Address to 2017 Economic and Social Outlook Conference
Andrew, thank you for the introduction. Ross, Michael, a very good morning to all and what a pleasure it is to be back in Melbourne to address this conference.
Today provides a timely opportunity to share views on the new Trump Administration in the United States and its engagement with the Indo-Pacific Region - or as the organisers coined my topic, "Trump and Asia".
It is one of our most important foreign policy considerations for some time as the United States matters - to Australia, to our region and the world.
For the past 70 years, since the end of the Second World War including the war in the Pacific, the United States has been the instigator, the promoter and the guarantor of what we call the international rules-based order.
This order has underpinned international law and has defined the way States should behave, in general, and towards each other.
While the international rules-based order has embraced globalisation, economic integration, the rule of law, human rights and free and open societies, it has not always been universally applied or enforced.
Nonetheless the United States has been the reference point, as the most powerful economy with the greatest military capability, and the only nation with the values, interests, global alliances and thus the ability to uphold and defend the international rules-based order.
Indeed, it is because the order exists and because the United States has been prepared to enforce it, that we have had relative peace and stability in our region.
This has enabled hundreds of millions of people to be lifted out of poverty through economic development driven by access to global markets.
Our region has undoubtedly been the major beneficiary of United States leadership as we have witnessed the shift of global economic power from the West to the East.
With the rise of China as an economic powerhouse and India, with Japan and other Asian economies, ours is the fastest growing and most dynamic economic region in the world today.
There can be no complacency.
The international rules-based order is under pressure.
There are signs of weakening confidence in it, as strains of anti-globalisation, protectionism, and economic nationalism have emerged.
Brexit and the emergence of political parties and candidates in democratic elections who advocate a return to a by-gone era of protectionist and isolationist policies, have been causes for global anxiety.
The election of President Donald Trump in November 2016 raised concerns as to whether our international rules-based order would continue to be the bedrock for peace, stability and prosperity.
This morning, I will describe how the Australian Government has engaged with the Trump Administration, our relationship with the United States, and then reflect on how the Trump Administration's policies and approaches may impact on Asia.
While there is an almost universal focus, some may say obsession, with the President's twitter account, and it has proven to be a most effective means of instantaneous communication, we have been focusing on what the President and his Administration have been doing.
We analyse and respond to decisions and actions.
The source of most concern is the fact that the President campaigned upon, and has restated in office, an 'America First' policy.
If this means that he intends to focus on the interests of the United States as an overriding priority, then it is hardly surprising, given every world leader should say that their priority is to act in the national interest of their citizens.
The concern comes from conjecture as to what this means for US leadership, in terms of its support for and enforcement of the international rules-based order.
Will there be an interventionist or isolationist foreign policy?
Well we were determined to find out.
From the outset, the Australian Government was preparing to engage with and seek to shape the thinking of the new Administration.
I sought a comprehensive incoming brief from DFAT in the lead up to the presidential election detailing the policies of both candidate Trump and candidate Clinton – and this was at a time when the polls and media were predicting an easy Clinton win.
It was important that we took a longer term view and reaffirmed the responsibility of the Australian government to actively and constructively engage with whomever the American people elected as their President.
This is what the Government has been doing.
Prime Minister Turnbull met with President Trump in New York and more recently at the G20 meeting in Hamburg.
I meet with, and speak to, and indeed text with, Secretary of State Rex Tillerson regularly.
Likewise I have met with Vice President Mike Pence and Defence Secretary Jim Mattis on a regular basis - in Australia and in Washington - and with National Security Adviser McMaster and their UN Permanent Representative Ambassador Haley.
My ministerial colleagues have likewise been in regular communication with their counterparts in the Trump Cabinet.
Through this high level contact, we have established, and will continue to develop, strong interpersonal relationships with the new Administration, commensurate with the broad and deep nature of our alliance and partnership.
Australia's values and interests align more closely with those of the United States than virtually any other nation.
While the bilateral relationship is mutually beneficial, America's global leadership remains firmly in Australia's national interest.
We are working to ensure that the new administration is fully aware of the importance of our alliance and, of course, its broader global leadership role.
In prosecuting Australia's foreign policy, we must balance the need to pursue our interests and promote our values.
They are generally mutually reinforcing, although it can lead to tensions at times.
Our interests are in open markets and free trade, the maintenance of peace, prosperity, security, and stability.
Our values are those of a firmly entrenched democracy, with an unshakeable belief in the rule of law, individual liberties, human rights, and democratic institutions.
We promote and protect our reputation as an open liberal democracy, with an open export-oriented market economy - free people, free markets.
We do not presume to lecture others about our values, although we are an example of what our values can offer.
We are the most successful multicultural nation on earth, with about 45 percent of our population born overseas or with at least one parent born overseas.
We are the 13th largest economy, yet 53rd in terms of population, and we have set a world record of 26 continuous years of economic growth.
We are a positive contributor to the international rules-based order.
Our voice is heard, for example, encouraging territorial disputes to be peacefully resolved through negotiation, and under relevant international legal frameworks including UNCLOS.
The values we share with the United States include our commitment to freedom and democracy, individual rights and economic opportunity.
These are values that President Trump has articulated, most recently in his Warsaw speech.
These shared values and interests continue to form the basis for Australia's enduring relationship with the United States.
The United States is arguably our most important economic partner if one considers it is by far our largest source of foreign direct investment, coupled with being our second largest trading partner, after China.
The United States has been our major alliance partner since the signing of ANZUS in 1951, although we have been alongside the United States in every major conflict over the past 100 years.
Currently, we are partnering with the US in the fight against terrorists and extremists in Iraq, Syria, Afghanistan and more recently the Philippines.
US leadership has been vital in most theatres of military and security operations worldwide.
In our region Australian leadership has been important, for example in the Solomon Islands and Timor Leste where we have demonstrated our willingness and ability to contribute to regional security for the benefit of other nations.
Against this background and in this context, to my mind, there has been no diminution in the United States engagement or commitment to our region.
It continues to build regional capacity through development assistance, in maritime security, fisheries and management, counter-terrorism and intelligence sharing.
This can also be evidenced by the number and frequency of high level visits to our region by senior US Cabinet members.
There have been numerous leadership level visits from our region to the United States and elsewhere to meet President Trump and his administration.
The President has emphasised the importance of personal rapport with world leaders and our region is no exception.
I met Prime Minister Modi in New Delhi last Tuesday and he spoke of the warmth of his recent meeting with the President and his confidence in a deeper strategic and economic partnership between India and the United States.
Likewise, his meetings with Prime Minister Abe, President Xi Jinping, and President Widodo among others.
The President confirmed earlier this year that he will attend the East Asia Summit in The Philippines including a United States ASEAN leaders meeting and the APEC meeting in Vietnam later this year.
Along with personal assurances to regional leaders, this announcement sent a powerful message to the region that the United States intends to remain the cornerstone for peace and stability in our region.
I have not seen signs that the interest of the United States in our region is any less committed than past Administrations.
While we have the closest of relationships with the United States, there are two policy areas where we differ, and this is also reflected in the region.
We were disappointed by the President's decision to withdraw from the Trans-Pacific Partnership, an international trade agreement between 12 nations that covered around 40 per cent of the global economy.
President Trump took the view that the TPP was not in the direct national interest of the United States.
It should be noted that this was a policy position adopted by both Presidential candidates, indeed most nominees.
Australia respectfully disagrees with that position.
It comes down to an interpretation of national interest that we fear is too narrow.
The TPP was about more than trade.
It was also an expression of the closer engagement with the region and the strategic leadership of the United States.
Australia remains supportive of the TPP principles and we will continue to strive for high-quality trade agreements, which in this case, had set a new benchmark for trading rules.
We believe there are many benefits for the remaining 11 countries and we are continuing to discuss future options.
Our views are well known in Washington.
We are assured that the United States will continue to negotiate free trade deals, but with 'better' outcomes.
The US withdrawal from TPP also means the Regional Comprehensive Economic Partnership (RCEP), to which the US is not a party, takes on greater importance in regional trade negotiations.
Our perspectives also differ in relation to climate change.
The G20 meeting in Hamburg resulted in a new affirmation from 19 of the world's leading economies of the central commitment made through the Paris Agreement.
All 19 nations, including Australia, believe the Paris Agreement is a solid basis on which to make progress in reducing the impact of global greenhouse gas emissions.
President Trump's announcement that the US would withdraw from the Paris Agreement was disappointing, given it appeared that the US would meet its commitments in any event.
The withdrawal however was more than symbolic.
The US is one of the largest carbon emitters, and the fact it has rejected international cooperation with 197 nations signing the agreement and 153 ratifications, sends a negative message to many other nations, including in our region.
While these decisions give succour to the isolationist theory or the view that US influence is waning, I don't subscribe to either.
While the relative economic and military power of the United States and other powers has shifted in recent years, the fact is that the United States remains the dominant world power on virtually all measures.
In my discussions with senior members of the Trump administration, it is clear that they are well aware of the importance of continuing economic growth in this region to the world economy at large.
Peace and prosperity – and a system of international rules by which both can be maintained – are essential ingredients for this region to continue to prosper.
This is clearly in the national interests of the United States.
In fact, much of the economic growth in our region is driven by the US as an engine of innovation, a provider of the main reserve currency, and with the deepest of financial markets.
Such dominance will not be challenged for the foreseeable future regardless of changes in relative GDP.
America's vast and complex trade relationship with China is a major feature of the global economy and has grown dramatically over the past decade.
Understandably our region is watching closely to see how the relationship evolves under the Trump Administration.
During the election campaign, President Trump made strong statements about the US/China trade imbalance.
It remains to be seen how he intends to respond in terms of policy decisions.
Australia has urged for any differences to be resolved through negotiation, as no one's interests would be served by any form of trade conflict.
Our Productivity Commission had just published a research paper on the cost of protectionism via tariff increases, or border adjustment taxes, including the impact of various trade war scenarios.
At one extreme of the stylised trade war scenario, the research shows global GDP falling by nearly 3 per cent, ultimately leading to a worldwide recession.
The Commission's recommendations generally align with the Government's policy of pursuing an ambitious trade agenda, advocating the benefits of liberalised trade and resisting protectionism.
These are all policy positions we continue to put to the United States.
Of course, the United States is already deeply embedded, in economic terms in our region - China, India, Japan.
In the past decade, US goods and services exports to ASEAN countries, for example, have almost doubled, putting ASEAN almost on a par with Japan as a major US trade destination.
It is interesting to note that individual American states have healthy trading relationships in our region.
For instance:
- Indonesia is Wyoming's 3rd largest trade partner
- Pennsylvania has trade representatives in Indonesia and Singapore
- South Carolina's exports to ASEAN have more than doubled since 2012
All up, around 42,000 US companies export to ASEAN countries, directly or indirectly supporting almost 550,000 jobs.
Investment flows between the US and ASEAN have also been growing significantly in recent years.
Since 2004, US investment in ASEAN has grown 9 per cent a year – while ASEAN investment into the US grew at 28 per cent annually on average.
So the picture of US economic ties with our region is deep, complex and multifaceted – as are Australia's ties.
The Trump Administration is also reaching out to the region to solve some of the potential conflicts and actual tensions that exist.
On the South China Sea, while not taking sides on the merits of the maritime claims, the United States has urged peaceful negotiation and respect for the rule of law.
The United States has advocated the right of all nations to freedom of navigation and overflight in international waters.
It has maintained its long standing FONOPS program, globally and in our region.
The Trump Administration has focused on North Korea as one of its highest priorities.
The DPRK represents a profound threat to the stability and peace of the Indo-Pacific region today.
It continues to thumb its nose at the United Nations Security Council that has passed numerous resolutions banning the development and testing of ballistic missiles and nuclear weapons.
It is vital that all UN member states and particularly the Permanent Five of the Security Council take all possible steps to send a message to North Korea that it must halt its illegal behaviour and focus on improving the welfare of its impoverished and long-suffering people.
The Trump Administration is urging China to play a more constructive role in the pursuit of an enduring peace on the Korean Peninsula.
The international landscape is uncertain, there are evident shifts in power between states and the scale and pace of technological advances is disrupting how we live, work and communicate.
The Government is working on a Foreign Policy White Paper to be released later this year.
This White Paper will provide a framework to guide the decisions of policy makers in charting a course through what we expect will be a more competitive and contested international environment over the next decade.
In that context, US leadership is as important now as it has been at any time since the end of the Second World War.
There is no doubt in my mind that it is strongly in Australia's national interest, as it is in the national interest of all Indo-Pacific nations, for the United States to retain a strong, unwavering commitment to this region.
It is the indispensable power in promoting and upholding the international rules-based order where smaller states have the same rights as great powers.
We understand that is in our national interest to work closely with the new Administration, to help shape its thinking, and to encourage its deep commitment to our region in ways that work in Australia's interests and those of the US - and to our region and the wider world.
Such is my optimism.