China’s ‘seismic shift’ demands urgent foreign policy focus in Australia, says Paul Keating

Paul Keating in conversation at UTS. Photo: Jeremy Piper

Paul Keating in conversation at UTS. Photo: Jeremy Piper

In summary: 
  • Former Prime Minister Paul Keating discussed his time in office dealing with China and Australia’s relationship with China today in a conversation with broadcast journalist Kerry O’Brien
  • The event was part of the Prime Minister Series presented by the Australia-China Relations Institute (ACRI) at UTS

Former Prime Minister Paul Keating says a “seismic shift” in strategy and momentum is propelling China in its quest for a new international economic and political order.

Australia has many opportunities to benefit from its strong relationship with China and from its unique place in the region, but Federal Government inertia on foreign policy is standing in the way, Mr Keating told a capacity crowd at the University of Technology Sydney this week.

“The fact is Australia needs a foreign policy, and it needs one urgently. Australia does not have a foreign policy – that’s the biggest problem … We both need and deserve a nuanced foreign policy, which does take account of these big seismic shifts in the world. And we can't ever be caught up in some containment policy towards China … to assist the Americans to try and preserve strategic hegemony in Asia, in the Pacific,” he said.

Mr Keating made the comments in conversation with broadcast journalist Kerry O’Brien as part of the Prime Ministers Series presented by the Australia-China Relations Institute (ACRI) at UTS. In a broad-ranging interview, conducted in the week preceding the 11th G20 summit to be hosted by China on September 4-5, the former PM discussed his time in office dealing with China and Australia’s relationship with China today.

In introducing Mr Keating, UTS Provost Professor Peter Booth noted that China was our largest education services export market, with Chinese education-related travel to Australia contributing $4.97 billion to the economy last year. He said it was very important that “as two countries we understand each other”. Mr Keating’s far-reaching economic reforms while in office contributed to the strong relationship we have today, Professor Booth said.

Mr Keating said there had been a change in the economic underpinnings of the international order since the beginning of this century, in the same way the United States took the helm from Britain in the 20th century.

By the time of the inaugural G20 leaders’ forum in late 2008, amid the global financial crisis, the “mystique” around the Americans’ ability to manage the international economic system had fallen away.

“When that became obvious, that the mystique had disappeared, that there was really chaos on Wall Street, and that the Chinese were invited into the G20 to help fund the recovery, I think the idea dropped in their mind: ‘Look, now is the time for us to press our case as a rising economic and strategic power.’

“And what China now wants to see is a new international economic and political order, which is not part of the order produced by the victors of World War II.”

For the past nine years, Mr Keating has been chair of the International Advisory Council for the China Development Bank, providing expert commentary and context to China on the world economy.

He said the economic shift and wealth creation in China in recent times is without precedent. Its first and second industrial revolutions took just 25 years, compared with two centuries in the West, and it is now into its third – the digital revolution.

With its burgeoning middle class, expected to grow by 850 million people by 2030, and strong annual growth, China’s economy is now the world’s largest in purchasing power terms and second largest in US dollar terms. It has morphed from an agrarian economy to a GDP worth about $11 trillion, with growth at roughly 6.5 per cent.

The rising incomes and modernising of cities, infrastructure and telecommunications were creating “a massive force of an economy … and the benefits for Australia are going to be profound”.

Paul Keating and Kerry O'Brien. Photo: Jeremy Piper Paul Keating and Kerry O'Brien. Photo: Jeremy Piper

Australia was reasonably well prepared to maximise the China opportunity, he said, “but we’ll need to have our eyes open for it and go and do it”.

Mr Keating offered insights on the transformation of Asia-Pacific Economic Cooperation forum (APEC) that included both the delicate politics and the personalities: how the reserve shown by the Chinese and American leaders at the inaugural leaders’ meeting in the US in 1992 gave way a year later in Indonesia to “Clinton playing the saxophone and Jiang Zemin doing karaoke”.

Of what he termed a “messy” situation in the South China Sea, he said: “It’s basically China testing the strategic limits, and doing it in a very cheap way … there’s no territory involved, except some rocks in the South China Sea, which they have built some sand islands on. So at a very cheap price, they’re putting strategic pressure on the United States.”

Mr Keating said the US in Asia was fundamentally unled, and though President Obama had kept the United States out of potential conflicts “essentially the US did not see China coming”.

He believed a Hillary Clinton presidency, should it defeat “Trumpism”, would not make the mistake of trying to run business as usual.

“If Hillary Clinton believes the US still has the maritime and strategic capacity to be the framer and guarantor in Asia, despite the legitimate ambitions and economic scale of China, then I think that would be a great mistake, and a mistake I don’t think she is likely to make.”

Mr Keating said Australia’s alliance with the US had underpinned our security through the postwar years, but times had changed.

“Australia should be using the elasticity of diplomacy and foreign policy as our first power … and therefore try and construct a progressive and ambitious policy towards the countries of the region most important to us.”

In closing the discussion, the Director of ACRI, Professor Bob Carr, said Australia had an opportunity now to look beyond “the lens of Washington” and craft a China policy that takes account of Australian interests.

Diplomacy and an active foreign policy could help to resolve differences and create opportunities, he said – “keeping options alive for Australia, not closing them off in a burst of flag-waving and table-thumping”.

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