Fitting in Or Falling Out? Australia's Place in the Asia-Pacific Regional
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FITTING IN OR FALLING OUT? AUSTRALIA’S PLACE IN THE ASIA-PACIFIC REGIONAL ECONOMY Mark Beeson alliance.ussc.edu.au October 2012 US STUDIES CENTRE | ALLIANCE 21 FITTING IN OR FALLING OUT? AUSTRALIA’S PLACE IN THE ASIA-PACIFIC REGIONAL ECONOMY EXECUTIVE SUMMARY ■■ At■the■centre■of■the■new■economic■and■political■realities■that■shape■the■Asia- Pacific■region■is■the■relationship■between■China■and■the■United■States,■Australia’s■ The Alliance 21 Program is a multi-year research initiative respective■principal■trade■partner■and■long-standing■security■guarantor. that examines the historically strong Australia-United ■■ Australia■needs■to■adapt■to■new■market■forces■in■the■international■ States relationship and works to address the challenges economy■in■order■to■escape■the■resource■curse. and opportunities ahead as the alliance evolves in a changing Asia. Based within the United States Studies ■ ■ Despite■the■changing■dynamics■of■the■region■and■the■potential■rivalries■that■may■ Centre at the University of Sydney, the program was exist,■Australia■must■ensure■its■national■interests■continue■to■be■advanced. launched by the Australian Prime Minister in 2011 as a public-private partnership to develop new insights and policy ideas. Australia is caught between two worlds. On one hand, it has the opportunity to take advantage of Asia’s rise and intergrate with Asian economies in order to guarantee its inclusion in the region’s rapid growth. On the other The Australian Government and corporate partners Boral, hand, it faces a series of challenges. Asian economies are developing with great speed and promise. Adapting Dow, News Corp Australia, and Northrop Grumman to changing market complementarity and escaping the resource-curse will be crucial to Australia ‘fitting in’. To Australia support the program’s second phase, which avoid ‘falling out’ with the rest of the region, the country’s economic and geostrategic commitments must be commenced in July 2015 and is focused on the following carefully balanced. Managing these competing factors is essential to Australia’s continued prosperity for the first core research areas: defence and security; resource half of the 21st century. Developing the ability to think independently about what might actually be in the long- sustainability; alliance systems in Asia; and trade, term interests of Australia is pivotal to the future of Australia’s prosperity and integration with the Asian region. investment, and business innovation. Cover image: This work is a derivative of “Chain, Black’s Beach, San Diego, CA” by Photos by Clark, licensed under CC BY 2.0. United States Studies Centre The Alliance 21 Program receives funding support from the following partners. Research conclusions are derived Institute Building (H03) independently and authors represent their own view, rather than an institutional one of the United States Studies Centre. The University of Sydney NSW 2006 T: +61 2 9351 7249 E: [email protected] W: ussc.edu.au US STUDIES CENTRE | ALLIANCE 21 FITTING IN OR FALLING OUT? AUSTRALIA’S PLACE IN THE ASIA-PACIFIC REGIONAL ECONOMY Australia, we are constantly assured, has never had it so good. As many other OECD economies succumbed to the impact of the global financial crisis (GFC), the Australian economy appeared immune to the downturns that affected Europe and the United States in particular. Much of the credit for this fortunate state of affairs was attributed to Australia’s actually have to deal with. Navigating between the competing demands of its geographical position and natural endowments: located alongside the world’s economic and strategic partners will be the defining international problem for the most dynamic economic region and possessing the resources that East Asia’s foreseeable future. Although the primary focus of the subsequent discussion is on rapid industrialisation increasingly required, Australia did indeed look like the ‘lucky the economic impacts of Australia’s regional ties, it is not possible to understand country’. them in isolation. The Chinese government has, for example, pointedly indicated its displeasure about the recent decision to station American troops in Darwin, And yet it is important to remember that when Donald Horne described Australia and indicated that this could have negative consequences for Sino-Australian ties. as the lucky country in 1964 he was being ironic. Horne was pessimistic about the This overarching strategic context adds yet another level of complexity to the prospects of a country relying on natural resources to mitigate the shortcomings whole process of ‘Asian engagement’, an aspiration that, while not always clear, is of what he considered to be Australia’s second rate political leadership. Australia generally considered one of the keys to determining Australia’s place in the region. was ‘lucky’ in that it could get away with failings that a lack of resource wealth But before we can even begin to consider how Australia fits in, it is important to might have exposed in less fortunate countries. Although Australia’s political class say something about the identity of the region and the nature of the ‘engagement’ is arguably a good deal more professional, competent and sophisticated than it process. was in the 1960s, some of the problems Horne identified are strikingly familiar half a century later. Australia is once again highly dependent on its resource wealth Regional Politics and Identity to underpin national welfare, and increasingly reliant on a single country to absorb ever greater amounts of its commodity exports. In some ways, despite all of What’s in a name? When it comes to regional definitions, the answer is potentially the emphasis that has been placed on economic reform and becoming a ‘clever quite a lot. For Australia and the United States their preferred regional label is the country’ over the last few decades, important features of Australia’s economic ‘Asia-Pacific’. It could hardly be otherwise, of course, as the principal alternative, profile remain troublingly familiar. East Asia is one from which they are necessarily excluded. This will no doubt strike some readers as an excessively academic and arcane point, but a good deal hangs But while some aspects of ‘Australia’s’ relationship with its neighbours remain the on such niceties. When regional definitions are institutionalised they can have same, some are novel and present new challenges for the current generation of consequences. Regional organisations have the effect of determining who is in policymakers. At the centre of the new economic and political realities that are and who is out, who can act and who must observe, who is a rule-maker and who shaping Australia’s region is the relationship between China and the United States— is a rule taker. If a regional grouping negotiates a trade liberalisation agreement respectively Australia’s principal trade partner and its long-standing security among its members this can have potentially negative consequences for those guarantor. The inherently contradictory, potentially antagonistic and unstable Sino- who are excluded, for example. It was precisely this possibility that lay behind US relationship will help to determine what sort of region Australian policymakers 2 US STUDIES CENTRE | ALLIANCE 21 FITTING IN OR FALLING OUT? AUSTRALIA’S PLACE IN THE ASIA-PACIFIC REGIONAL ECONOMY Australia’s efforts to institutionalise its own position in the ‘Asia-Pacific’ and ensure economic principles. According to the theory of ‘comparative advantage’ nations that it was not locked out of what had become its most important markets. should do what they are ‘naturally’ best at. In this case, Australia’s resources compliment the East Asian economies’ hunger for raw materials and energy. East Despite its limited overall impact, Asia Pacific Economic Cooperation (APEC) Asia’s large labour force can transform Australian iron ore into manufactured goods, symbolises a profound long-term shift in Australia’s economic and political goals. which can then be exported to Australian in return. Both parties in this exchange Since at least the 1970s it has become clear that the economic fate of Australia was get to specialise and therefore increase overall economic efficiency and welfare. increasingly bound up with that of northeast Asia in particular. Japan led a region- While this model captures something important about the basis of the relationship wide process of development and industrialisation that expanded throughout East and the policies that seek to facilitate it, the nature of international economic activity Asia, triggering an historically unprecedented spurt of economic growth that has has changed profoundly since David Ricardo first posited the merits of comparative lifted millions from out of poverty. It has transformed the region of which Australia advantage at the beginning of the nineteenth century. is a part of however it is defined. For generations of policymakers in Australia, economic engagement with its northern neighbours has become the overwhelming The world is no longer composed of material reality with which they may contend. True, some governments may have discrete, highly differentiated national embraced interdependence with Asia more enthusiastically than others, but few economies. Not only do countries in the The world is no longer composed doubt that Australia’s economic destiny lies there. The numbers are unequivocal: ‘developed’ world often produce very of discrete, highly differentiated by 2008-09, around 65 per cent of Australia’s exports went to Asia, with Japan and similar products, but the nature of trade national economies China accounting for well over half between them. itself has changed profoundly. As Peter Gallagher’s contribution to this collection But if greater economic integration with East Asia was an inescapable long-term explains in more detail, the production and movement of goods in the contemporary reality, the terms of engagement were not inevitable. Creating regional identities era frequently takes place within production networks that transcend national and groupings may have been a slightly paradoxical part of a global trend, but borders.