"North Asia On the Move: Australian Perspectives"

The Honorable Alexander Downer, M.P.
Minister for Foreign Affairs, Australia

Hong Kong, November 17, 2000

Hong Kong is a major trading partner for Australia, as it is for most countries in the Asia/Pacific region. We have a vested interest, quite distinct from solely a philosophical interest, in the success of the one country/two systems formula. Australia has watched very closely since the handover, at the end of June 1997, how the one country/two systems has been working. Although, there have been controversies from time to time, our overall assessment is that this is an experiment and an arrangement that has been working very well. And long may it continue to succeed, consistent with the joint declaration and, in particular, the Basic Law.

Australia is heavily engaged in Northeast Asia, in a number of different ways and for good reason, which is what I am here to address to you today. Our involvement with Northeast Asia goes back to the very foundations of modern Australia, where shipping came from, particularly that from China down to Australia. Migrants started to come to Australia from China right from the very beginning of settlement of Australia and, as time has gone on, the economic links between Australia and Northeast Asia have grown to an extraordinary degree. Many Australians do not realize that about 40% of our exports now go to Northeast Asia. Most of Northeast Asia - in fact all of the countries of Northeast Asia, with the exception of North Korea - are in our top ten export markets. Therefore, this is a part of the world that economically is of great importance to us.

Northeast Asia is also a great source of investment into our country and there are many Australian companies that have invested and are active in this region. We have seen our neighbours in Southeast Asia go through a very difficult period and there are still many problems to be resolved, political and economic, in that region. We have been trying to help our neighbours, in particular Indonesia, address those problems and we hope that soon they will come out of this difficult period.

In the meantime, there have been a number of promising developments in Northeast Asia. First and foremost, we believe that this region needs to be more secure than historically it has been. I do not believe anyone would disagree with that proposition. But, remember what I said about the economic importance of the region to Australia. If there is a breakdown in security in Northeast Asia, on the Korean Peninsula, between Mainland China and Taiwan, or elsewhere, the consequences, for us economically -- in terms of jobs in Australia, incomes for Australians and our national GDP -- would be very severe. Moreover, I do not believe many people understand this, as clearly as perhaps they should in our own country. For us, what is important is that the security environment remains stable in Northeast Asia

Considering the region's security, I mentioned some areas of concern that we have had for a very long time. The Korean Peninsula. There were 17,000 Australian soldiers involved in the Korean War between 1950 and 1953, and the tensions on the Korean Peninsula have remained very severe. The concerns we have had about cross-straits relations between the mainland and Taiwan which, although an internal matter for China, has nevertheless enormous consequences for the rest of the Asia/Pacific region should things deteriorate in the worse possible way. There have been tensions in the South China Sea as well. There are still unresolved competing claims in that part of the world.

One of the factors, in our view, which has stabilized this difficult security environment has been the continuing contribution and presence of the US. I think it is only fair that, from time to time, a Foreign Minister in this region should stand up and say that the US' involvement on the Korean Peninsula, in Japan, and in this part of the world in general, has been crucial to the stability of the region over many years. If the US precipitously withdrew, it would lead to a very substantial escalation in tensions in Northeast Asia. I think that would be an extremely deleterious development. It is not, of course, about to happen. But I do believe, it is significant to note the importance of the US' presence and some countries feel uncomfortable about saying this. We, in Australia, never feel a bit uncomfortable about saying what we think and we are happy to make that point. Let me also say, in recent times, the diplomacy, partly of the US administration of President Clinton himself, of Madeleine Albright, and Bill Perry, have done a good deal to help stabilize the situation on the Korean Peninsula.

I believe we must also accept that the role of President Kim Dae Jung has been absolutely crucial as well. I thought the Nobel Peace Prize that he won was extremely well deserved. The Sunshine Policy pursued by President Kim Dae Jung and the summit that took place between him and Kim Jong-Il, have been truly historic developments in the region. It is our view that these developments are profoundly important to the stability of our region.

I have just come back from visiting North Korea (or the Democratic People's Republic of Korea). I was glad to present to North Korea's General Kim Jong-Il, a large photograph of an important scene that was at the opening ceremony of the Olympic Games in Sydney on September 15, when the North and South Korean teams marched under the one flag. Among the loudest cheers were for the united Korean team and also for the East Timorese. The united Korean team aroused an enormous ovation from the Australian people. It was an interesting illustration of the focus that people in Australia have on these issues.

During my visit I was encouraged by a number of things. First, there is no doubt that North Korea is in a very difficult economic situation. I believe that their desire to engage more constructively with the international community has partly been driven by that as well as by the diplomacy from the Clinton administration and from Kim Dae Jung. Without question, the North Korean officials know there is a need to engage with the international community, in order to feed their people and to provide more power for the country. But, on key security issues, I came away quite encouraged. On the question of long-and medium-range missiles: it is my view that the North Koreans are prepared to agree with the Americans to an arrangement whereby another country would launch North Korea's satellite systems. This would allow rockets that they say they are developing for the launch of satellites, but which of course could be militarized for intercontinental ballistic missiles, to be used for this purpose. Suspect systems could be disbanded, and the satellites launched by a third country in some capacity, although the North Korean leadership, of course, doesn't want to pay for the launch. That is only human I suppose.

The second encouraging development concerned medium-range missiles. Again I think they are looking to do a deal with the Americans and, in particular, on the export of missiles which have been a major concern to many of us in the international community. They are prepared to do a deal focussed on financial benefits, and have been quite frank stating that the export of missiles was, above all, for foreign exchange purposes, and that they desperately need foreign exchange.

One of the things that struck me the most in North Korea was the commitment of everyone I met there to the reunification of Korea on the basis of mutual respect. That is not reunification in the way that they may have intended some time ago, but reunification - and to say this in Hong Kong - is itself still significant. In one particular case, my interlocutor said to me, "On the basis of one country/two systems". I do not think they meant quite the analogy with Hong Kong and it should not be taken too far. So, there are obviously many differences in terms of what they are thinking about. But, the idea of having a Korean President and a National President, and having a Council of the North and the South, but having relatively autonomous Northern and Southern systems, appears to be something of their vision. This is a matter entirely for the Koreans to work through, but I was enormously heartened by the whole concept of their enthusiasm for an appropriate reunification of Korea.

I have told you all of this because, in our case, we do believe that Korean unification is important. As a significant country in the region, but not as a great power, we also believe it is important to play our part in trying to help stabilize the security environment on the Korean Peninsula. We, for example, have been a quite substantial contributor to KEDO, the Korean Peninsula Energy Development Organisation. More recently, we have decided to enter into a dialogue with the North Koreans. We did that last year, partly at their initiative actually. On May 8, this year, we re-established diplomatic relations. My visit was the next stage of that process and the North Korean Foreign Minister will soon visit Australia during the course of next year. Dates are already being discussed. We have not played the central role but we have been able to play an important role in, to use a phrase: "Bringing North Korea in from the cold", and thereby helping to contribute to a more stable regional security environment.

Amongst other challenges I mentioned that we have in this part of the world, are clearly the tensions across the Taiwan Straits. As I said earlier, this is an internal affair for China but one that weighs heavily as a concern, on all of our minds, in the Asia/Pacific region. We hope, and would expect, that a degree of coolness and restraint will be shown by both sides and that, in time, perhaps building on economic linkages between them, both sides start to address some of the political differences as well, as a means of achieving an appropriate resolution to that problem. But, obviously it is important that countries like ours, and others, continue to emphasise the need for a negotiated solution to the problem of the Taiwan Straits and not a military outcome.

On the economic front, I mentioned earlier that Australia had been concerned about the situation in Southeast Asia and I do not want to leave a negative message about Southeast Asia. The region has enormous potential but it is going through a difficult period. On the other hand, we have been somewhat enthused by the tremendous growth that there has been in the Chinese economy and the way China weathered, albeit with some difficulties, the Asian economic crisis. But now, in the case of China, where they do have problems, in terms of the state-owned enterprises and non-performing loans at their banks, there is no doubt that they are making a real effort to address those problems. They are not trying to fudge the issues. They are not trying to shirk their responsibilities to address them. I think that is well received by the international community. They are going straight at it, and are addressing the big points. The potential for China, in terms of its economic development, is excellent. The relationship that Australia has developed with the P.R.C., over the last few years, has been a close and very constructive relationship, to use another phrase: "Based on the principles of mutual respect". We very much welcome China's participation in the World Trade Organization (WTO) and there are some details to be finalized. However, I am confident that it will occur soon and, during the course of 2001, China will rightfully take its place in the WTO. This will be good for countries like ours because this gives us additional access to the Chinese markets, which is growing and flourishing. At the same time it brings for China many advantages: such as (i.) being part of the decision-making process for the future direction of world trade, and (ii.) market access, most-favoured nation status and all of those things. However, it brings the burden of compliance and that is going to be a significant issue for China. To ensure that it does comply with all of the rather complex obligations, as we all have to, under the WTO. Yet, we are positive and optimistic about the economic developments in this part of the world.

I have just come from the APEC meeting before I went to North Korea. One of the more interesting parts of this APEC process has been the way that it has now started looking at the post-Seattle trading environment. We are one of those countries that think that the whole of the Asia/Pacific region will get an optimal trade outcome if there is a new round of WTO negotiations. This is the reason we have been pushing for a commitment to the re-launch of those negotiations in 2001. And we hope, that that will be possible. It will depend very much on how the agenda is structured. If the agenda is going to be too comprehensive, if it includes environment and labor standards and there is an insistence on doing that, well there will not be another round. It just won't happen. But, if there's a degree of flexibility exercised with a bit of sensitivity and understanding, then I think we can launch that round and do it next year.

However, I do not think it is sufficient for Australia and other countries of the region just to sit and wait for the launch of the new round. Or, should I say, the conclusion of the negotiations in the new round. Let us be optimistic about it. We are also looking at the question of bilateral trade agreements. That can be put in the way that Prime Minister Goh Chok Tong of Singapore sometimes puts it, that those countries that wish to run fastest are able to do so and those that don't wish to run at all, they don't have to. But, from our perspective, for example, we have announced that we are going to negotiate a bilateral free trade agreement with Singapore, something that our neighbour, New Zealand, has successfully concluded. We have only one free trade agreement at the moment with New Zealand. It is a very happy and successful one. But we think it will be relatively easy to conclude an agreement with Singapore and possibly, before too long, one with Hong Kong.

A successful WTO round of multilateral and global trade liberalization is an optimal outcome. But, let us not put all our eggs into that basket. Let us look at building faster trading relationships and freer trading relationships with some of the other countries in the Asia/Pacific region. I think one of the consequences of this will be that those countries that do not want to move quickly on trade liberalisation, countries that are resistant to trade liberalization, will find that they are living in an environment where there is a web of free trade agreements developing around the region. By not participating in that process of trade liberalization, they will realize the losses and will want to join, and hopefully, I think, that would still lead to some very positive developments. Nevertheless, the easiest way to improve the trading environment is to get the WTO negotiations going and concluded quickly. This is a difficult problem for the Southern part of the region, our part of it. However, I believe that we have to keep striving forward with the trade liberalization agenda if we are to ensure a continuation of the rise in living standards that we have seen over the past few decades. If we don't and we cave in to the Seattle demonstrators, if we agree with their proposition, which is to close down markets, to erect barriers between economies and between countries, then I think we have a very poor and miserable future ahead of us.