The circumstance, of course, is the rise of Chinese and Indian economic power.
Ken Henry, former Secretary of the Australian Treasury and a towering figure in Australian public policy thinking, will head up the review and the delivery of a White Paper on the issue by mid next year.
The context of Gillard’s initiative is striking. ‘On the eve of Australia’s long run of economic growth’, Gillard said, ‘before our two decades of reform-driven prosperity, ours and China’s were economies of roughly comparable size in market exchange rate terms. Now, remember Australia’s been growing for twenty years since and yet on the same basis China’s economy is today close to four and half times bigger than ours. In twenty years, China and India have grown so fast they’ve almost tripled their share of the global economy — and increased their absolute economic size almost nine-fold. Just two countries, which have grown from less than a tenth of the global economy to almost a fifth, in just two decades — and which, over the next two decades, are projected to grow from a fifth to a third. This incredible economic growth in our region is driving economic and strategic change in our world too’.
The shifts in the structure of global economic power that are under way are bigger shifts in the locus of global output than those recorded after the industrial revolution, and they are taking place in much shorter timeframes. As Gillard says: ‘Australia hasn’t been here before’.
In this week’s lead essay, Shiro Armstrong argues, quoting Gillard, that in Asia’s emergence in the 21st century we are experiencing changes of ‘type, not degree’.
The response to these changes, so far, has been piecemeal and ad hoc, and an underlying premise has been that the changes in our strategic circumstance are matters of degree, not substance. As Armstrong says, ‘Governments in Australia in the past decade or two have not been willing to accept and to face the reality of the changes we face in our region front-on. Gillard is changing the game and taking up the challenge. Her call for a rethink and a new strategy on Australia’s engagement with Asia is an entirely positive development and has come not a moment too soon’.
Australia is by no means unique in having to confront these new realities. Countries all around the region and indeed the globe, more or less urgently, now have to deal with the same circumstance.
In a thoughtful speech at the LSE this week, Malcolm Turnbull, former leader of the Australian Opposition and leading Liberal figure, made points that resonate closely with the argument the Australian Prime Minister has now set out.
‘China represents a challenge to the United States which is utterly unique’, Turnbull observed.
‘Americans, imbued with a deep sense of their own exceptionalism, have assumed that they will always be the strongest, richest and cleverest nation on earth. Their birthright has been to provide the benchmark in living standards, infrastructure, education and technology. Tom Friedman’s latest book, That Used to Be Us, is eloquent testimony to the growing sense of inadequacy Americans feel as they compare their country to China. Its title was inspired by President Obama in November 2010: “It makes no sense for China to have better rail systems than us, and Singapore having better airports than us. And we just learned that China now has the fastest supercomputer on Earth — that used to be us.”’
This sense of being outclassed by China is not limited to Americans but advanced economies cannot blame Asia for our own choices, Turnbull says. The solution, he concludes, is in ourselves and defining how we need to respond.
That’s what the Gillard White Paper seeks to do.
On the regional front, Gillard makes it abundantly clear that we are not in the business of creating new institutions but that we need to build around the existing institutions and structures — ‘Groups with the right membership and mandate to address the full range of security, political and economic issues facing the region’. What is needed is a flexible but robust set of arrangements that keeps the Unites States engaged but allows the development of an agenda that transcends new Asian power.
The immediate priorities are ‘working in the G20 to deal with structural imbalances, at APEC to open the region as a whole’ and working on building the EAS up as an institution since ‘[w]e’ve got the East Asian Summit (EAS) off the starting blocks now but there’s a long race ahead’, Gillard cautions.
Still far too few comprehend the scale and importance of what is going on in Asia, be it in the economy or politically, let alone the importance of Asia in terms of its palpable impact on our region and on the structure of world economic and political power.
Fortunately, we now have confirmation that the Australian Prime Minister does, and articulation in a national statement of what we have to deal with and what the opportunities and risks are in how we deal with it. The White Paper she has commissioned provides a chance to put the issues under forensic scrutiny and rigorous assessment and to engage the community in the process. It will be helpful to Australia and helpful also to our partners in the region.
Peter Drysdale