Speech at the Hungary Institute for Foreign Affairs

JULIE BISHOP: Ambassador, Excellencies, ladies and gentlemen. I am certainly delighted to be here in Budapest in response to a very kind invitation from your Foreign Minister, Péter Szijjártó, and I intend to take up his invitation to go jogging tomorrow morning as well. I see that it is going to be knee-deep in snow so that should make for rather interesting exercise.

As you indicated Ambassador, my visit provides an opportunity to enhance our bilateral relationship with Hungary, our engagement with the Visegrad Four, the V4, to gain their perspectives, and to gain perspectives on the EU in the post-Brexit world.

I am particularly delighted to be here at the Hungarian Institute for Foreign Affairs to speak about Australia's international engagement as articulated in our Foreign Policy White Paper which we released late last year and to share our perspectives with you on the global and regional challenges that lie ahead.

Australia is an open, liberal democracy committed to freedoms, democratic institutions, and the rule of law. We are an open export oriented market economy. Our standard of living, our economic growth depends upon our ability to sell our goods and services around the world.

Our Foreign Policy White Paper articulates the specific interests and priorities which guide our international engagement over the next decade and beyond.

It is our first White Paper since 2003, and this exercise has been a very useful opportunity for us to reflect on the scale of geo-strategic changes during those past 14 years.

So, let's go back to 2003. From a continental European perspective, it has been a time of immense consolidation. Think of this roll call - it has been most impressive - Hungary joined the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Malta, Poland, Slovenia and Slovakia in signing the 2003 Treaty of Accession in Athens, paving the way for admission to the European Union a year later.

This increased the number of countries committing to the objectives of the EU to 25 - later 28 with Bulgaria and Romania in 2007 and Croatia in 2013.

What an extraordinary expansion of a commitment to common values.

Across Europe, I think there has been a sense of natural inevitability about the embrace of the rules-based order that has evolved since the Second World War, an order designed to prevent a repeat of that catastrophic conflict.

This rules based order, that network of alliances, treaties, conventions, norms, and relationships underpinned by international law, has supported relative peace and security in Europe over recent decades.

NATO has dominated the security architecture in Europe, but it is worth noting that it was in fact in 2003, that NATO took command of the peacekeeping force in Afghanistan - the first major operation outside Europe in its 54 year history.

Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia and Slovenia joined NATO and so this collective security organisation expanded dramatically one year later, in 2004.

Continental Europe seemed a relatively benign space, yet fault lines began to appear. Brexit, the mass movement of people from outside Europe, the financial shocks following the Global Financial Crisis, the rise of non-state actors and terrorist groups in particular, and indeed today the whole world seems a far more contested, uncertain space just over that 14 year period.

Key pillars of our international rules based order are under pressure, are under strain.

The most obvious although far from only example is Russia's annexation of Crimea in 2014, an egregious attempt at redrawing Europe's international borders.

In our part of the world, the actions of North Korea in developing its illegal programs of intercontinental ballistic missiles and nuclear weapons is another example of the attack on the international rules based order.

It was against this landscape of disruption and uncertainty that we sought to review our foreign policy.

While Australia's interests are undoubtedly global, our priorities are regional and much of our White Paper focuses on the Indo-Pacific as our primary area of interest and responsibility – the countries of the Indian Ocean and Asia-Pacific.

However, key themes of our policies continue to have relevance for Europe, and particularly our focus on the need to strengthen and support and defend that rules-based order.

We believe that the rapid changes in economic power, and over time strategic weight in the Indo-Pacific need to be successfully managed – or the gains of the last few decades could slow or even be reversed.

In many respects we are managing the consequences of success.

Economic progress in terms of rising material wealth and poverty alleviation in our region over the past five decades are unprecedented in human history.

Rising economic powers invariably become more powerful in defence capability and strategic weight. The Indo-Pacific is a case in point.

According to the Stockholm International Peace Research Institute, over half of the top 10 countries with the largest military budgets are in our region in the Indo-Pacific - the United States, China, Russia, India, Japan and South Korea – all with the exception of Russia amongst the top 10 trading partners for Australia. Six of the nine countries with nuclear weapons are in our region.

On the economic front, the progress made has been good but we have some way to go.

Of the 10 most populous nations in the world, seven are in the Indo-Pacific and five are still low to middle-income countries which are yet to fully industrialise.

In the first five decades after the Second World War, middle class consumers in what we now refer to as the Group of Seven industrialised countries were the primary drivers of demand, and therefore economic growth in the world.

Although the G7 remain leading centres of final consumption in the global economy, the major sources of growth in global consumption are coming from large developing countries predominantly in the Indo-Pacific.

Indeed, we are living through the most rapid expansion of the middle class in human history.
It took 150 years from the Industrial Revolution onward in Europe for the world to reach a middle class of some one billion people – we achieved this milestone in the mid-1980s.

Current estimates are that about half of the global middle class, of 3 billion people, today, are in our region, and by 2030, when that global middle class is estimated to be 5 billion people, it is forecast that two-thirds will be living in our region.

Australia's priority is to ensure the conditions are there to support ongoing economic growth and that they remain in place.

In a region where there are unsettled territorial disputes and rivalries dating back decades, even centuries, peace and stability cannot be taken for granted.

With its rapidly growing economy which is already the second largest in the world, and with the largest military budget in Asia, much attention is naturally focused on China.

Its economic rise is one of the greatest success stories of recent history.

China is increasingly becoming a crucial economic power and partner to the region, and the world. It is in fact Australia's largest merchandise trading partner by far.

With greater power and wealth comes responsibility to protect and strengthen the very system which supported that rise.

We have elevated defending, promoting and strengthening the international rules based order as our highest foreign policy priority.

The rules based order serves to regulate rivalries and behaviour, and to ensure countries compete fairly and in a way that does not threaten others, or destabilise the region or the world.

This order protects the rights of small and large countries by preventing stronger powers from arbitrarily imposing their will on less powerful countries.

We are committed to working with other like-minded countries to ensure that there are strong incentives for all to abide by the rules based order – and compelling disincentives for those considering or pursuing the alternative.

The security architecture in Europe is predominantly defined by NATO - a collective security or collective defence commitment in which an attack on one member is considered an attack against all members.
But the security environment in the Indo-Pacific is vastly different.

Security architecture and commitments are based on bilateral arrangements between the United States and its alliance and security partners.

Unlike NATO, the extent of the American commitment to each ally is not uniform and many commitments are not formalised in writing.

Other institutions such as ASEAN, the Association of South East Asian Nations, do not impose obligations or commitments on its members who are free to negotiate their own arrangements with other countries.

So this rich development of multilateral economic institutions and agreements in the Indo-Pacific stands in stark contrast to the rather more sparse multilateral security arrangements in place. However, greater economic interdependence does not guarantee an increase in security cooperation. In some cases, greater economic interdependence has been accompanied by worsening security relations between certain countries.

We recognise that there are no risk or cost free options. We seek to work closely with other nations, all of which have much at stake in defending that rules-based order.

Australia greatly values the role that the EU plays as a global force for peace and prosperity and as a critical pillar of the international rules based order. We believe that the weight and voice of the EU is absolutely vital.

The EU is of course committed to these principles and is active in promoting such values within its member states.

It is also important to note the evolution of the geo-strategic environment in Europe, as in the Indo-Pacific, is occurring alongside a global conversation with respect to whether the decades' long trend of economic liberalisation will continue or retreat over time.

Greater economic interaction and integration between countries will not always assuage strategic competition between those countries.

However, history does suggest that increasing trade and investment barriers in the vain hope of benefitting one's economy at the expense of another's will lead to economic decline, if not decay – and is likely to increase strategic tension at the same time.

This protectionist sentiment that remains alive in many places around the world is of concern, and particularly among those who feel they have not benefitted from more open trade, is an issue we must challenge.

It is incumbent on leaders around the world, I suggest to explain to their communities that putting up barriers is a recipe for economic stagnation. They must work to ensure opportunities are available more broadly within their societies.

I believe that opportunities for Australia and other economies will depend on:

• The extent to which advanced economies continue to champion and defend an open, rules-based economic order;
• The extent to which developing countries continue to liberalise their economies - and dismantle behind the border restrictions in particular;
• The extent to which countries are able to resist using economic tools in a coercive or unfair way to achieve narrow strategic and political objectives; and
• The extent to which populations within countries believe that they stand to gain from further liberalisation and that economic openness does not only benefit so-called elites.

Australia is entering our 27th consecutive year of uninterrupted economic growth – an unparalleled performance among advanced economies.

Much of our success has to do with our ability to sell high quality goods and services around the world. We are an energy and resource powerhouse, a major agriculture exporter, and increasingly services make up a significant part of our export profile – education, tourism, and financial services.

Australia has pursued an ambitious program of free trade agreements. Since 2013, we have signed bilateral free trade agreements with China, Japan and South Korea. We have existing free trade agreements with the United States, Singapore and the ASEAN countries.

We have now just concluded the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or TPP-11 which includes Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

The TPP-11 entrenches a set of rules and high standards for economic liberalisation which address 'behind the border' obstacles and protections. It is not only economically important, it is strategically important for us.

We are cautiously encouraged by recent renewed interest from the United States Administration in re-joining the TPP, and I note with some interest there has been a level of interest, I would say, including from the United Kingdom.

The TPP-11 is an open agreement. Others are free to assent to it if they are prepared to meet the standards and benchmarks and guidelines in it.

It is in this spirit that Australia and the European Union are working towards formal negotiations for a high quality free trade agreement – to create opportunities for our two economies and to set high standards for economic agreements between nations.
The EU's stance on trade and commerce matters has significant influence and weight globally.

The EU is the largest provider of, and destination for foreign direct investment in the world when measured by both flows and stocks. It is the largest external source for FDI, foreign direct investment entering into Asia.

It is the world's largest exporter of manufactured goods and services and its more than 500 million consumers make it the largest centre for domestic consumption in the world.

Indeed, the EU is the biggest export market for around 80 countries in the world, and Asia's export-orientated economies are heavily dependent on Europe.

If the EU speaks loudly on economic principles and issues, and more importantly takes action, the world will take note.

Within this context, the views of the Visegrad Four, collectively and individually, are of great interest to us. With a combined GDP of over $1 trillion and continuing, strong economic growth, we share common views on open economies, trade and investment liberalisation.

May I suggest Hungary has much to gain from a Australia-EU free trade agreement including:

• potential tariff cuts in sectors such as passenger vehicles, manufactured goods, and food;
• potential outcomes on regulatory cooperation and government procurement; and
• potential preferential services and investment access to Australia.

I have just been at a roundtable with the Hungary Chamber of Commerce and so in anticipation of a question, might I say that our agricultural products are indeed of the highest quality but we cannot satisfy demand from our own region let alone beyond.

In addition to the economic, trade and investment opportunities that can accrue, Australia and members of the Visegrad Four are also cooperating in a number of other ways to advance our mutual interests.

Hungary and Australia, for example are working together in the United Nations, where we are serving on the Human Rights Council. We are also cooperating through deployments in support of international peace and security in Afghanistan and through participation in the Global Coalition against ISIS.

In short, Australia sees Visegrad Four as a dynamic force within the EU, and tomorrow I will meet the broader Visegrad Four group foreign ministers to engage in a broad-ranging discussion spanning trade and investment but also global and regional developments and challenges.

Australia's regional security challenges will be key among these discussions. I imagine we will also exchange views on migration.

Australia's approach to migration reflects the fact that we are one of the most successful multicultural societies on earth. We are a nation of immigrants. Over half of our population was born overseas or has at least one parent born overseas. We have settled over 865,000 refugees since World War II. Net migration is another 190,000 people a year and we continue to welcome migrants from all corners of the globe.

In fact, we have an extraordinary array of diaspora communities including the over 70,000 Australians who have Hungarian ancestry and many of them have made a significant mark on Australian society in fields as diverse as culture, sport, the arts and even politics.

I love the example of Stephen Forgács who arrived from Hungary in 1957, as one of the 14,000 Hungarians who came to Australia at that time to escape the Uprising.

Stephen was a toolmaker, a fitter and turner and he eventually started his own engineering company, Forgács Engineering. His company employed many thousands of Australians and became a major supplier to the Australian Defence Force. Today his legacy lives on in Forgács Marine and Defence, a multinational shipbuilder and a great contributor to Australia's significant defence industry.

Such people-to-people links underpin Australia's close links to Europe and our interests in this part of the world.

Australia's collective interests with the EU and Hungary are best served by ensuring that that international rules-based order remains strong, and that international peace and security thereby safeguarded.

A strong, and unified, and confident European Union is an essential force for a peaceful, stable, prosperous and just international order.

Australia will continue to look to the EU, and its individual members, including Hungary, to assist us in championing free trade, and free societies.