SENATOR THE HON PENNY WONG

LEADER OF THE OPPOSITION IN THE SENATE

SHADOW MINISTER FOR FOREIGN AFFAIRS

LABOR SENATOR FOR SOUTH AUSTRALIA

SPEECH

2 October 2017

IN THE ZONE — THE BLUE ZONE CONFERENCE

PERTH

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May I begin by acknowledging the traditional owners of the lands on which we are meeting this morning, the Whadjuk Nyoongar peoples, and by paying our respects to their elders past and present.

Last Friday my friend and colleague Chris Bowen, the Shadow Treasurer, delivered a major speech to The Asia Society in Sydney. In it he outlined Labor’s new, comprehensive and holistic policy approach to engagement with Asia. “FutureAsia” will be a whole-of-government framework underpinning our efforts to deepen and broaden our engagement.

As the Shadow Treasurer said, Asian economies are changing, and Australia isn’t keeping up.

We need a step change in our thinking. Not tinkering, not gradualism, but a fundamental whole of government, indeed whole of nation, effort to deepen and broaden our engagement with Asia.

If we want to maintain our record for economic growth, if we still want our place in the G20 in decades to come, it is critically important that we improve our trade, investment, education, security and cultural links with Asia.

The engagement we advocate is motivated by two fundamental propositions – that economic strength is a foundation of national power; and that economic engagement benefits our relationships with key nations as well as ourselves.

Maintaining and enhancing our economic strength and resilience is critical – for the Australian people and for national power. And this demonstrably requires engagement with Asia, across the Indo-Pacific.

So today I am grateful to Professor Flake for affording me the opportunity to speak to you about Labor’s “FutureAsia” policy as it pertains to the Indian Ocean.

Thank you also to the organisers of In the Zone – The University of Western Australia and the Perth USAsia Centre.

And welcome to our international visitors – including former South Korean Prime Minister Dr Han Seung-soo, Admiral Koda, Admiral Singh and scholars from throughout the region.

Foreign policy is a national enterprise. It involves the entire nation, and helps deliver to our citizens the benefits of living in a globalised world. Perth itself is a great symbol of Australia’s place in a globalised world. One of the most remote cities in the world, Perth remains host to many of the mining and energy companies that continue to play such a significant role in both Asia’s economic growth and our own national prosperity. Western Australia is such an important contributor to Australia’s economic strength and to its security.

So I do understand why some of you may feel that the foreign and security policy establishment on the east coast sometimes seems to overlook the fact that Australia lies between two of the world’s major oceans. It’s as though our colleagues in the east welcome the sunrise over the Pacific without remembering that the sun sets over the Indian Ocean. Coming from Adelaide, I consider that I am able to mediate here, since we South Australians necessarily look in all directions.

As we look north, we certainly need to look east and west, across the Indo-Pacific. As we respond to the new opportunities that present themselves across the whole of Asia, from our north-west to our north-east, it is particularly important that a contemporary and fit for purpose foreign policy addresses the fact that we must be proactive in our own interests rather than reactive to developments that might take place in either the Indian or Pacific Oceans. Confidence and optimism must be the hallmarks of our foreign policy.

The starting and ending points for Australian foreign policy are our interests, wherever they might be engaged. As a continent facing onto two of the world’s great oceans, not to mention the Southern Ocean and the Arafura Sea, we are better off concentrating on what matters to us rather than only on the location where any given issue might arise. After all, we live in an interconnected world.

As Paul Keating reminds us, when they were handing out continents, not many people got one. Geography is important. But the real test of policy is the extent to which it meets the economic, political and strategic purposes it is intended to achieve – in other words, the issues. This in turn means that we must always deal with the world as it is, wherever it is, and that we must approach meeting our national interests with confidence. And to do so, we need to understand what we stand for and what we want to be – our values – and the purposive nature of our foreign policy – our national interests.

Early in July, I set out Labor’s view of our national interests in a speech to the Lowy Institute (admittedly on the eastern sea board). I said that the core interests that will continue to underpin the framing and delivery of Labor’s foreign policy are:

  • The security of the nation and its people.
  • The economic prosperity of the nation and its people, enabled by frameworks that will allow Australia to take advantage of international economic opportunities.
  • A stable, co-operative strategic system in our region anchored in the rule of law.
  • Constructive internationalism supporting the continued development of an international rules-based order.

The realisation and advancement of these four core interests depend on our ability to harness the national power that gives substance to the national interest. And national power, along with a strong sense of national identity, is what gives substance our role, both actual and potential, in the Indian Ocean.

Australia is, of course, deeply enmeshed in what many like to call the Asian Century. And while the rise of China has had the greatest impact on the fortunes of regional countries, including Australia, we need to remain very alert to the fact that the Asian century is not limited to North Asia in terms of economics, politics or strategy.

In a recent speech delivered in Perth to the American Chamber of Commerce, the Governor of the Reserve Bank, Philip Lowe, reviewed the chapter in Australia’s economic history that is now drawing to a close, and turned his mind to the chapter that is about to start. He acknowledged that the current chapter has been a successful one for Australia, with real income per person around twenty percent higher than it was in the mid-2000s and real wealth per person around forty percent higher. Inflation has averaged 2.5 percent and GDP growth has averaged 2.75 percent. Demand from China has been an important driver of this, along with Australia’s decisive action to protect the economy during the financial crisis.

But, as the Reserve Bank Governor noted, growth in China is trending lower, with the Chinese economy going through some difficult adjustments as it transitions from a growth model based on industrial expansion to one based more on services. And that adjustment is exacerbated by an increasingly large and complex financial system.

This transition has been one of the factors weighing on Australia’s net growth in real per capita incomes since 2011.

Looking to the future, however, Dr Lowe said that the shift in the global economy that could shape the next chapter is the growth of other economies in Asia. He commented:

Developments in India and Indonesia bear especially close watching. Both of these countries, especially India, have very large populations, and per capita incomes are still quite low. In time, the effects of economic progress in these countries and others in the region could be expected to have a substantial effect on the Australian economy, just as the development of China has.

In response to a follow up question, the Reserve Bank Governor accepted the premise that to secure our ongoing prosperity, the next wave of trade and investment had to come from India and Indonesia.

Over the last fifty years Australia’s economy has benefited enormously from our trading relationships with the nations of North Asia, as they rapidly grew their economies and the living standards of their populations. In the last years of the 20th century, Japan was our largest trading partner, to be replaced by China in 2007. And Korea, of course, has been among our top five trading partners for decades.

If India and Indonesia reach their full potential, there is every reason to expect that our Indian Ocean trade relationships can be as beneficial for all parties, as our trade with North Asia has been across the last half century.

Indian Ocean states are on the move.

And, of course, the biggest Indian Ocean state that’s on the move is India. India’s rise has been long anticipated, though it has been slow to materialise. Highly centralised economic policy, a heavily regulated economy, extensive subsidy schemes and an inefficient taxation system have combined to shackle the Indian economy, delaying the much hoped for economic take-off.

It is fashionable in some quarters, of course, to entertain a rather negative view of India’s economic performance. When compared one-on-one with China’s growth, that is perhaps understandable, though it is rather like comparing apples with oranges. The fact is that India, particularly under Prime Minister Modi’s leadership, has sustained remarkably high annual growth rates, and the indications are that India will continue to record strong levels of economic growth going forward.

The recent cash crunch caused by the crackdown on the black economy through the removal of 500 and 1,000 rupee notes has now washed through the economy, which is once again on an upwards trajectory. As the Asian Development Bank noted in its Asian Development Outlook 2017 report, increased consumption in India could engage excess capacity and encourage fresh investment. The report notes:

Public investment will continue to be an important driver of growth as private investment remains listless. . . . Public investment is likely to receive a boost if the government receives significantly more revenue from the tax amnesties introduced in 2016. Current deleveraging by private corporations and a rising proportion of corporate debt instruments being upgraded signal some improvement in corporate financial health, which could aid investment recovery.

So the ADB’s report supports optimism for the recovery and continued growth of the Indian economy. It will remain essential, of course, that domestic private investment in the national economy continues to grow in parallel with public investment.

Put most simply, as India learns to invest in itself, the rest of the world will follow suit.

And make no mistake, a strong and prosperous India is the key to the economic and strategic future of the Indian Ocean. Location and size afford India a central position in the long term security and stability of the Indian Ocean region, something that has informed Prime Minister Modi’s approach to regional security discussions and military exercises.

As I said earlier, security is predicated on a nation’s economic strength, which is why India’s economic trajectory is so important. While realising its economic prospects is a challenge for India, its success would constitute a major strategic asset for the region. This, allied to the fact that India is the world’s biggest democracy, provides grounds for the optimism we should all share concerning the region’s strategic future.

As we think about the Indian Ocean region’s future, it is important that we identify what the Key Performance Indicators might look like. We should define what makes for an optimistic and confident future in the interests of Australia, and all the nations of this region.

First, the Indian Ocean region will be peaceful, stable and secure. That will be as much a consequence of sound domestic policy on the part of all nations in the region as it will be of the involvement of other major international players such as China, the US, and global institutions such as the World Bank, the IMF and the ADB.

It will be driven by a determination to avoid escalation and conflict, through nations committing to an international rules-based order through which they resolve any differences and work in a spirit of peaceful co-operation.

Second, the Indian Ocean region will be prosperous. While this is in some measure linked to the policy drivers I have just mentioned, it will also be important that regional economies open themselves to greater participation in the global trade and investment system. The experience of North Asia is that trade and engagement have driven economic growth, lifting people out of poverty, and creating a more prosperous region. After all, it is shared prosperity which grounds stability.

Third, the Indian Ocean region will be interconnected. The Indian Ocean Rim Association (IORA) is a key step in generating this interconnectedness, though in my view there is much more to be done. While governments will continue to provide much of the impetus towards making the Indian Ocean community more effective and robust, the private sector has a critical role to play as this century unfolds.

The test of an interconnected Indian Ocean community will be a strengthened Indian Ocean market – and the private sector is essential to its development. Just let me note in passing that this conference – In the Zone – is a very important initiative that brings focus to the many interests that need to combine if an Indian Ocean community is to eventuate.

And fourth, the Indian Ocean region will be a model for the management of complicated issues that affect both regional and global communities. The Indian Ocean is part of the great global commons – those environments where the global community has shared interests – the open seas, the atmosphere, the Polar Regions and space, and in more recent times the internet and cyber-space. The effective management of the global commons is something that affects every Indian Ocean nation and getting this right can only be to the benefit of all nations in the region, including Australia.

This brings me to three issues that, from a foreign policy perspective, demand immediate attention if the global commons are to be protected and the interests of all global citizens are to be advanced – fisheries, the exploitation of ocean and sea-bed resources and, of course, climate change.

Other speakers at this conference will deal with ‘the blue zone’ – the ocean, marine life and marine resources. But let me make a couple of points from a foreign policy perspective.

The Indian Ocean fishery is under threat, just as the other great fisheries of the world are under threat. While there are regional agreements in place, such as the Indian Ocean Tuna Commission and the Southern Indian Ocean Fisheries Agreement, their membership is far from comprehensive and their monitoring and policing are far from adequate.

Similarly, the exploitation of sea bed resources is another issue where both the benefits for the Indian Ocean states and the environmental consequences of sea-bed mining need exhaustive investigation.

When fisheries and sea-bed resource exploitation begin to overlap with naval security issues, the situation becomes even more complex. In a Brookings editorial in September last year, Dhruva Jaishankar drew attention to this problem from a specifically Indian perspective.

In the near future, collective steps will need to be taken to prevent unnecessary – and possibly ruinous – maritime competition in the Indian Ocean. Greater Indian and international efforts must be made to ensure transparency concerning naval activity and development of potential dual-use facilities, which can be used for both civilian and military purposes. Indian leadership will also be necessary if international coordination and cooperation is to improve, whether on sustainable resource extraction, humanitarian measures, or Indian Ocean governance.

But this is not just a problem for India. It is a problem for all Indian Ocean states and it is in the interests of all nations, including Australia, that we act sooner rather than later to head off the sort of disputes that we are now seeing in the South China Sea, act co-operatively to mitigate against climate change, and to protect the resources of the Indian Ocean for the benefit of all our nations.

Climate change is similarly a problem we face collectively. Like the Pacific Island nations, Indian Ocean states are under threat. The Maldives is exposed to existential threat due to climate change, a fact that was dramatically demonstrated in the lead-up to the Copenhagen Climate summit when President Nasheed and eleven of his Ministers held a Cabinet meeting wearing wet suits and scuba gear.

Rising sea levels threaten many parts of the Indian Ocean. The great river deltas of the Indian Ocean – the Zambesi, Tana and Limpopo deltas in West Africa, the Indus and Ganges-Brahmaputra deltas on the subcontinent and the Irrawaddy delta in Myanmar – are all at risk. The livelihoods of hundreds of millions of people on the Indian Ocean littoral may be affected as both agricultural lands and coastal fisheries are impacted.

Equally, we must pay attention to the security dimension of climate change. As I am sure some of the following speakers will note in their presentations, climate change has the potential to impact on both domestic and regional security as people try to deal with the climate impacts on agriculture and fisheries. Among the confidence building measures that regional countries embark upon, collaboration on climate change mitigation and adaptation must attract increasing priority.

It is important for us to deliver regional development assistance programs that better address the consequences of climate change.

To its credit, the Jakarta Concord – IORA’s twentieth anniversary communiqué released in March this year – recognised the need for enhanced cooperation among members to address issues related to climate change. But, as an issue affecting every IORA member, climate change remains on the back-burner, subsumed within the fourth of the Association’s six priority areas, “Enhancing Disaster Risk Management”.

This is a matter I would address as Minister for Foreign Affairs in a Shorten Labor Government. We have begun to see too many governments around the world, including the Turnbull Government unfortunately, starting to waver on their commitment to the reduction targets under the Paris agreement. We will want to work closely with the IORA member countries to beef up the Association’s role in addressing climate change as both a regional and global issue.

Adaptation activities will remain a high priority, of course. But a deceleration in the rate of increase in carbon emissions leading to their eventual reduction must continue to be the central goal if the more drastic consequences of climate change are to be avoided.

And this must be achieved whilst also delivering continued economic development for the peoples of this region.

During the Rudd and Gillard governments, Australia enjoyed a leadership role in global climate change efforts, particularly in the design of carbon pricing regimes and the management of carbon certificate registries. We were a leading player in the design of mitigation and adaptation strategies.

It is imperative that the entire global community comes to terms with the facts of climate change, and with the need to get back on track with the de-carbonisation of the economy and an evidence-based approach to renewable energy. The world is now exposed to greater climate risk, both near term and into the future.

A Shorten Labor Government fully intends to get back into the business of constructive international action on climate change. The Indian Ocean community as a whole has an important part to play in this task. As a major national conference focusing on Indian Ocean issues, In the Zone is an important contribution to energising the Indian Ocean community. It is a community that should play a role in global affairs commensurate with its abilities and its weight.

So, once again, may I thank Professor Flake and his team for their efforts to that end.