Lowy Institute

Geoff Miller, a former Director-General of the Office of National Assessments, writes:

In his comment of 4 July, Hugh White roundly criticises Australia's efforts to understand and form a relationship of trust with China, and wonders whether we can grasp the notion of such a relationship with any countries other than the US and UK. I think he's hard on the efforts made over the years —think for example of Bob Hawke's relationship with Zhao Ziyang — and I also think that his comment overlooks something that really must affect the relationship, and that is China's political system and the role of the Communist Party as the covert power behind the overt institutions. 

One Australian who probably understands China as well as anyone is Richard McGregor, whose recent book, The Party, described in detail the way in which the Chinese Communist Party second guesses, or at least has the power to second-guess, practically any decision of significance in any sphere.

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Our politics, and for that matter American and British politics, may at the moment be driving us all to distraction, but at the very least they are much more transparent and accessible than the manoeuvrings within the opaque leadership of the Chinese Communist Party, which when it comes down to it is a self-selecting clique. And, if recent events are any guide, it is a bitterly divided one, and also one with many members very ready to take advantage of the opportunities for personal gain that political position provides.

Of course China is enormously important, and we and others must make a major effort to understand it and engage with it. But in doing that we should not overlook the fact that our political and economic systems are very different, however engaging and impressive Chinese interlocutors may be.



Danielle Rajendram is a Research Associate in the Lowy Institute's International Security Program whose work focuses on India and China-India relations.
Graeme Dobell cites recent census figures about languages spoken in Australian homes to argue that Australia has come a long way in its embrace of Asia. The political fretting about whether Australia is ready for the Asian Century risks overlooking this simple fact, as a closer look at the 2011 Census shows. In fact, the results reveal nothing less than a transformation in Australia's demographic composition.

While Australia has long been able to consider itself a multicultural nation, the importance of our migrant communities is becoming more pronounced, with almost a quarter of Australia's population born overseas, and 43.1% with at least one overseas-born parent.

Perhaps more revealing is the data on the geographic origins of these communities. While the proportion of Australia's overseas-born population is up 3% since the last census in 2006, our Asian-born population has grown even faster. Asian-born Australians now comprise one-third of Australia's overseas born population, up from 24% in 2006. Mandarin is now the language most commonly spoken at home after English.

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Five of Australia's top ten overseas countries of birth are now located in Asia, with China and India coming in third and fourth after the UK and New Zealand respectively. The growth of migrant communities is particularly evident in our cities: 66% of Australians live in capital cities compared with 82% of the overseas born population, and over a third of the residents of Sydney, Melbourne and Perth were born overseas.

Of particular significance is the growth and consolidation of the Indian community in Australia. The number of Australians born in India more than doubled since 2006, and Punjabi became Australia's fastest growing language with an even more impressive 207.5% increase. Hinduism has experienced the fastest growth of any religion, with adherents almost doubling since 2006.

We can expect that these migrant communities will find their own unique political voice. Their expertise, language skills and people-to-people contacts will also be vital in securing Australia's interests in the Asian Century, allowing the pursuit of business and trade ventures with Asia's emerging giants.

Australia's relations with its regional neighbours must come to reflect the significance of our domestic Asian communities. This most recent census data makes a clear case for a renewed focus on Australia-India bilateral ties. We must be careful not to neglect our relations with India in favour of expending disproportionate diplomatic and political capital on China.

The increasing influence of Australia's migrant communities will mean that a place for Australia in the Asian Century is unavoidable. What we now need is a clear strategy to fully realise the opportunities and advantages presented to us by our demography.

Photo by Flickr user rubenerd


A key submission to the Asian Century inquiry – perhaps a foundational text – is a work that is fast nearing its 50th birthday.

In contemplating the grand task of an Asian future for Australia, Ken Henry would well understand the many layers of thought in Donald Horne's The Lucky Country, a dissection of Australia's regional fate that still resonates for its verve and insight – and the quality of its word-smithing.

Consider one of the most famous paragraphs ever penned by an intellectual proving his love of Oz by skilled use of both whip and scalpel: 'Australia is a lucky country run mainly by second-rate people who share its luck.' The Lucky Country was first published in 1964 and is still on the shop shelves. Do yourself a favour and shell out $9.95 for some classic Horne the next time you see that distinctive Penguin cover.

Horne's two great themes have been the subject of separate inquiries by Ken Henry: the modernisation of the Oz economy and the coming age of Asia. The way the Treasury Secretary's review of the tax system was bowdlerised and bastardised by Canberra's present rulers might draw a silent nod from Henry for the Horne rating of our leaders.

One of the many merits of The Lucky Country is as a reminder of the considerable distance Australia has already traveled, using much more than luck. When the book first appeared in the 1960s, Australia's mental barriers to Asia were shut nearly as tight as the migration laws. I was a teenager in that era, and I often return to Horne's rendering of the time to revisit familiar faces and deep attitudes that seemed at the time like the natural order of Oz.

As editor of The Bulletin in 1960, Horne had deleted The Bully's old motto: 'Australia for the White Man'. This was a politer rendering of the original version: 'Australia for the White Man and China for the Chows.'

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Remembering that time gives some sense of Horne's vision in headlining his prologue 'Peopled from all over Asia'. The title draws on a Filipino prediction offered to Horne during a lunch at the University of the Philippines: 'We are all interested in Australia. It is a huge continent. In a hundred years' time it will be peopled from all over Asia.'

We are nearly half way along the course of that century journey and the view from Manila is being rendered accurate by the census figures. The census results just released show that Mandarin is now the most common language in Oz after English; others in the top ten languages spoken at home include Arabic, Cantonese, Vietnamese, Hindi and Tagalog. Lucky – and smart – is the country that can work changes like that in 50 years.

Horne charted some of that journey in the 1990s in his prologue to the fifth edition of the book, noting the shift over three decades from the age of Menzies to that of Howard. He wrote that many had missed the deep irony in his description of Oz as The Lucky Country, ignoring the loud warnings he sounded: 

It was essential to accept the challenges of where Australia is on the map, the need for a revolution in economic priorities and the need for a bold redefinition of what the whole place adds up to now. These three warnings can now simply be replayed with the amplifying knobs turned up. The first need has been met by many Australians: greater engagement with some of the countries in Asia has helped Australia move into the second chapter of its history.

Horne's most important point for the Asian Century inquiry is one he continually returned to; the thing, he thought, that might save a lucky land that was starting to run out of luck as Asia arrived. Donald Horne knew the hard-headed pragmatism and adaptability of Oz. He closed his work with the thought that those Australian traits of pragmatic improvisation mingled well with non-doctrinaire tolerance, an egalitarian sense of fair play and a courage that could be stoic. These were qualities, he concluded, that could constitute the beginnings of a great nation.

The words Horne penned in 1998 for the fifth edition are still apt: 'In contemplating our present leaders we come face to face with a paradox that became a leitmotiv of The Lucky Country: there are times when the only pragmatic course is to be visionary.'


The fresh perspective in Linda Jakobson's excellent Policy Brief on managing our relations with China brings out all kinds of things that have escaped my attention but now seem clear, and very important. 

Our relationship with China is now arguably more important to us than any relationship Australia has ever had with any country other than the UK and US, and yet our approach to developing the relationship has not changed for decades. In fact, as Linda shows, China gets less political and policy energy today than it did ten or twenty or even thirty years ago.

How could this be? I think the roots of our policy paralysis go deeper than Canberra's indolence or inattention. They go all the way down to our inability to imagine a relationship with a country as powerful as China which is not an Anglo Saxon ally. 

Much of the debate hitherto about Australia's relationship with China has proceeded on the assumption that this is a matter which Australia will decide. In his Lowy essay last year, Alan Dupont said Australians need to decide what we want from the relationship. That is an important question, but it is much less important than the other question: what does China want?

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Many Australians will no doubt think it craven to suggest that this is a central question in the future of our relationship with China. That just shows how little we understand the realities of power. We are neophytes in this because for 234 years we have been on the side of the rich and powerful against the relatively poor and weak. Now our position is much more complex. To a degree greater than we have ever known, the boot is on the other foot. 

That is why the questions Linda poses are so hard. We lack a relationship of political trust with China not only because we do not have the right forums and meetings, but because we fundamentally do not accept China's view of its strategic and political role in Asia. John Howard got away with sweeping this under the carpet, but his model for managing the relationship, and for balancing it with our alliance with Washington, is over a decade old now. It is not working any more.

Photo by Flickr user bildungsr0man.


Dennis Argall writes:

Linda Jakobson's analysis and recommendations for Australia-China relations are timely and sound.

The history of the degradation of Australian government approaches to the relationship is disappointing. Recent trends reflect elements that have worked on the relationship for a very long time. I was closely involved as desk officer, section head, branch and division head and as ambassador in Beijing (with some gaps) from 1970 to 1985.

China was for long a difficult negative for much of the foreign affairs establishment. It remained on the outer in a foreign service political career world that tended to be focused on ASEAN countries and a policy style that arose from management of the ASEAN relationship by hunting for things which might be 'ASEAN sensitivities' and building Australian policies, at micro and macro level, to avoid impinging on such assumed sensitivities; this wonderfully provoked many such sensitivities, of course.

While China was outside that strange environment, it was possible to deal with China in a more open way on the issues, presenting our perspectives frankly. It was an approach for which senior Chinese officials expressed appreciation privately in the mid-80s: 'We always know your perspective, even when we don't agree, and we like the fact that you don't make a public fight out of it like the Americans.'

It worked with the Americans, too. In 1980, approaching his US presidential election victory, Ronald Reagan announced that he planned to restore relations with the 'true, free Republic of China on Taiwan'. The Chinese asked us, at official level, to speak to the Americans for them. We said we would not speak to the Americans for China, but we would of course be articulating our own views at the right time. Which we did, with sensible officials in Washington warmly welcoming Australian opinion that helped them to keep American policy going in a sensible direction. It was good to do that with Australian initiative.

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In the Washington embassy when the Carter Administration had taken office in 1976, at a time when I was acting minister, we received Canberra's advice that we would like the US to regard us as a source of advice on our region. Excellent. But, so typically, this was followed soon after by a cable from Canberra to say, 'We are thinking about ASEAN policy, what do the Americans think. [Full stop, no thoughts from us experts]'. I confess now to having immediately confected a mirror message in reply, claiming that the State Department was reviewing ASEAN policy, what did Australia have to offer? The general level of dumb was exhibited when, at a lunch for him at the embassy, Carter's National Security Advisor Zbigniew Brzezinski was asked to express views on ASEAN, which he did so more than willingly, at inordinate length as he still tends to do, but concluded: 'By the way, is Australia a member of ASEAN?'

I digress, but to point to broader problems of policy development and management. We may think we are smarter now than 35 years ago, but imagine what they will say 35 years from now about present policy muddling.

China policy drifted, early. Stephen FitzGerald as our first Ambassador to China was hated by the Foreign Affairs establishment as a dangerous young outsider come among Jesuits, his thoughts opposed, his departure welcomed. Whereafter, also during a strange and difficult period in China, darkness fell on China policy-making among officials, though much happened at the top of government after Vietnam occupied Cambodia, China attacked Vietnam and the USSR occupied Afghanistan.

I found on my return to the department from elsewhere in 1980 that the standing departmental briefing of objectives for the China relationship was to encourage China towards positive engagement with international institutions and with the region, just as we had so broadly put it five or seven years earlier. It was something that by 1980 had already happened. I thought it dangerous that we were intensely engaging with China (and the United States, but the China embrace was real and enthusiastic) at the highest political level in what the Chinese would call a 'united front' against Vietnam and the Soviet Union. This, to me, constituted a very narrow and potentially fragile base for the political relationship in both countries. The economic relationship was growing, already 40% of Australia's exports went to North Asia. But in the Canberra world, with its separate trade and foreign affairs departments, Foreign Affairs tended still to ignore the economic and the Trade Department sustained ignorance of and hostility towards broader relations. Despite the combining of the two departments in the late 1980s, I have the impression from outside that we don't have a coherent overview in government.

Before the visit of the then Chinese Vice-Premier Li Xiannian in April 1980, the Fraser Government adopted a large number of recommendations in a cabinet submission which were intended, in the language of the decision, to build a broadly based mutually beneficial relationship valued by any future Chinese government. We also broke through old systems, hostile expectations and absurd rules, such as we should not give the Vice-Premier a visa for many weeks because every Chinese official's visa application required a security check which, had we waited, would of course have revealed that he was nothing less than a member of the Standing Committee of the Political Bureau of the Central Committee of the Communist Party of China.

In following years, the 20-plus recommendations adopted by cabinet in 1980 saw programs to connect with China in most areas of government such as law, audit, tax and courts. Of enormous importance (now as then) for a country embarking on the construction of an entirely new way of governing and opening its economy were such things as 'profit and loss'. This program to build the relationship was endorsed and added to by the Hawke Government soon after it took office in 1983. When Hawke went to China in 1984, with Ross Garnaut as adviser, a major step was taken to support China's modernisation with the decision that we would help them rehabilitate steel mills. China's first joint venture abroad, several years later, was in the Pilbara.

I think the money thing unbalanced thinking over time, with the importance of supporting China's reform process less visibly embraced, certainly at the political level. Also, though, there is a problem we have in general at the highest political levels: that our leaders do not want to say difficult things to foreign leaders. This in part reflects a lack of sophisticated thinking about strategic and international issues. Too much of our posture is still determined by leaders' feelings for those they deal with. Talking to China about relations with Vietnam, beginning back with that 'united front' entanglement, talking about the human dimensions of our relationship, has been fraught with apprehensions. It has, psychologically, been easier to talk about the money. And easier for the strategic stuff to retreat to where it was in the 1960s: big speeches and unwise military adventures with Americans.

We do not know, nor do the Chinese know, how they will develop their long-standing foreign policy principles and apply them through the era of their great power. We do not know the extent to which China's great power, along with the decaying quality of governance in the West, will see alteration of what the 'state' is in the world generally. My own expectation is that much good could come from the Chinese principles of equality and non-interference. But we cannot influence Chinese policy, any more than we can influence American policy, so long as we simply endorse adventurist and interventionist American policy and say nothing much to the Chinese. The 1974 Barnard-Schlesinger Memorandum, between the then Australian defence minister and the US defense secretary, established a right of strategic consultation between the two governments because we aligned ourselves with US strategic interests by accepting joint defence installations in Australia. The specific consultation process vanished down a secret departmental rabbit hole and the general concept got lost in the alliance's Australian political nonsense and our leaders' love of mateship over succeeding decades and in futile wars.

Jakobson is right to link the management of the US relationship with the China relationship. We can't solve one problem without the other being solved. There remains then a huge drag factor of old Australian thinking and timidity about the alliance. Also, there is a problem of the alliance being so heavily shaped by the defence forces' desires for world's best equipment to be fully interoperable with US forces, at far higher unit cost than the US faces, even when this fantasy posture is increasingly looking broke. Realistically, a good ally should be trying to help the Americans down from an unsustainable posture and pattern of behaviour. Tough love, politically focused, not confined to discussion of the deployment and use of force, the great alliance error of 1914. It can and must be done, the level of liquid in the creek is dropping.

Whatever China does, whatever Chinese do, there is always a streak of racial and anti-communist comment in Australia. Have we not accepted British, American and other white investment for a long time? Get the race factor out and we can deal with the big issues sensibly. To deal with the race issue, leaders have to talk about it openly.

China and other countries in the region deal with enormous issues every day. Australia gets excited about bottom pimples every day, metaphorically and comparatively speaking. Who would know we rank number two on the UNDP's Human Development Index?

Too much public and some political discussion seems still to be driven by colonialist, superior mindsets for which we will pay. We must grow up. 

Photo by Flickr user SpecialKRB.


A synopsis from the official website:

Every spring, China’s cities are plunged into chaos, as all at once, a tidal wave of humanity attempts to return home by train. It is the Chinese New Year. The wave is made up of millions of migrant factory workers. The homes they seek are the rural villages and families they left behind to seek work in the booming coastal cities. It is an epic spectacle that tells us much about China, a country discarding traditional ways as it hurtles towards modernity and global economic dominance.

Last Train Home draws us into the fractured lives of a single migrant family caught up in this desperate annual migration.

(H/t Fallows.)


Soon after I began delving into the study of Australia-China relations upon moving to Sydney 14 months ago, a senior Australian official told me: 'Our top leaders find China too hard; just too hard.'

It isn't just the lack of English-speaking counterparts in China, nor the cultural differences or that understanding China requires so much effort. It's not even the distaste for their political system, he said. 'It's all of this, but above all it's an uneasiness of the unknown. We Australians know the United States, but we haven't even started to know China.'

In a new Lowy Institute Policy Brief about the underdeveloped political relations between Canberra and Beijing, I argue that Australians have invested a lot of time and resources in understanding and working with the complexities of the American political system. Now is the time to invest in China know-how.

China is indeed demanding. But as an outsider I cannot see Australia's political elites having any other choice than to do their utmost to understand how Chinese senior officials make decisions, how Chinese elites think, and above all how best to have an impact on Chinese decisions and perceptions.

Depending on how you calculate it, Australia tops the list or is among the top three countries in the world which are economically most dependent on China. When problems arise bilaterally, as they inevitably do, familiarity and a degree of trust are essential to resolve the problem. Equally important, China is no longer merely an economic power. How can Australia pursue its stated national objective of contributing to a stable and peaceful region if it does not reach out to China to discuss regional challenges?

At present, senior Australian political leaders discuss regional issues when they happen to meet overseas. Prime Minister Gillard spent two days in Beijing in April 2011 on her first visit in over a decade. She had 45 minutes of discussion with President Hu Jintao.

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In the Policy Brief, I recommend establishing an annual, intensive exchange study program for Australian and Chinese mid-career political leaders focusing on politics and strategic thinking. The vice governors  and deputy party secretaries of today will be the ones who rise to the pinnacle of power in China in 2022. It would unquestionably be in Australia's interest that one of China's most influential leaders in the next decade has an intimate knowledge of Australia and personal relationships within the Australian political establishment.

In his book about Australia and China, David Uren describes Bob Hawke asking then-Premier of China Hu Yaobang in 1985 who would be an influential leader in twenty years time. Hawke then sent Ross Garnaut, Australia's Ambassador in Beijing, to far-off Guizhou to extend an invitation to the man Hu Yaobang recommended, Hu Jintao, then a Party Secretary in this impoverished province.

Subsequently, Hu came to Australia as part of the Senior Visitors Program in 1986. More than fifteen years later he became head of the Communist Party of China and President of the People's Republic of China in 2002/03.

According to a Chinese interlocutor who was part of the delegation traveling with Hu when he paid an official visit to Canberra in 2003 and addressed the Australian parliament, Hu referred repeatedly to his fortnight spent in Australia seventeen years earlier. Australian officials who met Hu during his 2003 visit recall that Hu displayed an unusual level of knowledge about Australia's resource industry and enthusiasm for the potential of establishing robust Chinese and Australian economic ties.

Hawke laid a stone in the foundation of the flourishing Australia-China economic ties which exist today. Now Australia needs a leader (and the initiative) to lay a few stones to cement the basis for meaningful political ties in the next decade. It's a far more complex challenge today than it was thirty years ago.

Photo by Flickr user joachimtraun.


Dr Morris Jones, who has writtenpreviouslyfor The Interpreter, is an Australian space analyst.

There is a condescending tone to much of the international reportage on China's recent space docking and expedition to its first space laboratory, Tiangong 1. Commentators applaud China's progress in space exploration but claim they are decades behind the US and Russia, who achieved similar feats in the 1970s.

These reports fail to account for the 'leapfrog' effect of technological advances, and the benefit of experience from other nations. Such effects are propelling much of Africa from being disconnected from telecommunications to enjoying broadband wireless services in just a few years. The effects are just as significant for China's space missions.

China has now perfected the complex art of space docking, a fundamental skill that opens all sorts of options. The Tiangong 1 module, described by the Chinese as a 'space laboratory', is actually a small space station and China expects to launch a large, modular space station within a decade.

China also operates its own independent fleet of rockets and astronaut-carrying spacecraft. Contrast this with the US, which does not presently have a system for launching its own astronauts, and has no idea of when this capability will be restored. Plans for the future of NASA are in disarray and the subject of spaceflight has barely appeared in recent political campaigns.

The US will probably only restore vitality to its space program when it realises that China has achieved near-parity with its own activities. That time is probably not too far in the future.

Photo by Flickr user tenshots.


Just as Washington's bookstores were piled high at the turn of the century with works celebrating America's global primacy, Delhi's were awash with titles proclaiming the rise of India. Almost each month, it seemed, a new book would appear with cover artwork depicting a tiger squaring up to a dragon. Back then, it seemed reasonable to ponder which country would end the Asian century on top, India or China?

Gone is the optimism of those 'India Shining' years, along with the rash of articles from reporters who believed they were present at the birth of a new superpower.

'Goodbye 2020, Hello 1991' lamented a recent headline, recalling the year India went cap in hand to the IMF for a bail-out. Some are even questioning whether India deserves its place among the BRIC nations, and whether the 'I' more rightly belongs to Indonesia.  

GDP growth, which averaged 8.7% from 2004-2008, slumped to 5.3% during this first quarter of 2012, its slowest pace in nine years. Corporations bemoan the policy paralysis in Delhi. The country is beset by long-standing infrastructure problems, while regulatory obstacles are blocking foreign investment. Consider the South Korean steel giant POSCO's plan to invest $12 billion in the steel sector. The deal, which would become India's biggest ever foreign investment, has been stalled for seven years.

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'Will India be the first BRIC fallen angel?' asked a report last month from Standard and Poor's. The question was left unanswered, but the hard-hitting report would have made for unhappy reading in South Block, Delhi's version of the West Wing, not least because its focus was on politics as much as the economy.

Coalition government is part of the problem. Prime Minister Manmohan Singh's Congress Party-led administration had to reverse its plan to raise the cap on foreign investment in retail, which would have opened the way for US giants like Walmart, because of opposition from its coalition partners.

Allegations of corruption in sectors like mining and communications, an old Indian bugbear, have undermined public confidence in the economic reform agenda. Ministers also fear greater deregulation, not because of ideological qualms but through fear of relinquishing political power.

However, the overriding problem, according to Standard and Poor's, is the dysfunction at the top of government, and the separation of powers between Dr Singh and his political patron, Sonia Gandhi, President of the Congress Party. Singh, who as Finance Minister in the early 1990s started liberalising the economy, cannot choose his cabinet. Nor can he make it bend to his will, because he lacks a power-base of his own.

The irony is that Singh enjoyed far more power as Finance Minister in the Rao Government twenty years ago than as Prime Minister today.

Now, following Pranab Mukherjee's decision to step down as Finance Minister to run for the largely ceremonial position of president, Singh will perform both jobs himself. His aim is to revive the 'animal spirit' of Indian economic growth. It helps that India has a strong private sector, a thrusting middle class and foreign exchange reserves worth some $250 billion. But Singh's 'animal spirit' comments have been roundly lampooned, because the mild-mannered leader rarely, if ever, shows his teeth.

Nor is he likely to when it comes to confronting the central institutional problem: the impoverishment of Congress Party politics.

Photo by Flickr user snapper san.


I notice Linda Jakobson's new paper (Australia-China ties: In search of political trust) is already getting a lot of attention on Twitter. Here's her video summary:


Dr Shannon Smith, a Jakarta-based public relations consultant who was Counselor (Education) at the Australian Embassy, Jakarta, from 2005-2010, writes:

Thanks Fergus Hanson for a very thoughtful response to my riposte. Fergus brings the ediplomacy discussion usefully forward to where I think the conversation should be focused, and that is around public diplomacy.

It is fair to say that Australia has a reasonably positive reputation overseas, derived largely from the international successes of our arts community (musicians, artists and filmmakers), our sportspeople and our international corporate expansion. Our kangaroos, koalas and beaches contribute, though neutrally, as well.

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Australian diplomats are generally highly regarded and form relationships with official counterparts, foreign media and broader elite audiences easily. But what they do is traditional diplomacy, which is about reaching decision makers and those who influence opinions, and it is often is around single issues (eg. a trade negotiation, or an arrested Australian). 

Public diplomacy differs because but it has a broader reach, it goes beyond the influential few to the masses, to those indifferent, ignorant or not seeking to know. It seeks out a new audience and encourages communities to adopt a positive and open outlook towards Australia.

My concern is that ediplomacy, such as the Australian Embassy’s Facebook page, is a diversion from the real business of public diplomacy, the kind that gets out into regular Indonesian communities (outreach). The public affairs and cultural sections in DFAT are constantly being squeezed of resources; and the Australia-Indonesia Institute’s funding has barely changed over the past decade.

In Indonesia, there are less than a handful of successful programs remaining. They being the Muslim Exchange and Youth Exchange programs from the Australia-Indonesia Institute; and the BRIDGE and Australian Scholarships promotion strategies, interestingly funded by AusAID but developed and managed by the Education Attache.

These programs, and I applaud their incredibly positive impact, do not and cannot reach 245 million Indonesians. But they are all that remains after years and years of substantial funding and program cuts. Australia once had in Indonesia what was arguably a more extensive education and culture presence than any other country.

The Australian Education Centres (AECs) in Jakarta, Surabaya and Medan annually generated over 300 newspaper and television news items. In any given year, this was between a third and a half of all stories generated by the entire Australian Embassy in Jakarta. 

And the AECs communicated directly to tens of thousands of young people every year, delivering presentations in classrooms or to school assemblies, answering questions at education fairs and exhibitions, working directly with teachers and local governments. For example, annually they delivered career-oriented My Future workshops to almost 5000 students and their parents.

 I have elsewhere described in detail what happened, but the AEC Network was shut down by the Government in 2010 and overnight the Australian Embassy lost practically half of its public diplomacy profile and capabilities. And the Government made savings of $200,000, the annual cost of running the AEC network.

Australia became the only country with a significant relationship with Indonesia that doesn’t have an educational or cultural presence in Jakarta. The Americans, the British, the Dutch, the Germans, the Italians, the Japanese, the French and a host of other countries are now much more visible than Australia.

What Australia does right now as public diplomacy is piecemeal, there is much less of it than before, and there is no coordination. Take for example Tourism Australia and AusAID, who both recently put out tenders for their campaigns in Indonesia. 

Tourism Australia sought an agency to provide 'marketing of Australia as a destination for leisure and business travel'. AusAID sought an agency to 'increase the profile of Australia and its [$500 million a year] contribution to Indonesia’s education sector through a concentrated public diplomacy strategy' with a budget of $2.2 million a year.

How they each went about it is interesting. AusAID, simply because its tender process is complicated and bound in red-tape (the RFT was 179 pages long with hundreds of pages of attachments), received tenders from its regular development assistance contractors. Tourism Australia, because its tender process was simple (a one-page RFT), received tenders from public relations firms. 

Tourism Australia will get public relations expertise. AusAID will get another managing contractor, when what they really want is an AEC network!

Photo courtesy of AusAID.


Australia is being forced to become more sensitive to China's prerogatives in everything from currency flows to resource projects to the application of foreign investment rules.

In meshing our economy with Japan, Australia was able to retain a US dollar frame of reference that happily cohabited with a US alliance structure. A yuan frame of reference will mean that some of the questions we never had to consider with Japan will confront us. If this is the Asian Century, then we are now in the China decades.

The adjustment pains are already showing. Both sides of Oz politics, when in government, have experienced the intense discomfort of receiving Chinese burns. The daily attacks (minute by minute) China mounts on Australia in cyberspace are a constant reminder of the hurt Beijing can deliver. The decision to ban Huawei from the National Broadband Network was a significant 'no' moment, a demonstration of Australia's capacity to push back and a reminder that cyber attack can cause blowback costs on those doing the attacking.

Still, great growth tends to outrun grumbles. We are going to be a lot more worried and even more security obsessed if China comes a cropper and starts to fail, rather than continue its present glorious trajectory. A China that crashes is an even more burning question for Australia than a China that continues to rise.

Even as economic sun shines ever brighter, China has managed to achieve the difficult feat of driving Australia closer to the US alliance. The intimacy of the Howard decade suggested it would be impossible for Australia to actually tighten its embrace of the US. Julia Gillard has managed it.

The Obama visit to Australia seemed to be a fine expression of the hope/wish/determination that defence and security would be in one box while trade and economics would keep going on uninterrupted in a separate sphere altogether. That is the way we and Washington would like it to work. Beijing, though, can play the game by other rules.

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You don't have to be an old Maoist Marxist to believe that the only way to think about economics is to pair it with a heavy descriptor so that it becomes a discussion of 'political economy'.

It was striking that after the Obama-Gillard Marine basing announcement in November, everyone put the focus on the military/diplomatic reaction from Beijing – it duly came and was duly negative, as rendered by various Party mouthpieces. What happened next, though, seemed to be the truly important reaction. It came just a week after Obama and Gillard had their Canberra presser on 16 November: Beijing announced that for the first time its currency would be exchanged directly for the Australian dollar. The effect was to remove the need for deals to be run via an intermediate transaction using (trumpets please) the US dollar. The Oz dollar became just the seventh currency to achieve this status as China ever-so-slowly edges towards making the yuan convertible on international markets.

Was it merely a coincidence that Beijing made the shift so shortly after the Obama-Gillard basing announcement? Currency issues are intensely political for Beijing. So mark the shift as one that had more to do with judgment and message-management than any happenstance of timing. China brought forward a change that would give Canberra a gentle elbow in the ribs and point to the shape of things to come.

At the moment, all Oz mineral contracts with China are written in US dollars. Will that still be the case a decade from now when China, in parity pricing terms, is overtaking the US to become the number one economy in the world? As of today, 23 cents of every dollar of exports goes to China and three-quarters of those are for commodities. Big integrative effects and policy implications are in view when Australia confronts the demand to cash those contracts in yuan rather than US dollars.

The mandarins of the Australian Treasury and Reserve Bank will need to do much of their thinking in Mandarin. As then-private citizen Bob Carr blogged on the eve of the Obama visit last November, Australia should not side with the US in any dispute over the value of China's currency. On the yuan, Carr advised Gillard: 'Tell the president politely we are not signing up to a mindless anti-China campaign. The alliance does not require it.'

Ah, the judgments involved in acknowledging Chinese prerogatives.



Trade and economic interests are not always definitive, but they have obvious weight and, most importantly, they influence the hierarchy and slow re-ordering of national preferences.

The shift of economic weight has cumulative effects on preferences which feed into judgments about national interest. What were once easy options can become unthinkable or at least look narrow and outdated because of these cumulative changes. This is not soft power influence, but the hard power calculations of dollars and cents.

Consider how Australia thinks about China and India using the APEC frame. In 1989, Australia was happy to help create the key governmental expression of the Asia Pacific's economic future, APEC, while not having China as a founding member. The blood and horror of Tiananmen meant China could not be in. And when, a few years later, Beijing did join, it had to walk through the door with Taiwan and Hong Kong, an equivalence that is unthinkable now.

When APEC was being created, India did not even stand on the threshold of membership. India is still out, but now APEC is the loser. When it chaired APEC in 2007, Australia was guilty of a failure of imagination and leadership for not crusading on India's behalf. China was quite happy with the existing membership, while ASEAN was more interested in India's role in the East Asia Summit. Australia did not push.

Yet if we were doing APEC from scratch today, both China and India would be so essential as to have something of a veto. 

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The structures are not always quick to adapt to the way power is shifting. And some new structures try to resist the coming tide. Australia is happily pushing the accelerator to try to realise the US vision of a Trans Pacific Partnership. This would be an exclusionary preferential trade system for the Asia Pacific with labour, environmental and copyright standards that China would not be able to stomach. A decade after the major and sustained effort China made to get into the WTO, Beijing sees not reason why it has to grapple with a fresh set of US demands.

As argued previously, a key question for Australia in the TPP is how much it is prepared to shut out China. Even posing the question in such terms suggests what a diabolical choice it could become.

The Japan experience is important in considering how Australia's preferences and understandings are reforming. Japan took centre stage in Australian regional thinking in the 1970s, 80s and early 90s. The cumulative effect was that Australia could not conceive of being in any trade deal aimed against Japan. Keating made that pledge in 1992, a statement notable for being as obvious as it was important. 

When Keating made that point, Japan had stood at the top of Australia's trade table for nearly three decades; that was three decades of growing importance as Australia's policy and interests realigned to reflect an understanding of what Japan meant. The fact that Japan was a US ally made it that much easier, but nevertheless the reshaping and reordering of Australian preferences from the 1960s to the 1990s reflected a significant Japan influence.

In the 1960 and 1970s, it was almost inevitable that Australia would abandon the century-old mindset of the White Australia policy, yet Asia demanded that of us. It was Japan that exemplified this reality in economic and diplomatic terms that were as important as the social or immigration policy elements. This is a point with a lot of history. Recall that at the Versailles negations after World War I it was Billy Hughes' passionate defence of White Australia that caused a disastrous clash with Japan, with echoes that resounded through the coming decades.

Having Japan as our number one partner for three decades altered many Australian assumptions; two to three decades of the same with China will surely have an equal impact. And just over the horizon, there is India.

Photo courtesy of Wikipedia.