King's College Menzies Centre Speech

JULIE BISHOP: Thank you for that very kind introduction,Excellencies, friends of Australia and friends of the United Kingdom.

Iam delighted to be here at King's College today. Indeed, this is my first visitand hopefully it will be a timely visit because just three months ago Australiareleased a Foreign Policy White Paper – the first since 2003. Indeed, the lastwas delivered by none other than Alexander Downer, when he was Australia'sForeign Minister. Indeed, the longest serving foreign minister of Australia, helikes to remind me!

Our2017 White Paper clearly articulates the interests, priorities and values whichwill guide our international engagement and international efforts over the nextdecade and beyond.

Thisis important given the challenges – and opportunities that lie ahead.

Australiais optimistic although not complacent about the future.

Wehave lived through periods of greater global uncertainty and conflict than thepresent time.

Thepowerful nationalism which gave rise to the dangerous rivalries betweenEuropean powers prior to the First World War have subsided.

Theviolent and expansionist ideologies which took root in the Interwar years nolonger have legitimacy in our polity.

Whilethere has been an increase in the number of wars this century – particularlycivil wars - as compared with the second half of the 20th century, these havebeen smaller in scale and the number of deaths from war has been decliningsince the 1970s.

Therehas been a rise in the activity of non-state actors like terrorist groups.However, we have not experienced great power conflict for several generations.

Aglobal focus on trade, economic liberalisation and development means that wehave enjoyed unprecedented gains in prosperity and in poverty alleviation,especially in our Indo-Pacific region – the countries situated in the IndianOcean and the Asia-Pacific.

In1980, an estimated 44 per cent of the population still lived in absolutepoverty defined by the World Bank standard as living on US$1.90 a day or less.

By2000, this figure fell to about 30 per cent.

Itis now less than 10 per cent.

Onthe back of technological advances, the world is more connected andinterdependent than has ever been the case in human history.

Themajority of people can connect from the palm of their hand with others aroundthe world.

However,this contemporary period of global growth brings new challenges.

Inthe 1800s, industrial revolutions in what we now call the advanced and fullyindustrialised economies of Europe, North America and Northeast Asia led towhat economists refer to as the Great Divergence.

From1820 to 1990, a handful of now advanced economies broke away from the pack andincreased their share of global GDP from 20 per cent to 70 per cent.

Overthe past almost 2 decades, the economic rise of large developing countries suchas China, India and Brazil means they are catching up in terms of share ofglobal GDP even if they remain far behind in GDP per capita terms – giving riseto an era which can now be referred as the Great Convergence.

Rapidchanges in the distribution of economic weight will bring change and havegeo-strategic ramifications.

DrHenry Kissinger wrote in his 2014 book World Order that we are at a moment inhistory when "chaos threatens side by side with unprecedented interdependence."

Uncertaintyand disruption do not necessarily lead to chaos.

However,rapid changes in economic power need to be successfully managed – or the gainsof the last few decades could slow or even be reversed.

Inmany respects, our Foreign Policy White Paper recognises that we must activelymanage the consequences of success to ensure that we can continue to benefitfrom those opportunities.

WhileAustralia's interests are undoubtedly global, we have identified theIndo-Pacific as our region of priority, and to keep it peaceful and prosperousat a time of change. For good reason.

Accordingto the Stockholm International Peace Research Institute, 5 of the top tencountries with the largest military budgets are in the Indo-Pacific: the UnitedStates, China, Russia, India and South Korea – all, with the exception ofRussia, are amongst Australia's top ten trading partners.

Itis worth noting that five of these Indo-Pacific nations have ongoing andsignificant territorial or maritime disputes with their neighbours.

Sixof world's nine nuclear weapons nations are in our region.

Thestakes are indeed high. However there is no desire for conflict among thenations of the Indo- Pacific, with only North Korea directly threatening otherswith military strikes.

Onthe economic front, the Indo-Pacific has a way to go.

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

Althoughthe G7 nations remain leading centres of final consumption in the globaleconomy, the major sources of growth in global consumption are now coming fromlarge developing countries predominantly in the Indo-Pacific.

Withlarge populations, it means we are living through the most rapid expansion of themiddle class in human history.

Ittook 150 years from the Industrial Revolution onward in Europe for the world toreach a middle class of some one billion people – achieving this milestone inthe mid-1980s.

Currentestimates are that about half of the global middle class, of some 3 billionpeople live in the Indo-Pacific and by 2030 when that middle class reaches 5billion people, it is forecast that two-thirds will be living in our region.

So,in a region where there are unsettled territorial disputes and pre-existingrivalries dating back decades, even centuries, peace and stability cannot betaken for granted.

Therise of China has been the most marked development in our region with itseconomic power, one of the great success stories of recent history.

Withits rapidly advancing economy, which is already the second largest in theworld, and with the largest military budget in Asia, much attention isnaturally focused on China.

Ourrelationship with China is one of our most important, and it is a crucialeconomic power and partner to our region and the world.

Itis vital that China plays a constructive role, commensurate with its standing.

Chinahas additional responsibilities as a permanent member of the Security Councilin terms of safeguarding international peace and security – as does the UnitedKingdom.

Withgreater power and wealth comes a responsibility to protect and strengthen thevery system which supported that rise.

Asarticulated in our White Paper, we have elevated defending, promoting andstrengthening the international rules based order as our highest priority.

Theimportance of the international rules-based order – that network of alliances,treaties, institutions and conventions under international law that has evolvedsince the Second World War - cannot be overstated.

Inthe main, the rules-based order is not facing the same direct assault as duringperiods of the Cold War – even if the policies of pariah countries such asNorth Korea are in direct defiance of it.

Howeverwe must ensure that nations do not fall for the temptation of ignoringinternational law and rules for narrow advantage and short-term gain.

Therules-based order will quickly fray if it is perceived that advantage can begained by flouting it or working around it.

Weare particularly focused on the Indo-Pacific as we seek to defend andstrengthen the existing order to enable the continued economic rise ofindividual countries, and the region as a whole.

Weshould never forget that the rules-based order came into existence after thehorrors of World War II, because there was a collective will to ensure thatthere would not be a Third World War – we needed to create order from chaos.

Theorder is designed to regulate behaviour and rivalries of and between States,and ensure countries compete fairly and in a way that does not threaten othersor destabilise their region or the world.

Itseeks to protect the rights of small and large countries by establishing normsof behaviour that lead to cooperation and dispute resolution through dialogue.

Thenature of its institutions places limitations on the extent to which countriesuse their economic or military power to impose unfair agreements on lesspowerful nations.

Itis important that Australia work with other like-minded countries to ensurethat there are strong incentives for all to abide by the rules based order –and strong disincentives for those considering or pursuing the alternative.

Thereis a compelling incentive for all nations to support the rules.

Themaintenance of peace and stability is vital to support sustainable economicgrowth and trade.

Thesecurity architecture in Europe is predominantly defined by the North AtlanticTreaty Organisation: a collective security or defence commitment in which anattack on one member is considered an attack against all members.

TheIndo-Pacific is vastly different.

Securityarchitecture and commitments are based on bilateral arrangements between theUnited States and its alliance and security partners.

UnlikeNATO, the extent of the American commitment to each ally is not uniform andmany commitments are not formalised in writing.

Moreover,the bilateral agreements between the US and its regional allies are not matchedby separate bilateral alliances between the allies.

Institutionssuch as ASEAN – the Association of Southeast Asian Nations – do not imposeobligations or commitments on its members who are free to negotiate their ownarrangements with other countries.

Therich development of multilateral economic institutions and agreements in theIndo-Pacific stand in contrast to the sparse multilateral security arrangementsin place – meaning that greater economic interdependence will not guarantee anincrease in security cooperation between all economies.

Insome cases, greater economic interdependence has been accompanied by worseningsecurity relations between certain countries.

Thisis why Australia recognises that in this environment, the rules-based ordertakes on even greater importance.

MayI suggest that in this context, the weight and voice of the United Kingdom isvital, for the UK is:

• one of the chief underwriters of theinternational rules based order;
• a Permanent Member of the United NationsSecurity Council;
• the foundation nation of the Commonwealth;
• a dominant global economic and financialcentre;
• a leading military and nuclear power withformidable projection capabilities; and
• a leading source of capital and technologytransfer into developing countries in the region.

Inour region, Australia and the United Kingdom are members of the 1971 Five PowerDefence Arrangements with Malaysia, Singapore and New Zealand.

Membersare obligated to consult with each other in the event of an external attackagainst Malaysia or Singapore – not a collective security agreement as such.

Asa global trading nation, the UK has the same strong interest in free and openaccess to regional and global maritime commons as any other nation.

Itis also important to note the changes to the geo-strategic environment areoccurring alongside a global conversation with respect to whether the decades'long trend of economic liberalisation will continue or retreat.

Historyhas proven that protectionism is the pathway to economic decline and decay,however that has not prevented populist leaders beating that drum.

Australiais an open export oriented market economy. We have broken a world record – weare entering our 27th consecutive year of uninterrupted economic growth – noother advanced economy can match that record.

Ibelieve that future opportunities for Australia and other nations will dependon the extent to which:

• advanced economies continue to champion anddefend an open economic order;
• developing countries continue to liberalisetheir economies - and dismantle behind the border restrictions in particular;
• countries are able to resist using economictools in a coercive or unfair way to achieve narrow strategic and politicalobjectives;
• populations within countries believe thatthey stand to gain from further liberalisation.

Itis a positive reflection on Australia's political climate that we remained astrong supporter of the Trans-Pacific Partnership after the United Statesindicated its intention to withdraw.

Weare committed to what is now the Comprehensive and Progressive Agreement forTrans-Pacific Partnership or TPP-11 which includes Brunei, Canada, Chile,Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

TheTPP-11 entrenches a set of rules and high standards for economic liberalisationwhich address 'behind the border' obstacles and protections.

Withthe consent of existing members, it is open to new members willing to abide bythe rules, standards and spirit of the agreement. And I welcome the recentremarks by Secretary Liam Fox regarding interest in TPP-11.

Thishigh quality liberalising outcome serves as a model to which we will aspire inour own future bilateral free trade agreement we hope to pursue with the UnitedKingdom.

Ourtwo countries have endured and achieved much separately and together.

TheUnited Kingdom and Australia continue to share a common purpose and speak withone voice on important matters.

However,I believe that it is now more important than ever that as like-minded nationswe join in promoting, defending and upholding the rules based order – includingtogether in the Indo-Pacific.

Imake special mention of the Commonwealth, which continues to be a beacon formany nations.

TheCommonwealth Charter enshrines a commitment to democracy, human rights, therule of law, gender equality, tolerance, sustainable development and goodgovernance, among many other fine principles.

Thesehave attracted the interest of nations who were not part of the British Empire.

Weshould welcome new members who are committed to the principles and values ofthis institution that continues to play a very important role in globalaffairs.

Inthe pre and post Brexit world, there are opportunities for Australia and the UKto reinvigorate our historically close relationship:

• a free trade agreement, when thecircumstances are right;
• greater co-operation in the Indo-Pacific –mindful that 19 Indo-Pacific nations are members of the Commonwealth;
• opportunities to enhance joint engagement fordevelopment assistance in the Pacific where 11 Pacific Island nations aremembers of the Commonwealth; and
• more broadly to work together to enhancepeace and prosperity under the international rules based order.

Longmay our partnership endure.

- Ends -