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The economic crisis & the Asia Pacific

Global engagement in a globalised world

Kevin Rudd

In only seven years the Shangri-La Dialogue has cemented itself as the pre-eminent defence and security dialogue in the Asia Pacific region. The successful development of the Shangri-La Dialogue is symbolic, in some ways, of Singapore's own emergence as a critical player in our region. From its independence 43 years ago, when some thought this new political entity, Singapore would not survive. Singapore has developed into a thriving, influential nation-state that it is today. Singapore has become a major centre of regional and world trade; a global transport hub and an international financial centre. Singapore has maintained a peaceful multi-ethnic society in a region where ethnic tensions have, from time to time, been acute. And Singapore continues as a strong force for stability and effective diplomacy in our region - and therefore a most appropriate place for this regular dialogue to be held. Ladies and gentleman, at the forefront of every government's mind today is the global economic crisis. Twelve months ago, the International Monetary Fund forecast that the world economy would expand by 3.8 per cent. Earlier this month, the IMF announced that in 2009, world economic output would contract by 1.3 per cent. Much, very much has changed. This is the first time the global economy will contract since the war. What began as a financial crisis, has become an economic crisis and then an employment crisis; in some countries becoming a social crisis and political crisis, and prospectively fuelling a new range of security crises yet to fully unfold. In Japan exports have contracted 43 per cent in just six months. In China exports have contracted 33 per cent.In South East Asia the total GDP of the ASEAN members contracted by around 13 per cent in the course of 2008. The Asian Development Bank has predicted the global recession could in 2009 lead to an additional 62 million people living in poverty in Asia.

Through the G20, the international community is rising to these challenges. Through the G20, national governments have responded with stimulus packages worth nearly 2.5 trillion US dollars to ameliorate the effects of this crisis. Over one trillion dollars of that stimulus is government measures in our own region, in addition to the total stimulus measures in the United States worth one trillion dollars in its own right. Japan, China, and Korea have also delivered large-scale packages that help to support not only their domestic economies but, importantly, regional commerce as well. Through the G20, the world has also agreed to $1.1 trillion for the international financial institutions to guard against future financial crises, particularly in emerging markets. And through the G20, we've also agreed to act against an outbreak of protectionism, which would only harm everybody's interests.

The governments in this region and the world have responded quickly, decisively and remarkably together to confront the common economic danger. We have recognised that co-ordinated measures deliver the greatest results. In short, we have responded to the crisis with co-operation. When the Great Depression hit in the 1930s this was not the case. Each country responded to protect its national interests to the detriment of others. The prescriptions they chose back then served nobody's interests. The Great Depression was as long and as severe as it was because the international community resorted to nationalist competition rather than international co-operation. These were the economic consequences of the Depression. In seeking to protect itself, each country harmed itself. Furthermore, the social, political and security consequences of this outbreak of rampant economic nationalism in the 1930s was disastrous for the world at large. This time, we have, thankfully, responded differently - both at the Washington Summit in November and the London Summit in April. When the governments of the world gathered most recently in London, they crafted together a global strategy for economic recovery.

The G20 brings together the established and the emerging powers. The G20 straddles all continents and all major regions: five from Asia, five from the Americas, five from Europe and five from other regions including Africa - as well as including the most populous Muslim country, Indonesia. The G20 bridges therefore the strategic and economic weight of the present and of the future. It is small enough to have efficiency but large enough to have legitimacy. Its combined membership makes up 75 per cent of global GDP, 85 per cent of global trade and two thirds of the world's population. All of the largest economies in the Asia-Pacific region are represented in the G20 - and ASEAN was also present at the London meeting. What has also struck me as a participant of the London Summit about the G20 is the degree of transparency and co-operation countries have brought to the table at this time of great economic crisis. There has been a remarkable degree of collective determination to work together for the collective good. This has been good global leadership. Leadership where the G20 through its membership reaches out to the wider international community to seek ideas to shape policy; to forge the political consensus for strong programs of action; and then to build support for outcomes once reached.

Much of course remains to be done. And I look forward to the next G20 Summit in Pittsburgh in September to continue our collaborative responses to the global economic crisis. Of course, this recent example of global economic co-operation, we have already seen at a regional level here in South East Asia - and across a much broader policy scope. Back in the 1960s, South East Asia was faced with a choice. In the midst of the Cold War, with newly independent nations finding their feet, the nations of this region were faced with a choice about their future. The choice was how to shape their region; how to look beyond their own borders and to build a region that would support their ambition to grow in peace, stability and prosperity. The nations of South East Asia - including of course our hosts Singapore chose, actively chose co-operation. They chose to shape their common future together. They chose to form the Association of South East Asian Nations. At its core was the notion that through co-operation, rather than conflict or competition, all members, all members would be better off. Implicit in the choice made by those farsighted leaders in the 1960s is the notion of interdependence - that the future of a nation depends on the future of the nations around it; that by building communities of nations, all members of the community reap greater rewards than they could working alone. The results of course speak for themselves. ASEAN has played an important role in building a stable strategic foundation for South East Asia, when before its creation this was far from the case. And that stability has enabled its member nations to grow from strength to strength. It has also allowed the influence of South East Asia to be felt in the region and beyond.

Tonight I want to draw on the great example of ASEAN and talk about the future of our wider region in this the Asia Pacific century. I want to draw on the lessons of ASEAN and argue that as a wider region we also have long-term choices before us. The choice is whether we seek actively to shape the future of our wider region - the Asia Pacific region - by building the regional architecture we need for the future, if we are together to shape a common regional future. Or whether instead, we will adopt a passive approach - where we simply wait and see what evolves, whether that enhances stability or whether in fact it undermines stability. Do we sit by and allow relations between states to be buffeted by economic and strategic shifts and shocks. Or do we seek to build institutions to provide anchorages of stability able to withstand the strategic stresses and strains of the future, when they inevitably arise.

In the first half of the 20th century, we saw the tragic consequences of rampant nationalism as nations competed for power. Great powers in Europe bumped up against each other without the benefit of regional institutions to smooth problems as they arose. The result was devastating conflict. For our own region, we cannot simply assume that peace and prosperity are the inevitable products of human progress. Will we make choices for co-operation or conflict? Will we make active choices for co-operation; or allow drift to set in that takes us in the reverse direction. Will we seek a framework of shaping the institutions of common security for our region; or will we allow traditional interstate tensions to evolve and in some cases escalate.

It will take us time to make the choices before us. But the first step in this process is that we need to have the regional conversation about our trajectory for the future - about what sort of region we want to be in 2020 and beyond. We need to have a discussion about what we have. We need to have a discussion about what we want to be. And, if there is agreement on this, what steps might be useful in realising our common regional future. History tells us that co-operation delivers benefits in strategic stability, not just in economic growth. The truth is we must work hard at peace and stability because the possibilities of miscommunication, of miscalculation, and misadventure are always great. And that co-operation, transparency and common endeavour represent the exception, which means our conscious efforts to enhance co-operation must always be the greater because the natural default position tends to be suspicion rather than co-operation.

Within East Asia there are also other particular dynamics at play. Strong East Asian growth is altering relativities making the management of regional security even more complicated. America's capacity for economic re-invention and renewal should never be underestimated. And, while China's remarkable development will continue, we should not underestimate the challenges China faces in balancing its engines of growth from exports to domestic consumption, potentially a turning point in East Asia's future economic growth. Managing major power relations - particularly in the context of the rise of China and India - will be crucial for our collective future. This will place a premium on wise statecraft, particularly the effective management of relations between the United States, Japan, China and India. Over the last half century the United States has underwritten stability in the Asia Pacific. This stability has allowed nations in the region to prosper. And our common interest is for this stability to continue into the future. But just as economic co-operation cannot be assumed, strategic co-operation too is also a matter of choice. Asia includes the world's two most populous countries; the world's largest holders of foreign exchange reserves; two of the world's top three economies; and three of the world's five largest militaries, there's a lot going on in our neighbourhood.

The centre of global geo-strategic and geo-economic gravity is shifting to our region.So not only do the countries of our region have an interest in the region's future stability, so too does the world at large. The simple truth is this; that much of the critical history of the 21st century will be written, shaped and lived out here in our own region. Together therefore we shoulder great responsibilities both regional and global. Also in our region we have the United States, which will remain for the foreseeable future the single most powerful strategic actor through a combination of military, economic and soft power, and the only nation capable of projecting power globally. This strategic primacy of the United States will continue to be vital in the maintenance of stability. As other countries become more affluent, their military spending will also increase. Strategically therefore, our region will be dynamic, not static, adding further to the uncertainties we confront in the future. And in a rapidly changing region, we will therefore face a wide range of emerging security challenges - both traditional and non-traditional.

The convergence of: demographic change; population movements; environmental change, energy pressures; resource pressures; global public health concerns; mass migration flows; transnational crime and terrorism will increase rather than reduce the risk of conflict. And the chance of conflict between states can never be ruled out - even if its frequency has declined. The proliferation of weapons of mass destruction, including the possibility of such weapons falling into the hands of terrorists, is a threat of increasing international concern. Iran's nuclear program is of continuing concern. North Korea's second nuclear test is a threat to the peace and stability of our region. The nuclear test, coupled with the North's ongoing missile development program, is yet another provocative act. The international community must respond with one voice and with a common program of action against Pyongyang. The United Nations Security Council must be of common resolve against a regime which is so reckless in relation to our common security. The security challenges we face are therefore many and complex. And to help manage this complex security agenda in a region where security relativities are not static but dynamic, we will need together to calmly think through the mechanisms we may need to foster active collaboration for the future.

We need robust structures that can cope with dynamic environments. We also need to build the habits of dialogue, discussion and co-operation that will help minimise friction and provide a mechanism for dealing with it when it arises. We need mechanisms that help us cope with strategic shocks and discontinuities. We need a body that brings together the leaders of the key nations in the Asia Pacific region - including Indonesia, India, China, Japan, the United States and other nations - with a mandate to engage across the breadth of the security, economic and political challenges we will face in the future. Absent such a body, I am concerned in the long term about the possibility of strategic drift within our region, or even worse strategic polarisation; polarisation which I believe serves nobody's interests.

As presently configured, there is no single regional organisation with a pan-regional mandate that covers the full policy spectrum. In June last year I proposed the development in the long term of what I have called an Asia Pacific community. An Asia Pacific community could help ensure that the process of regional economic and financial integration keeps moving forward. An APC could also help to nurture a culture of co-operation and collaboration on security - including a culture of military transparency, helping to build confidence and security building measures by providing information that reassures neighbours rather than alarms them. An Asia Pacific community could also provide a vehicle for discussion and cooperation across the range of challenges with transnational reach, such as climate change, resource and food security, bio-security and terrorism. Just as ASEAN built a strong measure of strategic congruence within South East Asia between many countries of different political systems, and, at times, with active hostilities towards one another, so also could an Asia Pacific community over time build up a sharper sense of security community across our wider region.

An Asia Pacific community could be seen as a natural broadening of the processes of confidence, security - and community-building in South-east Asia led by ASEAN, while ASEAN itself would of course remain central to the region and would also be an important part of any future Asia Pacific community. The regional groupings and institutions already in place in the Asia-Pacific region all make valuable contributions. ASEAN, APEC, the East Asia Summit, ASEAN +3, the ASEAN Regional Forum and other bodies are doing important work in enhancing economic and other forms of co-operation. As part of our regional conversation about the future of our institutions we can draw strength from their accumulated experience. That was my goal in appointing a Special Envoy on the Asia Pacific community, Richard Woolcott, a distinguished Australian diplomat who together with others did much of the diplomatic leg work in the formation of APEC twenty years ago. Mr Woolcott visited capitals in the region to discuss the Asia Pacific community proposal over the last 12 months. The Government greatly appreciates the frank and constructive discussions Mr Woolcott was able to have with governments and non-government institutions across the region. He has now provided his report to me and I would like to outline his key findings and where we might go from here.

First, there has been broad agreement on the value of a focused discussion about how regional architecture can best serve all our interests in the future. Everyone, it seems, has been keen to put forward their view about the idea of developing an Asia Pacific community and understandably these views are far from uniform. And this is something that I welcome. The whole point of this initiative is to begin the conversation about where we need to go. Secondly, there is widespread recognition that our current structures do not provide a single forum for all relevant leaders to discuss the full range of political, economic and security challenges we face for the future. Thirdly, it is clear that no-one wants more meetings. There is no appetite for additional institutions. It is difficult enough for leaders to make it to the range of meetings we already have. And coming from Australia, where every meeting involves another trip, another voyage, I wholeheartedly agree. As I have said many times and as my envoy has stated around the region, I have a completely open mind on how we proceed and where we end up. Australia has no prescriptive view. This is a complex and important matter which needs proper consideration. The clear conclusion from my envoy's report is that there is interest in the region in this discussion - and there is a wish to explore the possibilities without any fixed or final views on a destination. So my intention is to continue and deepen this conversation in the months ahead with interested parties across the region.

I am pleased to announce tonight that, following the East Asia Summit and APEC meetings later this year, where I will brief leaders personally on the outcomes of my special envoy's discussions and hear their views, Australia will convene a one-and-a-half track conference to further explore the idea of an Asia Pacific community. We will invite key government officials, academics and opinion makers from around the region to come together and discuss the future of our regional architecture for the 21st century. For us, this is the next logical step in an unfolding regional conversation. I look forward to representation from as many countries as possible. And I look forward to a free-flowing and open discussion about our region, its future and the institutions we might need to maximise our future peace and prosperity.

There will inevitably be disagreement along the way. This is natural and normal. In fact it would be abnormal to expect any immediate agreement on such a complex challenge. That is why I have deliberately set a target of an Asia Pacific community by 2020: comfortably removed from the present but still sufficiently close to focus our collective mind. Some of you may ask why Australia has put forward this proposal. The answer is straightforward. We're committed to active middle power diplomacy. By ourselves, Australia cannot shape the future of the region we live in. Nor do we believe our contribution is unique. It is not. Through skilful diplomacy and through the strength of its contribution, Singapore has become a lynch pin of South East Asian regionalism - as this conference itself demonstrates. Singapore is a model of how countries can use their best assets - their people and their ideas, to make a contribution to regional and global order and always with a refreshing, clear, realist perspective. It is in that tradition that I am committed to Australia making a positive contribution to the international policy debate on the future of our wider region. I do not believe we can afford to sit idly by while the region simply evolves - without any sense of strategic purpose. In fact I believe this is potentially dangerous. We do not bring to the table a misty-eyed idealism about some pan-regional utopia. By contrast, the Australian Government takes a deeply realist approach to security. But the realism of the international relations of the 21st century necessarily involves a high degree of structured regional and global engagement to be effective in our highly globalised world.

Australia is also a strong believer in the importance of military co-operation and military transparency as contributing to long-term security. That is why Australia is building on our already strong defence and security relationships around the region. And it is why we have recently released Australia's first Defence White Paper in nearly a decade. If sovereign states are clear about their strategic perceptions and their military forces, the risk of miscalculation is reduced. The White Paper is a frank document that describes how we see the world and how we are shaping our military forces to respond to possible challenges ahead. It affirms the centrality of Australia's alliance relationship with the United States, and assesses that the United States will remain the most powerful and influential actor up to 2030, the timeframe within which our White Paper is cast. And Australia's close alliance with the United States will remain the bedrock on which Australia's national security is built. It remains also Australia's view that strategic stability in the region at large is best underpinned by the continued presence of the United States through its network of alliances and security partnerships - including with Japan, the RoK and Australia - and by significant levels of US military capability continuing to be located in the Western Pacific. The Australian Government will also continue to strengthen its defence and strategic ties with our partners around the region. We have concluded a Joint Declaration on Security Co-operation with Japan. In March of this year in Canberra, President Lee of Korea and I issued a Joint Statement on Enhanced Global and Security Co-operation between Australia and the Republic of Korea. We are active in the ASEAN Regional Forum - as we were when it was established 15 years ago. We maintain the Five Powers Defence agreement with our regional partners in Malaysia and Singapore - as well as with New Zealand and the UK. And we are strengthening our bilateral security links, including with Indonesia through the Lombok Treaty.

The White Paper also makes clear our desire to expand our security dialogue with China and strengthen our defence relationship with India. Australia has strong security and strategic interests that go well beyond our neighbourhood. Australia by definition is a maritime power with maritime interests. We are, therefore, deeply focused on the importance of the Indian Ocean and the Pacific Ocean in our own long-term security. We also maintain a special relationship, along with our New Zealand partners, with the Pacific island countries, including uniquely strong ties in defence in a region of direct importance to Australia. Equally, Australia is of unparalleled strategic importance to these island countries where Australia remains the pre-eminent economic development partner. The Australia Defence White Paper makes clear our desire to have constructive military relations with a wide range of partners in our region and beyond. And, like all nations, our desire is to be able to protect ourselves if needs be. Our Defence policy is based on the need to ensure that Australia can act in its own self defence against a wide range of threats. This means that we must have the ability to conduct independent military operations in the defence of Australia by controlling our air and sea approaches and denying any potential adversary the ability to operate in our immediate neighbourhood.

What we need also to do is build confidence on a solid foundation of transparency and co-operation. This can be done bilaterally. It can be done operationally. It can for example be done if our combined forces co-ordinate in rapid response to large scale natural disasters in our region, a region is which regrettably is highly prone to such disasters. All peoples benefit from such co-operation because natural disasters rather than armed conflict remains the largest threat to life in our region. But also our militaries would be required to plan together and operate together on a regular basis against a common challenge, thus developing new confidence and security building and transparency measures for the future. All this must also be done through effective regional institutions.

To conclude, you have some big days of discussion and deliberation ahead of you at this, the region's premier conference on regional security. You will have the region's best strategic thinkers and shapers of policies leading your discussions. And I think you have a challenge before you. Your challenge is to go beyond describing the trends that we see. It is to go beyond reacting to the trends that we see. Your challenge is to take the next step, the more difficult step, and think about how we can actively shape those trends for our common regional interests for the future. We need to build on the strong foundation of regional co-operation we already have. We need to learn from the great experience embodied in ASEAN. We need to engage the leaders of the key nations of the region in a single forum that makes sense for all, not just for some. And to act and to actively work against any long-term polarisation of a region so rich in potential for all our peoples and in fact all peoples of the world. My intention with beginning a dialogue about an Asia Pacific community was precisely that. An Asia Pacific community is not a short-term project. It will take time a long time to achieve. A very long time to achieve. History however shows that risks arise not from developing new initiatives for the future. But from failing to act; failing to anticipate; and failing to shape new sets of strategic realities as they emerge. I am an unapologetic optimist about our region's future. Just as I am an unapologetic realist about the choices we will need to make for our region's future together. I thank you for your attention.


This is the text of the Australian Prime Minister's Address at the Shangri-La Dialogue in Singapore of 9 May 2009.


Suggested citation

Rudd, Kevin, 'The economic crisis & the Asia Pacific', Evatt Journal, Vol. 9, No. 3, June 2009.<>


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