Let me at the outset commend the Lowy Institute for the contribution it makes to our understanding of Australia's place in the world. Lowy's analysis, its outreach and its expertise places it in the front rank of Australian think tanks and its reputation has rightly spread well beyond Australia.When I meet each year with our new graduate recruits, I stress the importance of developing a world view which can anchor their career in diplomacy. Many of them ask me what mine is; how I see Australia in the world and how the big themes of foreign policy such as interests, power, influence and values come together.
My speech today is an attempt to provide a practitioner's answer to these questions. It is not a comprehensive policy statement or a review of our current foreign policy challenges. Instead I wish today to offer a personal perspective on the shapers of an Australian world view.
Foreign policy is an ecosystem: everything is connected to everything else. A change in one area creates consequences in other areas. The grammar of chaos theory finds a distinct echo in foreign policy even if charting the chain of consequences is more art than science.
The Department of Foreign Affairs and Trade cannot confine itself to foreign policy or even to foreign, trade and aid policy. It must deal with Australia's international interests in the round.
Managing our major bilateral relationships takes you into the many nooks and crannies of the ecosystem: the economy, strategic policy, immigration, energy security, social policy, aviation negotiations, tourism, tax and investment agreements and a myriad of other issues.
We can marvel at the complexity of it all. But as practitioners we have to do more than admire the problem. We have to find some order amidst the chaos; build a framework around what we seek to achieve and have a clear sense of what we can and cannot do.
We need to match aspiration to capacity. We need to understand the way in which history has shaped current challenges. We need to understand strategic geography as well as the character and temperament of our international partners.
All foreign policy starts at home. And all foreign policy is a means to an end: to advance the interests of our country and our community. The best foreign policy is anchored in a clear view of those interests and an institutional capacity to advance them.
The practice of foreign policy is less about describing the ends than determining the means to get there. And while the ends may be objective, the means are often subjective.
How best to achieve our foreign policy objectives will be strongly influenced by how we see power, what relative weight we give to bilateral relations and multilateralism, the balance in our thinking between realism and idealism, the extent to which values shape interests and so on.
These are the anchor points of how Australia looks out on the world and how we conceptualise our strategic environment. They constitute the core elements of a "world view" and no foreign policy can last long without a sense of it.
Values
Foreign policy is anchored in interests but it must also reflect values. Australia's liberal democratic, secular and multicultural character is fundamental to our sense of self. It is as much of an Australian national interest as our security and prosperity. Giving expression to our values should be seen as a natural part of our international relations.
It is true that sometimes the defence of values can be in tension with the advancement of interests. Here, as elsewhere in foreign policy, we strive to strike the right balance. But that balance should be about how best to be true to our core values rather than simply trading values for interests. And we need to start from the premise that values are not there to be imposed on others. They should define who we are, not what we insist others become.
Australia's values are the values of an open society. We believe that freedom is best advanced when we nurture an environment where ideas can flourish, where contending philosophies have to make their case in the marketplace of ideas and where those who govern are held accountable to the governed.
Some will argue that as noble as these values may be, they are largely the lived experience of western democracies and as such hold little meaning for those – and they are the vast majority – outside that cultural and historical tradition.
It has been easy for us to assert our core values as universal values because from the time of British settlement, Australia has been closely aligned, culturally and intellectually, with the dominant global powers. We were part of the system which wrote the rules; which authored the international conventions on human rights and which gave universal reach to our founding principles.
We must also recognise that the values of liberal democracy evolved gradually in the west. The journey from the divine right of kings through to one person one vote was long and difficult. For most of human history the values which we today think of as self-evident truths – the rule of law, the accountability of the government to the people, freedom of speech and assembly and a free media – were anything but universal.
Yet it seems to me quite unsatisfactory to consign our most cherished ideals to the prosaic logic of time and place. Yes, we are all products of our history. But surely that does not mean that our history is incapable of producing a universal truth?
In our foreign policy we should be quietly confident about our values because the best way to engage the world is with a clear sense of who we are and what we believe in.
The Australian community expects us to hold true to the values that define us. And foreign policy is also very much about the values and the principles which we want to see embedded in the international system.
National Interests
Australia's national interests are frequently asserted but rarely defined. At their core, they are timeless: to advance security and prosperity and to contribute to the shaping and running of international institutions which reinforce the rule of law and international norms of behaviour.
Australia's sense of itself in the world has evolved. For much of our history we submerged our national identity within the broader framework of empire. Even in those days Australia had a sense of its distinctive interests – witness Deakin's invitation to the US Great White Fleet in 1908 or Billy Hughes at Versailles. But it has only been since the end of the second world war that we have consciously sought to give a distinctively Australian voice to the definition of our interests and our place in the world.
Australia has also shied away from the exercise of power. We have tended to see power as belonging to others. And when we have engaged with the projection of power we have traditionally been more comfortable in the slipstream than in the lead.
If anything, Australia has underestimated its foreign policy weight and the effect on others of what we say and do. We are after all the twelfth largest economy in the world and the number one global exporter of beef, coal and iron ore. We are an emerging energy superpower and have the third largest pool of investment funds under management.
If there is a gap between our international weight and our ambivalence about the exercise of power it reflects a history of strategic anxiety shaped by many things: a relatively small population inhabiting a large continent, that for all but the last several decades our near abroad was seen as a region of poverty and instability, and that, historically, we also saw ourselves as a long way from our cultural roots and therefore vulnerable.
When Australia was part of the British Empire these anxieties were largely held in check by the strategic reassurance that imperial power provided.
Strategic anxiety may also be the reason why war has featured so prominently in our history. Australia is not a warlike country. We do not go looking for a fight. But, despite our remote geography and relative isolation, we have accepted wars as a fact of life. We have been prepared to pay the price of war in blood and treasure, as our death toll in the first world war so graphically illustrates.
The paradox is that our strategic anxiety sits side by side with a strategic geography which ought to be fundamentally reassuring. Our best strategic judgement for decades has been that we face no foreseeable threat. Our continental geography gives us strategic depth. We have a security alliance with the world's strongest military power. And these days Asia is so much more a region of opportunity than of instability.
One result of this historical paradox – or "unreasoning fearfulness" as one of my predecessors called it – is Australia has become adept at crafting a strategic policy which does not take as its starting point a clearly identified threat: a form of arming without aiming to borrow a description once used to describe Indian strategic policy.
All of this has had the effect of stretching Australia's strategic horizons. We think of our security across a very broad canvass, perhaps reflecting the fact that we initially learnt our world view as part of the British empire with its long geographic reach. And then further developed it as an ally of a global superpower.
But if anxiety has shaped our strategic world view, the imperatives of trade have shaped our economic world view. And, as with strategic policy, geography has also been at the heart of our trade policy.
Without a deep domestic market, blessed with natural resources and a competitive agricultural sector, and far away from our consumer market for the first two centuries of post settlement history, Australia traded largely within an imperial framework. Imperial trade and domestic protection were our twin economic pillars. And foreign investment – a consistent theme in our economic growth – was also largely sourced from the centre of empire.
We were alert to trade opportunities elsewhere, as evidenced in our nineteenth century trade relationship with Asia, and our post war trade relationship with Japan. But it was Britain's entry into the then European Economic Community which began the real broadening of our trade focus. And it was not until the eighties that we truly saw our future in global markets.
Imperial trade and domestic protection gave way to global markets and a more open economy. And around the same time, our strategic policy also underwent profound changes with a stronger emphasis on defence self-reliance and a greater confidence in our ability to defend Australia but within an alliance framework.
From the Asia Pacific to the Indo Pacific
For Australia the crucible of our security interests is Asia. It is here where our core economic and strategic interests lie. And it is from this region where any momentous disruption to our peace and prosperity is most likely to occur.
Traditionally our concept of Asia has focussed on the Asia Pacific as a coherent strategic system straddling the United States, the strategic heavy weights of North East Asia and our closer neighbours in South East Asia and the South Pacific. More recently we have also had to think about where India fits in.
India has traditionally seen its strategic interests in neighbourhood terms. But as its interests in East Asia expand and as East Asian security dynamics take on more institutional substance, it makes sense to think of India as a key player in an Indo-Pacific strategic system which also encompasses the United States, East Asia and the South Pacific.
An Indo-Pacific construct also better captures our expectation that the big strategic issues in our region will be maritime such as conflicting maritime territorial claims and keeping open sea lanes vital for trade. By linking the Pacific and Indian oceans, the Indo Pacific construct also recognises Australia's distinctive geo-strategic position as a continent which faces both oceans.
This idea of an Indo-Pacific region is particularly important because we are living at a time of profound transition in the economic and strategic environment of Asia. A key question for Australian policy makers is how will the shift in economic weight in our region affect the distribution of power and what will it mean for Australia's national interests?
Indo Pacific Challenges
The meta challenge of Australian foreign policy over the medium term is how to maximise economic opportunity and minimise strategic risk as this larger rearrangement of economic and strategic weight works its way through our region.
This involves a number of complicated judgements about how change will unfold and just what the strategic settling point of the Indo Pacific will be. How should Australia position itself within this complicated and shifting dynamic?
The last several decades have been decades of growth in Asia. But now virtually all the major Asian economies face deep structural economic challenges. In most cases their political systems are struggling to embark on the reforms needed to address these challenges. It is here, at the intersection of economics and politics, that the biggest risks to the Asian growth story lies. And while Asia will undoubtedly continue to play a big role in Australia's economic future the rising political economy risk in the region suggests that we should also be alert to the need better to spread our economic risk.
We also need to recognise that the Indo Pacific strategic environment is in the midst of a profound transition as it moves towards a multipolar strategic system. The Asian growth story has been underpinned by a strategic stability underwritten by US strategic dominance. Now we are seeing other major powers rising in strategic weight.
A more multipolar Asia means that Australia's security will depend even more on how the US, China, India, Japan, Russia and others manage the complexity of their relationships. The character of those relationships, especially the US-China relationship, will be the single biggest determinant of strategic stability in Asia.
At the heart of these relationships is the tension between economic interdependence and strategic competition.
Asia will be a test bed of whether this tension can be effectively managed.
Economic space is infinitely flexible. Strategic space tends to be much less so. The challenge of state craft and leadership is to ensure that one does not derail the other.
Discussion of the major power relationships is too often shaped around a narrative of US decline and China's rise. This underestimates both the capacity of the US to regenerate and the magnitude of the challenges facing China. It also tends to crowd out the contribution of the other major powers to the balance sheet of power in the region.
With multipolarity inevitably comes a reduced margin of influence for the United States. But for the foreseeable future America's power will stay more multidimensional and more global than China's. The US will remain in a league of its own in global military reach and readiness to use force.
Our alliance with the US is the bedrock of our strategic policy. The alliance is a deterrent to potential aggressors, an irreplaceable source of intelligence and defence technology and a communion of values. The last is important because the convergence of interests and values is a powerful combination in foreign policy.
China's influence will grow as its economic importance to other countries in the region continues to rise. We are today seeing a more confident China with higher expectations that the region will naturally take China's interests into account when formulating national strategies.
China is a country and a civilisation which understands power and its sense of place has been shaped by the many centuries in which it was the Middle Kingdom.
That pull of history is likely to play an important role in the way in which China relates to regional states.
China's leaders are acutely conscious of the many challenges they face. They are currently at the start of a profound transition in their economic model towards more market based and consumption driven growth with less emphasis on exports and fixed investment.
The challenges posed by this transition are huge and we underestimate them at our peril. It is a high wire act which seeks both to preserve the monopoly of power of the Chinese communist party while simultaneously allowing the market to determine the allocation of resources. There is no certainty about how this will end.
We all however have a stake in the success of that transition. Abrupt shifts in China's strategic policies, especially flowing from an economic crisis, would be highly destabilising. No one gains if China fails.
China will ultimately define its own strategic settling point. It will not be forced into someone else's view of what it should do or become. Nor is it realistic to expect that the US and China can negotiate some grand bargain to share power in Asia. The process of adjusting to shifting power balances in a multipolar Asia will be incremental and organic.
China's behaviour is likely to be a mix of many elements. It will be a responsible stakeholder where its interests are served. It will not be a classic revisionist power because China has been too much a beneficiary of the existing system to want to completely overturn it. But it will also look to play a greater role in existing institutions and to craft new institutions and arrangements which place it at the centre in a pattern perhaps reminiscent of the Middle Kingdom.
China has every right to seek greater strategic influence to match its economic weight. The extent to which this can be peacefully accommodated will turn ultimately on both the pattern of China's international behaviour and the extent to which the existing international and regional order intelligently finds more space for China.
Some assume that when China becomes the world's largest economy, it will seek to assert itself as the hegemon of Asia. But a China with the world's largest GDP will still be, in some respects, a relatively poor country with a relatively low per capita income. Its economic size will give it strategic leverage but China's primary focus will also likely be domestic as it seeks further to increase the living standards and quality of life of its citizens. The same applies to India. The strategic behaviour of a large rich country and a large poor country is not the same. To assume it is can lead to serious policy errors.
Australian interests are best served by a stable strategic system in Asia which favours open societies, encourages economic integration, is inclusive in membership and looks outward.
The US-China relationship may be the central axis around which Asia's strategic fate will be determined. But the other major powers are not going to be passive bystanders. The whole point about multipolarity is that strategic influence is spread more broadly.
Japan's strategic perceptions will inevitably be influenced by a stronger China to which Japan's own economic fortunes are still tied. But Japan also recognises that a brittle relationship with China is not in its interests or that of regional stability. So Japan is likely to continue with the priority it attaches to its alliance with the US.
Under the US security umbrella, Tokyo will keep moving to expand its strategic engagement, and to cast off many of the self-imposed restrictions to it becoming a more "normal" country in terms of defence and strategic policy.
India, if it finds the path to sustained economic growth, will become a more important strategic player in the broader Indo Pacific. An India with a younger demography and growing faster than China will exert influence an order of magnitude higher than now.
But India's strategic preoccupations are likely also to remain close to home, especially Pakistan and China. Being on the periphery of the most contested Eurasian theatres, the Middle East and East Asia, gives India more room for strategic manoeuvre. How India will choose to use this is far from clear although we can safely assume that India will want to march to its own strategic tune. Notwithstanding its expanding strategic relationship with the US, Japan, Australia and others, it is unlikely to become any one's ally.
Russia is likely to stay a two-dimensional power, relying on energy – especially its huge gas reserves – and nuclear weapons. Soft power will likely stay Russia's weak point. Its growing relationship with China will be more opportunistic than strategic. Moscow will retain a desire to cut the US down to size and this may see more of Russia's European blocking agenda seep into its Asia policy.
The future of the Korean peninsula is one of the big unknowns in the region. When reunification comes it will not only be costly in economic terms but will also raise the question of the strategic disposition of a united Korea and the nature of its relationships with China and the US. Which way will a unified Korea lean: towards the US or China? Or will it set out in a completely independent strategic direction?
For Australia, South East Asia will always loom large in our world view from both a security and economic perspective. And within South East Asia the country that matters most to us is Indonesia. Indonesia is the natural leader of ASEAN and the direction of its strategic policy and the strength of its economy will have a large influence on ASEAN's standing.
The stability of South East Asia is central to our own security. We do not want to see a strategic fault line running through its middle. That is why ASEAN as an institution matters to Australia because it has played a remarkable role in consolidating the strategic stability of South East Asia as well as expanding its economic reach.
But ASEAN will have to work harder to keep its strategic influence. Its economic integration agenda has been largely underestimated. A more economically integrated Southeast Asia will add economic heft to ASEAN but the lack of a common strategic perspective will limit ASEAN's capacity to be a strategic shaper in the big powers environment of Asia.
Building regional institutions
Australia has only a limited capacity to influence the relationships the major powers have with one another. We should be cautious of any suggestion that we can be a mediator or bridge between great powers.
What we can do is work on building institutions and norms in the region which can help manage strategic tensions and which can act as an anchor at a time of transition in the region.
From Australia's strategic perspective, the EAS is the regional institution which has the highest priority and the most potential. Its members account for 55 per cent of global GDP and half the global population.
The EAS can complement the work of APEC in fostering greater economic cooperation. Australia's role in the founding of APEC and our active agenda in the EAS reflect the pivotal role we see for regional cooperation in advancing our national interests.
A core objective of the EAS should be to nurture habits of consultation across the region. Consultation might not resolve problems but it can make the search for solutions easier and diminish the risk of miscommunication and miscalculation.
Ultimately this is about the strategic culture we wish to see embedded in the Asian region. Will it be a culture of raw power or of consultation and collaboration? Will strategic behaviour flow from what you can get away with or will it reflect core principles about respect for international law?
Beyond Asia
Asia is the strategic centre of an Australian world view but Australia's horizons necessarily stretch much further.
The Asian growth story does not mean that the world's future belongs to Asia. This century may not belong to any one country or region.
By 2020, Asia will still only represent about a third of global GDP. Economic weight and strategic influence are becoming more dispersed. Some of the poles of power this century will be outside Asia, although the size of Asia's population means that it is likely to be unique in the scale of its economic growth this century.
An Asia strategy only makes sense in the broader context of an Australian foreign and trade policy which has a global focus. So our interests in Europe, the Middle East, Latin America and Africa are an important part of our world view.
Not all of foreign and trade policy is of course about opportunity. Geography imposes its own requirements.
The South Pacific is Australia's near abroad. Our size and location make us the major power of the region. If things go bad in the South Pacific both the region and the wider international community look to Australia to take a lead. And the successful management of our relationships in the South Pacific gives us extra weight in our dealings with the great powers of the Indo Pacific and beyond.
Our interests are best served by strong relationships with all the countries of the South Pacific and by economic and aid policies which work in partnership with them to help grow their economies. We also have an interest in regional institutions which can address the unique challenges of micro-states as well as the development challenges of the other Pacific Island economies.
The challenges in the South Pacific are not uniform. The micro states wrestle with economic viability which is why a deeper integration into the Australian economy and labour market are crucial to their prospects. For the larger Pacific Island states, the challenges are more ones of governance and private sector growth.
PNG has the scale and the natural resources to be a wealthy country. Its stability matters to Australia and the Australian market has a large role to play in its prosperity. In the past our relationship has been dominated by aid. The future however will need to focus more on partnership. Perhaps more than any other single relationship the state of our relationship with PNG is seen as a barometer of Australian foreign policy success.
Multilateralism
Beyond our core interests in Asia and the South Pacific, an Australian world view needs to reflect the contribution which multilateralism can make to advancing our interests.
Bilateral relationships are the bedrock of Australian foreign policy. But Australia can neither bully nor buy its way in the world so an international rules-based order is in our best interests. An effective multilateral system is the surest way to get there.
For most Australians multilateralism means the UN which, it must be said, has a very mixed record. Its political posturing can be annoying. Its inability to agree on decisive action can be frustrating.
But for all its flaws the UN does possess the unique legitimacy of universal membership. And the need for its essential peacekeeping role is increasing. Ultimately the success of the UN is hostage to what its members themselves can agree to allow it to do. The truth is if we did not today have the UN we would have to invent it – warts and all.
The multilateral system we have today is largely a post-war creation. And it has many achievements to its credit. Our international economy has undergone significant reform. Trade has been liberalised; globalisation and more open, WTO rules-based, markets have delivered more prosperity and wealth around the world than ever before. Democracy and the rule of law are much more widespread than they were in the ashes of 1945.
But today multilateralism is under intense pressure. We need it more than ever, but it is not delivering on our expectations.
There is a basic tension at the heart of global multilateralism: the mismatch between national power and global cooperation.
Global multilateralism rests on the equality of states. But power resides with the handful of states with the strategic and economic reach to shape events. The story of multilateralism is the constant quest to expand the reach of the former and constrain the raw power of the latter. It works best when states with power accept that their broader interests are served by a system of international rules and norms which apply to all.
What we may regard as universal however may not be how others see it. The current multilateral system is largely an invention of the United States and a clutch of western countries. It reflects a post-war US view that the creation of global public goods was squarely in its national interest.
This was unusual to say the least. There is no historical precedent for the leading global power to define its interests as best served by a system of multilateral rules underpinned by the ideal of global public goods.
For a country like Australia the post war world would have looked very different – and much for the worse – if the US definition of its interests had been more narrowly framed.
Today emerging powers are no longer willing to accept rules they did not write or outcomes which they perceive do not take their interests into account. Some do not share the core values and interests of Western countries. Others favour state sovereignty over individual rights, and so are wary of interventions in national affairs. And others still have shown little interest in taking a leadership role on the global stage.
Unless we find a way to resolve these tensions and to refurbish the multilateral system we will struggle to deal with the many challenges which can only be resolved through global action. Regionalism will get you only so far. Issues based coalitions can achieve much. But neither can deal effectively with global challenges such as climate change, or health pandemics or non proliferation.
The current edifice of global institutions is simply not strong enough to carry the weight of the challenges we face. The largest gap is the absence of a driving centre: a grouping reflective of the distribution of power in this century and capable of providing leadership on the big challenges of the future. Some see this as a role to which the G20 should ultimately aspire.
The individual interests of the G20 members are not often aligned. It embraces different political and economic systems as well as values. But it is precisely this diversity, coupled with strategic and economic reach, which makes it suited to driving global action. The standing of its members means that if it agrees on something it has the means to deliver it. The G20 contains an inherent alignment of means and ends.
Economic diplomacy
No Australian foreign policy world view can be complete without an understanding of how our economic, trade and investment and development assistance interests intersect. It is at this intersection that economic diplomacy resides.
Closely linked to trade and investment policy is the importance of keeping our domestic economy open and competitive.
Trade agreements can help business benefit from the demand in the region and beyond. They can further open global markets currently closed to goods, services and investment. They can lock in open settings at home. And they can underpin much-needed support for an open, rules-based global trade environment.
The rules-based international trading system that has prevailed over the last 60 years has achieved much in terms of reducing trade barriers, providing transparent rules and structures, and adjudicating disputes. It has helped underpin the strong growth of the region. But multilateral approaches to trade liberalisation through the Doha Development Round have stalled, and uncertainty and renewed protectionism cloud the global economy.
The difficult task of shoring up support for rules-based institutions underpinning trade and growth remains critical. As global economic power diffuses, diverging interests are making it more difficult to reach consensus in multilateral organisations like the WTO.
But ultimately success in trade comes not from agreements but from a domestic economy which puts a premium on productivity and competitiveness. That is why we must complete our program of tariff elimination, and further open our economy to investment and people. Our regulatory settings must not unnecessarily restrict trade. We must greatly improve our domestic infrastructure and connectivity including roads, ports and rail.
Our aid program has a key role to play in promoting private sector led economic growth and assisting developing countries to address constraints to development and attract investment. And we need to find more innovative ways of delivering development assistance in a world where financial flows dwarf aid flows.
Terrorism
Although there is no neat conceptual slot for it in an Australian world view I would be remiss not to address the challenge of terrorism.
Today, terrorism has become a first order security issue for Australia, even if it has limits as a strategic threat in the classic sense of that word.
The threat posed by terrorism is serious and rising. The rise of Daesh is a new chapter and the threat it poses is not simply a continuation of the post 9/11 threat. A terrorist group with the ambitions of a state and already many of its attributes poses a different type of threat than a jihadist movement such as Al Qaeda.
Analytically, we have struggled to define the strategic magnitude of the terrorist threat. In the immediate aftermath of 9/11, and for some time thereafter, we were inclined to view islamist terrorism as a global insurgency or a mass movement in the making. Some still do and the threat we face does have elements of both.
I think however that the more compelling analytical construct is to regard it as a potent combination of ideology and pathology. Terrorists are recruited at the intersection of ideology and pathology. To date, our efforts to counter violent extremism have placed most emphasis on countering the ideology. But as recruits in Australia become younger and the process faster, the pathological triggers will need more attention. Extremist ideologies eventually exhaust themselves. Pathologies tend to be enduring.
Conclusion
We are at a moment in history when tectonic plates are shifting. Power is moving from west to east. Asia will see for the first time in centuries a clutch of powers which are simultaneously strong. New patterns of economic cooperation and interdependence are being built on long-standing strategic fault lines.
The future will put a premium on policy nimbleness because we cannot be certain of either the strategic or economic trajectory of our region and beyond. This uncertainty will challenge us to recognise what will change and what will continue. It will be as much a test of mindset as of policy.
Australia should face these challenges with a measure of confidence. We bring to it several assets.
Australians understand the vocabulary of economic reform. Our history and our geography have combined to instil in us a global perspective. Ours is a society shaped by the values and institutions of the west, intimately connected to Asia, with economic interests across all regions and a community which has found unity in the principles of a multicultural liberal democracy.
Of course none of this guarantees our success and much of it can be overtaken by events outside our borders and beyond our control.
Ultimately the security and prosperity of our region and beyond will depend on our collective capacity to both understand and shape the forces which are redrawing our economic and strategic maps. It will be a testing time for our world view.