Sydney, 29th April 2013. CEO Boardroom Luncheon Briefing with the Secretary of Department of Foreign Affairs and Trade, Mr Peter Varghese AO.

Speech by Mr Peter Varghese, Secretary of the Department of Foreign Affairs and Trade

Let me, at the outset, acknowledge the work the Asia Society has done over many years to deepen our understanding of Asia. It is crucial to the task ahead of us to engage across the community with our relationships in the region; and to understand better the momentous changes which are occurring in Asia: changes which will have a profound impact on Australian interests.

I want to begin with some observations about the way in which Australia's perceptions of Asia have evolved and where the idea of Asia sits in our national consciousness.

We tend to think about ideas in the abstract: as phantoms without physical form. But some ideas are so potent they shape the world in which we live.

According to Isaiah Berlin, German poet Heine warned the French not to underestimate the power of ideas: "philosophical concepts nurtured in the stillness of a professor's study, wrote Heine, could destroy a civilisation". He described the words of Rousseau as the "blood-stained weapon which, in the hands of Robespierre, had destroyed the old regime".1

More prosaically, in our own context, think of the Australian Dream of the quarter-acre block. For generations, that was an idea that captured this country. Shaped the towns and cities that evolved. Gave impetus to the staccato spread of bitumen across Australia. Supported the dominion of the car.

Or the idea of Terra nullius on which the British settlement of Australia rested and which paved the way for our economic development and the creation of modern Australia.

We have others, in this country. Ideas that have stuck, and changed and shaped the way we see the world, with consequences for how we see ourselves, and how we act: the Lucky Country, the Tyranny of Distance, and so on.

But if it is true that there is nothing so powerful as an idea whose time has come, it is also the case that the best ideas adapt to the times. And that is what we see in Australia's sense of the disparate continent to our north – Asia. It is an idea which has varied and shifted as both Australia and Asia have changed.

The idea of Asia

For much of our history since the arrival of the first fleet 225 years ago, our idea of Asia was marked by a sense of strategic vulnerability.

We began as a tiny, exposed settlement on the edge of an unexplored continent (at least one not explored by Europeans), and we've never completely let go that visceral sense of vulnerability. In the 19th Century, our fears were of the great European powers – the French, the Russians. But later the focus shifted to Asia, where it linked powerfully with notions of race and culture.

Henry Parkes, working to drive Australian unification 100 years after Sydney Cove, talked about the "countless millions … who are within easy sail of these shores." 2

Alfred Deakin – perhaps our first Asia literate prime minister – writing a decade later: "From the far east and far west alike we behold menaces and contagion."3

Amid our foundation documents as a nation, not a bill of rights, but the White Australia policy, seen then as a bulwark of our national identity.

What lay behind the White Australia policy – one of the first acts of the federal parliament – if it wasn't our strategic vulnerability, melded with fears of cheap labour, woven together by the psychological appeal of Parkes's "crimson thread of kinship"?

Deakin's desire, as Prime Minister, for the Great White Fleet to visit in 1907: an appeal to the protection of a great maritime power; white in this instance referring to the colour of the ships not the nation!

Even in our selection of a location for Canberra, the prospects of naval bombardment of a national capital were a live debating point.

Billy Hughes, at the Paris Peace Conference in 1919, campaigned against a Japanese motion to include an anti-racial discrimination clause in the Charter of the League of Nations. As a result, Japan's bid to be accepted as an equal to Europeans failed.

The populate or perish idea of post-war Australia.

From Federation until the last few decades, Asia was seen as a region of poverty and instability – which, for the most part it was. Historically, we saw ourselves as a long way from our cultural roots and therefore vulnerable.

When Australia was part of the British Empire these anxieties were held in check by the strategic reassurance provided by the Empire's might. But even before the end of empire, Australia often fretted about how we would defend ourselves, perched at the edge of Asia and with limited military capability of our own.

During the Cold War, the idea of communism – the anti-democratic authoritarianism and violence that it represented in the West – had a palpable impact on the way Australians saw the world and particularly Asia.

But there is a paradox here: Australia's psychological anxiety sits side by side with a strategic reality which ought to be fundamentally reassuring.

Yes – we have faced real, not imagined, threats. The Japanese advance during the Second World War, the post-war poverty of Asia as a breeding ground for extremism and instability, all had clear, direct security implications for Australia.

Others have seemed real, but maybe were not what we thought they were. The domino theory of the approach of communism was a driver of national politics from the 1950s to the early 1970s. But in hindsight, the wave of post-colonial nationalism through Asia and not communism was the more powerful driver of revolution.

In the 1950s and 1960s Australian governments argued that the People's Republic of China was a fundamental threat to Australian security and a source of destabilisation in Southeast Asia.

Today those fears look hopelessly exaggerated, but in the context of the Cold War they were far from ridiculous. And since then we have developed a more nuanced sense of our strategic circumstances. And a better appreciation of our strategic strengths.

Our continental geography, for example, gives us strategic depth. We have a security alliance with the world's strongest military power. And importantly, these days Asia is more a region of opportunity than of instability.

The opportunity of Asia

Historically, Australia conceptualised its national defence as finding security from Asia.

That way of thinking about Australian security became obsolete in the dying days of the Cold War.

From that time onward, we have understood that Australia's security lies as part of Asia, not in keeping our distance. And since then Australian security policy has been more open to the principles of common security (that security is best achieved with others, not against them) and the broader concept of cooperative security, although buttressed throughout by our alliance with the United States.

We now recognise the opportunities that abound in our region, and the balance of opportunity and risk looks very different today than it did in the past. This is the philosophy underpinning the Australia in the Asian Century White Paper. In Australia's evolving engagement with Asia, the White Paper is an important new chapter, but it's not a completely new book.

There is today not just a sharper sense of the opportunities for Australia in Asia but also of the urgency that we build a comprehensive relationship with Asia. And that we use this window of transition in the region – as the shifts in economic weight reshape the strategic landscape – to build habits of cooperation and inclusive regional institutions which can help ensure that the transition is a stable one.

This conviction and policy approach has manifested itself through our long-held desire to uphold international order in our region by building institutions that promote growth and stability and set the rules and practices for peaceful coexistence and cooperation.

It has sat behind the drive – articulated through APEC and our regional engagement with ASEAN – to build economic prosperity in our region. Behind the push for the ASEAN Regional Forum, the first security component of our regional architecture. Behind our strong support for the East Asia Summit, and later, for the inclusion in the EAS of the United States and Russia, to ensure that we have the right membership for a forum which we see as important for managing the challenges to the security, stability, prosperity and well-being of our region. And behind our support for the ASEAN Defence Ministers Plus meetings.

Against this background, I would like to give you a sense of the size of the canvass on which we see Australia's security future being painted – how our idea of Asia is continuing to evolve. And I'd like to talk about the big security challenges facing our region.

Strategic framework: the Indo-Pacific

The White Paper on the Asian Century forms the backdrop to these two issues. The term Asian century is a useful shorthand to describe the re-emergence of Asia as a region of first order economic and strategic significance in its own right. It does not mean that this century will belong to any one country or region. Economic weight and strategic influence are becoming more dispersed. Some of the poles of power this century will be outside Asia. But the size of Asia's population means that it is likely to be unique in the scale of its economic growth.

The industrial revolution leap-frogged population as a measure of power. Today, population is back in the mix and the combination of a large population and a modernising economy is bringing Asia back to the preeminent place it had in the global economy until the end of the eighteenth century.

Our post war strategic and economic interests accustomed us to thinking about Asia as predominantly the large and expanding economies of Northeast Asia, as well as our closer neighbours in Southeast Asia.

But we need to expand our concept of "Asia". A new Indo-Pacific strategic arc is beginning to emerge, extending from India through Southeast Asia to Northeast Asia, including the sea lines of communication on which the region depends.

The strategic importance of this broader region is being forged by a range of factors, including the growing impact of the Indian economy. The region also contains some of the world's most active and strategically significant trade routes. While the Indo-Pacific is still evolving as a strategic system, over time, Australia's security environment will be significantly influenced by how this broader region develops.

This wider definition returns India to Asia's strategic matrix. It embraces great powers such as China, key players such as Japan – a lynchpin among our regional relationships – Indonesia and South Korea as well as the importance of individual ASEAN countries and the collective economic and strategic weight of an evolving ASEAN community. And it recognises the strategically crucial role that the US plays in the stability of the region.

The Indo-Pacific also helps capture a sense of our own place in Asia.

Australia, after all, straddles both oceans.

Geopolitically, we have interests and affinities in the diverse sub-regions around us, from the South Pacific to South Asia, and from Southeast Asia to Northeast Asia.

With our distinct national culture and historical experience we are at home in a region that has a profusion of distinct national cultures and histories. We have close relationships with the major powers of the region as well as the smallest of the developing island states.

One of my distinguished predecessors once described Australia's ambition towards Asia as to be the "odd man in". Well, today we look less odd and certainly more in.

Challenges for the international order

With that framework in mind, what are the big security challenges we face in Asia?

Undoubtedly, in our time, our biggest task is unfurling the strategic implications of the economic transformation taking place. This is a challenge not only to individual countries, but also to international order itself. For the first time in centuries, we face an Asian region in which a clutch of powers are simultaneously strong: China, Japan, India, Indonesia, and the Republic of Korea among others.

The United States has, of course, been the crucial security player in the Indo-Pacific. Its commitment to maintaining strategic stability from the Persian Gulf to the western Pacific has underpinned the security and prosperity of the Indo-Pacific region for seven decades. It still does. And let us not forget that without this long period of strategic stability there would have been no Asian economic miracle. For an ally like Australia, it will be important that the United States continues to maintain its presence in the region.

And the capacity of the United States to renew and reinvent itself remains remarkable. You only have to look at the shale gas revolution in the US and its impact on their economic and strategic outlook, to be reminded of the intense power of their capacity for reinvention. Or the prospects of a free trade agreement with Europe – to remember that other narratives are possible, that ideas of decline can pass – as they have so many times before.

But more and more we have to deal with the management of relationships in which economic interdependence sits on top of deeply entrenched strategic rivalry.

This is what you get when you merge the modern economic footprint of globalisation with a strategic map shaped by centuries of rivalry and competition. It has created a dynamic where economic cooperation and strategic competition live side by side.

The strategic challenge of our time is the co-existence of relationships of competition and cooperation; of interdependence and rivalry.

Now, economic interdependence is unquestionably a strategic stabiliser. It raises the threshold of conflict. But it does not always trump strategic rivalry. And it would be naive to think that it is a strategic guarantor.

Countries that trade together can and have gone to war – but please do not take that as a prediction. And it is always worth remembering that the last golden age of economic interdependence – the second half of the nineteenth century – ended in the bitter tears of World War I.

In that context, we cannot afford – if we ever could – to look at economic and strategic questions in isolation.

The rise of countries like China – and Brazil, India and Indonesia – goes to the heart of our international system.

For the peace and prosperity of the past 70 years, we owe some debt to the happy fact that the strongest power of the post-war period saw active support for the development of a global system of international rules and norms as consistent with its national interest; indeed as providing the best framework within which to achieve its national objectives.

With their very different national histories, including painful colonial periods for countries such as China, India, and Indonesia, we cannot assume that the emerging powers will believe that the same active support for global public goods is as high a priority or indeed as consistent with their own national interest.

They might perceive parts of the current international order as inconsistent with their national interest, or, at least, take the view that it does not deserve the same level of active support and leadership that the US gave in the post-war period.

Emerging powers such as China have every right to seek greater strategic influence to match their economic weight.

But the extent to which this can be peacefully accommodated will turn ultimately on both the pattern of China's international behaviour and the extent to which the existing international order intelligently finds more space for China.

The American academic John Ikenberry has asked: "Will China seek to integrate into the existing American-led international order or seek to transform it? Does the rise of China – and Asia more generally – signal the emergence of a rival non-Western way of organising the international system or simply the arrival of new stakeholders seeking greater authority and leadership within the existing international order? Or, in other words, will China and other rising states embrace the core features of the liberal international order or seek new rules and institutions?" 4

This might be too stark a dichotomy but it is a fundamental question for all of us. More likely, China will neither unreservedly accept nor seek to overthrow the current order. Rather, China will try to maximise the benefits of interdependence by reshaping patterns of economic activity to more suit its needs. This is what all countries try to do – and what major powers have more scope to do.

This century, the biggest challenge faced in the Indo-Pacific region isn't the rise of any one power. Rather it is the way in which major powers manage the complex blend of interdependence and competition which lie at the heart of their bilateral relationships. Ambiguous relationships of both competition and cooperation are the new norm.

And there is another paradox inherent in the rise of the emerging powers. They offer such hope for human progress, but their dynamism is also matched by their fragility and their need for reform. Success carries its own challenges: like the threat of nationalism which, if allowed to precipitate conflict, could undo the gains of prosperity.

There is no large Asian economy which will not face serious challenges.

In the complex regional order which is evolving, our security lies not in containment, nor 19th Century balance of power approaches. It lies in the effective management of major power relationships. And it ultimately rests on the major powers accepting that the benefits of a strong economy joined at the hip to the global economy outweigh the risks of pursuing strategic competition to the point of threatening regional stability. So we have a lot riding on sensible leadership making rational calculations of where the best interests of their countries lie.

Our future also lies in building and reforming a robust global and regional order that allows for the resolution of potential conflicts between different states.

Something approaching the "dynamic equilibrium" proposed by Indonesia, in which bodies like ASEAN and the EAS help build trust and habits of cooperation in our region.

Southeast Asia

Southeast Asia deserves a special mention. Southeast Asia occupies a geo-strategically pivotal position between the Pacific and Indian Oceans. Its acts as the fulcrum for the rapidly intensifying exchange of goods, people and ideas between East, West and South Asia. The region straddles the Malacca Strait, one of the world's busiest shipping channels and the second most popular oil tanker route.

Southeast Asia is a central element of the Indo-Pacific region, and Australia's future security and prosperity will depend heavily on the region remaining peaceful, secure, stable and prosperous.

There is a risk that Southeast Asia could become an arena of US-China strategic competition, as different countries weigh their growing economic links with China with the critically important presence of the US.

This could in turn put at risk the solidarity of ASEAN and its effectiveness as one of the fundamental institutional forces for maintaining the peace, stability and prosperity of the region.

One of the primary original purposes of ASEAN was to combine the strength of Southeast Asian nations into a community of Southeast Asian states that could act collectively to resist the destabilising Cold War interventions of the major external powers in their affairs. The very symbol of ASEAN expresses the Indonesian saying that "a single stick can easily be broken in half, but a bundle of sticks will not be broken".

As Thai Foreign Minister and one of ASEAN's founding fathers Thanat Khoman argued in 1966: [If Southeast Asian nations] "work … closely together and present … a solid front to anyone daring to entertain evil designs against them … not only will each and every one of them be spared from destruction, but the region as a whole will emerge as a strong and free community, capable of serving its own interests as well as the world at large".5

And as Alice Ba has written:

If today we see in Southeast Asia a coherent regional entity – as opposed to what one 1954 observer characterized as "a place on the globe where certain groups of peoples, holding little in common, live contiguously with one another" – it is largely due to the existence of ASEAN, whose activities and ideas about Southeast Asia have done much to give both form and substance to this once ambiguous region. 6
A Southeast Asia in which ASEAN's unity was weakened would not be in the interests of regional stability.

But I think we have grounds to be more positive than that. The truth is Australia's security and prosperity has benefitted immensely from the fact that the original ASEAN states have been at peace for almost half a century, and the region as a whole – since the incorporation of the Indochinese states and Myanmar into ASEAN – for nearly quarter of a century.

Australia therefore has a strong interest in ASEAN continuing to advance its project to develop a strong, cohesive community of states bound by common purposes, interests and values.

Over the past decade, we have seen progress with the establishment of an ASEAN Economic Community and ASEAN's external economic engagement with other Asian countries through its concluded Free Trade Agreements with China, India, Japan, Korea and Australia-New Zealand. All 16 countries are now engaged in negotiating a new Regional Comprehensive Economic Partnership.

And through cooperation in the EAS, as well as bilaterally, we have an opportunity to expand more broadly the sort of cooperation we have seen in Southeast Asia through ASEAN.

Australia's security

So where does all this leave Australia?

Managing change is the test of foreign policy. And shaping the future its ultimate ambition. And on both we should be optimistic, not least because our idea of Asia is growing and adapting to suit the times.

It is clear that we are at a moment in history when the tectonic plates are shifting. Power is shifting from west to east. McKinsey's has even tried to map it – creating global maps that show the world's economic centre of gravity has moved faster in the past decade than any other time in history.

Between 1940 and 2000, that notional economic centre of gravity – calculated from national GDPs – hovered somewhere over the north Atlantic. But by 2010 it had moved sharply onto northern Russia, and by 2025 will be swinging even more sharply down towards Central Asia and China.

Times of transition challenge policy. We face trends we can identify but only dimly project. We can never know the end point – challenging us to think creatively about how we manage change.

Our region is one that is characterised by interdependence. Every country in our region has a big incentive not to get into conflict. The risk of miscalculation is there and real. But both the United States and China know how critical their bilateral relationship is – which is why they invest hugely in it. ASEAN states are fully aware of the links between their stability and their prosperity.

And Australia is well positioned to take advantage of the large changes around us. We are close to the economic centre of gravity in the Indo-Pacific. Our economy is Asia oriented. There is a structural complementarity between the demands of a growing Asia and Australia's capacity to supply. We have seen it strongly in the resources sector. We will see it also in the agricultural and services sector as patterns of Asian urbanisation and growing middle classes, measured in their billions, create new demand for goods and services which Australia should be well positioned to supply.

Add to this our strengths in human resources and governance; the appeal of an open economy, a strong tertiary education sector and a multicultural community, and Australians should be confident about our prospects in the Asian century.

Our region is unquestionably moving into a new phase in its history. It will not be without risks. And success will turn as much on how we position and prepare ourselves as on the scale of the opportunities. But if we play our cards right, this could be a century of great promise for Australia.
 

1 Isaiah Berlin, "Liberty", edited by Henry Hardy, Oxford University Press, 2005

2 Anthony Burke, "Fear of Security: Australia's Invasion Anxiety", Cambridge University Press, 2008

3 Anthony Burke, "Fear of Security: Australia's Invasion Anxiety", Cambridge University Press, 2008

4 David Shambaugh, Tangled Titans, Rowman & Littlefield Publishers, 2012

5 Alice Ba, "[Re]Negotiating East and Southeast Asia," Stanford University Press 2009

6 Alice Ba, "[Re]Negotiating East and Southeast Asia", Stanford University Press 2009