oneworldtalk

In a major speech delivered in Perth last night, Mr Keating described the global financial crisis as a "great discontinuity" that would generate profound changes in the global order, including the return of China as the world's largest economy.

Keating conspicuously avoided any endorsement of Mr Rudd's plan to create an "Asia-Pacific Community" by 2020.
The former Labor prime minister mounted a passionate defence of the annual APEC leaders summit that he initiated in the early 1990s as the cornerstone of a post-Cold War regional order.

Keating has longstanding links with Chinese political leaders and has advised major Australian companies on dealing with China since he quit politics after the 1996 election.

He disagreed with some of the key strategic judgments in the new defence white paper published two months ago.
Keating said he believed the rise of China as the world's largest economy would be "altogether positive" for the world at large as well as eastern Asia. China's eventual eclipse of the US as the world's largest economy, together with the rise of India, amounted to a major strategic shift but nevertheless held out huge opportunity for Australia.

Keating said that too often Australia created problems for itself when its defence policy had gotten ahead of its foreign policy.
Its regional diplomacy must remain inclusive as well as "positive, outgoing and alert to opportunity".

He said the global financial crisis had fundamentally changed the way the world worked with the centre of global economic power having finally shifted to eastern Asia.

China would have to switch its industrial development from heavy reliance on exports and import replacement towards more domestic consumption, while the US and Australia would have to reduce consumption and save and export more.

Paul Keating

July 3, 2009

THE dominant issue of John Curtin's wartime prime ministership was the salvation of his country, which he accomplished by adapting to rapidly changing events and circumstances. The enlightened view then was that security in the future was only to be had through partnerships and by the congregation of societies within multilateral institutions. It could not be secured by resort to isolation and defensiveness or by the quest for yet another strategic guarantor.

You would have thought this lesson was fairly obvious, but not so obvious as to deter people in this country, even today, from thinking in terms of our exceptionalism: finding our security from Asia by dint either of our own resources or by association with great and powerful friends. But the changed global economy has caused the world to reconsider this approach.

By mid-2008, when the steep slide into recession and near depression began, the US transformed itself from the largest creditor country to the largest debtor country, fuelling its economy with consumption and rising living standards that were had by resort to borrowings, including from the largest of the world's poorer countries, China.

The global financial crisis has forced changes in international co-operation flowing from economic and financial necessity. This will give rise to a fundamental repair of the international trade and savings imbalance: the imbalance between the savings-rich, trade-surplus countries and the savings-poor, trade-deficit countries — a change that will have huge effects on the way these countries develop, both domestically and internationally, into the future.

Surplus countries such as China, Russia and the oil states will have to save less and consume more, while deficit countries such as US, Britain and Australia will have to save more and consume less. China will have to change the focus of its industrial development away from exports and import replacement to an altogether better mix of growing domestic consumption with a focus on housing and services. On the other hand, the industrial structure of the US will have to adapt to lower consumption and lower household expenditure with a greater emphasis on net exports.

It is obvious that the global financial crisis will change the way our own country functions as it must change the way we look at the world around us. It will make absolutely no sense for us to think of our security in isolationist and defensive terms. The notion of Australia's security being found outside Asia is as absurd now as it has always been since we were dragged to Asia during John Curtin's time. Yet obvious as this may seem, it is still not obvious to all.

I have always believed that Australia's security was best found when it was searching for and seeking to divine it in the region in which we live — the East Asian hemisphere. I am convinced that the future prosperity, peace and security of the Asia Pacific would best be realised if China was encouraged to play an active role in world affairs, including a multilateral one subject to rules and disciplines.

Until the early 19th century, China was the world's largest economy and had been since the Middle Ages. It was knocked off that perch by a much smaller country, Britain, with its Industrial Revolution and the innovations that that brought. And the same thing happened in Germany and then in the US with an even larger population. This had to happen in China. Only Mao's primitive view of Chinese society had stopped it happening earlier. China was slated to win the big economic race because it had five times the population of the largest economy, the US. And more than five times the pent-up demand. It was also putting into place new infrastructure and new productive capacity. So this great state with its profound sense of self and the wherewithal to make a better life for its citizens has eased itself into a major role in world affairs, which I believe will be an altogether positive one.

In all probability we will be looking at some concert of powers in the Pacific and Indian oceans rather than a balance of power, which has often been the device of an uneasy peace. All of this should tell us that while developments of this kind are as uncertain as they are incapable of prediction, for a country like Australia they nevertheless hold out huge opportunity. We must be alert, dextrous and positive: never defensive. For these reasons, I found myself at odds with some of the text of the Government's 2009 defence white paper, which outlines the kind of military capabilities Australia might need to respond to this contingent risk; foreshadowing an increase in our submarine fleet from six to 12 vessels, quadrupling the number of our bigger warships while acquiring cruise missile-type offensive capabilities. But the paper failed to give an indication as to whether it foresaw the growth of China's military capabilities as a natural and legitimate thing for a rising economic power or whether it was something we should regard as a threat and for which we should plan.

The fact is, Australia does not know and cannot divine what sort of new order might obtain as Chinese economic and military power grows in the face of relative American decline. And complicating that assessment, China is rising in the company of other rising regional powers. A region of this kind might turn out to be as peaceful and as prosperous for Australia as the one we have had since the end of the Vietnam War; a place where all powers have a role and where Australia is open to have whatever relationship it wants with any of them. But then again the region may become more problematic. This is why a defence policy is a must-have contingency against adverse developments. But it has to be woven into a view of the region and that view can only be encapsulated within a foreign policy. Co-operative regionalism must be the hallmark of an Australian foreign policy in these new times. We should never return to a posture of fear or reaction of the kind that prevailed during the Menzies years, nor should we look to position ourselves as a comfortable accessory tucked under someone else's armpit.

Paul Keating was prime minister from 1991 to 1996. This is an edited extract from the John Curtin Prime Ministerial Lecture delivered last night at Curtin University, Perth.

May 4, 2009

China is on its way to becoming a superpower but Australia is not under threat from it or any of its overseas military campaigns, former defence force chief General Peter Cosgrove says.

His comments follow the release on Saturday of Australia's first defence white paper in nine years.

The 140-page document commits the government to increasing defence funding in real terms by 3.0 per cent per year from its current $22.7 billion annual funding until 2017-18, and then by 2.2 per cent until 2030.

It says China will be Asia's strongest military power "by a considerable margin" and warns that the pace and scope of China's growth has the potential to give its neighbours cause for concern.

General Cosgrove says the document strikes a balance between concern and reality.

"I think the rise of any nation to true superpower status, and China is sort of on the way there, I think that it's something if you don't note that in a security sense you're mad," he told Fairfax Radio on Monday.

"We're not running around declaring China a threat, we're saying it's a factor..."

"That's what I think the white paper seeks to tell us. It will be a different set of strategic factors in 20 or 30 years."

General Cosgrove also said Australia's military presence in Afghanistan, and its peacekeeping role in the Asia-Pacific region, did not pose a security threat.

"Both of those don't have a direct and immediate impact on our sense of security here in the homeland," he said.