High Commissioner's Address at the Delhi Policy Group
21 April 2017
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Thank you Ambassador Nanda for your warm introduction. Thank you also to the Delhi Policy Group for the invitation to speak today.
The opportunity to present my views on developments in the Indo-Pacific region is quite timely. You will no doubt be aware that our Prime Minister, Malcolm Turnbull, just concluded a very successful visit to India last week, his first in fact since becoming Prime Minister in 2015.
The Prime Minister’s visit came at a time when the relationship has never been stronger.
In addition to reaffirming bilateral ties and mutual interests, the visit was also an opportunity for the Prime Minister to see first-hand the immense change in India.
Mr Turnbull was impressed by the progress towards Prime Minister Modi’s agenda to improve the tax system, deregulate the economy, invest in skills and training and reduce bureaucratic inefficiencies.
During the visit, Mr Turnbull also talked about the enormous scope to expand the economic and strategic relationship between our two countries. All of this happened in what was evidently a warm personal rapport between our two Prime Ministers.
And we need such relationships now more than ever.
These are troubling times for our region. As I speak, tensions are rising on the Korean Peninsula. Less than a week ago, North Korea attempted to test a medium-range ballistic missile, prompting a strong response from the US. Separately, China has protested the deployment of the THAAD anti-missile system in South Korea.
Going further afield, concerns remain around China’s intentions in the South China Sea. The apparent terrorist attack on police officers overnight on the Champs Elysees in Paris reminds us that asymmetric threats are always present, random and unpredictable.
At times, it seems as if our existing mechanisms for collective security are not up to the task of managing and preventing these threats. It is worth examining what more we can do.
What I would like to do today therefore is examine the broader trends in the Indo-Pacific and what this means for Australian and Indian interests. I have essentially three core propositions:
First, the Indo-Pacific region is undergoing a prolonged and dramatic period of flux. This brings its own set of opportunities and challenges.
As a result, my second proposition is that we need flexible, adaptable and swift mechanisms of cooperation to manage the change in our region.
Finally, as two democratic, liberal economies, Australian and Indian interests are converging. We are natural partners to establish new mechanisms and habits of cooperation in our region.
But first, let me briefly explain what I mean by the Indo-Pacific. When I use the term “Indo-Pacific”, I am referring to a geo-strategic concept. Each country will have their own geographic definition to match their national interest. But, broadly, it overlaps with a number of common elements.
From an Australian perspective, the Indo-Pacific stretches from India through to the Pacific including Southeast and East Asia. It includes our top five trading partners.
The concept captures the maritime nature of our region. Both the Indian and Pacific Oceans lap our shores.
Like India, we depend heavily on the oceans for trade. More than 98 per cent of Australia’s international trade by volume and 97 per cent of India’s trade by volume is carried by sea.
Both our economies have a strong interest in free and secure trade routes across the Indo‑Pacific. And this means we need to be certain that the maritime space is stable and free of conflict.
Our region: An unprecedented pace and scale of change
So, going to my first proposition, the Indo-Pacific is undergoing a dramatic transformation.
What we are witnessing is a pace and scale of change that is without precedent. And, importantly, we are looking at a prolonged period of flux.
The Indo-Pacific is experiencing the greatest shift in power relativities in the world.
For example, China is predicted to overtake the United States by 2030 as the world’s largest economy in market exchange rate terms. China’s GDP in Purchasing Power Parity terms has increased from around $14 trillion to $21 trillion in only five years. To put this in perspective, if we exclude the United States, China’s economy is roughly equal to the next six biggest economies in the Indo-Pacific.
For its part, India is the fastest growing big economy in the world. India is expected to become the world’s third largest economy in US dollar terms by 2030. That is not to say its growth will be linear. There remain challenges. India has the immense task of training and skilling its youth to harness the ‘demographic dividend’. Further economic reforms and liberalisation are required to sustain long-term economic growth and private investment.
Just to further underscore the dramatic shift in power relativities, The Economist predicts that by 2050:
- Indonesia will leap from the 16th largest economy today into the top 10 economies;
- Vietnam may be one of the fastest growing large economies; and
- Established economies like Japan, South Korea and Australia will drop in relative GDP rankings.
Despite commentators’ reports, including some highly sensationalised articles about the decline of the US, it is very likely that US primacy in the region will continue for some time yet. The United States is still predicted to be a top three economy by 2050. Its military and technological investments now will give it a sizeable edge in the future.
So what does all this add up to?
History has shown that with great shifts in power relativities also come uncertainty, anxiety and a greater risk of miscalculation.
With a shift of economic weight to and within the Indo-Pacific, we have also witnessed the rise of military capabilities.
According to the 2016 Defence Outlook by Deloitte:
- Naval budgets are projected to increase by 60 per cent through to 2020;
- China will build 30 new submarines and one new aircraft carrier;
- Nineteen countries in our region will account for one third of global defence budgets by 2020;
- The Indo-Pacific is expected to drive 60 per cent of the global increase in defence acquisition, research and development.
The interconnected nature of the global economy and unpredictability of international events mean that no state can consider itself immune to the threats of instability and tension.
At the same time that our region is dealing with internal challenges, it is also afflicted by external pressures.
Terrorism remains an asymmetrical threat. Prime Minister Modi and Prime Minister Turnbull acknowledged in their Joint Statement that terrorism constitutes one of the most serious threats to peace and stability. It preoccupies nearly every government. The same technologies that have enabled greater connectivity, access, communication and economic opportunities have also contributed to the spread of terrorism and radicalisation, particularly among the youth.
The rise in digital technology and social media has fragmented sources of information. Governments find it increasingly difficult to shape public opinion and political outcomes are less predictable.
Climate change presents another global challenge requiring transnational solutions.
All of this is to say that we face a number of challenges at a time of great transition in states’ economic activity, strategic weight and international ambition.
Developing a regional strategic order in the Indo-Pacific
The challenges I have outlined ask us to think differently about the strategic order in the region.
As strategic thinkers, we deal with change by trying to get to a new status quo as quickly and peacefully as possible. But given the rate and extent of change now underway, it is impossible to predict when, or indeed if, we will achieve a new status quo in the Indo-Pacific. We may be decades away from a settling point.
This brings me to my second proposition. In the current climate of change, we need to reconsider what kind of regional order will best meet our needs.
Such an order would ideally seek to achieve three things:
- Manage change peacefully and minimise the risk of conflict over time
- Address transnational as well as regional threats effectively;
- Preserve our shared values including the rule of law, a liberal economic order and open societies.
Australia’s Foreign Minister Ms Julie Bishop captured this well when she said:
“In this more competitive and uncertain international environment, we must work differently, we must be bolder and we must be adaptable while still holding true to our values.”
We need institutions and habits of dialogue and cooperation that can deliver to these objectives. Given the pace of change, we should place a premium on speed, agility and flexibility.
The importance of dialogue is often underrated. There is a tendency to see it as the soft end of strategic policy. But history shows that it can be the most effective way to build understanding, avoid miscalculation and resolve differences while they are still small. The network of bilateral and trilateral dialogues which are developing in the region are well suited to this task.
I am arguing a case to bring bilateral, trilateral and small group mechanisms closer to the centre of our strategic thinking. We will need all these to be able to shape developments and to respond to challenges and threats quickly and effectively.
Existing structures are by no means obsolete. They continue to play a role in global governance and establishing norms and international law. The UN Convention on the Law of the Sea and the recent arbitral tribunals including between India and Bangladesh are an excellent example.
Similarly, regional institutions like the EAS continue to provide value and guidance for regional issues. But, as I’ve just sketched out the rapid and unpredictable nature of the challenges we face, these existing mechanisms may not be agile enough.
Small group diplomacy will matter more over time in the Indo-Pacific. Small groups, overlapping groups and so-called ‘minilateralism’ are important because every strategic issue we face is different and will engage different countries in different combinations.
Australia and India: A strong platform of cooperation
This leads me to my final observation. Australian and Indian interests are clearly converging. We have a strong basis of strategic alignment, cooperation and trust. Thus, we are natural partners to address the challenges in our region.
A headline outcome of Prime Minister Turnbull’s visit was the signing of the MOU on Combatting Terrorism and International Organised Crime. It paves the way for greater cooperation to tackle common threats including terrorism, cyber-crime and people smuggling.
Defence cooperation has deepened. We held our first bilateral maritime exercise in the Bay of Bengal in 2015 and we will hold a second iteration in 2018. We now have annual staff talks between our Army, Navy and Air Forces. Our countries hosted reciprocal port visits by HMAS Perth, HMAS Arunta and INS Sumitra. And we will soon schedule the inaugural defence and foreign secretaries’ 2+2 talks.
We are also seeing an increasing diversification of our trade relationship. Australia is a natural partner to meet India’s energy security needs and we expect the first export of Australian uranium to India in the near future. We have an established knowledge partnership. Over 60,000 Indian students studying in Australia in 2016 and we have the capabilities to support Prime Minister Modi’s ambition to train 400 million Indians by 2022.
Expanding habits of cooperation
With a sound platform in our bilateral relationship, we are well placed to expand habits of cooperation and work with other countries in our region.
What I’m putting forward is an argument for a better toolkit. We need new and different combinations of countries to come together so we have the right connections in place to deal with issues swiftly and effectively. But we also need to use these groups to ensure that we protect our interests and preserve our values in the process.
Australia and India are well on the way to developing this toolkit. Australia has helped found the MIKTA group of ‘pivotal powers’ – Mexico, Indonesia, Korea, Turkey and Australia. India has shown leadership in the BBIN, BIMSTEC and BRICS. We are already adept at working in small groups.
Australia and India have established a variety of trilateral groupings with other countries, such as the Australia-Japan-US trilateral dialogue. India has a version of the same.
Next week, the Australian, Indian and Japanese Foreign Secretaries will meet at their third iteration of our trilateral dialogue. The effectiveness of dialogue groups like these is heightened when they are underpinned by practical cooperation. We should explore new groupings with countries like Indonesia and the United States.
We also see a strategic intersect with regional organisations. The East Asia Summit is the most suitable regional organisation to pursue security cooperation. By deepening our engagement with ASEAN, Australia and India can help strengthen its unity and effectiveness. And in IORA, our two countries have a role in sustaining momentum and improving its capability to manage Indian Ocean issues.
During times of dramatic change, there is no automatic harmony. Although the trajectory of our region is clear, the building blocks that will manage this period of flux are not.
The purpose of my remarks today was to encourage creative and innovative thinking about how to promote prosperity and security in an unpredictable region.
Creating an order in the Indo-Pacific that is flexible, resilient and nimble is key. With converging interests and shared values, Australia and India are natural partners to shape the strategic environment.
It requires the active participation of government, business and civil society.
It requires ever closer and richer bilateral cooperation.
And it requires new and different mechanisms for collective engagement in our region. As High Commissioner, I look forward to working with India to build collective security in the region.