FRAN KELLY      Global tensions over the South China Sea have spiked – it’s Australia that’s been caught in the middle. Beijing has accused Canberra of “double standards and taking sides” and overnight as we heard earlier on AM a Foreign Ministry spokesperson said that Beijing cannot be blamed for increasing tensions in the South China Sea.

“However there are some countries who deploy weapons in waters near these islands and keep flexing their muscles. There are other factors that are escalating tensions in these waters. We hope these countries can stop hiking up the tension and stick to their commitments that they will not take sides in relevant issues.”

That’s a spokesperson for the Foreign Ministry in Beijing overnight.

This follows the joint declaration by the United States and Australia that called on China to stop the militarisation of the Spratly Islands and to permit free ship movements and aircraft overflights in the area. Foreign Minister Julie Bishop was a signatory to the AUSMIN Declaration and she joins us now from Washington.

Julie Bishop welcome to Breakfast.

JULIE BISHOP    Thanks Fran, good to be with you.

FRAN KELLY      The response from China to your press conference with the US Secretary of State yesterday was angry and immediate, pretty much, warning our Government to stop adding fuel to the flames of regional tension. What is your response to that reaction we heard there from China?

JULIE BISHOP    The concerns that we raise are the concerns that have been raised in many forums by many nations in recent times and I expect they will continue to be raised while reclamation and construction work is carried out in the South China Sea. Australia has a legitimate interest in maintaining peace, stability and security in this area, after all about two thirds of our trade passes through the South China Sea. So we will of course continue to traverse these seas under international law and international waters. The point we’re making is that all of the claimants to these territorial disputes should respect international law, should allow unimpeded trade, and should respect the principle of freedom of navigation and freedom of overflight. We don’t take sides in these claims but we call on all parties to resolve their differences peacefully and for negotiations to be carried out in accordance with international law.

As far as the question of militarisation is concerned, I note that President Xi said in Washington that China did not intend to militarise in this region and so we welcome that statement.

FRAN KELLY      You welcome that statement and yet the US and Australia stood side by side yesterday while the US said that it will run exercises that test that 12km boundary, that it is going to insist on that and this is what China has reacted to. And China is also saying in this statement overnight that its reclamation activity, its activity around the reefs of South China, is reasonable, justified and lawful, beyond reproach. What is your response?

JULIE BISHOP    Well, that has not been tested by international law or by any international tribunal.

FRAN KELLY      Does it need to be tested?

JULIE BISHOP    We don’t believe that the reclamation work and the construction work has been reasonable. We have raised our concerns on many occasions in the past and we will continue to do so because we do have a legitimate interest in maintaining peace and stability in the region, and this kind of activity increases regional tensions. You don’t have to ask Australia to understand that you just have to be present at some of the forums that I’ve been at recently - the East Asia Summit, the ASEAN Regional Forum - where virtually all of the nations present expressed their concerns about escalating tensions because of increased activity in the area. China is not the only country that has been reclaiming and seeking to carry out construction work and therefore we’ve called on all parties to respect international law and allow trade and commerce to continue unimpeded in the region.

FRAN KELLY      So what is the way to deal with this? The US Defence Secretary Ash Carter said yesterday that the Unites States will fly and sail wherever international law permits. Our Defence Minister Marise Payne said the same thing last night. Have you been briefed that Washington is preparing to test the free navigation principle by sailing within 12 nautical miles of one of China’s islands?

JULIE BISHOP    Well let us take this a step at a time. The statement that the United States will travel in international waters under international law is hardly remarkable.

FRAN KELLY      No, indeed.

JULIE BISHOP    That is a right that all countries assert. In fact Australia asserts that right, that we will travel in the international waters pursuant to international law. That is our right, that is what we will continue to do. The point I’ve made from the outset is that we don’t take sides in the territorial claims or the sovereignty claims. What we do call for is for countries to respect international law and to respect freedom of navigation and freedom of overflight.

FRAN KELLY      And so is Washington preparing to test that, the navigation principle, by sailing it’s warships within a 12 nautical mile zone and is Australia considering or has there been any request for Australian ships to accompany US ships?

JULIE BISHOP    There was no such discussion. Australia will continue to assert its right to travel in international waters and throughout the South China Sea in accordance with international law. We do that now and we will continue to do that. Likewise in terms of flying through the region, we respect international law, and we will continue to fly and traverse the South China Sea to continue to pursue our national interest.

FRAN KELLY      What do you make then of China’s angry and immediate response?

JULIE BISHOP    I have heard China respond in this way in the past to nations raising concerns. But China must understand that it is raising regional tensions and there are sensitivities in the neighbourhood. And this has been expressed, publically, in many forums and privately in many forums. It is not just the United States and Australia, but others have also raised issues. Indeed the Philippines has sought a jurisdictional ruling from the international courts in relation to China’s activity in their part of the world. So the international community is being asked to make a judgment in this regard and we call on all parties to carry out their negotiations peacefully and in accordance with international law and indeed the law of the sea.

FRAN KELLY      On that point about China escalating regional tensions you’ve just addressed the Centre for Strategic and International Studies in Washington I think, and you made the point in your speech that “we are living through a period of fundamental challenge to the global order – power is moving east to the Indo-Pacific.” You say the United States will continue to lead but only until about the 2040s. If China is escalating regional tension –

JULIE BISHOP    No I believe I said at least until the 2040s. And that was a prediction of Professor Joseph Nye so I am referring to Professor Nye’s prediction that it will remain in the lead until at least the 2040s. And I believe that was the window that he was addressing in his recent work.

FRAN KELLY      So you’re not predicting, necessarily, a decline in US power?

JULIE BISHOP    No certainly not, certainly not. In fact I made the point quite specifically in my speech where I talk about the decline of current powers and I said I am specifically not referring to the United States.

FRAN KELLY      Our guest is Foreign Minister Julie Bishop joining us from Washington. Minister, can I ask you too about the conflict in Syria, because obviously that was an element of your talks with US officials. You’ve spoken of the need to find a creative way to bring peace, security and unity to Syria, which has become a quagmire. Following your talks with the US Secretary of State and the Defence Secretary, do you have a better sense of the way forward? Is the US interested in finding these creative ways that might include Bashar al-Assad sitting around the table.

JULIE BISHOP    I believe that the United States is preparing to look at a short-to-medium-term political solution but of course the longer term political solution in Syria is exceedingly complex and complicated.

This all began with a civil war in about 2011 in Syria and the Assad regime’s attack on the majority population that it rules over and of course at that time there was what is called the Geneva Process that was seeking to find a political solution. A precondition of many of the countries involved in that negotiation was that President Assad must leave. Well years on he has not and he is now receiving backing from Russia, Iran and others. So Australia’s position has been that we have to deal with the reality, the realpolitik, and that means that other players would have to be at the negotiating table, players other than those who were present in 2011. Self-evidently matters have changed significantly. We’ve seen the rise of Da’esh, the terrorist organisation and other terrorist organisations in Syria. The Iraqi Government has formed and has been backed by the US and Australia and other coalition members. So it’s a very complex situation.

I think the US and others appreciate that we need to be quite creative in coming up with ways to resolve the quagmire that is developing in Syria.

FRAN KELLY      So the other players you talk about there, does that mean Iran should be around that table, and does Assad perhaps, the Assad Government?

JULIE BISHOP    Well I certainly believe that Iran must be, and obviously Russia will now be a more significant player because Russia has intervened on the side of the Assad regime. So the process towards peace will have to include those that have intervened and those who claim to have an interest in this.

FRAN KELLY      Foreign Minister, can I just ask you about a domestic issue. Here at home while you’ve been there at the AUSMIN talks, Labor has gone after Prime Minister Malcolm Turnbull and his financial arrangements. Malcolm Turnbull is adamant his investments have been properly declared, he pays his tax in full. But is it an appropriate look for the Prime Minister of this country to be using overseas investment funds, managed funds, domiciled in notorious tax havens? Is that appropriate?

JULIE BISHOP    The Prime Minister has declared his family investments. Labor itself has acknowledged that they are legal and he has fully disclosed them to the Parliament. That should be the end of the matter. Perhaps the leader of the opposition Bill Shorten should be disclosing fully his knowledge of secret side deals during his time as a union boss as revealed in the royal commission, rather than trying to smear the Prime Minister over fully disclosed, legal investments.

FRAN KELLY      Julie Bishop, thank you for joining us.

JULIE BISHOP    Thanks Fran.

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