Institute for Regional Security Annual Dinner

Thank you very much for the introduction. Ladies and Gentlemen I'm delighted to be here and may I specifically acknowledge Ambassador Kusaka, James Carouso from the US Embassy and General O'Shaughnessy.

In January 2015, I had the pleasure of addressing the gala dinner for this Institute, and at that time I focused on the challenges of dealing with the threats to international peace and security and I referenced North Korea and radicalism as embodied by Daesh or ISIL, al Qaeda and related groups.

These issues continue to challenge us, but this year I will focus on why it is important to ensure that the democratic principles that underpin freedom and prosperity are strengthened, not weakened, in the face of such challenges.

The Institute's regional focus is important as there is significant potential for further economic growth in the Indo-Pacific, while there remain points of pressure and tension.

Managing these will require sensible policy and behaviour from the major players, to ensure opportunity is sustainably and efficiently exploited, and conflict is avoided by reducing the risk of miscalculation through frank and ongoing discussions.

There is an important way the Institute contributes to this task, beyond its obvious intellectual and policy output, by continuing to mentor the next generation of foreign policy thinkers, as it has done for over a decade.

This is being achieved through its Future Strategic Leaders program which has helped hundreds of our rising stars improve their skills and build their networks.

The Australian community and government will be the beneficiaries of this investment for decades to come.

As this dinner is the prelude to the Annual Strategic Dialogue held over the next three days, I am also delighted to address an audience that includes many of our Japanese and American friends.

The Institute's decision to invite Japanese participants to join the Strategic Dialogue for the first time in 2014 was prescient.

The United States, Japan and Australia are the three most powerful liberal-democratic military and economic powers in East Asia.

We have a special strategic role and responsibility to an Indian Ocean, Asian Pacific region, most of whom are dependent on open markets and trade.

It is important that we ensure that the rules-based order continues to survive and flourish.

I would argue that much of the Indo-Pacific region agrees with that proposition.

It is notable that almost every country in that region views the closer trilateral cooperation between our three countries as a benign and welcome development.

This is not due to indifference or ignorance but is based on the expectation that our region will continue to be one of the most economically dynamic for the next several decades at least.

Incidentally, this is why we support the Trans-Pacific Partnership. It will create new opportunities for advanced and developing countries through further trade liberalization and entrench sensible economic rules of the road.

It is also seen as the economic manifestation of the United States Strategic pivot or re-balance to Asia. Without the TPP I believe that a vacuum will be created and a vacuum will be filled by others and that should give us pause for thought.

There are some in our region who switch off when they hear us speak of 'shared values' and the significance of 'liberal democracy'.

Democracy is hard work - sometimes very hard work as some perhaps in the United States are finding at present.

Without doubt the US presidential is compelling viewing. As one commentator noted, if you sold tickets to the presidential debates to a global audience on a pay-per-view basis, the US could pay off the national debt!

All elections have the potential to be controversial.

I know, I have been through seven election campaigns in my life as a Parliamentarian and all have been challenging in different ways.

In Australia, the political parties believe the stakes are high. From our side, from the Liberal-National side, we honestly believe that only a Coalition government can safeguard our economy, and protect the nation's finances – from which all else in terms of peace, stability, security and prosperity will flow. The other side of politics apparently has another view.

This requires many long hours of policy development before the inevitable political wrangling takes place.

It is challenging to undertake community advocacy to win public support for measures, working with colleagues to ensure consistency of messaging, consulting and compromising with the Senate crossbench when necessary, and dealing with a media who's searching for any mistake, however tiny.

Yes, to achieve an open liberal democracy is hard work.

When Kim Jong Un sits down to a glass of cognac at night, he may well wonder why we go through such an exhaustive and exhausting process.

(Then again, maybe he doesn't.)

We know that liberal-democratic values matter, and as much in foreign as they do in domestic affairs.

The 70 year old economic and security order that the United States essentially established after the Second World War – and adapted over time – is under stress.

But consider what a liberal order really means.

Within a liberal order, governments must commit to uphold a system based on agreed rules - the rule of law, where we are all equal before the law regardless of wealth or position, as well as protect the rights and freedoms of citizens, and indeed, nations.

We also commit to an agreed framework for economic cooperation, through trade and other means.

More importantly, there is an acceptance of the need for a system of economic competition, and independent dispute resolution mechanisms that are fair and objective.

To offer one example, the power and force projection capabilities of the U.S. Pacific Fleet throughout the Indo-Pacific is not leveraged to coerce or have any bearing on the operation of economic activity and competition in the region.

If Exxon Mobile loses out to a foreign petroleum company in a legitimate economic transaction, the liberal rules-based order means the United States cannot use, and does not use, its military or economic power to intervene.

Powerful countries can legitimately use their political or military power to protect their citizens abroad. However they cannot threaten or force foreign governments and other entities to achieve some desired economic result.

Within this order, a country with a population of less than half a million people such as Brunei has the same rights and privileges as giants such as the United States, Japan, India or China.

President Obama recently made the point to President Xi, that the United States accepts restraint by the rules-based order, as it is for the greater good, including the interests of the United States.

In policing the system to ensure its fair operation rather than in determining outcomes, powerful states forfeit their capacity to engineer an economic result that they might want.

The same principles apply to any international legal or dispute resolution process, where there is the same commitment to not use military power or political clout to influence decisions by legitimate administrative agencies or judicial bodies.

A rejection of the rules-based system is an implicit embrace of a world where 'might is right'.

The nineteenth and twentieth centuries tell us that a 'might is right' system does not tend to end well for any country, and inevitably leads to confrontation and conflict.

It shouldn't surprise anyone that the greatest defenders of such a rules-based order are those countries whose domestic systems reflect these same principles.

One of the ultimate manifestations of the rule of law is the peaceful removal of a serving government following an election defeat, which requires that it voluntarily relinquish all control over state assets including the military.

The submission of government to the rule of law is a political phenomenon really only properly achieved in the twentieth century.

There is of course much more to a functioning democracy, which is also underpinned by strong and independent institutions such as the bureaucracy and the judiciary and a free press.

For the United States and Japan as for Australia, respect for a rules-based order is a core expectation of our relative populations and failure to do so will justifiably lead to condemnation.

However, nations that do not have liberal-democratic systems of government can still participate successfully in an international liberal order or system.

For example, I am hopeful that China takes the view that it will become a far more powerful and successful country in supporting and defending the rules-based order that has allowed it to engage in the global economy to its great benefit.

The fact that hundreds of millions of Chinese people have been lifted out of poverty is one of the great economic miracles of this age.

The rise of China, and others, proves that it is a fair and open system in which we all operate.

One country's success should not come at the expense of another.

Many countries, since World War II in particular, have developed domestic liberal institutions over time and have been rewarded for that in the form of stable politics and societies.

Indeed, the vast majority of high-income nations are liberal democracies.

Even so, participating in the rules-based order is not always the same as strengthening it.

We must continue to remind those countries still reluctant to commit or which are agnostic about the international rules-based system about the benefits they can derive from such a commitment.

My argument should not be seen however as a denunciation of what is best described as 'hard power'.

The rules based order places responsibility and restraints on nations with the capability of projecting hard power, although it doesn't eliminate its use.

Power without rules will lead to oppression and tyranny, while law is impotent if no power is able or willing to enforce it.

Hard power can be necessary to restrain those who seek to overthrow the rules based order, and who threaten their populations or others.

How we wield power depends on our values. This is why the trilateral cooperation between our three countries can shape our region for common benefit.

Throughout the Indo-Pacific, countries are closely watching how we conduct our affairs, and assessing whether the order that we are promoting and defending is in their interests.

This is important strategically, because the more nations who subscribe to the same rules and values, the stronger and more powerful are the institutions underpinning them.

There are challenges to this order within our region and it will be a key test as to whether the rules-based system ultimately prevails or whether it is cast aside.

Some nations in our region are currently in a strategic holding pattern, watching to see whether the rules-based order can endure these challenges.

The United States, Japan and Australia have a special collective and strategic responsibility because our shared values underpin the institutions upon which the continued prosperity of the region depends.

Developing nations of the Indo-Pacific are not likely to fulfill their potential if the rules-based order does not survive.

Over the next three days, some of the leading strategic thinkers and officials from our three countries will meet in the beautiful and historic town of Bowral to grapple with some of these matters.

I understand the discussions will be held behind closed-doors, and so I expect a very frank, fearless and robust, as it should be.

It seems to me that clear-eyed optimism is what is required to guide the search for solutions.

I wish the 2016 Strategic Dialogue all the very best.