PROTECTING AND PROMOTING REGIONAL INTERESTS

I’m delighted to be back in this exciting city. I was here only last month, accompanying the Leader of Australian Labor, Anthony Albanese, on his first international visit as Labor Leader.
 
Of course Indonesia was a very deliberate choice for Anthony on his first visit, signifying the importance of the Indonesia relationship for us.
 
“Dunia tidak semata sedang berubah tetapi sedang terdisrupsi. Dan di era disrupsi ini kemapanan bisa runtuh, ketidakmungkinan bisa terjadi.”
 
(“The world is not only changing; it is experiencing disruption. In this era of disruption, the establishment may collapse, the impossibility may prevail.”)

So spoke President Widodo in his State Address on the 74th Anniversary of Independence, just last month.

The President’s words are a stark warning of the risks and challenges we face in this time of disruption.

Countries are grappling with inequality, ethnic tensions, greater numbers of displaced persons, security threats ranging from terrorism to cyber-attacks, rising nationalism and pressures on democracy.

In the international system we see erosion in support for international norms, rules and institutions.

And power is shifting. The balance of economic and strategic power is changing.

The two great powers, the US and China, are both – in different ways – choosing paths that challenge the status quo.

Their strategic competition is increasingly defining intent and driving behaviour.

It is the narrative of these times.

And whilst competition is inevitably an aspect of international relations, unless it is balanced by the objective of cooperation, our peace and stability become vulnerable.

Competition that is not conditioned by the recognition of shared interests - that assumes a zero sum outcome - is a risky path for all.

Our region is a focal point of disruption. Increasingly, it is also a locus of competition.

This is not a new experience for the nations of Southeast Asia. Great power competition has shaped and disrupted this region throughout its history, including in recent generations during World War Two and the Cold War.

And with the insights this history brings, you understand the imperative of working to avert unrestrained competition

In the midst of this disruption, countries of our region must do more than simply navigate the slipstream.

We must do what we can to shape the outcome we want.

We must start with a focus on the sort of region we want – one where none of us is subject to the hegemony of another.

Australia wants a region which retains a system of institutions, rules and norms to guide behaviour, to enable collective action and to resolve disputes.

A region in which those seeking to make or shape the rules do so through negotiation not imposition.

A region with an open trading system and investment transparency to maximise opportunity.

A region where outcomes are not determined only by power.

A region where all people live in peace and prosperity.

We know poverty alleviation is a necessary although not sufficient foundation of stability and prosperity.

And democratic governance and human rights are critical to sustainable development and lasting peace.

A region with these characteristics reflects Australia’s national interests and our values.

Indonesia has articulated similar objectives.

As President Widodo has said, Indonesia wants a region based on principles of openness, transparency and inclusion, built through a ‘habit of dialogue’ and ‘respect for international law’.

What does maintaining a region with these characteristics require?

In a context of increasingly intense strategic competition, how do we realise our shared objectives?

We can only realise our objectives through a multipolar region.

A multipolar region in which the United States remains deeply and constructively engaged; in which China is a positive contributor; and in which the perspectives and contributions of smaller powers are respected and valued.

A region in which there is shared support for international rules, norms and characteristics.

The United States has played a foundational role in modern Asia in the post-World War Two era.

US presence transformed Australia’s security, and the security of its other allies and partners. It was a key driver of international trade and investment regimes that enabled our economies to prosper.

Beyond military and economic power, the United States also matters in the region because of its values and what it represents.

Our future resilience, prosperity and security depend on ongoing and strengthened constructive engagement from the United States.

But also key to the future of our region is the extent to which China is a positive contributor.

China is critical to the shape and character of the entire region.

In fact it is hard to think of an important issue for the region’s future where China will not be an influential player.

China is, and will continue to be, of great importance to Australia, to our region and to the world.

We recognise that China has a right to develop, and a right to a role in the region alongside other regional powers.

We do not and should not pre-emptively frame China only as a threat.

But we also recognise that China is not a democracy nor does it share our commitment to the rule of law.

Differences between our systems and values will inevitably affect the nature of our interactions.

And they will, and do, affect the nature of China’s behaviour and ambitions in the region.

There’s no doubt that under President Xi           China has evinced increasing assertiveness in pressing its interests. It has also demonstrated its belief as to its right to a greater role in the region.

None of this is particularly surprising. As China’s relative economic weight increased, it is unsurprising that it would seek a greater say in the region. The question is: on what terms.

Australia is not alone in expressing concerns about some of Beijing’s actions – including, for example, land reclamation, militarisation and illegal, unreported and unregulated  (IUU) fishing in the South China Sea, cyber-attacks, and issues around intellectual property theft and industrial subsidies.

It is legitimate that these concerns are aired and addressed.

Such behaviour is not consistent with the region we want.

The shape and character of the region we want depends not only on the way the two great powers engage with the region, but also how they engage with each other.

The relationship between the United States and China is the most significant in the world today. Its character will determine our region for decades to come.

It is clear that the United States and China now treat each other as strategic competitors.

The strategic competition in our region means we need to think carefully and engage actively to avoid becoming collateral.
Great powers will do what great powers do – assert their interests. But the rest of us are not without our own agency.

As Bilahari Kausikan somewhat provocatively asserts:

“..under present circumstances, there may be no sweet spot we can occupy that will keep both the Chinese and the Americans simultaneously happy. There is no silver bullet, and it is a fool’s errand to look for one.

Neither can we just lie low and hope for the best. You may not look for trouble but trouble may come looking for you. And trouble is all the more likely to seek you out if either side thinks you are, or can be, intimidated.

We must have the courage to pursue our own national interests.”

This strategic competition is taking place within the context of certain regional realities - realities that will inevitably frame our interests and shape our decisions.

This is something we must remind both great powers of.

We need to address the competition paradigm directly, by being clear about the reality of its boundaries.

I’d like to highlight what I refer to as the four realities.

First, there is the reality of economic trends.

I often reference a compelling chart in the Australian Government’s Foreign Policy White Paper – Figure 2.4. It projects GDP in purchasing power parity terms out to 2030.

US GDP rises from US $18.6 trillion in 2016 to US $24 trillion by 2030. China’s GDP rises from US $21.4 trillion to US $42.4 trillion over the same period.

So within a decade, the Chinese economy is set to become nearly twice as large as the economies of the US, India ($20.9 trillion) and the EU ($23.3 trillion) and seven times larger than the economy of Japan.

Alternatively, if you look at GDP in market exchange rates terms, PWC’s World in 2050 report predicts US GDP will rise from $18.6 trillion in 2016 to $26.5 in 2030. China’s GDP rises from US $11.4 trillion to US $26.5 trillion over the same period.

Even if these figures don’t quite reach the heights projected, the trajectory outlined represents a fundamental reshaping of the global and regional economy – with profound implications for our region and for the United States.

Second, there is the reality of our economic engagement with China.

China is a top trading partner for many countries in our region, a major source of investment, and an intrinsic part of global and regional supply chains.

Indeed, the Lowy Institute Asia Power Index has ranked China first in Economic Resources, largely due to economic weight – the size of its economy – and its connectivity – the capital flows and physical means by which countries connect to and shape the global economy.

Moreover, the size and nature of most regional economies means we will continue to rely on open trade and foreign investment.

Even if one assesses that the United States and China can actually ‘decouple’ from each other, the integration of both major powers in the global economy means that the rest of us will not be able to do so.

So economic engagement with China will remain imperative.

It is in Beijing’s interest too, regardless of what other choices and decisions we make.

Third, there is the reality of China’s place in the world.

To a much greater extent than the Soviet Union in the Cold War, China is deeply enmeshed in the international system.

Beijing is actively engaged in all the major international organisations – from the UN Security Council, to the IMF, WHO and Interpol. And its role is integral to the resolution of global issues and challenges – from climate change to nuclear disarmament.

And the fourth reality is the reality of power.

Over the next decades neither the United States nor China will be able to exert undisputed primacy. They must be prepared to live with each other as a major power.

These are the realities that underlie the decisions of regional countries and must inform the interactions of both Beijing and Washington.

The United States is Australia’s closest friend and our most important security partner.

Our alliance is longstanding, and enduring.

This closeness enables us to have frank conversations.

It is within this context that we speak of the risks associated with a narrow focus on strategic competition and how that is expressed in our region.

Of course competition in and of itself is not a bad thing.

But a strategic competition frame that manifests as ‘you’re either with us or against us’ limits the scope of regional players to make decisions that contribute to the region we want.

It disregards the four realities.

And it reinforces – even if not intentionally – the notion of a binary choice: that the only alternatives are accepting a Chinese-led regional order or unconditional support for US-defined strategic competition with Beijing.

This, ultimately, is not the United States’ interest.

The current trade war is the most prominent example – though this dynamic is not limited to the economic sphere.

It is a binary frame in which the gains are unclear but the losses could be catastrophic.

Whilst some countries may benefit in the immediate term, as some companies shift locations, the uncertainty felt in global markets and the trend towards greater protectionism will lead to negative economic consequences for many of us, including Australia.

Because fundamentally, no one wins from a trade war.

I look forward to seeing what benefits our Prime Minister, Scott Morrison, secured from his state visit to Washington over the weekend – particularly how he has been able to shape the Administration’s thinking and language on the trade war.

The trade war, as currently conducted, also undermines multilateralism and the rules-based trading system, including by reinforcing the idea that size and economic power determine the terms of engagement.

And it perpetuates the perception that, for Washington, regional engagement is secondary to the US-China relationship – and that we all only matter in relation to its competition with China.

US leadership is most effective when it is conceived in terms of leading a community of nations, with all that entails.

Of course, this is not just an issue for the United States.

Beijing too should recognise that most of us in the region are not comfortable with an authoritarian China becoming the predominant power.

It’s fair to say that many countries in the region are unclear about what precisely it is that the United States is seeking to achieve.

More questions, like those raised by Kurt Campbell and Jake Sullivan, need to be asked: “What, exactly, is the US competing for? And what might a plausible desired outcome of this competition look like?”

Absent that clarity, China will assume the worst.

It will give fuel to those within the Communist Party of China who believe that the United States wants to thwart China’s rise and ‘contain’ it.

Of course, given the entrenched narrative within China about US ambitions of ‘containment’, it is possible that greater US clarity won’t quell Chinese suspicions.

But more clarity will give greater assurance to other regional countries who must deal with the (geographic and economic) realities of China as it is and some of the disruptive actions and rhetoric from the United States under President Trump.

What is a realistic and workable vision of an end state or settling point?

These are all fundamental questions; the answers to which will influence how we all respond.

A greater focus on the likely settling point will enable the United States to recognise – and embrace – the fact that multipolarity in the region is likely to get stronger.

And in the context of Beijing’s ambitions, this growing multipolarity – with countries like Indonesia, India and Japan playing increasingly important leadership roles in the region – is beneficial to Washington’s interests.

Defining a realistic settling point will also help the United States recognise and accept that decisions relating to China will vary depending on the issues and interests at stake.

And it would help remind Beijing that when we make decisions that defend or assert our national interests in ways that may not reflect China’s views it is not due to a ‘Cold War mentality’.

Framing this settling point in terms of what we share would help foster cooperation with ASEAN nations.

Our relationships to and with the US and China will inevitably be different, by virtue of our own histories and interests. Some of us have formal alliance partnerships with the United States; others are steeped in the Non-Aligned Movement. Some of us have economies that are complementary with China’s; others are more directly competing.

A focus on the nature of the region and the individual and collective benefit to many regional players enables greater possibilities for working cooperatively than a simple focus on strategic competition.

We should expect China to respect the core elements that define a stable, peaceful and prosperous region.

We also look to the United States to present a positive narrative and vision about the future, by articulating and presenting what it offers not only what it is against.

As Peter Varghese puts it:

“Those of us who value US leadership want the US to retain it by lifting its game, not spoiling China’s.”

The decisions made by the Trump Administration – including the withdrawal from the Trans Pacific Partnership, the Paris Agreement on climate change, the UN Human Rights Council, the Iran nuclear deal, and the imposition of quotas and tariffs including on allies and partners – indicates a rejection, at least in part, of the rules and norms to which we have become accustomed.

I spoke earlier about Beijing’s increasing assertiveness in seeking to shape the region in line with its preferences and ambitions, and some of its actions and behaviours not being conducive to the kind of region in which we want to live.

It is evident that both great powers are challenging the status quo – though in different ways and to differing degrees.

So we are in fact faced with a choice – but it is not the US-China binary.

The choice is this:

Are we simply to be spectators to the consequences of this strategic competition in our region, or do we work proactively and collectively to shape rules, norms and standards in line with our interests and values?

Some have already relegated ASEAN to the sidelines. They point to the consensus-based practice of decision-making and the increasingly divergent strategic perspectives across the ten member states as constricting ASEAN’s ability to respond effectively.

The ASEAN Outlook on the Indo-Pacific, championed by Indonesia, reflects a desire for this not to be the case.

I want to quote briefly from the Outlook:

“It is in the interest of ASEAN to lead the shaping of their economic and security architecture and ensure that such dynamics will continue to bring about peace, security, stability and prosperity for the peoples in the Southeast Asia as well as in the wider Asia-Pacific and Indian Ocean regions or the Indo-Pacific.”

“ASEAN also needs to continue being an honest broker within the strategic environment of competing interests.”
 
These objectives for ASEAN are welcome.
 
Of course, in practice, beyond asserting ASEAN’s role, it also requires ASEAN to insert itself in the process of regional balancing and adjustment.
 
This matters for ASEAN centrality.
 
It matters for the region.
 
Because the region we want needs the engagement and support – and ultimately the ownership – of the major Southeast Asian states.
 
So the question is what can we do together, and what can we do on our own, to ensure the region we want.
 
As we work collectively we should focus on upholding the existing rules and norms that we want to protect – like the UN Convention on the Law of the Sea and the Nuclear Non-Proliferation Treaty.
 
And we should focus on being standard setters for new norms, rules and institutions, or for those that need to be made fit for purpose.
 
It is apparent, for example, that some aspects of the WTO’s structures, rules and standards no longer reflect the world’s economic realities; yet for countries like Australia and Indonesia it remains a vital multilateral organisation for managing trade issues.
 
I welcome Indonesia’s indication at G20 of a desire to drive initiatives for reform of the WTO. Australia’s history of proactive leadership in the multilateral trade arena – including through the Cairns Group and APEC’s focus on regional economic integration - is a tradition we must continue.
 
Australia and Indonesia can draw on our shared interests and experiences to work to ensure the WTO remains fit for purpose, and that the creation of new standards on issues it does not effectively cover – like e-commerce and State Owned Enterprises  - reflect our values and interests.
 
This is important, too, in the negotiation of norms and practices to manage the development of cyber security, smart cities, AI and the regulation of social media.
 
In doing so we should recall what Foreign Minister Marsudi said in her annual foreign policy statement at the beginning of this year “ASEAN must be proactive in addressing strategic developments and changes in the region. ASEAN must always be the driver for progress in the region.”
 
Then there is the question of how we ensure we strengthen the regional architecture and maximise our opportunities for engagement.
 
Indonesia is already taking a leading role in strengthening the Indo-Pacific regional architecture – including by recognising that other countries’ notions of the Indo-Pacific, and existing bilateral and minilateral arrangements, can coexist with ASEAN-led mechanisms.
 
Indonesia has also initiated coordination and cooperation mechanisms within ASEAN, and strengthened the role of other groupings – such as IORA, the South West Pacific Dialogue and trilateral maritime cooperation with Philippines and Malaysia.
 
Indonesian willingness to contribute and lead is welcome.
 
What we do at home also matters for the kind of region we want.
 
Our domestic policies and actions not only have consequences for our own wellbeing, they matter for the nature of our region.
 
We must work to ensure our economic and social policies provide benefits to all.
 
While Australia has so far avoided the political polarisation manifest in many nations around the world, we are not immune to the risk. Australia’s economy continues to grow, but we are experiencing the slowest economic growth since the Global Financial Crisis. Wage growth for workers has stagnated.
 
This demonstrates that Australia’s prosperity is not being shared equally. Greater inequality at home risks undermining the very characteristics of the region that we are seeking to ensure.
 
Similarly, Indonesia’s domestic focus on economic development is good for Indonesia, and a strong and prosperous Indonesia is good for the region.
 
As a multicultural country that draws strength from our waves of migration and from our First Peoples, Australia must ensure we remain an inclusive society.
 
And as a country with the world’s largest Muslim population, but diverse in culture, religion and geography, Indonesia also finds strength in diversity and inclusivity.
 
In this disrupted world we all need to find ways to ensure the resilience of our own democratic institutions.
 
What our region is looking for is less a contest about who should be or will be number one, than how we foster partnerships of enduring connection and relevance.
 
Partnerships that respect sovereignty, support development objectives and contribute to a peaceful, stable, secure, prosperous and inclusive region.
 
We know that the region needs more cooperation not less -
 

 
The onus is on all of us to protect and advance our interests.
 
As President Widodo said last month in his State Address on the 74th Anniversary of Independence:
 
“Dalam situasi dunia yang penuh persaingan, misi untuk ikut membangun tatanan dunia yang lebih baik tidak boleh kita abaikan.”
 
(“In a global situation full of competition, the mission to participate in building a better world order must not be ignored.”)

ENDS