Saturday 16 Feb 2019 | 10:42 | SYDNEY
Saturday 16 Feb 2019 | 10:42 | SYDNEY
Debates

Australia’s Foreign Policy White Paper 2017

15 Feb 2017 11:16

In August, Foreign Minister Julie Bishop announced that the Turnbull Government would produce a new foreign policy white paper. The Minister described it as a 'philosophical framework to guide Australia's engagement, regardless of international events'.

The world is changing so fast it is sometimes hard to keep up. This makes the writing of a white paper very hard. But it also makes it very important.

This will be the third foreign policy white paper Australia has produced, after In the National Interest in 1997 and Advancing the National Interest in 2003. Australia in the Asian Century, a blueprint for Asian engagement, went way beyond foreign policy and was produced by the Department of Prime Minister and Cabinet.

By contrast, we have had no shortage of defence white papers – seven since 1976, with four since the turn of the century.

Observers at the Lowy Institute and elsewhere will be hoping the new white paper sets a framework for Australia’s foreign policy to guide our actions. After all, a country of our size and significance should try to shape its environment. Australia responds to events with great professionalism. But what are the shaping initiatives in which Canberra is currently engaged? It is hard to identify many.

I have argued for greater ambition in defining Australia’s interests, but of course, that ambition needs to be tempered by coherence.

In 1943 the American journalist and author Walter Lippmann wrote:

Without the controlling principle that the nation must maintain its objectives and its power in equilibrium, its purposes within its means and its means equal to its purposes, its commitments related to its resources and its resources adequate to its commitments, it is impossible to think at all about foreign affairs.

Australia has not always achieved this equilibrium in foreign affairs.

There have been hyperactive periods when Australian foreign policy was ambitious but incoherent, when we had big ideas but little ability to bring them off. During these periods, we were quick to urge countries to do things we were unprepared to do ourselves. Teddy Roosevelt spoke softly and carried a big stick. We spoke loudly and carried a small stick.

In Lippmann’s terms, our commitments exceeded our resources.

But perhaps the default mode for Australian foreign policy is the opposite – periods characterised by policy laziness, in which we rested on our laurels, fell back on old relationships and old slogans and pursued a small-target strategy. In Lippmann’s typology, our commitments were inadequate compared to our resources.

Australia needs ambitions, not illusions. Governments that try to do too many things at once do few of them well. Governments that are too timid are quickly forgotten. We need to align our ends and means, and engage in practical, tough-minded diplomacy directed at making a difference.

The task of preparing a White Paper was sufficiently difficult when it was announced last August. In November, when the American people elected Donald Trump as president, it became much harder.

For the first time since the Second World War, the leader of the free world has a narrow conception of leadership and may not even believe in the free world. President Trump’s 'hostile' phone call with Prime Minister Malcolm Turnbull, and Australian public opinion on Mr Trump both point to complications ahead. The section of the White Paper on the Australia-US alliance will make for fascinating reading.

The Lowy Institute will play a role in the public consultations for the White Paper, with former DFAT Secretary Peter Varghese sharing his experiences at a public event here at the Institute on tonight.  We will also be conducting a roundtable discussion in partnership with DFAT next month.

And in coming weeks The Interpreter will host a wide-ranging debate on what should be in this important national document.

COMMENTS

16 Feb 2017 15:40

This post is part of a debate on Australia’s foreign policy White paper 2017. Click here for other debate posts.

The ‘Call for Public Submissions’ for the upcoming Foreign Policy White Paper lists a number of questions to be addressed. The first of these relates to an assessment of our national interests. Possibly prior to making this assessment we should consider what Australia is like, and therefore what our national ambitions can realistically be. It’s common for government spokespeople to refer to Australia as a ‘Top 20’ country, referring to our membership of the G20, our substantial economy and our role as a major world trader. Those things are all correct, but we also need to consider that our population is small (10 million less than Canada, for example ),our continental extent imposes tasks and costs as well as advantages, and our isolated position means that we are not an automatically included member of any established and tight-knit group of countries like ASEAN, the EU (assuming that does indeed hold together!), and the Latin American and African groupings.

To me, these factors mean that we have to be active and imaginative in defending and promoting our national interests. These are of course easy to state in very general terms - national security and prosperity, and the promotion of regional and international orders as compatible as possible with our national values - but they can be difficult to prosecute successfully. The world environment has become turbulent and uncertain, not only because of political events like Brexit and the coming to power of President Trump, but also because of intractable global issues like climate change and mobilising effective action to contain it, Islamic terrorism in the Middle East and elsewhere, and almost unparalleled mass movements of people. A Japanese academic visiting Sydney recently said that we face 'fragility in every corner of the world'. Globalisation, seen as the engine of universal economic advancement, has come under increasingly widespread criticism as a cause of inequality, while technological change and automation is increasingly seen as a threat to the future availability of work and jobs.

Some of the actions we might take in response to these challenges are essentially domestic. However, in regard to the economy we will of course continue to pursue advantageous trade arrangements. These will likely be increasingly less globalgiven the stalemate at the WTO, but certainly regional agreements - the TPP if it is still alive and the RCEP - and bilateral agreements, such as with India and Indonesia, will continue to be important. (It is of course worth noting that the pursuit of trade agreements almost for their own sake is not necessarily advantageous; recent reviews of the effect of our trade agreement with the US, in the context of Trump-created uncertainty about it, show that it has benefited the US much more than Australia.) Given increasing technological and competitive challenges it will be very important for us to encourage Australian industries that can survive the end of the mining boom.

It’s important to note that that is not getting easier. For years after the end of World War II we had a significant technological advantage over our neighbours, but they have caught up and other factors — like their larger populations and the international mobility of capital — have come into play. One obvious example is the auto industry. Very soon we will not have one, while Indonesia and Thailand will.

For a country with a small population like Australia of course there will always be questions as to what we pay attention to, both economically, politically and in terms of supra-national issues like climate change. For example, for decades Australians with an interest have complained that neither our government nor our business people have paid sufficient attention to Indonesia; large, on the march and full of potential despite the difficulties of doing business there. But in those same decades our economic engagement with China, even larger and more on the march, has increased enormously, absorbing a huge amount of our commercial and governmental energies. (Perhaps the visit to Australia by President Jokowi later this month will focus more attention on Indonesia.)

The above is just one example. In terms of our situation in the world we should pay sustained attention to many kinds of countries and relationships as well as issues. As an ally of the US and a major trading partner of China, we need to be alert to everything that goes on between them, as well as within them. As a neighbour of the countries of East, Southeast and, to some extent, South Asia we need to pay close attention to countries such as Japan, India, Indonesia and the Republic of Korea and work with them to foster regional stability and resilience. With New Zealand, we have to pay close attention to the small island countries of the South Pacific, where we can make a difference to their struggles for social and economic advancement, and, unfortunately, perhaps later assist with the consequences of climate change.

How are we to do all these things, and give all the varied challenges and opportunities their due?  The last question posed in the ’Call for Public Submissions’ addresses this. In my view, those drafting the Paper could do a lot worse than carefully considering the Lowy Institute papers of recent years on the very limited resources available to the Department of Foreign Affairs and Trade, in comparison with relevant countries world-wide. For a country like ours, largely on its own apart from New Zealand, exposed to and dependent on the world economy, with a large annual migrant intake, in a strategically critical and demanding part of the world, needs to have a well-staffed and resourced foreign service able to inform the government, deal with international issues and partners, and effectively put Australia’s case to others and in world and regional forums. Such an asset of course comes at a cost, but from the point of view of perspective we should bear in mind its likely relative utility compared with the enormously costly planned Defence acquisitions such as the JSF and replacement submarines.

In my view a country of moderate size and weight such as Australia should put a high priority on multi-lateral diplomacy as a ‘force-multiplier’. We have a lot of achievements to our credit in this field, and have even initiated very successful institutions such as APEC and the Cairns Group. Hopefully future developments in the Asia-Pacific will be moderated for the better in bodies such as the East Asia Summit (which Australia had a major role in seeing expanded to its present inclusive membership).

Mentioning the Asia-Pacific brings me to my last point, but certainly a very major one. One issue which the Australian public will certainly hope to see the White Paper address is the relationship between the US and China, and how Australia might be involved in that. As everyone knows, the US is our major ally, and our two countries are linked in innumerable ways. On the other hand, China is our largest trading partner and other links grow steadily. Developing the China relationship has been a bipartisan Australian policy since the Whitlam/Fraser years, not long after former Australian diplomat Greg Clark wrote his book In Fear of China (he queried the fear). At the same time, we are of course aware of the strategic rivalry between China and the US, and the possibility of some pushing and shoving escalating into armed conflict. We are also aware that years of involvement by our Defence Force with the US Armed Forces have led to such a degree of integration and interoperability that it would not be easy for Australia to ‘pass’ if the US became involved in a clash with China — for example in the South China Sea. This is an important possible downside to set against the undoubted advantages such integration brings.

Such a contingency may of course never arise.  The Sydney Morning Herald's 10 Febuary report on the (surprisingly little-reported) meeting of Chinese Foreign Minister Wang Yi with Foreign Minister Bishop last week noted that he had said publicly that Australia 'can continue to be an ally of the US, at the same time be a comprehensive strategic partner for China'.  And over the weekend there was news of an exchange between Presidents Xi and Trump which seemed more constructive than earlier American remarks. Americans often refer to us appreciatively as having been with them in all their wars since World War I.  Remarks to that effect were made in the aftermath of the apparently awful Trump-Turnbull telephone conversation. But the outcomes of the more recent of those wars have not been a source of much satisfaction, and many Australians are seeking assurance that there will be no automatic involvement by us in hostilities in the South China Sea in the name of freedom of navigation or 'defending the shared commons'.  The government’s policy so far in regard to this issue has been prudent and sensible, and has recently been endorsed by the respected former Chief of the Defence Force, Sir Angus Houston. Navigation has not been impaired, and it’s not in China’s interests to do so. But any words of assurance that the White Paper can contain on this crucial issue will I am sure be welcomed.

COMMENTS

17 Feb 2017 10:05

This post is part of a debate on Australia’s foreign policy White paper 2017. Click here for other debate posts.

‘Australia needs to be ambitious in grasping economic opportunities’.

In calling for submissions for the Foreign Affairs White Paper, the Foreign Minister included this among the key issues. Fair enough, but what does it mean in practice? Michael Fullilove warns us against ambition when it is not ‘tempered by coherence’, and cites earlier examples, including the Asian Century White Paper, where ambition ran ahead of the substance. So how do we stand on ‘grasping economic opportunities’?

Perhaps by the time the White Paper is published the Trump era will have established a less aggressively ‘America first’ stance. But at least at this juncture, the opportunities for ambition in global economics seem constrained. America has been such a dominant force in the post-World War II international economic landscape that it is difficult to foresee how things will work out with an inward-looking America. America’s retreat from globalisation casts a shadow over the possibilities.

If Trump precipitates a tariff war, this would lead to a responsive battening-down of hatches everywhere. Even if his ire is directed just at individual countries such as China, that would be bad news for us as a commodity exporter.

Will President Trump bother to go to G20 meetings? If he does, will his presence advance the cause of international cooperation or set it back? America has always been an active, even dominant, member of the IMF, using it as a vehicle for global policies which by-and-large have been in the general interest. The Fund kept Greece and the euro’s peripheral countries afloat in 2010, holding the euro together in the process. The IMF’s substantial program keeps Ukraine from debt default, shoring-up an important frontier. Will the IMF be hobbled in the next crisis by its largest member?

President Trump has already issued an executive order to roll back the huge effort that has gone on since 2008 to reduce the risk of another financial crisis. This not only covers the unravelling of the Dodd-Frank Act: Congress has already instructed the US Fed to cease taking part in the ongoing negotiations under the Basel Accords designed to bring a degree of international uniformity to banking regulation.

The abandonment of the TPP and the Basel Accords may be symptomatic of a larger reversal. Will America continue its progress towards signing up to UNCLOS? What will happen when the World Bank and the regional developments banks (such as the Asian Development Bank) pass around the hat for capital increases to fund ongoing operations? Trump’s strategy of bilateral trade deals, further entangling the spaghetti-bowl of existing agreements, is the unfortunate antithesis of the multilateralism that is needed to obtain the full benefits of global trade. In short, America is no longer attempting to put in place a global rules-based order that has been the subject of so much commentary, here and elsewhere.

It is in this unpropitious environment that the White Paper seeks to be ‘ambitious in grasping opportunities’. So does adversity create opportunities?

Australia had its opportunity to reinvigorate the G20 in 2014 when it held the chair but now does not have the heft to do much. The same applies to the IMF, where we have always been a bit-player.

Our best chance of coherent ambition lies in Asia, the source of 70% of global growth. This would, however, require a dramatic lifting of our game. Our American-centred foreign policy has led us to emphasise APEC over ASEAN, always with the priority of trying to increase American involvement in Asia. We may never have had the opportunity to join the six-country core of ASEAN, but Japan succeeded in getting into the next row of seats – ASEAN+3. Our formal connection is via the East Asia Forum, a peripheral meeting-place. Coming very late to the party, we need to make sure we are welcome, and find ways to make this apparent to the core membership. The Rudd Asia-Pacific Community initiative to seize the high ground with a new institution was doomed from the start: this is not a party you can crash by offering to take over the job of hosting. John Edwards may well be right that Australia is ‘the one country in the region with the capacity and repute to drive negotiations on a regional free trade agreement.’ But this would be a huge diplomatic task, as none of the Asian countries currently sees us as a logical fit for this leading role.

A starting point would be to redirect the diplomatic resources, hitherto futilely engaged on TPP, to the Regional Comprehensive Economic Partnership (RCEP). Pining for some kind of rump TPP, without America, seems misguided. If China is active in bringing Asia together through developing the Free Trade Area of the Asia Pacific (FTAAP), we should throw our modest weight behind this.

One specific opportunity for some serious re-thinking would be our stance on foreign investment in Australia - not usually thought of as a key element of our foreign policy.

The starting point is a recognition that China will want to have much more foreign investment than it has at the moment, and this will run into deep-seated domestic concerns. Part of the concern is about the sheer size of the prospective asset-ownership: think of the issue in terms of portfolio balance, where Chinese investors (including state-owned enterprises) will want a diversified portfolio with substantial overseas investments. China is already so much bigger than we are, and this disparity will increase sharply over the next few decades, with China growing at more than twice our pace. On top of the concerns about the sheer volume, both the Australian public and the Australian bureaucracy have a heightened perception of the security implications of Chinese investment, and our politicians are ready to give voice to these concerns.

We need to sort all this out if we are to avoid serious inconsistencies between, on the one hand, our desire to attract foreign investment to fund the current account deficit, and on the other our sensitivity to perceived security risks and concerns about ‘selling off the farm and the family silver’. Some countries (Canada) are welcome to buy critical infrastructure, while others (China) are not. Some countries can own large tracts of agricultural land (the UK), while others are excluded. If we don’t explain these issues coherently, this ad-hocery will look like xenophobia. If the targets are Asian countries, we shouldn’t be surprised if our efforts to integrate more with Asia are frustrated.

As part of the reconsideration, we might shift the Foreign Investment Review Board from a negative assessment of proposals (requiring proposals to overcome various hurdles) to a benefits-focused evaluation: what can the foreign investors provide which will be to our benefit, beyond simply funding the external deficit? Encouraging Chinese and Indonesian food-oriented companies to take part-stakes in Australian agriculture is an example of integration-fostering policy. It would link Australian production into the fast-growing middle-class-driven consumption markets that we can’t access successfully without the foreigners’ special affinity and knowledge of local business methods. We need partners to lobby and facilitate our integration with these difficult-to-access markets. Offering them a less-constrained opportunity to participate in productive investment in Australia might seem ambitious, given the political sensitivity of this issue. But it would, at least, offer an example of coherence.

Photo by Flickr user Kate Dixon.

COMMENTS

20 Feb 2017 08:47

This post is part of a debate on Australia’s foreign policy White paper 2017. Click here for other debate posts.

Australia has a great story to tell the world, a powerful 'strategic narrative' that is a potent source of soft power. But it's increasingly difficult for this story to be heard, given the transformations arising out of the digitalisation of the media and communications landscape.

The forthcoming Foreign Policy White Paper provides an opportunity to take stock of and address these changes. This is necessary and timely. The last White Paper was launched in the same year as MySpace and Second Life. In 2003, there was no Facebook, Youtube, Instagram, Sina Weibo, or Snapchat; no Wikipedia or Wikileaks; no selfies or hashtags.

There was no Twiplomacy; no emoji diplomacy; no WhatsApp diplomacy. No Ambassador's dogs on Twitter. No Presidential Tweets in the witching hours (and no officials dedicated to monitoring them). No livestreaming military campaigns on Facebook. No one fretting about what's trending. No one knew what was coming. Now we know better. In terms of public diplomacy, we need to catch up. The first task of the White Paper is to explain why and how.

Foreign Minister Julie Bishop has stated she hopes the White Paper will have a 'dynamism about it that can carry forward over about 10 years'. Try to imagine a decade of innovations in artificial intelligence, machine learning, big data analytics, locative media and augmented reality, as well as everything we don't yet know about that is just around the corner.

To address the developments will require that diplomacy get imaginative, innovative and prepared. This is the White Paper's second task.

In this context, Australia's public diplomacy challenges are multiple, and require attention to both the external environment and diplomacy's inner workings. Each of the following problems invites its own responding goal and associated strategy. Some can be solved; some must be managed.

I've outlined the first problem: the pace the world keeps seismically shifting. The goal in this case is firstly to keep up. One strategy is to take a design thinking approach. Stripped of its jargon, design thinking is based on constant learning by doing. Diplomats should be supported to try things, knowing that they won't all work, and be willing to say when something isn't working and fix it. The idea is to keep updating the playbook while staying principled and coherent.

The second external problem is the competition for attention. The digital transformation of the media has led to a multiplication of channels and thus the fragmentation of audiences, including the bubbles and echo chambers where much political discourse now occurs.

Some of these are transnational networks of various shapes, colours and creeds: activists and terrorists; immigrants and diasporas; students and travellers; sports fans, music fans and foodies. These networks are significant because they act as communicative structures that transcend borders, yet shape the ideas of their constituents and hence their behaviours, including where to travel, study or invest, what to buy, whom to admire and emulate, whom to resent and attack.

One strategy here is to utilise the community, either through crowd-sourcing content and comment from an entire target group or through engaging supportive key influencers. The value of this lies in utilising members of a community to speak with and hear from that community. Locally-engaged staff at post may be best placed to lead this.

This might prove uncomfortable: historically, public diplomacy everywhere has been based on a propaganda/broadcast model, predicated on the idea that there is a definite message from a government to foreign publics. This model is great at reducing risk and maintaining control. But nowadays, that model cannot compete. Deputy Security Gary Quinlan's call to become 'digital by default' is a signal DFAT is moving towards an approach that is more open and dynamic.

Australian public diplomacy still faces some internal challenges. One is that its diplomats (the Public Diplomacy team aside) are not always experts in public communications. Nor is expertise in this area a requirement, even though they may be tasked with managing public diplomacy while posted off-shore.

But, DFAT is full of clever, driven professionals (some I know have considerable communications skills) and digital diplomacy is not rocket science, so I suspect a little investment will go a long way in this regard. Moreover, DFAT's recent Digital Media Strategy is a strong indication that the problem is understood and the plan to address it is underway.

This could be an area of real achievement. To support this, the White Paper should ensure it is central to DFAT's overall vision by bringing digital expertise in at highest possible levels, and rewarding excellence in digital diplomacy.

The second problem is the challenge that every organisation faces: not knowing what's working and what's worthwhile. This is an especially acute problem for public diplomacy, as the messages and the media vary from place to place.

The stated goal for public diplomacy for all nations is usually to promote values and interests. I suggest that more specific goals, identified by location and audience, would be beneficial. The strategy then is to be campaign-oriented, learning from marketing and NGO advocacy campaigns where specific targets are identified and guide the tactics used. This process doesn't guarantee success, but it does outline a pathway towards a desired goal.

Overall, like the opening up of the economy, Australia should consider an opening up of its diplomacy by being collaborative and flexible, creative and confident. Alternatively, Australia's public diplomacy can go softly and quietly about its business, leaving others to tell our stories for us.

COMMENTS

21 Feb 2017 09:10

This post is part of a debate on Australia’s foreign policy White paper 2017. Click here for other debate posts.

Back in October I wrote a piece about the Foreign Policy White Paper ('White Paper blues') which asked what might be behind Foreign Minister Julie Bishop's statement that the purpose of the White Paper was to establish a 'philosophical framework to guide Australia's engagement, regardless of international events' (my emphasis).

At the time, I was rather taken by that phrase, arguing that it was an oblique acknowledgment that White Papers rarely date well, and that Bishop's team would make a real attempt to craft a document that was intended to last well beyond the headlines it created on the day of the launch. In other words, Bishop wanted a White Paper which would do more than just describe Australia's circumstances but would be a guide to policy over the coming ten years, even if we could not predict exactly what challenges Australia would be faced with in that period.

Since then, it has occurred to me that there is another plausible reading of Bishop's phrase, which is that the promise to produce a White Paper which could guide foreign policy 'regardless of events' might actually be code for avoiding certain events, or one big event in particular: the rise of China.

Finding a way to manage the tension between the interests of our major strategic partner - the US - and our primary economic partner - China - surely has to be at the very heart of Australian foreign policy over the coming decade, yet our political leaders seem far from ready to even acknowlege the tension. In fact, as that tension has become more acute over the last 10-20 years, Australian prime ministers have either insisted that the Howard-era formula that Australia 'does not have to choose' between the US and China still applies, or (in the case of Malcolm Turnbull) have ignored the tension even though they acknowledged it before taking office.

If the White Paper ignores this dilemma, it cannot meet Julie Bishop's ambition for it to be a document that guides foreign policy for the coming decade. Yet some will point out that while a White Paper is a strategy document it is also a diplomatic document intended for consumption by foreign governments. In the hours after its publication, diplomats from around Canberra will be parsing it to see how their country was treated, and what this says about their relationship with Australia. Depending on what the White Paper says, relationships with some countries might even dip, as allegedly happened after China reacted badly to the 2013 Defence White Paper.

That's a justifiable concern which will inevitably limit how direct the White Paper can be, yet against that we must weigh the gravity of Australia's situation. Throughout our history as a sovereign nation, Australia has been lucky enough to have a strategic partner that was also our major economic partner. First it was the UK, then after the fall of Singapore it became the US. In the '70s our major economic partner became Japan, also a reliable ally of the US. So our economic and strategic interests never clashed directly, as they are beginning to do now.

It's a tension that may very well require Australia to make some extremely difficult decisions, and may raise issues which won't be confined to wonkish websites like this one. As we saw with the Dastyari episode last year, the consequences of China's rise to power can quickly become prominent in the national conversation. And the issue won't always be as trivial as an MP taking travel payments from Chinese concerns. What if the government needs to make moves which could harm us economically, or which could damage our standing with our ally, or which could lead the commitment of military forces in North Asia? The public needs to be prepared for such potentially dramatic shifts, and the White Paper would be an excellent platform from which to make such preparations. 

By the time she launched the public consultation phase of the White Paper in December last year, Julie Bishop had sharpened her sentiments about the ambitions of the White Paper: 

This is not about predicting the future – nobody can do that – it's about looking at the kind of framework that needs to be in place so that we're not reacting to events, we're strategically positioned to manage, maybe even shape, events.

That's a much more robust formulation: the aim should be to produce a paper which can cope with changing events, rather than one which is works 'regardless' of events. The latter sounds like a document containing principles so broad and general as to be little guide to policymakers, while the former could actually achieve the rare aim of being something that is consulted by busy policymakers for years after publication.

COMMENTS

23 Feb 2017 17:29

Concern over the possible decline of US power and the resilience of its commitment to underwriting security in Asia is not new. In the post-1945 period, doubts over Washington’s commitment to maintaining a leadership role in the region have followed President Nixon’s shift to the Guam Doctrine in 1969, eventual defeat in Vietnam in 1975, the end of the Cold War in the early 1990s, and the Bush Administration’s preoccupation with the Middle East post-9/11.

With China’s capacity to project economic and military power growing daily, and Beijing’s apparent goal of challenging US strategic preeminence in Asia, these concerns have once more been raised. They have emerged as a feature of foreign policy debate in the US and throughout Asia, including in Canberra and Tokyo.

What makes this latest round of concern different to that of prior decades is the sharply unconventional, unprecedented, and highly unpredictable thinking of US President Donald Trump. As Michael Fullilove has observed, ‘the leader of the free world has a narrow conception of leadership and may not even believe in the free world’. Indeed, Trump is the first post-1945 president not to clearly endorse the long-standing US commitment to maintain the liberal international order it has relied on both for the pursuit of its own interests, as well as a wellspring of legitimacy for US leadership.

The persistent ambiguity over what the Trump Administration is committed to in its foreign relations (other than putting ‘America first’, whatever that might mean) has caused major conniptions in various capitals, but there are some signs that normal service may be resuming in the White House (at least in Trump’s thinking on Asia, if not yet on Europe). His reaffirmation of the ‘One-China’ policy and soothing assurances for Japan and South Korea have been welcomed. But many remain rightly suspicious of Trump and the ability of the US political system to rein in his maverick behavior over the next four years. So far, built-in checks and balances seem to be mostly working, but for how long remains uncertain.

Last December in Tokyo, the annual Australia-Japan Dialogue (jointly hosted by the Griffith Asia Institute and the Japan Institute of International Affairs) brought together experts from Australia, Japan, and the US. T to consider the nature of the Australian and Japanese commitment to the US as guarantor of the current Asian security order and how shared interests underpinning that commitment can best be managed in the future. These types of questions are fundamental to Australian policy thinking, since so much of our outlook and ambition has been predicated on continuing US extended deterrence and support for the region’s liberal order. They merit careful consideration under Canberra’s upcoming Foreign Policy White Paper, especially given that major change is underway in the region and has been for some time.

Indeed, Trump’s shock election only a few weeks the Dialogue threw an entirely different light on the original theme and questions that had been set out for discussion. But many of the same issues, while subsequently carrying a different order of concern and urgency, were already on the table even with the expectation that Hillary Clinton would be elected. Keeping the US engaged, growing irritation in Washington over perceptions of free-riding allies, and managing a tougher line on China are challenges the Abe and Turnbull governments would still be facing, regardless of who won last November. The major difficulty posed by Trump’s Presidency is dealing with these issues in a context where the value and commitment Washington attaches to its regional alliances appears to be far more negotiable than before.

The overriding themes that emerged from the Dialogue regarding how Australia and Japan can best manage their relations with the US, taking into account the Trump wildcard, were founded on the following assumptions:

1. Managing the uncertainty over US foreign policy and Washington’s long-term commitment to Asia is the immediate challenge facing Australia, Japan, and other US allies in the broader region. How the Trump Administration calibrates US strategic engagement, particularly with respect to reassuring allies through extended deterrence, expectations over burden-sharing, and whether Washington remains fully focused on the region when other theatres like the Middle East become a priority are all sources of uncertainty.

2. Uncertainty over the depth of, and possible limitations placed upon, US security commitments to allies will continue to be a major factor shaping strategic thinking in Canberra and Tokyo. Trump’s decision to trash the US commitment to the TPP with minimal (if any) consultation with Asian allies is a very worrying sign, since similar indifference may also characterise his Administration’s approach to alliance management on other important issues, such as North Korea’s WMD program, China’s posture on territorial disputes, and the promotion of liberal democratic values in Asia.  

3. Australia and Japan remain strongly committed to their alliances with the US and to supporting continued US leadership of the current order. Although the post-war ‘hub-and-spokes’ bilateral alliance system is becoming outdated, Australia and Japan’s bilateral relationship (and trilateral relations with the US through the highly successful Trilateral Strategic Dialogue) will be more important than ever in promoting shared security and political interests in Asia. 

A major White Paper takeout from the Dialogue is that increased security cooperation between US allies with support from US security partners in the region (e.g., Vietnam, Singapore, Indonesia and India) could be very effective not only in satisfying demands from Trump and future administrations for a bigger contribution from allies (and therefore encouraging ongoing US support), but also as a hedge against a possible drawdown of US strategic engagement in Asia. Increasing the tempo of strategic cooperation among like-minded states also is likely to provide a stronger platform for greater regional influence on policy thinking in Washington.

How Trump would react to a major black swan event, such as 9/11, is a worrying proposition. One only has to recall the abrupt, and ultimately disastrous, policy shift under the Bush Administration following the al-Qaeda attacks on New York and Washington to appreciate how a capricious and monochrome individual like Trump (and his senior advisers of decidedly mixed quality) might react. Thus, even long-standing and highly regarded US allies such as Australia and Japan need a Plan B.

This is not a plan involving any realignment or downgrading of support for US leadership, but instead a plan that allows Canberra, Tokyo, and other like-minded Asian states to prepare effectively for the many unknowns (both known and unknown) that surround America’s future role in Asia, with or without Trump as Commander-in-Chief.

COMMENTS

24 Feb 2017 10:48

Sam Roggeveen is right ('One Big Question the White Paper Cannot Ignore'). The new DFAT White Paper cannot ignore the big questions about America, China and the strategic future of Asia, because those big questions will do more than anything to frame Australia’s international situation over the decades ahead. But what can the White Paper say? There are no well-honed talking points on all this, because for a decade now our political leaders – with one notable and lamented exception - have been in denial, unwilling even to acknowledge the problem, let alone discuss how we should respond to it.

So we need some new language if the White Paper is to be credible. It is too much to hope that the Government will come up with a fully developed national strategy to secure Australia’s position in the new regional order now taking shape. But it could at least describe and explain what’s happening in our region clearly enough to launch the national debate we need about how to respond. The challenge is to do that without saying anything so scary that it damages the government politically, or gets it into hot water diplomatically. It’s a tough drafting job.

Long experience in government suggests that when you face this kind of task it is best not to spend too much time on preliminary debates. You need to get a draft on the table that helps you to see what works and what doesn’t. And often when you do this, you find that what seems hard in the abstract often looks rather easier in practice.

I think that’s true here. It is quite possible to sketch what’s happening in Asia and what it means for us in terms which are not as scary politically or diplomatically as our ministers seem to assume. So here, in a spirit of helpfulness, is a modest drafting suggestion:

Australians have always understood that our security and prosperity depend fundamentally on the maintenance of a peaceful and stable order in Asia. For decades that has been assured by American strategic leadership, and by the fact that its leadership has been accepted and welcomed by the majority of regional countries.

Now Asia’s US-led order faces significant challenges. Those challenges have several sources, but the most important is the marked shift in relative economic power and strategic weight as Asia’s economies have grown over recent decades. This should not surprise us. We cannot expect to see Asia change so much economically without equally significant strategic and political changes. This means there will be major changes in the Asian regional order. That order cannot remain unchanged when the material basis of power in Asia has shifted so much.

So we have to accept that Asia in future will work differently from the way it has in the past. Our task now is to ensure that we do all we can to protect Australia’s interests and maximise our security and prosperity in the new regional order that is emerging. There are two parts to this task.

First, it is vital for Australia that Asia’s new order should evolve peacefully, and that cannot be taken for granted. We cannot ignore the rising tensions between the most powerful countries in Asia, and we need to be clear about their cause. These tensions are not just about contested claims to uninhabited islands and reefs or questions of maritime law. They go to the basis of Asia’s regional order.

The danger that these disputes might escalate to conflict are real: the lesson of history – back to Thucydides – is that big shifts in power like the one we are living though often lead to rivalry, confrontation and war. 

But it is not at all inevitable. There is no doubt that the countries of Asia can peacefully create a new order that reflects the new distribution of power and satisfies the most vital interests of all of them. But that can only happen if all sides are willing to compromise. Compromise is vital because no one can get all they want with threats of military force. Australia will do what it can to promote the constructive dialogue which will be essential to Asia’s peaceful strategic evolution. 

Second, we have to develop our own clear vision of the kind of new Asian order that would offer the best chance of peace and suit Australia best. We might start by saying that we would seek a new order which:

  • Ensures the largest possible US role consistent with a stable and cooperative relationship with China.
  • Accords China a larger role than hitherto.
  • Provides a respected and secure place for Japan as East Asia’s other key major power.
  • Protects the vital interests of the region’s middle and smaller powers, including of course Australia.
  • Upholds the broad norms of international conduct which have done so much to foster peace and stability in recent decades.

Only this kind of order will ensure that Australia does not face an impossible choice between America and China in the future. Today we face a choice about what we can best do to help bring it about. Nothing is more important to our future. It is among the greatest foreign policy challenges we have ever faced.

I’m sure lots of people will disagree with much of this draft. Fine – that’s what drafts are for. I invite them to offer their own drafting of what the White Paper should say on this central issue. Together we might help the Government find a way to say something worthwhile about it.

COMMENTS

27 Feb 2017 17:11

Australian foreign policy has often overlooked energy. Yet the global energy system is failing to keep up with the rapid transformations taking place in energy markets. This poses significant risks to Australia’s interests.

The Foreign Policy White Paper process presents a timely opportunity for Australia, a global energy superpower, to reconsider its role in shaping the rules that govern energy.

Transformations in global energy markets

The global energy sector is experiencing a transformation wrought by two historically significant trends. The first is the shift in the sources of global production and consumption. Nations that were major energy importers only a few years ago are becoming exporters, exporters are becoming large consumers, and previously small consumers are now the prime source of global demand for oil and gas.

China is now the world’s largest energy consumer and is set to become the largest oil importing country and the US, once the largest energy consumer and dependent on Middle Eastern oil, could be on track for energy self-sufficiency with the revolution in unconventional oil and gas supplies. In other words, the global energy sector is no longer dominated by a small band of OECD countries on both sides of the Atlantic Ocean.

Second however, these changes are also taking place in a carbon-constrained world.  Yet energy-related CO2 emissions continue to rise, and according to IEA projections, will increase by 20% to 2035, even when the impact of existing measures to combat climate change are taken into account.

A global energy governance gap

The international energy architecture has not kept pace with these rapid transformations, and there is now a consensus among scholars and policymakers that the current international energy system is a mess with many actors, many priorities, little coherence, and limited effectiveness.

In other policy domains states have created a leading international institution, such as WTO for trade, the WHO for health and the IMF for finance. However, there is no single institution for energy.

The dominant existing institution is the IEA, established in 1974 by the world’s largest oil consumers - including the US, the UK and Japan - as a counterbalance to the world’s largest oil producers (represented by OPEC) following the oil shocks of the 1970s. In recent decades it has broadened its focus to include not only oil markets, but gas markets, energy efficiency and climate change issues. It has also expanded its membership from the original 17 to 29 member countries, almost all of the OECD membership.

Yet because Brazil, Russia, India and China are not members of the OECD - one of the key requirements for formal membership of the IEA, along with a requirement to hold strategic oil stocks equivalent to 90 days’ worth of imports - they remain outside the IEA.

Aside from the IEA, the existing international energy architecture includes a series of energy organisations that overlap, often with conflicting agendas. These include OPEC, which was created in 1960, and began interacting with the IEA only after the first Gulf War in 1991; the International Energy Forum (IEF), which was created in 1991 as a dialogue between oil-consuming countries and OPEC members; the Energy Charter Treaty organization (ECT), established in the same year to promote energy sector investment in eastern Europe following the end of the Cold War; and, most recently, the International Renewable Energy Agency (IRENA), which was established in 2011 largely as a result of German leadership to advance renewable energy.

While these organisations have more inclusive memberships than the IEA - the IEF, for example, includes Brazil, Russia, India and China, among its members - their influence on international energy markets and resources is very limited in comparison.

Australia’s role

At the G20 Summit in 2014 world leaders agreed for the first time that the existing international energy architecture is out of date and needs to be reformed. Australia should play a lead role in driving these discussions to ensure concrete outcomes are achieved. 

A case in point is reform of the IEA. The G20 agreement in 2014 recognised that the IEA needs to be reformed. If reform is to go close to matching the changes taking place in energy markets, then the IEA treaty needs to be amended to allow large energy consumers, such as Brazil, Russia, India and China, to become full members.

This should be done immediately. It would not only improve the IEA’s representativeness, but it would enhance cooperation between developed and emerging economies on energy.

However, substantive reform that leads to reliable, affordable and clean energy will require more. Australia should push the G20 to embrace the role of a global steering committee. That is, a body that can produce global public goods by using its power to set the international agenda, agree on global norms and steer existing multilateral institutions, or even create new ones.

In this role the G20 could consider whether a new world energy organisation is required, or perhaps more likely, whether the mandate of the IEA should be reorientated from a focus on global oil markets to a focus on achieving a clean energy revolution.

The politics of such changes will not be easy, but as an energy superpower and member of the G20, Australia is well placed to steer such discussions.

COMMENTS

28 Feb 2017 14:03

The acid test of Australia’s new foreign policy will be longevity. As a nation, can we set an approach that endures? 'A dynamism about it that can carry forward over about 10 years', is how Foreign Minister, Julie Bishop, described the key ingredient for the new foreign policy white paper.  

Setting a path for Australia in the world without being buffeted by confronting change is a formidable task. But too often we have evaded difficult choices, sitting back to see what happens next. This has left us vulnerable to shifts of power. We must tell the rest of the world what we are about, before the whims of others dictate it. 

Integral to a lasting foreign policy is a grounding in values: the Australian values that govern our own society. Australia is a liberal democracy founded on the rule of law with a long tradition of national social policy addressing the circumstances of people in need. We should base our new foreign policy on this and use our aid and development program to make it happen, building coalitions to combat common global challenges including extreme poverty and climate change.

The prospect of a decline in US soft power in the Asia-Pacific, coupled with what a White House budget official has described as a 'large reduction' in the US foreign aid budget, means we will need to work harder if we are to shore up Australia’s future prosperity and security. As a greater burden of responsibility falls to Australia, we must engage the region in a manner consistent with our values of generosity, cooperation, democracy, egalitarianism and a fair-go. Through a more effective and recognised narrative about Australia, others will know where we stand and how they can work with us.

One of the most effective tools we can use to achieve these ends is our aid and international development program. The program is a partnership between Government and civil society which projects our values and national character, while strategically addressing the root causes of problems that undermine security and prosperity.

Borders mean something to Australians, but they are not a panacea for stopping the effects of disease and climate change. Non-state-based threats - including natural disasters, extreme weather and pandemics - in Australia’s immediate region have economic and security costs and they are indifferent to borders and military might. 

Australian aid and development can mitigate and build resilience to climate change by helping communities to adapt. It can support vaccination and health programs to control disease, and help develop agricultural resilience to prevent food shortages. In a period of rising isolationism, we must remind ourselves that failing to address the global challenges we face will not remove us from the effects.

Our aid and development program should be wired together with Australian diplomacy to build stronger partnerships and collaborative responses to the threats we face, by working both with individual nations and through multilateral bodies. As a principled partner, we can help drive collective action to tackle insecurity, economic inequality and corruption.

We cannot create greater prosperity and security for Australia if we pursue a set of narrowly defined interests using a piecemeal strategy. To get the enduring policy we need, we must create a values-based foreign policy expressed in terms that resonate and which the population can support. Only then we will be able to defend our position when it is inevitably and repeatedly challenged in the years ahead. 

Photo: Flickr/CeBit Australia

COMMENTS

2 Mar 2017 16:29

Earlier contributors to The Interpreter’s Foreign Policy White Paper debate have clearly and succinctly articulated some of the challenges the government must address if it is to develop a comprehensive and effective strategy to guide Australia’s international engagement over the next ten years. 

Michael Fullilove calls for 'greater ambition in defining Australia’s interests’, but notes that this needs to be tempered by coherence. Stephen Grenville argues that Australia's 'best chance of coherent ambition lies in Asia', but that we need to '[lift] our game' and redirect our efforts to the Regional Comprehensive Economic Partnership (RCEP) and resolve potential inconsistencies in our approach to Chinese foreign investment in Australia. Sam Roggeveen highlights the importance of 'finding a way to manage the tension between the interests of our major strategic partner - the US - and our primary economic partner - China'.  Michael Heazle and Andrew O'Neil highlight that 'Australia and Japan’s bilateral relationship...will be more important than ever in promoting shared security and political interests in Asia'.  They note that 'increased security cooperation between US allies with support from US security partners in the region' will assist in managing a ‘possible drawdown of US strategic engagement in Asia.

Hugh White argues, inter alia, for an Asian order which ‘ensures the largest possible US role consistent with a stable and cooperative relationship with China’; accords China a larger role; provides a ‘respected and secure place for Japan as East Asia’s other key major power’; protects the ‘interests of the region’s middle and smaller powers’; and ‘upholds the broad norms of international conduct’.

In addition to the White Paper’s necessary focus on the Indo-Pacific region, it will – as Geoff Miller points out – be important to pay ‘sustained attention to many kinds of countries and relationships as well as issues'. He also suggests that Australia should accord a ‘high priority on multi-lateral diplomacy as a force multiplier’

In order for the White Paper to address these challenges successfully and to balance Australia’s bilateral, regional and multilateral priorities effectively, it will be necessary to ensure that sufficient resources are devoted to Australia's international engagement, both in Australia and overseas.  As the Lowy Institute has identified in the past and Geoff Miller notes in his contribution, there are 'very limited resources available to the Department of Foreign Affairs and Trade, in comparison with relevant countries world-wide'.  

The Lowy Institute’s Global Diplomacy Index 2016 ranks Australia’s diplomatic network as  27th among G20 and OECD countries, in between Saudi Arabia and Israel (which are below) and Portugal, Belgium and the Czech Republic (which are above). Perhaps, as a middle power, Australia should be aiming to be within the top 20, along with other like-minded countries such as Canada (18th) or The Netherlands (17th). To achieve this would require a significant injection of additional funding for Australia’s diplomatic network .

Damien Spry highlights the importance of public diplomacy in his contribution to this debate. Despite successive governments attempts to present Australia as a diverse, sophisticated and innovative nation, Australia is all too often perceived as being a predominantly Anglo-Celtic - and at times racist - country, which is too closely aligned to traditional partners such as the United Kingdom and the United States. While there have been efforts by successive governments to address these perceptions, including through the Gillard government's 2012 Australia in the Asian Century White Paper, the fact remains that Australia is from time to time seen internationally as inward-looking and hostage to its colonial past.

The task of presenting Australia as a diverse, sophisticated and innovative nation goes beyond initiatives such as fashion diplomacy or promoting sporting prowess, which perhaps reinforce traditional stereotypes of Australia. Greater effort and resources should also be invested in showcasing excellence in education, science, the arts and so on, in conjunction with the private sector and side-by-side with posts' economic diplomacy efforts. Public diplomacy is an area which is often under-resourced at overseas posts, with many managing on a shoestring budget.

Training and development is another important area of focus. While the recent establishment of DFAT's diplomatic academy is to be commended, additional resources should be invested to ensure that DFAT staff - both Australia-based and locally-engaged - have the basic drafting, analytical and tradecraft skills necessary to perform their roles to a high standard, which - unfortunately - is not always the case. As an efficiency measure, post management at overseas missions should also have greater flexibility and discretion to manage local staffing (ie. the ability hire and fire), depending on operational requirements and in accordance with local labour law.

All of this will require additional resources and perhaps some trade-offs. Although not likely to be politically palatable, one area which could be looked at is consular assistance.  Perhaps the government could consider a public awareness campaign to manage-down the expectations of the Australian public in terms of consular assistance overseas. While the reality television show Embassy a couple of years ago sought to portray the nature and limitations of consular assistance, it is possible that it achieved the opposite of its desired effect and served to increase public expectations of the consular assistance and support that Australia’s overseas missions are able to provide. It also did little to promote popular understanding of the nature of the work of Australia’s overseas posts or to promote Australia as a sophisticated country. More could also be done to promote understanding domestically of foreign and trade policy, and of the importance of Australia’s international engagement for Australia’s prosperity and security.

The White Paper provides an opportunity to look afresh at Australia’s priorities in international engagement - to examine the whole box and dice - and to consider how the many competing priorities should be resourced.

COMMENTS

6 Mar 2017 11:46

This post is part of a debate on Australia’s foreign policy White paper 2017. Click here for other debate posts.

The dazzling speed at which Asia has grown in the past 50 years has obscured a fact we often overlook in Australia: most of the countries and people in our part of the world remain terribly poor. Only a handful of countries are on a stable pathway to achieving the prosperity that we enjoy in Australia, and the list that have achieved parity with us is even smaller, as the map below demonstrates.

 

This is something that our foreign policy does not fully appreciate. For most of Asia and the Pacific our vague concept of ‘development’ remains very real, and sits squarely at the top of their agendas. Surely working with our nearest neighbours on the issues most important to them is within Australia’s national interest. The White Paper provides an opportunity to clearly acknowledge this.

While development is critical for most of the countries around us, it is an area of Australian foreign policy that has become increasingly marginalised. If this continues, our ability to effectively work in the region will also be reduced. The White Paper is an important opportunity to reframe development (a concept that stretches far beyond aid) as a critical element  in our foreign policy toolkit, one that should be considered as carefully and ranked as highly as  diplomacy, trade and security.

Engaging with our region on development challenges in a constructive and long-term fashion is critical to our national interest in that it helps build a prosperous region while maintaining strong bilateral partnerships. There could be no better way of enshrining its importance than renaming DFAT to incorporate development. The Minister for International Development and the Pacific should also be promoted to Cabinet rank to make the position less of a political stepping stone.

Such recognition would also acknowledge development goes way beyond engaging with our partners through our aid program. As important as the aid program is, a change in the language our diplomats use and the culture within our foreign service is even more critical. We cannot afford to let development become a dirty word.

When it comes to engaging in development challenges in our region, Australia has few tools as powerful as our $3.8 billion foreign aid program. By recognising the importance of development, the White Paper should also acknowledge the critical role a robust, forward-thinking and effective aid program will play in building and maintaining relationships and prosperity in our region.

Our aid program faces many challenges beyond the obvious one that it now sits at the lowest levels in Australia’s history. The only boundary we seem able put on our aid program is how much of it we will give, but not what it will be spent on. This has led it to be spent on just about anything that fits in the catch-all category  of ‘development’, and thereby steadily watering down what it can hope to achieve. Our expertise and capacity to implement an effective aid program has significantly weakened since DFAT absorbed AusAID in 2013. More elements of aid implementation are outsourced every day. Our bilateral aid is spread too thinly across too many partners. The list of challenges goes on.

Below are some recommendations as to how we could improve the aid program to better serve the development goals that should be central to foreign policy in our region.

First, the government should commit to increasing Australia’s foreign aid as a share of GNI from its current 0.22% to 0.35%, the peak reached in 2012-13 (with bipartisan support), by 2025. We are on the edge of (or within) a region of profound development need, yet we are heading toward the bottom third of OECD nations when it comes to the share of aid we give. There is an important global reputational hazard here – we cannot ‘punch above our weight’ in our foreign policy if our neighbours do not perceive us to be a good international citizen. Polling has consistently shown that foreign aid doesn’t move the needle for the Australian electorate, so we need our politicians acknowledge the critical role aid plays in our foreign policy and, ultimately, our national interest. I should also note that at 0.35% I am not advocating for the moon. This would be half the level (0.70%) that Australia committed to the United Nations when it signed up to the Millennium Development Goals in 2000.

Second, the government should continue to scale down our bilateral activities. More than 40% of our aid is delivered through bilateral programs, and a further 15% is channelled through regional or cross-regional programs. We should continue to scale back our bilateral efforts to focus on our immediate region of the Pacific and Timor-Leste, and deliver more of our aid to broader Asia through regional and multilateral institutions. This would help focus our now depleted development expertise on a region where we should expect to, if managed correctly, be influential and able to affect positive change. At the same time, we could increase our standing and influence in regional institutions such as the ADB and AIIB where we should strive to be thought-leaders and policy-shapers, not just financial contributors. It would also free up more of our finite aid resources to focus on contributing to global public goods, humanitarian assistance, climate change and development oriented research.  

Third, the government should start thinking differently about the way in which we use our aid program in the Pacific. I will have more to say on this in a separate post but in brief, by acknowledging that foreign aid will remain a permanent element of our partnership with the Pacific, we can be more ambitious in the way in which we deliver our aid program and become a more reliable funding partner to the region.

Fourth, the government should invest in a scoping study into the establishment of a development finance company for Asia and the Pacific. We spend a lot of time promoting two-way trade and investment and Australian investment in the region but, as our research on the Asian Development Bank has shown, Asia is at the start of a century of insatiable demand for capital. This is an idea that has been floated before by the likes of Bob McMullen and Jim Adams, and it warrants serious assessment.

These recommendations will no doubt be added to the pile of hundreds of others from the international development community with regards to our aid program, all of which warrant consideration. But if there is one message that should resonate with the White Paper taskforce it is this: it’s time for development to come out of the cold and assume its rightful place as a central element in our foreign policy. 

COMMENTS

14 Mar 2017 16:56

This post is part of a debate on Australia’s foreign policy White Paper 2017. Click here for other debate posts.

Sam Roggeveen is right when he says that managing the tension between the interests of the United States and China ‘has to be at the very heart of Australian foreign policy’. But his commentary differentiating the US as our major strategic partner and China as our primary economic partner looks somewhat awry when we examine economic data beyond simply exports and imports.

Most Australians understand that China is Australia’s largest partner for trade in goods and services. But as Kim Beazley noted in this post, fewer realise the United States is by far Australia’s largest investment partner, while China ranks seventh in two-way investment with Australia. Sales by Australian firms in the United States and by US firms in Australia dwarf the value of exports - from Australia to the US and from the US to Australia respectively - by a factor of four. 

As well, the profile of goods and services trade between Australia and the US is more knowledge and technology-intensive than Australia’s trade with most others. Two-way goods trade with the US is dominated by elaborately transformed manufactures and the US is Australia’s largest partner in services trade, which is dominated by technical, business and financial services.

Australia needs a more holistic understanding of its shifting global trade and investment interests if we are to fully understand our economic position in the world, promote all facets of trade and investment, and successfully negotiate investment and services chapters of free trade agreements.  

Despite gaps in current data, there is strong evidence in recent DFAT and Austrade publications that Australian firms operating internationally are transitioning from principally export-focussed business models to more investment in-country to improve their access to local markets and participate in global and regional value chains. This trend will only accelerate as Australia’s economy shifts to larger exports of services, many of which must be delivered through in-country presence of firms providing them.

Despite two-way investment becoming as important to Australia’s economy as trade in goods and services, most of the discussions about Australia’s economic relationships focus on exports and inward investment (commentary on the latter is as much negative as positive). There is little commentary - and even less data - about how Australian companies are changing business models, adding investment to export in their pursuit of markets abroad.  Some Austrade reports and presentations have highlighted the trend, however.

There were promising signs of a more contemporary  understanding of Australia’s economic interests (and implementation of a more economically focussed foreign policy) when, in August 2014, the then Trade Minister Andrew Robb and Foreign Minister Julie Bishop launched the Economic Diplomacy strategy.  But since then, there has been little discussion of the full range of economic interactions, though Trade Minister Steve Ciobo has canvassed two way investment interests in his Investment Statement to Parliament and in recent speeches in the United States and China.

The investment gap in commentary about Australia’s economic interests has persisted in this White Paper debate so far. There has been some discussion about the role of foreign investment into Australia but nothing about the increasingly important role Australian investment abroad plays is in supporting the Australian economy. Currently, the stock of inward foreign direct investment ($735.5 billion) makes up about 18% of all direct investment in thi country. Surprisingly to some, the stock of Australian direct investment abroad is a high $594.4 billion, or 74% of inward investment.

The lack of discussion about inward and outward investment in part is due to of deficiencies in Australian data, particularly about Australian investment abroad, which admittedly is difficult to track. Several other developed nations successfully track two-way investment, however, plus the performance of foreign affiliates. These nations’ policies reflect superior understanding of investment dynamics.

Australian government officials are well aware of the data gaps in the face of changing dynamics of trade and investment and authors of DFAT and Austrade reports have highlighted the need for more comprehensive data. It is understood that during 2017, DFAT will commission a survey of Australian services firms operating abroad.

What we do know from current ABS and DFAT investment data is that the largest sectors for Australian direct investment abroad are financial and insurance services (31.4%), manufacturing (17.5%) and mining (15.2%).

The Department of Foreign Affairs and Trade recently analysed data from agencies in the US, European Union and New Zealand to better understand the performance of Australian firms there.

The results are surprising and point to a shift of strategies by many Australian firms to better access international markets.  In 2012 and 2013 there were more than 4800 Australian majority-owned enterprises in the US, EU and NZ, with combined investment of around $265 billion, generating sales of $127 billion. This sales total is more than two and a half times the value of exports from Australia to these economies of $49 billion.

A 2016 Austrade-sponsored survey of 913 companies in Australia found 71% have been involved in inward and outward investment.

Canadian Government data and Australian university research find that Australian-listed companies make up the second-largest group of explorers for minerals and coal globally by both number of companies and expenditure. Australian exploration and mining companies are active in all regions of the globe.

Australia’s very positive two-way  investment story could turn negative if Australia fails to maintain its competiveness for investment here and net investment flows from both Australia and its main investor nations increasingly turn towards destinations abroad. Policy-makers need to understand and respond to changes in the international strategies of firms by modifying government narratives and policy settings to those that embrace and celebrate the success of Australian investment internationally, as well as foreign investment in Australia.

This requires adequate data and analysis to enable policymakers to gain a better understanding of investment at home and abroad, to negotiate enhanced investment provisions in FTAs, and to create an improved investment climate at home.

COMMENTS

16 Mar 2017 12:10

This post is part of a debate on Australia’s foreign policy White paper 2017. Click here for other debate posts.

When Foreign Minister Julie Bishop put economic diplomacy at the centre of Australian international relations in 2014, I suggested this might just be a canny way for a globe-trotting but ambitious Foreign Minister to keep a grip on the core government economic debates from abroad.

This wasn't meant to be a criticism, as there was much to welcome about the push to better align traditional diplomacy objectives with broader economic imperatives in a trade- and investment-exposed country.

But I was reminded of the more sceptical view recently when I asked both a German diplomatic commentator and a Japanese economic official what was going on with economic diplomacy back in their hometowns.

'I only hear about that when I visit the [Australian] embassy in Berlin,' the German replied cheekily. And my Japanese friend gave me a quick refresher course in the separation of powers between the Ministry of Foreign Affairs and the Ministry of Economy, Trade and Industry, not to mention the guiding role trading companies have long played in Japanese diplomacy.

Economic diplomacy seems to have recently faded somewhat from ministerial rhetoric, as trade policy has been dealt a body blow by Donald Trump to become all about jobs, jobs and jobs. The unglamorous work of actually integrating diplomacy and the former AusAID development agency has also had to proceed.

But the formulation of a new Foreign Policy White Paper raises the question of where now for this one-time priority that promised to bring some pro-business practicality to diplomacy and provide a framework for doing away with (and saving money from) a specialist development agency.

Economic diplomacy and commercial diplomacy scored no references in the last two foreign policy white papers. More surprisingly, that was only marginally less attention than then better established alternative foreign policy concepts such as soft power and public diplomacy. Business, on the other hand scored 40-50 references; on average, a bit more attention than trade policy.

In contrast, the Australia in the Asian Century White Paper embraced public diplomacy, but ignored economic diplomacy and took a distinctly economically determinist outlook on the region.

So will economic diplomacy be supplanted in the newest white paper by the newest alternative lever of international relations, digital diplomacy? Or is it even more relevant to providing a practical, self-interested gloss to expanding the diplomatic post network, funding the development budget and providing a new defence of trade liberalisation when the anti-aid and trade political forces are drawing inspiration from Trump?

The clear political threats to aid and the confusion about the best trade deal strategy that are now afoot seem to make a strong case for providing a persuasive narrative about how diplomatic infrastructure (from cocktail parties to annual meetings of ambassadors) does play a role in facilitating inward and outward trade and investment.    

The links between selling education to foreign students and the alumni networks this can create for Australian businesses struggling to establish a foothold in difficult foreign markets needs to be explained as the stuff of the new economic diplomats.

The work done by banks on financial literacy in the Pacific with some development aid alignment is in the interests of their shareholders who are nervous about Asian risky exposures. But it is also in the national interest of slowly reducing dependence on foreign aid in poor neighbourhood communities.

The case studies being mooted as part of the White Paper education process can play a crucial role in explaining these diplomatic complexities to make the document and (more importantly) diplomatic infrastructure in general more palatable to a sceptical electorate.

However, maintaining an economic diplomacy focus in the White Paper will also require addressing two other interrelated challenges to government policymaking in this area.

First, if economic diplomacy is to be retained as a serious arm of policy, the White Paper will need to address the way economic and security analysts often talk past each other in the Australian policymaking space, with their different language and philosophies. This happens in many countries, especially at the academic level, but is arguably a more pressing issue to address in a country such as Australia, which faces obvious tensions between its longstanding main security partner in the US and its rising, likely most important economic partner in China.

This week's Perth USAsia Centre paper identifying how sales by Australian owned businesses in the US are now quadruple Australian exports to the US shows how economic and security connections will be more difficult to disentangle in the modern world. But so too does the growing reality that our international education and tourist sectors are heavily dependent on Chinese clients. This has both positive and negative implications for a holistic approach to economic diplomacy.

Second, a serious approach to economic diplomacy will involve the acceptance by traditional foreign policymakers that many more arms of government policy need to be brought into the international policymaking process to achieve the 2014 stated aims of liberalising trade, boosting economic growth, encouraging investment and helping business.

So economic diplomacy requires greater liaison at least, and probably involves some ceding of decision-making to agencies ranging from the Reserve Bank of Australia to the Foreign Investment Review Board. Tristram Sainsbury outlines the case for more hard economics in this still-evolving new approach to foreign policy in the Australian Journal of International Affairs here (pay-walled).

This won't be easy, even in the fairly integrated bureaucratic process like present in Australia, as was demonstrated by the impasse between competition theory-focussed econocrats and deal-focussed trade negotiators over intellectual property in the Trans-Pacific Partnership.

The controversies over the lease of the Port of Darwin and partial sale of Ausgrid last year underline the need for a better integration of security and investment thinking. And the development of a critical infrastructure list in response illustrates the need for multi-agency cooperation to manage the foreign relations challenge of rising Chinese investment.

So the White Paper will need to address just how much of a shift in Australia's foreign policy approach really occurred when Bishop and then-Trade Minister Andrew Robb seized the economic tiller back in 2014, just as the government's top economic ministers were stranded by a mishandled national budget.

COMMENTS

21 Mar 2017 07:07

This post is part of a debate on Australia’s foreign policy White paper 2017. Click here for other debate posts.

The debate on Section 18C of the Racial Discrimination Act is of limited interest to most people, but nonetheless reflects a divide on values in Australia. This divide has profile, given the wash from Donald Trump’s accession to the presidency in America and a shift in political attitudes in Europe.

At one end of the values spectrum sit those for whom multiculturalism is not a descriptor, but an ethos. They are progressives on gender and sexual identity and are intolerant of those who are not. They can be too ready to regard other Australians as stupid.

At the other end are those who like flags. They prefer to keep foreigners out of Australia rather than to let them in. They are most comfortable with members of the so-called Anglosphere. The wealthy in this group want to stay that way. The poorer in the group believe that others are responsible for their poverty or dispossession.

These sets of values separate those who prefer the familiar to the foreign, the realistic to the idealistic, and beliefs based on history to outlooks premised on geography. Australians are not extremists. The values of most lie somewhere between the two poles.

Of one thing be sure, as Australia this year re-examines the shape of its foreign policy in a White Paper, there will be calls for it to reflect Australian values.

And so it should. The preservation of a nation’s values is a core interest for a democracy, along with security and prosperity. It has to be. Values derive from history, beliefs and systems of governance. They define and reflect the sort of people we are and what we want of our society.

That said, given different community perspectives, in a democracy values have to be mainstream to make sense as a basis for foreign policy. The perspectives of the poles are not mainstream. Mainstream values derive from a mix of generosity, fairness and tolerance on the one hand and competitiveness and self-interest on the other.

Values play a proportionately larger part in the conceptualisation and practice of Australian foreign policy than is the case in most other Western democracies. This is because our immediate neighbours,  other than New Zealand, have different traditions and hence value structures. This puts us in a different position to, say, Canada or the Netherlands, whose primary relationships tend to be with countries whose values are not too different from their own.

How then do values work in foreign policy?

Over the longer term a democracy cannot conduct itself in a manner that is inconsistent with mainstream national values without suffering popular opprobrium. For example, when it engages militarily, a liberal democracy will be obliged to minimise harm to civilians. It will be under pressure to prevent its businesses from engaging in corrupt practices abroad.

A second concept, particularly for a middle power, is that adherence to international norms helps engender and preserve an environment in which raw power is regulated.

These norms are based on value structures to which we subscribe. If we don’t adhere to these rules, why should others? We bent the rules when we intervened in Iraq. And our unhappy management of the refugee issue has called into question our adherence to the spirit of the Refugee Convention. These actions were not unambiguous breaches of international law, but they impinge on our capacity to argue from the high ground when we criticise, for example, Chinese actions in the South China Sea.

A third issue is the degree to which we seek to impose our values on others. The history of Australia’s relations with Asian nations is replete with examples of our value- based actions impinging on our other dealings with those countries: human rights with Indonesia and China; governance with Thailand; media freedoms with Singapore and so on. Animal rights issues have been prominent in our dealings with both Japan (whales) and Indonesia (cattle). Alleged racism has also featured in our discourse with Asia (for example, with India).

Our approach on such questions is shaped by the principle noted above that a democracy has to reflect mainstream values. But there is in practice some room for flexibility on how we comment on the domestic policies of others. In the real world, our neighbours are not perfect. Nor are we. In the end this issue is one for careful judgment rather than a practitioner’s handbook.

The fourth question is how Australia should regard the juxtaposition of the United States and China in the region in a values context.

A foreign policy dichotomy is frequently presented for Australia between according overall priority to dealings with the United States on one hand and with Asia on the other. Of the Asian powers, Japan, South Korea, India and most in ASEAN want the US presence in the region to continue, not only to countervail China strategically but because they are more comfortable with US values (for all their imperfections). Hence ANZUS is a plus from their perspective.

The exception is of course China itself. China would prefer that we (as well as Japan and South Korea) had a different relationship with the United States. We have to deal with that. Some problems don’t go away.

But differences in values are an argument for improved dialogue with China, not against it. Nor should common values with the United States be used to support the case for unalloyed support for the US policies, where these policies are not in Australia’s overall interest. Political courage will be important here. That, too, is a value with which mainstream Australians like to identify.

Photo: Flickr/jennofarc

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