among the major powers are stable.
China's growing economic, political and strategic weight is the single most
important trend in the East Asian region.
Overlaying and interacting with these security trends is the pervasive impact
of the globalisation of the world economy, which has continued apace during
the past decade.
Globalisation offers the possibility of great benefits to most countries.
But it also carries its own pressures and disciplines on governance and institutions,
as we saw during the East Asian financial crisis of 1997-98.
Indeed, it is no exaggeration to say that the quality of a country's institutions
and governance plays a large part in determining how well it succeeds in an
era of globalisation.
Australia's place in the International System
Australia's place in the international system is a subject that regularly
attracts lively debate among commentators.
And, overseas too, foreign governments and commentators find it difficult
to classify Australia into any of the readily available groups.
This question will be taken up directly in the new White Paper on Foreign
and Trade Policy, entitled �Advancing the National Interest�, that
the Government intends publishing later this year.
In my view, it is important that we address this issue in confident, realistic
and clear-sighted terms that encourage a mature and balanced view of Australia's
place in world affairs.
The formulations we use also need to ring true to the wider Australian public.
The starting point, I suggest, is to recognize that the overall framework
for Australian foreign and trade policy is global, reflecting the wide spread
of our interests and relationships.
Some of our interests are defined by geography, others are not.�
Australia is comprehensively engaged with the countries of Asia because of
Japan is our biggest export market overall, and East Asian countries account
for seven of our ten largest merchandise export markets.�
We share with Asian countries a fundamental interest in the security and
stability of the region, and collaborate closely with them on important strategic
and foreign policy objectives.
In addition, Asian countries are important sources of investment and tourism
for Australia, and a growing source of skilled migrants.
Australia is a leading destination for Asian students studying overseas.
So, quite naturally, close engagement with Asia is an abiding priority in
Australian external policy.
We have important associations beyond Asia.
Our most significant alliance and security ties are with the United States,
and our most important intelligence links are with the United States and Britain.
We share with the United States political values and cultural affinities.
Counting goods and services together, the United States is our biggest two-way
It is also the most important source of investment into Australia, and the
most important destination of Australian overseas investment.
But, if we want to consider the European Union as a single entity, it is
our biggest two-way trade partner and our second biggest investment partner.
We have close people-to-people links and other significant affinities with
many countries in Europe.
We have shared formative parts of our history with the peoples of Europe,
the United States, New Zealand and Canada - experiences which remain assets
in our international relations.
Maintaining a productive interplay between these two things � the imperative
of close engagement with Asia, on the one hand, and the basic Western make-up
of Australian society and its institutions and our wider international associations,
on the other � lies at the heart of Australian foreign policy.
All these things are authentic elements of Australia's place in the international
A mature and creative approach to foreign policy should set as its objective
maximising our interests in all of our significant relationships around the
I believe that the outward-looking nature of Australian society, the strength
of our economy, the quality of our institutions and our diverse international
linkages equip us well to succeed in a period of economic globalisation and
Relationships with Asia
In line with the priority accorded Asia that I described earlier, relations
with North Asia are very much at the forefront of Australian foreign and trade
More than 40 per cent of Australia's merchandise exports go to North Asia,
and the region is a locus of intersection of the strategic interests of the
United States and other major powers.
Australia enjoys a longstanding and successful economic and diplomatic partnership
Even during the past decade � a period of economic and political drift in
Japan � Australian exports to Japan grew by 65 per cent and account for four
per cent of Australia's GDP.
Despite the continuing malaise in Japan's economy, its importance for Australian
Japan is the world's second-largest economy and the largest in Asia by several
No country in Asia will supplant Japan's importance to Australia's prosperity
for at least another decade.
During the visit to Australia earlier this year by Prime Minister Koizumi,
he and Prime Minister Howard agreed that the two Governments should work together
to identify opportunities to strengthen and inject new vigour and dynamism
into our economic links.
In this process, Australia's objective is to conclude, if possible, a new
trade and economic agreement with Japan.
Australia's security links with Japan are also becoming more important as
the constitutional and political constraints on Japan's security policies
are gradually loosened.
The Government is interested in strengthening our strategic dialogue and
defence cooperation with Japan at a pace that the Japanese side is comfortable
with and that takes account of continuing constraints.
Two weeks ago in Tokyo I led the Australian delegation to the first meeting
of a trilateral security dialogue between the United States, Japan and Australia.
This meeting was further demonstration of the maturity and mutual confidence
that characterises our relationship with Japan.�
The increasing importance of Australia's relations with China reflects China's
steady economic advancement, and increasing standing in regional and international
This year we celebrate the 30th anniversary of the normalisation
of diplomatic relations between Australia and the People's Republic of China
� a period that has seen remarkable growth in all dimensions of the relationship.
Australian merchandise exports to China have doubled over the last five years
to reach $7.8 billion.
China is Australia's fifth biggest two-way trading partner.
Our investment ties are relatively modest, but the strong complementaries
between the two economies and China's accession to the World Trade Organisation
should provide a sound basis for the steady expansion of both trade and investment
The Government is working with China at the highest levels to build a shared
understanding of how we can manage relations in a way that makes the most
of our shared interests, while acknowledging our differences in areas such
as human rights and weapon-technology proliferation.
During the Prime Minister's visit to Beijing in May, he agreed with the Chinese
leaders to promote the development of economic ties through a framework agreement
to strengthen the long-term trade and investment relationship.
The successful tender to supply liquefied natural gas to China's first LNG
project in Guangdong Province is a significant step towards establishing a
long-term strategic partnership with China in the energy area.
This outcome is a particularly pleasing development in the relationship.
It is the result of a sustained joint government - industry advocacy effort
led by the Prime Minister himself.
Our other major partnership in North Asia is that with the Republic of Korea,
with which country we share well-developed economic ties and important security
Korea's determined response to the East Asian financial crisis has revived
the vitality of its economy, and sustained its place as our third-largest
merchandise export market.
Australia supports the Republic of Korea's policy of engagement with North
A few weeks ago, a new Ambassador of the Democratic People's Republic of
Korea presented his credentials to the Governor-General in Canberra.
In the period ahead, the Government will give consideration as to whether
we shall re-establish an Australian Embassy in Pyongyang.
Another important Asian relationship which warrants particular emphasis is
that with Indonesia.
The Republic of Indonesia's transition to a modern, inclusive and decentralized
democracy � after 30 years of autocratic rule � is one of the most significant
post-Cold War developments.
It is very much in Australia's interests to support this process.
We have a fundamental national interest in Indonesia's stability, unity and
During the past two years, the two Governments have achieved considerable
progress in overcoming the strains generated by the 1999 East Timor crisis,
and in re-establishing a cordial and businesslike relationship.
The Prime Minister visited Jakarta last year, and again this February.
During the latter visit, the two Governments signed a Memorandum of Understanding
on Combating Terrorism, which set a model for similar agreements that Australia
has now negotiated with Malaysia and Thailand.
In late February, Foreign Minister Alexander Downer and his Indonesian counterpart,
Hassan Wirajuda, co-chaired in Bali an important regional conference on people
smuggling and related transnational crimes.
The conference involved ministers from 36 countries.
A further ministerial conference on people smuggling, again co-chaired by
Australia and Indonesia, is planned for the first half of next year.
Next month, Australia, Indonesia and East Timor will join other neighbours
in the inaugural ministerial-level meeting of the South-West Pacific Dialogue,
which is a new forum for sub-regional cooperation.
The process of consolidating our important relationship with Indonesia has
been assisted by strong commercial and people-to-people ties which continued
to flourish despite a period of political difficulty.
Indonesia is our tenth-largest merchandise export market, and in 2000 was
the largest source of foreign students in Australia.
Trade Policy Agenda
The trade and economic framework agreements that Australia is seeking to
conclude with Japan and China are part of a broad-ranging trade policy agenda
which is the most ambitious we have been engaged in at any time in our history.
At the centre of this agenda is our participation in the Doha Round of WTO
multilateral trade negotiations.
Multilateral negotiations are accorded primacy in our trade policy agenda
because they offer the best hope for better access for Australian goods and
services to global markets.
The Doha Round is crucial for the liberalisation of trade in agriculture
and food, which is still the most protected area of global trade.
An outcome on agriculture that meets the needs of Australia and other agricultural
exporters, particularly developing countries, is crucial for the success of
The complex agenda of the Doha Round goes beyond that of any previous round
of negotiations, and the greatly expanded membership of the WTO will make
the negotiations difficult.
As Chair of the Cairns group of agriculture exporting nations, the Doha Round
will call for skilful and tenacious diplomacy from Australia.
The Government will be alert to opportunities to work with others, forming
different coalitions on different issues.
Australia will play a significant role in helping drive forward the Doha
Round by hosting on 14 and 15 November an informal meeting of Trade Ministers
from around 25 countries representing a broad cross-section of the WTO membership.
The meeting will be chaired by Trade Minister Mark Vaile.��
He will work closely with his Mexican counterpart,
Dr Luis Derbez, who will host the fifth WTO Ministerial Conference in Cancun
in September 2003.�
We expect that the November informal ministerial meeting will focus on developing
country concerns - in particular the way in which Uruguay Round commitments
have been implemented - as well as market access issues and the road to Cancun.
While the greatest trade benefits come from multilateral liberalisation,
progress in the Doha Round and the implementation of its results could be
The Government is, therefore, determined to pursue pragmatically the advantages
that free trade agreements or other arrangements can offer Australia in parallel
with our active participation in the Doha Round.
Such agreements can deliver market access gains faster than a multilateral
round, and it is also possible for them to go deeper and further than the
Australia and Singapore are well advanced in negotiating a bilateral free
trade agreement, which we hope to conclude before the end of the year.�
We have also recently commenced negotiations on an FTA with Thailand.
In parallel with these bilateral initiatives, Mr Vaile will sign later this
week in Brunei a Closer Economic Partnership between ASEAN and Australia and
New Zealand that will remove impediments to our trade and investment with
the markets of South-East Asia.
And in APEC, we are developing new mechanisms to allow those economies which
are prepared to move faster than others on trade facilitation and liberalisation
to do so.
The other big item in our trade policy agenda is the proposed free trade
agreement with the United States.
This is now a major policy objective for the Government.
The prospects of launching negotiations in the near future have become much
clearer since the Bush Administration's success last month in obtaining approval
by Congress of Trade Promotion Authority.
An FTA with the United States offers important gains to the Australian economy
The Centre for Independent Economics has calculated that the benefit of increased
access to the world's largest market and the removal of trade barriers would
be worth up to $4 billion a year for the Australian economy.
More important over time would be the attraction of new investment, the intensification
of commercial links, and the scope for greater business integration in areas
such as innovation, research and development, marketing, and information technology.
An FTA with the United States could also have an important demonstration
effect for other trade negotiations, particularly at the WTO, as part of what
US Trade Representative Bob Zoellick has described as �competitive liberalisation�.
An FTA could be important, inter alia, as a defensive strategy to minimise
any competitive disadvantage we could face as a result of US agreements with
third countries, for example, in South America.
Finally, as Alexander Downer has argued in a recent speech, an FTA could
help place our economic relations with the United States on the same footing
as our political and security relations, including a structure to guide and
manage potential problems and actual disputes, when they arise.
One criticism that is sometimes made against the proposed FTA with the United
States is that it would mean we were turning our back on Asia.
With due respect to those people who advance this argument, I have to say
that I think it is confused and mistaken.
An important point to note is that Australia has been pursuing free trade
agreements with South-East Asian countries both collectively and bilaterally
from well before we started the same process in earnest with the United States.
In 2000, the ASEAN countries � influenced by reservations by Malaysia � decided
not to proceed with an FTA with Australia and New Zealand despite very positive
recommendations from a feasibility study that we had all participated in.
Instead, it was agreed that we would conclude a more broad-gauged Closer
Economic Partnership, which as I said earlier will be signed this week.
As already mentioned, bilateral FTA negotiations with Singapore and Thailand
are currently under way.
And we would be delighted to negotiate FTAs with Japan and Korea if they
ever showed any willingness to consider dismantling their protectionist barriers
against agricultural imports.
So, it is totally unreasonable to expect Australia to hold back from concluding
an FTA with the United States just because some partners in East Asia are
not yet ready to do one with us.
Rather than turning our back on Asia, we are keen to conclude arrangements
for freer trade and investment links just as soon as Asian partners are ready
to join us.
The more basic response to this line of criticism is simply that, as I argued
earlier, Australia � or for that matter any other country � will always want
to make the most of each of its significant relationships around the world.
Singapore, for example, is well advanced in negotiating an FTA with the United
States, and Japan is seriously contemplating one with Mexico.
The conduct of international relations should never be conceived of as some
sort of zero-sum game.
My comments this evening have covered a sample of the mainstream business
of Australia's foreign and trade policy.
The ground covered is in no sense intended to be comprehensive or even representative.
Time does not allow me to take up in detail the close and highly productive
partnership that we enjoy with New Zealand, the more dynamic and forward-looking
relationship that we are seeking to develop with India, the efforts that we
and Brussels are making to develop a wider and deeper basis for cooperation
with the European Union, our rapidly expanding commercial links with the Middle
East, or our valuable bilateral and multilateral interaction with Latin American
Before concluding, however, I should like to mention three subjects which
will have particular salience in our external policy over the coming months.
The first is the challenge that Iraq poses to the international community
by its persistent defiance of the UN Security Council.
The Bush Administration has made clear its position that doing nothing in
response to Saddam Hussein's efforts to develop and deploy weapons of mass
destruction is simply not an acceptable option.
This week, the United States will step up its effort to re-engage the UN
Security Council and the wider international community on the question of
how to respond credibly and effectively to Iraq.
Australia believes firmly that the issue is one for the UN Security Council
to address and that that process should be tested thoroughly before military
action is contemplated.
Foreign Minister Downer left today for New York where he will join the efforts
of the United States and others to underline the seriousness of the situation.
The second issue is Zimbabwe, which has added significance in Australian
diplomacy because the Prime Minister is currently the Chair of the Commonwealth.
The Government of Zimbabwe has rebuffed the Commonwealth, rejecting the independent
report of the Commonwealth Observer Group on the March elections, and refusing
to address crippling economic and social issues.
Australia has been at the forefront of countries pressing Zimbabwe for reconciliation
and reform � so far to little avail.
As a result, the Prime Minister has said the Government may need to consider
imposing sanctions against Zimbabwe in the foreseeable future.
The third subject I should like to flag for your attention is the South Pacific.
Many South Pacific countries face a difficult future.
The demands generated by ethnic and social tensions and rapid population
growth are outstripping patchy economic progress.
In a number of countries, governance is poor.
The Government is now engaged with the new Papua New Guinea Government led
by Sir Michael Somare, and will seek to encourage a realistic and effective
response to the serious budgetary and other pressures that PNG faces.
We will also continue our efforts to help the Government of the Solomon Islands
to establish better authority over a situation of lawlessness, and deal more
effectively with chronic budget imbalances.
Australia will not turn its back on the South Pacific.
But we can only help effectively those governments which are ready to help
themselves by tackling the problems of poor governance and economic underperformance.
Finally, in conclusion, let me mention again the new White Paper on Foreign
and Trade Policy that the Government plans to publish around November.
The White Paper aims to present a confident and realistic articulation of
Australia's place in the international system, and to explain the main strategic
directions of our country's foreign and trade policy.
When the time comes, I commend it to your attention.