2017 Griffith Asia Lecture by Mr Peter Varghese AO, Chancellor, The University of Queensland, Brisbane, 6 September 2017


I would like to begin by commending the Griffith Asia Centre for the sustained contribution it has made to our understanding of Asia and Australia’s relationships in the region. I thank the Centre for the invitation to deliver this second Griffith Asia Lecture. I am humbled to be following former Prime Minister John Howard, who delivered the inaugural lecture last year, and for whom I had the privilege to work over many years. His lecture was indeed a master class in Australia and Asia.

Asia has been central to Australian foreign policy for a long time and it has for the most part been a bipartisan commitment. It began seriously in the nineteen forties driven largely by strategic concerns. It has since evolved, as Asia itself has evolved, with the economic focus a much larger part of Australia’s Asia story.

Asia and an independent Australian foreign policy

Asia and the South Pacific were in many ways the gateway to an independent Australian foreign policy. Prior to the forties Australia saw the world largely through the prism of the British Empire. The empire’s interests were ours even if the reverse was not always the case. Occasionally there were glimpses of an independent mindset – Deakin’s invitation to the US Great White Fleet, Billy Hughes at Versailles- and a sense of distinctive Australian interests is evident well before the forties. But until the forties Australia had neither the instinct nor arguably the need for an independent foreign policy.

Some lament that this remains the case. But those who indulge in the phoney debate about the need for an independent Australian foreign policy should pay more attention to the historical drivers of Australia’s Asia policy. If they did they would recognise a fairly consistent pattern of seeing Asia through the prism of Australian national interests. And where Australian policy coincided with first British and then American policy in the post war period it was not imitation or dependence but shared interests that shaped the coincidence.

There is nothing derivative about the approach Australia has taken to Asia. The images of Asia in our historical imagination: Asia as alien, Asia as a security threat, Asia as an economic opportunity, Asia as the fulcrum of our core strategic and economic interests, all were conjured up from a distinctively Australian imagination. You can query its correctness but not its authenticity.

Those who insist that Australia has no independent foreign policy usually mean that we have the wrong foreign policy. Independence is measured by our distance from the United States. That Australia could make an independent, much less an informed, judgement that our national interests are served by a close alliance with the United States is dismissed as sycophancy and a stubborn refusal to stand on our own two feet.

The cheerleaders of this approach tend also to present close ties to Asia as a conceptual alternative to an alliance with the US. Australia’s future, they argue, is in Asia and our Asian interests are best served by not been seen as too close to the US. Theirs is not so much a call to sever ties with the US as to play down the relationship and certainly not to hold hands in public.

But such a furtive approach has an adolescent quality to it. A mature foreign policy should not be embarrassed about our alliance with the US or be shy about articulating why that alliance continues to serve our interests.

It is true that many Australian governments have struggled with whether and how to disagree with the US. We have yet to fully learn when we can say “no” and when we must say “yes” to our ally. Too often we have erred on the side of the latter. And too often we have seen the alliance as an insurance policy to which we need to make regular payments of acquiescence.

One thing however that we should not fret about is how compatible the alliance is with our interests in Asia.

On the contrary, our engagement with Asia and our alliance with the US are best understood as two parts of an integrated policy. One reinforces the other. We are an ally of the US primarily because it serves our strategic interests to be an ally of the world’s strongest power with whom we also share the values of a liberal democracy. But we have never seen the alliance in purely bilateral terms.

The US has been a central player in the unfolding Asian growth story of the last seven decades, as a large market for Asian exports, through the stability which the US strategic commitment in Asia underpinned, and the shaping role that the US has played in a rules based international order including a global trading system from which Asia has been a major beneficiary. There would simply have been no Asian growth story without the US and that is why it makes no sense for us to see the alliance as a barrier to the priority we must rightly give to Asia in our foreign policy.

Today, however, the central role of the US is under pressure and we cannot assume that the patterns of the past in Asia will continue. This is something which goes much deeper than the dysfunction of the Trump presidency. What we are witnessing in Asia today is a shifting of the tectonic plates. As economic weight is rearranged it would be naïve to believe that the strategic map will stay the same. This is the theme I wish to focus on tonight.

The fading of US strategic predominance

The meta challenge of Australian foreign policy over the medium term is how to maximise economic opportunity and minimise strategic risk as this larger rearrangement of economic and strategic weight works its way through the Asian – or as I prefer to call it – the Indo Pacific region.

This involves a number of complicated judgements about how change will unfold and just what the strategic settling point of the Indo Pacific will be. How should Australia position itself within this complicated and shifting dynamic?

A defining feature of the risks we face in Asia is the tension between economic interdependence and strategic competition. Asia will be a test bed of whether this tension can be effectively managed.

Economic space is infinitely flexible. Strategic space tends to be much less so. The challenge of statecraft and leadership is to ensure that one does not derail the other. No where is that challenge greater than in the management of the US-China relationship.

Central to how the US-China relationship evolves is how the region responds to the inevitable narrowing of US strategic predominance. What does Australia do in a world where US strategic predominance is no longer the lynchpin of regional security?

Not everyone is prepared to acknowledge that this is where we are heading. Some still hope for the best. This is not as delusional as it may sound. The US political system is not just polarised but verging on the dysfunctional. But while the US is losing strategic predominance it has not yet actually lost it and who can say for certain that it is inevitable? After all the US has an extraordinary capacity for reinvention and it still has a huge lead in the industries of the future from aerospace to biotechnology to artificial intelligence. It also has an economy of great depth and remarkable flexibility.

And who knows what will happen in China which is the largest challenger to US predominance? The next thirty years may look very different for China than the last thirty which saw both political stability and the most dramatic economic development in history. So why not take a punt on the US reversing its slipping margin of predominance, especially since there is no question that in an ideal world the continuance of US strategic predominance is very much in Australia’s interest?

But wishful thinking, even if it has some foundation, is no basis for sound policy. Multi-polarity in Asia is only going to get stronger. China has already eclipsed the US as the world’s largest economy measured by purchasing power parity and will likely overtake the US measured by market exchange rates in the not too distant future. This means that in the long term the security of the region cannot rely on the maintenance of US strategic predominance. The US will likely remain the world’s strongest power for decades to come. But this does not mean that it will also remain the most influential power in the Indo Pacific.

So where do we go from here?

China’s answer appears to be that it should replace the US as the predominant power in Asia. That is not an ambition you will find in any official Chinese government statement but it is hard to avoid the conclusion that it is the long term objective of Chinese policy.

It is also a realisable objective. The US focus is global and that dilutes the attention it can pay to particular regions. China too has global interests but its geopolitical priority is squarely in Asia. Its geography – as a resident Asian power – and the intensity of its economic links to the countries of Asia give it an advantage over the US in Asia.

China is a country and a civilisation which understands power and its sense of place has been shaped by the many centuries in which it was the Middle Kingdom. That pull of history is likely to play an important role in the way in which China relates to regional states.

China’s leaders are acutely conscious of the many challenges they face. They are currently at the start of a profound transition in their economic model towards more market based and consumption driven growth with less emphasis on exports and fixed investment.

The challenges posed by this transition are huge and we underestimate them at our peril. It is a high wire act which seeks both to preserve the monopoly of power of the Chinese communist party while simultaneously allowing the market to determine the allocation of resources. There is no certainty about how this will end.

We all however have a stake in the success of that transition. Abrupt shifts in China’s strategic policies, especially flowing from an economic crisis, would be highly destabilising. No one gains if China fails.

China will ultimately define its own strategic settling point. It will not be forced into someone else’s view of what it should do or become. Nor is it realistic to expect that the US and China can negotiate some grand bargain formally to share power in Asia, although share they must. The process of adjusting to shifting power balances in a multipolar Asia will be incremental and organic.

China’s behaviour is likely to be a mix of many elements. It will be a responsible stakeholder where its interests are served. It will not be a classic revisionist power because China has been too much a beneficiary of the existing system to want to completely overturn it. But there are elements of the system that China will want to see replaced. It will also look to have a greater say in existing institutions and to craft new institutions and arrangements which place it at the centre in a pattern reminiscent of the Middle Kingdom. What is clear is that China will not accept a regional and global order cast in the image of the US.

China’s aspiration to strategic predominance does not make it an enemy and it would be unwise to treat it as one. Nor does it negate the importance of engaging with China and working with it wherever we can. It is very much in Australia’s interests to have a close relationship with China in as many areas and at as many levels as possible. Such a relationship, anchored in mutual interest and mutual respect, serves both our strategic and economic interests. It also makes it easier to work with China on broader regional issues.

There is no sensible alternative to engaging China. Containing China, in the way the West sought to contain the Soviet Union, is a policy dead end. China is too enmeshed in the international system and too important to our region to be contained.

Nor is China an expansionist power, although it has an expansive view of what is historical Chinese territory. It is not in search of an empire. For China, strategic predominance means a return to the Middle Kingdom where regional states paid due respect to China’s interests and were careful not to act in any way which displeased China.

If China were a liberal democracy, Australia should be able to live with such an outcome. It would certainly remove the unease we would otherwise feel if an authoritarian state were to displace a liberal democracy as the major shaper of our strategic environment. But China shows no interest in becoming a liberal democracy. Indeed the Chinese leadership is absolutely determined that the monopoly of the party should prevail.

So if the alternative to US strategic predominance is Chinese strategic predominance then it is not an attractive one for Australia for as long as China remains an authoritarian state.

A third option is for the region to shape a balance of power which finds room for China but which also favours the region’s democracies. This, I would argue, is a better option for Australia, not least because it brings our strategic interests and our values into closer alignment.

The concept of a balance of power has lost its appeal to many scholars and practitioners of international relations. But in my view it still matters. And I take some comfort that the late Lee Kwan Yew, as shrewd an observer of our strategic environment as any, understood both the importance of a balance in Asia and also the need to think about it more broadly than just a military balance. As Lee observed: “In the old concept, balance of power meant largely military power. In today’s terms, it is a combination of economic and military, and I think the economic outweighs the military”.

Already a de facto balance along these lines is in the making through the shared desire of the US, India, Japan and others to balance China. Each has its own geopolitical and historical reasons for doing so, of which the non democratic character of China is by no means the primary driver. Moreover, this is not a classic balance of power grouping. It is an organic, not an orchestrated arrangement.

It is also an evolving balance on both sides.

Russia, for now, lines up with China. They both share an interest in clipping the wings of the US. Neither support a liberal international order. For the most part theirs is an opportunistic partnership masking a fundamental strategic suspicion of each other. But it is a partnership with a shelf life at least as long as their authoritarian systems.

Where Korea lines up in the longer term in the strategic balance of Asia is an open question. The ROK is an ally of the US. But what would be the strategic disposition of a united Korea? Would it lean towards China or the US? Or, more likely, would it seek an independent path with or without nuclear weapons? A united Korea is likely to be a democracy and this suggests it will at least lean towards balancing China. But no one knows which of these options will eventuate which is one reason why China does not want to push the North Korean regime to the point of collapse.

China is not comfortable with a nuclear armed North Korea. But it wants even less to lose a buffer state or to see a collapsed regime on its doorstep. It probably judges that North Korea can be deterred from first use of its nuclear weapons. After all the driver of North Korea’s nuclear program is the preservation of its dynastic regime and nothing would more clearly guarantee the toppling of that regime than a North Korean nuclear first strike whether aimed at its neighbours or the United States.

North Korea may be a peculiar state but it is not an irrational state. Its leadership’s survival strategy is now in its third generation. A regime preoccupied with survival is capable of being deterred.

To return to the strategic balance in Asia, China does not seek allies. But it has other ways of securing influence, most notably the gravitational pull of economic opportunity. This is already working its way through South East Asia. ASEAN as a grouping may remain on the sidelines of the strategic balance. But more and more individual ASEAN nations are being pulled into China’s orbit: not with enthusiasm or conviction but because they see that the economic cost of opposing China’s agenda is too high. Even Vietnam, which has a long and fraught history with China, will be constrained in how far it can go in lending support to balancing China.

So the long held hope that a non-aligned ASEAN would still lean towards the US and the west is now looking less likely. The US is doing little to change this and its TPP withdrawal only makes the problem worse. Japan and India, on the other hand, understand the stakes but their efforts to balance Chinese influence in South East Asia may not be enough.

Indonesia is the strategic pace setter of ASEAN. Its current leadership sees the world through an economic prism and that favours China more than it does the US. This may not be permanent but nor is it likely to change any time soon. So where to position Indonesia in the evolving geo strategic balance of Asia is an open question. That has large consequences for Australia because South East Asia is at the epicentre of our strategic interests.

The two Asian powers with an unambiguous commitment to balancing China are Japan and India. For each, China is the reference point of their strategic compass. Geography and history pull them to the other side of the China balance. This creates common strategic ground between them and both are moving quickly to build on that foundation.

Japan is no longer willing to contract out its strategic positioning to the US. It is carving out a more independent role determined to use its economic heft to leverage its strategic interests and more willing to push out the boundaries of its constitutional limits on the projection of power.

None of this should be seen as a precursor to Japan abandoning its alliance with the US. Indeed the larger China looms in the consciousness of Japan, the more persuaded it will remain of the value of the US alliance both as a security guarantor and as a balancer of China. If a break in that alliance comes it will be only because Japan has lost faith in the US commitment to Japan’s security and not even the fickleness of President Trump is likely to lead Japan to that grim conclusion.

India’s starting point is different to Japan’s but both end up with very similar conclusions about the perils of Chinese strategic predominance in Asia. For India strategic autonomy is the fundamental axis around which Indian strategic policy turns. India is not about to become an ally of the US or anyone else.

But India does see much more space to expand its strategic relationships with the west while hanging on to its strategic freedom of manoeuvre.

The India-China relationship will have elements of both economic cooperation and strategic competition, not unlike the way in which those two elements thread their way through China’s relationships with the US and Japan.

India will want to maximise its economic relationship with China. But it will also be opposed to any move by China to become the predominant power in the Indo Pacific. And it will be particularly concerned to ensure that China’s expanding interest in the Indian Ocean is not given free reign.

Australia, Japan and India approach China from both different and common perspectives. We share an unease at the prospect of Chinese predominance. But the dynamics of our respective relationships with China are different. Australia and Japan are allies of the United States. Unlike Japan and India, China is by far our largest trading partner, and we have in Australia a large Chinese diaspora. And again, unlike Japan and India, Australia has no territorial dispute with China and nor have we ever gone to war with China, unless you count the participation of Australians in putting down the Boxer rebellion.

The key player in the organic balancing of China is of course the United States. Without the US there can be no effective balance. The Trump presidency has complicated the situation but it does not fundamentally change it. Just as Australians draw a mature distinction between the persona of Trump and the alliance with the US, so also are US alliances in Asia likely to outlive the dysfunction of the Trump administration. I say “likely” because no one can be certain about anything relating to President Trump’s policy positions. We can only hope that the strength of interests which underpin the US commitment to the region will outlive the weakness in character of its current President.

Some have suggested that the best way for the US to deal with the declining margin of its strategic predominance is to move towards the role of an offshore balancer. Under this arrangement the US would no longer see itself as a resident power in Asia but rather as an offshore balancer which would only intervene strategically to protect its vital interests or if the balance in the region were to move in a direction which significantly cuts across US interests.

That would be a second best outcome for Australia. An offshore balancer would make for a more distant US at a time when we need the US to be active in the region. It is very much in our interests for the US, as an ally, a liberal democracy and as the most powerful strategic player in Asia, to be a resident shaper of the Asian strategic environment, not an offshore balancer of last resort.

It is important that we present this emerging balance of power as a means of ensuring a measure of stability at a time of churn in our strategic environment. China will probably see it as a form of containment which, for the reasons I have already outlined, it is not and should never become.

That is why a capital “A” alliance of democracies would be a bad idea because it would create a structural fault line in Asia and further harden China’s position. Avoiding an alliance is also a better fit with the strategic preferences of countries such as India and Indonesia, neither of which wish to be allies of the US or any other power. An organic balance is more in keeping with the strategic grain of the Indo Pacific than a formal arrangement.

Australia can contribute to this balance by strengthening its strategic engagement with each of the Asian democracies, with priority given to Japan, India and Indonesia. We should do this both bilaterally and through stronger trilateral arrangements such as Australia-US-Japan, Australia-Japan-India; Australia-Indonesia-Japan; and Australia-US-Indonesia.

We should also retain an open mind about reviving the quadrilateral involving the US, Japan, India and Australia. This was abandoned by the Rudd government because of Chinese concerns but one principle we need to be firm on is not to allow any country a right of veto over our strategic policy. The quadrilateral should not be a military arrangement and it should certainly not be presented as “aimed” at China. But its revival would send a signal to China about the strategic congruence among these four democracies as well as the enduring importance of values in our strategic calculations.

Australia should also persevere with the hard slog of building inclusive regional institutions of which the East Asia Summit is the most important. This signals that while we have close strategic relations with the democracies of the region we also want to work with China wherever we can to build institutions which can buttress strategic stability in the Indo Pacific. And that these institutions should promote fundamental principles such as respect for sovereignty, the peaceful resolution of disputes and abiding by international law. These are the foundation stones on which the strategic culture of the Indo Pacific should rest.

China tends to see some of these principles as aimed at it but ultimately they also serve the long term interests of China. After all, China has been a beneficiary of the rule of trade law through its membership of the WTO. It has been a beneficiary of the UN charter through its permanent seat on the Security Council. As a major power China should see international law and international norms as an important part of the international system in which it has every right to seek greater influence to match its economic and strategic weight.

Realists tend to query the emphasis on values in our strategic choices as soft headed. But while foreign policy should always be anchored in interests it must not be indifferent to values. Australia’s liberal democratic, secular and multicultural character is fundamental to our sense of self. Its preservation is as much of an Australian national interest as our security and prosperity. Giving expression to our values should be seen as a natural part of our international relations.

It is true that sometimes the defence of values can be in tension with the advancement of interests. Here, as elsewhere in foreign policy, the challenge is to strike the right balance. But that balance should be about how best to be true to our core values rather than simply trading values for interests. And we need to start from the premise that values are not there to be imposed on others. They should define who we are, not what we insist others become.

Australia’s values are the values of an open society. We believe that freedom is best advanced when we nurture an environment where ideas can flourish, where contending philosophies have to make their case in the marketplace of ideas and where those who govern are held accountable to the governed.

Some will argue that as noble as these values may be, they are largely the lived experience of western democracies and as such hold little meaning for those — and they are the vast majority — outside that cultural and historical tradition.

It has been easy for Australia to assert our core values as universal values because from the time of British settlement, Australia has been closely aligned, culturally and intellectually, with the dominant global powers. We were part of the system which wrote the rules; which authored the international conventions on human rights and which gave universal reach to our founding principles.

We must also recognise that the values of liberal democracy evolved gradually in the west. The journey from the divine right of kings through to one person one vote was long and difficult. For most of human history the values which Australians today think of as self-evident truths — the rule of law, the accountability of the government to the people, freedom of speech and assembly and a free media — were anything but universal.

Yet it seems to me quite unsatisfactory to consign our most cherished ideals to the prosaic logic of time and place. Yes, we are all products of our history. But surely that does not mean that our history is incapable of producing a universal truth.

In our foreign policy we should be quietly confident about our values because the best way to engage the world is with a clear sense of who we are and what we believe in.

Conclusion

Let me conclude with these observations.

We are at a moment in history when tectonic plates are shifting. Power is moving from west to east. Asia will see for the first time in centuries a clutch of powers which are simultaneously strong. New patterns of economic cooperation and interdependence are being built on long-standing strategic fault lines.

Our strategic environment is more uncertain than at any time since the start of the cold war and the unpredictable variables more numerous than at any time in our modern history. We cannot be certain of either the strategic or economic trajectory of our region and beyond.

Navigating this terrain will require a clear eyed view of our national interests, a forensic revisiting of the assumptions which have framed our foreign policy since the end of the cold war, a recognition that the era of US strategic predominance is drawing to a close and the imagination and diplomatic skills and resources to help shape a new balance of power in the Indo Pacific.

We should not be daunted by the scale of these challenges because we bring to them many assets as a nation and a community.

Our history and our geography have combined to instil in Australia a global perspective. Ours is a society shaped by the values and institutions of the west, intimately connected to Asia, with economic interests across all regions and a community which has found unity in the principles of a multicultural liberal democracy.

Australia does not have the power to bully or buy its way in the world. We have to deal with the world as it is. It is not in our interest to see a Manichean world split between the US and China. But neither can we ignore the fact that, for all the benefits it brings to Australia, the economic rise of China also shifts the strategic currents of the region.

We do not have to make a binary choice between the US and China, at least not unless one insists that we must. But we do need a sophisticated strategy for dealing honestly with the strategic uncertainties which lie ahead. And at the heart of that strategy must be a stable balance in our region which protects our interests and our values.

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