Europe, Asia and Australia: New imperatives for cooperation

Acting NATO Secretary General Claudio Bisogniero with Foreign Minister Rudd before the Minister's address to the North Atlantic Council on the 20th January 2012, Brussels. Photo: Foreignminister.gov.

The geostrategic importance of Asia is intensifying and as a result we are fast approaching some fundamental impacts on the post-war global order.China's economy is being transformed, along with India's, as are other economies through Asia, as industrialisation, urbanisation and modernisation brings new wealth to hundreds of millions of people and new power to the states that govern them.This will change our world, giving us a 21st century of diverse and dynamic opportunities, as well as difficult and perhaps destabilising challenges to the existing order.
We've witnessed historic turning points in our lifetime before; none more significant than the end of the Cold War. As with today, the primary cause for that change was economic.
A failed Soviet state, crippled by the impossible cost of a heavy, centrally-planned economy and an over-sized military, competing with a nimble, market-based system that relied on millions of decision makers to drive growth, prosperity and power.
But the turning point we face today has a critical distinction from that of 1989.There is no Berlin Wall coming down. No television footage of ordinary people tearing down statues to celebrate the end of oppression. No outpouring of emotions.
What we face is a quiet transformation, but still with far-reaching consequences. This revolution is taking place on the ground in Asia, but it's a story not just for Asia but for the world.
In 1982, on current prices, China's economy was less than 9 per cent the size of the US. 30 years later, again on current prices, China's economy is half the size of the American economy. By 2016, it will be more than four fifths the sizes of the US, and growing rapidly and by the end of the decade likely comfortably surpassing the US. On other measures that take into account the buying power of the yuan versus the greenback, the Economist reports that China will pass the US within the next 5 years.
But China isn't the whole story.
The prospects and promise of India are also being transformed as its economy develops and diversifies. India's economy is structured quite differently from China's, and its future development will likely be different as well. The Indian economy will, however, become a formidable force for the region and the world
Moreover, a range of other countries across Asia are crossing development thresholds as well.Australia's near neighbour, Indonesia is growing rapidly, and is likely to be a US $1 trillion economy by 2013. Nouriel Roubini predicts it could be in the top ten economies by the end of the decade. And arguably the world's 6th largest economy by 2030.
Furthermore, Vietnam's economy has radically changed in the past 20 years. In 1990, it was a largely agrarian economy, with 39 per cent of GDP coming from agriculture. Today, the GDP share from agriculture has fallen to 21 per cent, while industry's share has almost doubled, as its manufacturing base has broadened and deepened.
For the first time in more than 130 years, we face a strategic environment in which the American economy will no longer be the largest in the world. And the world's biggest economy will belong not only to a non-democratic state for the first time in 200 years but a non-Western state for the first time in 500 years. And in this, the combined economic weight of Asia will in time surpass that of the US and Europe combined.
The economic dynamism of what's happening in Asia is also reflected in Asian military spending. Growth in military expenditure is a direct function of economic growth, but also a reflection of strategic uncertainty in a region still dominated by unresolved territorial disputes from the past. The United States remains the world's biggest spender, and will be for decades to come. But the acceleration of military spending has been much higher in Asia. China's spending is up by 335 per cent for the decade to 2010. Russia is up by 368 per cent. India by 183 per cent.
That increased investment means regional militaries having a longer reach. It means greater buying power for new technology, and faster deployment of updated equipment. It potentially means greater capacity to deny access to strategically or economically important parts of Asia. And it means the development of non-conventional capabilities, like cyber attacks, that have the potential to be used in asymmetric warfare.
Asia in the 21st century is a place of deep strategic uncertainty, long historic enmities and longstanding unresolved territorial disputes. We have a nervous truce on the Korean Peninsula, cast into fresh uncertainty with the assumption of power by Kim Jong-un.
We have territorial disputes including the South China Sea, the East China Sea and the Sea of Japan. Then there is the Taiwan Straits. These are disputes of real tension that, in the context of rising powers, have a real risk of spilling over into live confrontation.
And the consequences of a miss-step in Asia this century are potentially global in scale.
As I have said many times, in Asia we face the prospect of the 21st century global economy resting on the shoulders of a 19th century set of security policy realities.
And the challenge for our hemisphere, the Asian hemisphere, is to manage the latter so it does not destroy the former.

Institutional Arrangements
Security in the Asia Pacific has not been underwritten by the same sorts of institutional mechanisms that have served the Euro-Atlantic so well in the post-war period. The institutional mechanisms that have underwritten European security since the Second World War have been founded upon a clarity of common values: commitment to individual liberty, democracy, human rights and the rule of law.
We are some way off a consensus of values in the Asia Pacific to underpin common security of the type that the EU and Nato have evolved in Europe. We recognise that ours is not the same challenge that faced Nato members after the Second World War. We aren't taking on this task in the aftermath of a world war, although our task in Asia is to ensure that war is never even contemplated.
With democratic values at the heart, both the EU and Nato have played a role in helping to spread the reach of democracy across Europe, following the end of the Cold War. In Asia, we don't have such common foundations derived from a common set of values. Nor therefore do we necessarily have a common set of bearings for the future.
But what we can do is ensure that our common interests are harmonised to the absolute maximum, and that the cultures, habits and institutions of our region are capable of managing (and perhaps even resolving) conflicting interests when they arise.
In Asia, we should be optimistic, because those nascent institutions are beginning to emerge. These institutions must work towards creating the range of confidence and security building measures that we saw slowly emerge in Europe through the Helsinki process. In that context, last year's entry into the East Asia Summit by the United States and Russia was a major step forward.
Our common challenge through this evolving institution is to help ensure that the rise of China is accommodated peacefully within the global and regional rules-based order; that India is encouraged to play its full, natural role as a major democratic power in Asia; and that the rest of Asia is able to preserve its sovereignty and maximise its prosperity in the process. In short, this is the core challenge of our century.

Economic interdependence between Europe and Asia
Fundamentally, what happens in Asia, the Pacific and Indian Oceans this century will reverberate on both sides of the Atlantic and around the world.
Economically, the interconnectedness of Europe and the United States with Asia is growing rapidly. 50 per cent of all global merchant traffic passes through the waters of the South China Sea. 85 per cent of South Korea's energy is imported. Japan's imports are on a similar scale. 90 per cent of China's crude oil is imported. India more than 81 per cent.
Asia's sea lines of communications with the rest of the world are therefore not just important, they are fundamental to Asia's economic future. Europe has some $860 billion in trade with the major economies of North East Asia, much of it transiting through the South China Sea.
There is much legitimate attention at present to the freedom of navigation in the Arabian Sea. But any serious conflict arising out of the South China Sea would have fundamental economic and strategic implications for all of us. Furthermore, according to the US Energy Information Administration, over 60,000 vessels pass through the Straits of Malacca each year, carrying up to 14 million barrels per day of oil.
If the straits were blocked, nearly half of the world's fleet would have to reroute through the Indonesian archipelago. So all countries have an interest in the peaceful resolution of outstanding disputes in our region that could in any way compromise freedom of navigation.

European Interests in Asia the need for greater EU and Nato engagement
It is in this context that both the EU and Nato have much to gain from a deepened understanding of and engagement with the security policy challenges that confront us across the Asia and its surrounding oceans and seas.
We want to encourage both the EU and Nato to further focus on what is happening in our region because our region's future will directly affect both sides of the Atlantic. The EU's and Nato's increasing engagement with the countries of Asia, including Australia, is to be encouraged.
We should further explore areas founded on our mutual interests, like maritime security.
We've already seen the United States recognise the shift to the Asia Pacific that is underway. During his visit to Australia in November, President Obama explicitly re-focused US attention on this region. Australia believes that a strong and adaptable US presence in the Asia-Pacific is vital to ongoing peace and stability, as it has been for more than half a century. That's why we're enhancing our defence cooperation with the US, including through rotational US military training in Australia's Northern Territory in coming years.
Against this backdrop, Australia through its 2009 Defence White Paper Report has resolved to grow its defence capabilities and provide sufficient resources for its own defence, and to optimise the resources available to be deployed.
Australia ranks in the top 15 countries in the world in absolute military expenditure. Measured against absolute military outlays, Australia would be 5th largest in Western Europe. Similarly, Australia's 3,000 troops currently deployed abroad on multiple missions would rank sixth among Nato European nations by number of armed forces personnel operating out of country. In a more complex, interconnected world, our military burden is not eased. It is increased. Despite growing global economic uncertainties, it is incumbent on all of us that our defence budgets ensure our capacity to safeguard against growing global security uncertainties.
As President Obama emphasised when outlining the United States' defence priorities, it's about working smarter with what we have and developing defence capabilities that are more "agile, flexible and ready for the full range of contingencies and threats". The increasing US focus on Asia will mean European Nato members will need to do more, not less, to provide security. I'd like to reiterate the concerns raised by outgoing US Defense Secretary, Bob Gates, last year of the "chronically starved" defence budgets of most NATO members.
According to the Stockholm International Peace Research Institute (Sipri), in 2010 total European military spending, which includes many non-Nato members, fell by 2.8 per cent in real terms. Last year was in fact the first year since 2001, again according to Sipri, that total military expenditure by Nato European members decreased dipping from US$308 billion in 2009 to US$298 billion in 2010.Both are signs that the global financial crisis and the economic recession are beginning to have a real impact on defence spending across the region. Australia understands the current and future pressures on European defence budgets. As a member of the G20, we fully grasp the dimensions of the European financial challenge.
But this is not the time for significant cuts to military budgets.
In a less predictable global security environment, the post-Cold War peace dividend has well and truly been spent so we need to make new investments in our mutual security.
12 years into the 21st century we have already shown what is possible when the international community comes together to share responsibilities in security.
In Libya, a coalition on an unprecedented scale of Nato Allies and non-Nato members joined forces to avert a massacre. Australia was one of the early supporters of a no-fly zone over Libya, actively canvassing such action. Australia, as a non-combatant, was the third largest donor globally to the humanitarian effort in Libya.
While our immediate region remains most critical to our interests, Australia recognises that we are also profoundly shaped by political, economic and security developments around the globe. And that Australia has a responsibility to help meet the global challenges that affect us all in which our partnership with Nato is fundamental.
Afghanistan
Australia's commitment to Afghanistan reflects these principles.We recognised that the threat of al-Qaeda affected not just the United States and Europe, but our own interests, and required effective collective action.
Over the last decade, Australia has been consistently one of the top ten military contributors. We have long been the largest non-Nato contributor to the International Security Assistance Force mission in Afghanistan. We have today around 1550 armed forces personnel and around 50 civilian personnel on the ground at any one time.
The clear gains that have been achieved in Afghanistan are testament to Nato's leadership of Isaf over the last decade and to the commitment shown by the international coalition.
We have significantly reduced the threat of al-Qaeda. We have made good progress on reversing the insurgency and strengthening the capacity of the Afghan National Security Forces. And, of course, a great deal of progress has been made in bettering the lives of everyday Afghans. We are one of the top ten donors of development assistance in Afghanistan. But it is important that this commitment is matched by concrete support for Afghanistan through transition and into the longer term.
The International Conference on Afghanistan in Bonn last month (which I attended on behalf of Australia) sent a very clear message that the international community will continue to be there for the people of Afghanistan.
As we expect Nato will retain a leadership role in continuing military support for the Afghan security forces after 2014, it is important that at the Nato summit in May there is agreement on the key elements of post-2014 engagement in Afghanistan.
I also urge agreement at Chicago of a credible plan to ensure a sustainment of an Afghan National Security Force of sufficient size to enable them to meet the challenges ahead. For Australia's part, we are on track to completing our primary mission of training of the Afghan National Army's Fourth Brigade by the end of 2014. But, as I made clear in Bonn last month, Australia will remain engaged in Afghanistan through this decade at least.

The Australia-Nato relationship
Australia's role in Afghanistan underscores our credentials as a valuable and capable partner of Nato something of course Nato has recognised. Isaf is the cornerstone of Australia's engagement with Nato. For, as we have made gains in Afghanistan, we've also made gains in the Australia-Nato relationship in recent times. Driven by our work together in Afghanistan, Australia is in the process of formalising our engagement with Nato through a framework for political and military cooperation. The framework will provide a mechanism to allow us to consult more closely at the policy level and the operational level.
Over more than 60 years, Nato has joined with the forces of the world's most powerful nation, the United States, with the combined capabilities of the countries of Europe and Canada, creating powerful capacity, powerful protective force and powerful deterrence.
The Strategic Concept launched at the Lisbon Summit in 2010 was an important step in Nato's reinvention and extension as we move further into the 21st century. Australia welcomes the focus in the Strategic Concept on partnerships with a wide network of countries and organisations around the globe. We also welcome Nato's commitment to strengthening its strategic partnership with the European Union. And we are committed to remaining a serious, substantive partner of Nato as it continues to play a pivotal role as guarantor of security not just in Europe, but, as appropriate, beyond Europe as well.
We have upgraded our representation to Nato, appointing Dr Brendan Nelson as our first Ambassador to Nato. And our negotiations so far for a High Level Political Declaration have been fruitful and we look forward to this being concluded this year.
Australia was honoured to welcome Nato Deputy Secretary General, Ambassador Claudio Bisogniero, to our shores last year and we will be equally honoured to host Secretary General Rasmussen this year.
Australia is committed to taking its partnership with Nato to the next level. We see a future for collaboration with Nato where our common values and strategic interests intersect. Both sides could gain from closer collaboration in areas such as interoperability, an exchange in defence education, training, defence sector reform, and in high-level political consultations.
They are areas that, in the words of Deputy Secretary General Bisogniero, would "make our partnership a genuine two-way street". Which is ultimately what both Nato and Australia should be striving for.

Conclusion
Australia sees a bright future for collaboration with Nato. We want to build on our successful collaboration in Afghanistan, where Australia is committed to seeing through our commitment to the Isaf mission. As Nato's strongest partner in Asia, Australia is keen to share its own unique perspective on our region, as you reach out and build links with other Asian partners. As Asia takes on a central place in the world of the future, a closer engagement from Nato in our region will help secure a safer path for us all in the 21st Century.

The writer is the Australian Foreign Minister.

This speech was delivered at North Atlantic Council at Nato Headquarters in Brussels on 20 January.