The Economic Dimension

of Foreign Policy

Origins of Trade in FPTrade was not a key element of AFP until the early 1980’s.

$AUD floated in December 1983-opening up of the economy

Dept of Trade merged into Dept of Foreign Affairs to form DFAT in 1987. Clear demonstration of changed priorities elevating economics and trade to direct FA concerns.

Elevating trade and expanding opportunities was a major element of AFP during the Hawke-Keating years (1983 -1996).

Trade seen as the key way of boosting living standards & raising our profile in the world.

Trade push coincided with new approach to Asia and a reaction against the protectionist policies of the EU and USA.

Australia played a key role in the formation of the Cairns Group (1988) and APEC (1989).

• Australia has become a strong supporter of greater trade liberalisation and ‘free trade’.

• Advantageous for Australia as it has become a very competitive agricultural and mining exporter.

fewer trade barriers = increased export sales• The incredible strong performance of ‘Asian Tigers’ (China, Vietnam, South

Korea) is a large factor in Australia’s economic transformation in a more globalised environment.

• Calls for freer global trade has bought Australia in ‘conflict’ with some of our more traditional partners e.g. USA, Japan and EU.

Australian exports by destination

Destination 1999/2000 2009/2010

PRC 5.1 23.2

Japan 19.3 18.5

South Korea 7.8 8.2

India 1.6 8.1

USA 9.9 4.8

New Zealand 6.9 4.0

Euro Area 7.7 4.0

UK 4.3 3.6

Taiwan 4.8 3.4

Singapore 5.0 2.5

Consequences for AFP?

Australia’s Major Two-Way Trading Partner

1. China $64b2. Japan $60b3. USA $50b4. Singapore $28b5. UK $26b6. South Korea $23b7. New Zealand $22b8. Thailand $16b9. Germany $14b10. Malaysia $14b

WORLD TRADE ORGANISATION

The WTO is the only organisation that deals with the rules governing trade between countries. All member states of the WTO have the same status. All members have a say, but decision making is based on consensus where ideally all agree for a decision to be taken.

Australia benefits by:– a 1/3 reduction in duties & custom charges faced by manufacturing

exports in foreign markets;– The opening up of agricultural markets– The creation of opportunities to export Australian education, financial,

business & other services– Resolution of trade disputes w/o the prospect of military repercussions

TRADE LIBERALISATION

• When countries liberalise their economies, they stand to benefit greatly from increased access for their businesses, & consumers to the world’s marketplace. It also encourages businesses to become more productive & efficient.

Former PM Howard said:

“the biggest thing the developed world can do to alleviate poverty is remove trade barriers. The benefits of

that are infinitely better than direct aid”.

What’s DOHA?• At Doha in 2001, Trade ministers agreed to improve

access for trade in agriculture, services and industrial products

• The World Bank has found that the full liberalisation of trade in all goods could lead to global income gains of up to USD $832 billion – almost two thirds of these gains would flow to low and middle income countries.

• Australia is a strong supporter of trade liberalisation as we are an efficient agricultural exporter.

FREE TRADE AGREEMENTS• In recent years FTA’s has been used to help propel

Australia’s trade interests as the WTO’s multilateral trade system has becoming increasingly stalled during the Doha round.

• Australia is negotiating FTA’s with: China, Japan and Malaysia

• It has negotiated FTA’s with the:New Zealand United States of AmericaChile ThailandSingapore ASEAN

AUSFTA (Australia United States Free Trade Agreement)

signed in 2006

FOR• Allows equal treatment of Australian & US companies in the USA• Underlines the value of the security alliance• Increase job opportunities in Australia• Dairy industry benefits are AUD$56 million a year• US investment in Australia easier• Easier access to the world’s largest economy

AGAINST• It will take up to 18 years to be fully implemented• Tighter copyright laws for US products • Most farming barriers remain in place• Imports will increase by A$2 billion in favour of the USA• Australian culture could become marginalised. With an easing of content

restrictions.

Economics/Trade Questions

1. What is meant by the term globalisation? 2. What is the W.T.O.? How does it promote globalisation?3. Discuss two reasons why trade is important to Australian foreign policy.4. What is a Free Trade Agreement? Why is Australia keen to sign such

agreements? 5. Clearly distinguish between a bilateral and a multilateral trade

relationship. 6. Evaluate the argument that the promotion of trade should be a priority

of Australia's foreign policy.7. How accurate is it to argue that Australian foreign policy is

predominantly economic in its focus? What are the reasons for this?

The debateabout

nationalinterest

FOREIGN POLICY OBJECTIVES

Maintain National Security: ANZUS, ASEAN Regional Forum, Howard Doctrine, “forward defence”, Indonesia & East Timor, Relationship with US, Arms Control

Promotion of Economic & Trade Interests: Expand regional & global links. WTO, APEC & China, Multilateral & Bilateral Relationships, Free Trade Agreement, Protection & “economic rationalism”, & direct national interest equation.

Responsibility as a good global citizen: UN, International Peacekeeping, Foreign Aid, Human Rights, Environment & Kyoto Protocol

Principle vs. Pragmatism The perpetual battlefront in FP Should a state act purely out of self-interest

(pragmatism/realism) or should it actions be based on a moral principle (right and wrong)?

Principle implies a more consistent approach to FP while pragmatism allows for more ‘flexibility’.

The notion of internationalism is underpinned by principle and not pragmatism.

On the other hand, national interest is based purely on pragmatism.

Overseas Aid however, encompasses both: ‘enlightened self-interest’.

Provide AFP examples of both concepts

FORMULATION of National interest PM&FM – dominates the “focus & flow” of FP. no consultation or debate necessary.

Prime instigator of foreign policy, signs contracts, Complicated by leadership issues as well. Australia’s presence worldwide. Examples – Climate Change & policy change, Iraq etc.

Department of Foreign Affairs & Trade (DFAT) – advice & information, international security, promoting trade interests, projecting a positive image of Australia internationally, help Australians in trouble overseas. Ministers in charge –

Cabinet - especially with matters that involve trade and defence forces.

Parliament – Joint Parliamentary Committee on Foreign Affairs, Defence & Trade, Senate Committee, Joint Standing Committee on Treaties. Despite the talk bi-partisanship is the norm especially on matters of security and trade.

NGO’s and the UN

Public Opinion – variable some issues very hot: Kyoto, Asylum seekers and Whales while others such as uranium sales to India and China rarely discussed.

How

foreign policy is shaped in australia

Hot Button issues

• Common areas in which there is some debate over what informs the ‘national interest’ in Australian foreign policy are: refugee and asylum seeker policy-are we too cruel or just

sensible?human rights and relationship to China-should we trade

and criticise? climate change and environmental security how much

should we try and do? the US alliance- in terms of involvement in Afghanistan-

why are we really there?

Regional relationships

BACKGROUND • First Phase (1945-49) underlined by the experiences of the war, which

highlighted both the importance of the region to Australia & the security threats posed

• Second Phase – fear of Asia consolidated as the threat of communism spread. Korean & Vietnam wars, SEATO signed.

• Third Phase – more responsible for its own defence & security. Increased dialogue with ASEAN & removal of White Australia Policy

• Fourth Phase – (80’s & 90’s) – self-reliant on defence, economic aspects & recognised the potential & opportunity offered by Asia. APEC initiative, member of ASEAN Regional Forum (ARF), & increase in trade to the region.

• Fifth Phase – Howard government from 1996 to 2007. A new emphasis placed on it post 9/11.Border protection and the issue of asylum seekers becomes a key element of AFP.

• Sixth Phase Rudd/Gillard government plenty of activities already: Kyoto, Uranium sale to India stopped, Troops out of Iraq, China, Japan, USA visit, ETS, proposed new regional organisation, return to more active role in the region. Border protection returns to the fore with the rise of Gillard to PM-a return to the Howard approach?

OBSERVATIONSFormer FM Downer – “closer engagement with Asia is the Australian government’s highest foreign policy priority”

Government press release – “US involvement in regional security is critical to the region to realise its full economic potential … there is much common ground”.

Former Malaysian PM Mahathir Mohammad – “Australia is talking about becoming the deputy of the US in policing Asia. This is unmitigated arrogance”.

2003 White paper:“Australia’s interests are global in scope & not solely defined in geography”.

“Our traditional security concerns remain: the Asia-Pacific is still home to 8 out of the world’s 10 largest armies & the world’s 3 most volatile flashpoints: Taiwan, the Korean peninsula & Kashmir”

Regional terrorism via JI has been a major issue in Indonesia, Philippines.

Entrapment and Abandonment

• Australia governments are fearful of both. • In recent years the strong focus on the US alliance

has entrapped Aust and altered perceptions of us in Asia. See response to ‘WoT’

• Potentially we may be abandoned by China on trade – especially if US and China ever came into conflict.

• However, if Australia prioritises its burgeoning economic relationship with China, we may be abandoned by US in terms of our military alliance. Can both co-exist?

Can Australia avoid making a choice?

CHINA• Recently became our largest trading partner. In

2009 exports to China totalled $ 64 billion a 50 % rise on 2004.

• On the other hand, Australia has taken a softer line on China politically. We have been a strong advocate of improving human rights with China – no longer criticising them in the UN but under PM Howard and Rudd have had dealings on a bilateral basis.

• However, we may have to chose between economics (China) and security (USA)

• This is a choice Australia does not want to make.

AUST RELATIONSHIP WITH CHINAPM Rudd – “relationship with China is complex & challenging”.

Exports – iron ore, steel, coal, wheat, gold, uranium & crude oil ($136 billion from now to 2012-2013)

Signed $45 billion LNG deal in 2004 Recognises China’s sovereignty over Tibet but recognises

significant HR abuses – “Tibet is a concern to Australians”. Open dialogue with Dalai Lama & anger over Kyoto Protocol

concessions to China After some delay Rudd agreed to attend the Beijing Olympic

Games opening ceremony. Rudd has respect in China because he speaks Mandarin Chinese Granted visa to Rebiya Kadeer to visit Australia in 2009 against

China’s wishes. MIFF website subsequently hacked –by China? Arrest and imprisonment of several Rio-Tinto executives,

including Australian citizen Stern Hu for taking bribes and stealing Chinese trade secrets – strained relations in 2010.

The Arc of Instability is an interconnected chain of politically unstable nation states in the Asia-Pacific region. The term came into vogue in the late 1990s,

proving especially popular with Australian politicians and journalists.

it in Australia’s interests to see these states to prosper

NOT just about china!

• Indonesia – East Timor, Terrorism (BB), West Papua, live cattle exports

• Japan - Whaling ICJ case, but is also a MTP• Fiji - Dictatorship, using PIF to isolate

them, reinforcing image of being a Pacific superpower

• PNG - ‘failed state’? Greatest recipient of our ODA,

• India - Next economic powerhouse is r/ship strong? Uranium sales?

Research one of these relationships

Regional Relationships Questions

1. What is meant by the term regional security? 2. What is ‘the arc of instability’?3. Evaluate the argument that the government doesn’t give

sufficient consideration to human rights issues in formulating AFP.

4. What is the Pacific Islands Forum (PIF)? What role does Australia have in it?

5. Evaluate the argument that Australia has neglected its relationships with its regional neighbours.

6. Evaluate the argument that Australia should assume a more active role in the Asian region.

Recent Changes in Australian

Foreign Policy

AFP under Rudd A clear priority for then PM and his government.

The PM played a key role in all FP issues. Quite, understandable as was a former diplomat himself.

Rudd was keen to elevate Australia’s profile especially at the UN where our reputation had slipped during the Howard years. ALP has historically seen Australia as a ‘middle power’

He travelled overseas extensively, dubbed by many in the media as “Kevin 747” as opposed to Kevin 07.

Three Pillars of AFP• Soon after taking power in late 2007 FM Stephen

Smith set out the fundamental principles the Labor government would bring to AFP. He said:‘At the heart of the new Rudd Labor Government’s foreign policy approach lies the responsibility to protect, defend and enhance Australia’s national

security, to maximise our economic opportunities and to advance Australia’s national interest across the range of international issues. ‘

• He went on to say there were three pillars that would underpin AFP in a Labor government.

• They are:

1. Enhancing Australia’s alliance relationship with the USA.

2. Active participation in the institutions of global governance such as the United Nations and World Trade Organisation and…

3. Diplomatic and economic engagement in the dynamic and diverse Asia-Pacific region

No change in these priorities under Gillard

The 3 Pillars at WorkIn no particular order since 2007 Labor governments have:

signed the Kyoto Protocol, withdrawn combat troops from Iraq, increased troop deployments in Afghanistan, stopped the sale of uranium to India, who has not signed the

NPT proposed the creation of a new International Commission on

Nuclear Non-Proliferation and Disarmament signed a FTA with ASEAN begun a campaign to win a non-permanent seat on the UN

Security Council by 2013-2014 criticised’ Japan over its policy on scientific whaling –

promised to take Japan to the ICJ if they do not stop so called ‘scientific whaling’.

Proposed to sell uranium to India after initially cancelling the deal proposed when first elected in 2007.

Recognised Kosovo’s sovereignty even though the UN has not

questioned China over its poor human rights record in Tibet,

proposed the creation of a new Asian Economic Community,

shutdown overseas migration detention centres – but now decided to reopen some new ones in different states

supported the creation of a new post Kyoto multilateral climate change policy- but failed to introduce its own ETS as promised

reaffirmed Australia’s commitment to the UN’s Millennium Development Goals but likely to not reach all targets

Reaffirmed Australia’s commitment to the US alliance

introduced a pilot guest worker program for Pacific Islanders in Queensland and WA

started a Pacific Partnership for Development and Security,

allowed the sale of some Australian mining companies to Chinese interests, but not others like Rio Tinto & then Stern Hu is arrested?

identified a need to build up our military capability to match increases in defence spending in the region - see 2009 defence white paper

Done little to support WikiLeaks founder Julian Assange while fighting extradition to Sweden

Australia and the GFC• Australia avoided the full impact of the GFC, it did

not go into recession as the rest of the developed world did has and its pro-active economic measures have been effective, coupled with the fact that China continued buying our mineral exports in record quantities (see Gorgon).

• This has given Australia some international kudos especially at annual G 20 meetings in 2008 and 2009. Which Rudd enjoyed..

The G 20 meeting in Pittsburgh Canberra's key ambitions heading into the G-20 summit go

beyond the trilateral Australia-China-U.S. relationship.

Australia has played up the major changes in the global economic imbalance, emphasizing the role that developing countries should play in broader financial and economic discussions.

Then PM Rudd -- currently co-chair of the G-20's working group on IMF reform -- is arguing for a clear role for China in the global economy.

ASYLUM SEEKERS/Border Protection

See Handout