 It's great to see such an event put forward by our dynamic duo, two of our most dynamic PhD students in the College of Asia and the Pacific, because it speaks directly to what is written in the ANU Strategic Plan released earlier this year, that the ANU will lead national and global discussions about the Asia-Pacific's role in the world's future and Australia's future and role in the Asia-Pacific. That is exactly what events like this are designed to do. So it gives me great pleasure to formally introduce our four panellists and I'll introduce them in the order that they will speak in. First of all we have the Honourable Gay Brodman, the Member of Parliament for the seat of Canberra and a great friend of the College of Asia and the Pacific and the ANU. Gay has been in parliament since 2010, before which she worked in the private sector and for the Australian Government, working as a diplomat for the Australian Department of Foreign Affairs and Trade and serving as a diplomat in India among other roles. Following Gay will be Richard Rigby. Richard is an old friend or friend of long-standing and colleague who has worked as a diplomat and intelligence analyst for several decades. Richard joined the Department of Foreign Affairs and went on to play various roles both representing Australia overseas including Consul General in Shanghai and Ambassador to Israel before working in a senior management position in the Office of National Assessments and then coming and joining us here at the ANU as the director, the inaugural director of ANU's China Institute. Following Richard will be Dr Shiro Armstrong. Shiro is the director of the Australian Australia Japan Research Center within the Crawford School here at the ANU. He is a longtime specialist on Japan and particularly Japan's economy and Asia Pacific trade issues. Following Shiro will be Hugh White. Hugh needs very little introduction. He is Professor of Strategic Studies in the Strategic and Defense Study Center at the Coral Bell School at the ANU. Hugh has had a long and varied career as a moral philosopher, journalist, political staffer and advisor, senior defence bureaucrat and the inaugural director of the Australian Strategic Policy Institute before coming and joining us here at the ANU to run the Strategic and Defense Study Center for five years. Following their four presentations there will be a question time facilitated by Brendan Ford and that will give us all plenty of time to interrogate our panelists. So can I ask Gay, if you would please come and present your remarks at the podium. Thanks very much Mark. I'm sorry about the extraction of the lozenge. Just before I got up here but Hugh's got a bug and I don't want it so this is my protection. Look it is a great pleasure to be here today, a great honor to be here today, a great surprise in many ways to be here today so thank you so much for having me here and thank you for that introduction Michael. I'd like to begin by acknowledging that we meet on Nanowal country and to pay my respects to the Elders past and present. Now in the early 1960s in her 20s my mum would get on the train once a month to make a 38 kilometre journey to Melbourne's Chinatown for a knob of fresh ginger. She did so because she was a new bride and she was crazy in love with my dad. She did so because my dad was part Chinese and once a month he craved his little nana's stir fry of steak, beans and carrot. Now my mother had sat at the feet of little nana to learn that recipe and as a beautiful wife she was keen to get it right. That and congee that my dad which he ate for lunch every Saturday as my sisters and I tucked into meat pies and hot dogs and for breakfast when he went spearfishing as my sisters and I woke up to Vegemite toast. Now my dad's little nana was my grandmother's mother, my great-grandmother. Little Nana's family came out to Australia from China in the Gold Rush in the 1850s and they settled in Ballarat. Little Nana was tiny as her name suggests and instilled a passion for black mouse suits in what I called my Chinese aunts. And one of the abiding memories of my childhood was my grandmother's wedding photo. A depression wedding with very limited resources but a lineup of about 10 of my Chinese aunts standing next to my very blonde, very fair-skinned grandmother. Now Australia's relationship with China has waxed and waned for more than 150 years. It's been through many challenges regime change, regional war, world war, isolationism, protectionism, liberalisation, unprecedented growth, industrialisation, prosperity and the elevation of millions and millions of people from poverty. And it now faces a new set of challenges and it's vitally important that we get our response to them right to ensure the continuation of our mutual prosperity and the stability and security of our nation, our region and our world. We live in uncertain times and I can't see that changing in the near future. With the US we have Trump. With China we have island building, one belt one road, soft power with the hard edge, investment in the Pacific. So how do we respond to this environment? I say in a bold, in a confident way with a crystal clear clarity of purpose. While the world is indeed troubled I am not fearful about this age of uncertainty. I see this age of uncertainty as presenting an opportunity to Australia. It's an opportunity in the absence of few, if any, goalposts to define ourselves. It's an opportunity to have a conversation about ourselves and our place in the world. To develop a renewed and strong foundation to our bilateral relationships, our multilateral relationships, an empowered approach to our strategic environment, an approach that reflects who we are and what we cherish. It's an opportunity to have a conversation about what we value as Australians. It's an opportunity to articulate the principles that will operate inside our borders and how they will translate to our approach beyond them. It's an opportunity to acknowledge that we are indeed a middle power but a middle power that is confident in asserting how we will engage at home and abroad and how we think others should engage in Australia and abroad. It's an opportunity to say this is who we are, this is what will guide us, this is what we will discuss and these are the no-go zones. An explicit statement of how Australia will operate and engage in the national interest in the future and the Foreign Affairs White Paper gives us that perfect opportunity, that perfect chance to do it and it will be a poorer document and I do believe it will be a poorer document if it does not. It's also an opportunity to deepen the relationships that matter. Now I've found the deeper the relationship the greater the mutual respect and the greater the candour. We have that in our relationship with the US. We've been trading with the US since the American Trading Ship Hope first delivered 7,500 gallons of rum to Sydney in 1793 but our relationship is more than just economic. We speak the same language. We are both democracies. We operate by the same set of international norms. We are fought together in world and regional towards the same end and we agree to disagree on issues. Most recently Labor has made it clear we will speak out when policies are introduced by the US that we do not think are in Australia's national interest. We've been outspoken on our views on the Trump Administration's immigration and reproductive health policies and the US has been equally frank. Vice President just last week made it clear the Trump Administration will honour the Turnbull Government's asylum seeker agreement even though it doesn't admire it. We have a similar depth in the relationship with Japan. In the cold shadows of the Second World War we formalised the trading relationship with the 1957 commerce agreement and just thinking about it even now it's an extraordinary achievement given we were enemies just a little more than a decade before. We brought in that relationship with Japan in the 1970s and since then it has deepened across every sphere. Civil society, across government, across defence, multilateral engagement, tourism, services, investment, academic and scientific endeavour and cultural exchanges. It is now our most mature relationship in Asia and as Michael has said as someone with a long-standing interest in India not just going not just from my time there in the mid 90s but also prior to that I wish it was so with India. I wish we had a deeper relationship with India particularly given we share so much in common democracy, language, rule of law, a colonial past and of course an abiding love of cricket and I also wish it was so with China because currently our relationship with China is largely based on economic diplomacy. Yes there is a deepening of the relationship and I particularly welcome the engagement at the defence level through those joint exercises but it is still a relationship centred on the overwhelming heft of bilateral trade. We are also very different and that complicates the mission we speak different languages, we have different political systems we have different judicial systems, we have different ways of doing business and as you know China is a culture steeped in centuries and centuries and centuries of rich tradition and subliminal meaning and you only need to go to Jeremy Barma's chapter motifs in Red Rising Red Eclipse to gain an appreciation of that. I don't know whether you're familiar with that book but he's got a chapter in there that actually outlines he has little chapter motifs before each of his chapters and he goes into detailed explanation about what the symbols and the images that are covered in those chapter motifs actually mean and they've got such an extensive a significant history, a significant meaning, significant subliminal meaning. Now the challenge we have in charting a course for the future of the Sino-Australian relationship rests in part to its lack of depth so I welcome the very existence of the Australia Centre for China in the world and other academic institutions and think tanks and I also welcome the most recent contribution that's been made by Bates Gill and Lena Jacobson on the steps Australia needs to take to get the relationship right to quote them but the most pressing challenge is the lack of understanding about the future of the relationship apart from the obvious economic one. What does China want for the Sino-Australian relationship? Now countless tomes and opinions have been written and they've been provided about China's ambitions in the Indo-Pacific from colonisation to the rejuvenation of the middle kingdom to power sharing to the status quo. That said we're just not clear on what China wants for the bilateral relationship and most importantly what does Australia want from the relationship? What kind of a relationship best serves our national interests? Our future ambitions for our country, our region and our world. Now we can control what we can control and that is our response to this environment and this that is our response to the bilateral relationship. So I think Australia needs to establish what we want very clearly from the relationship and through that the expectations of the relationship. We can second guess as much as we want about the what the US would do in the Indo-Pacific particularly in response to North Korea's belligerence. I mean we're seeing that play out hourly at the moment. We can second guess as much as we want about what China's activity in the South China Sea means, about the New Silk Road economic belt, about the 21st century maritime silk road, about the China dream, about what is happening inside its borders. But we can control, we can determine how we will operate in this environment and we do that by setting our own moral compass. As a public policy practitioner this is where my focus lies. Now while the analysis and the the opinion pieces and the articles and the discussions are incredibly important and they are incredibly important. I just want to value the contribution or I just want to acknowledge rather the contribution that the panel has made to those discussions over the years. I've spent many lunches with Hugh and many discussions with Richard on these issues and and the contribution that the panel makes and others in the audience it's invaluable. It's vitally important to to me and my colleagues as public policy practitioners because even though the analysis is important I need to know how to respond to it. That is my job as a public policy practitioner and in these uncertain times the best I can do is follow the always sage advice of Hugh White from his China in the World Annual Lecture and begin by setting the parameters, the principles that will guide how we operate in this environment. And it was advice that was also echoed by Bates Gill and Linda Jacobson in that in their recent contribution. To set the parameters, set the principles through sober thinking as my colleague Richard Miles calls it, or slow thinking as I like to call it. Parameters for how we will operate and respond in the international environment particularly in the region. Parameters that broadly but by no means definitively accept the peaceful rise of China and our strong commitment to the US alliance. Australia must always choose in our national interest and our national interest is served by continuing to advance our relations with both China and the US. Parameters that respect the rule of law and the predictability the rule of law provides. The fact that we extend the rule of law to provide a global order to determine the outcome of controversy and contest. Freedom of navigation governed by the United Nations Convention on the Law of the Sea. A commitment to democracy and human rights. A commitment to freedom of speech. An open economy. Freedom of association. Freedom of thought and a free media. Equality due process. We have to make it clear that we stand by these values and we are not frightened to lose some skin in protecting them and defending them. They are parameters that define how we expect others to operate internationally regionally and domestically here in Australia. And I say domestically because I agree with Bates Gill and Linda Jacobson. We have been sending mixed messages to China on a range of issues particularly investment and that does not make for good business or good relations. So I welcome the fact that their foreign investment review board will now look at potential investments through a strategic lens as well as an economic lens to ensure greater consistency, most importantly greater clarity and greater transparency in the decision making process. And I'm particularly keen for the FURB to provide greater clarity on critical infrastructure. We still don't have the granularity that we need on critical infrastructure compared to other nations and I'm hoping that this the revised FURB process will provide that. And as shadow assistant minister for cybersecurity and defence I'm keen to ensure cybersecurity is factored into that thinking too. We can also control, determine what we want from the relationship to ensure a mutual benefit. There is so much more that we can be doing to deepen the engagement with China bilaterally through a range of measures through meaningful linkages between governments, business and civil society and also at the multilateral level as well. And again I'm looking to the Foreign Affairs White Paper to clearly outline to clearly articulate how we will do that. Because if Australia is to succeed in this age of uncertainty if Australia is to continue to advance its national interests in this age of uncertainty. We need to be resolute, we need to be clear and we need to be confident in our way forward. We have to clearly define our own strategic and moral line consistently and constantly in private and in public. And we have to clearly define what we want from bilateral relationships with China, with the US, with Japan, with India and with others. Now I'm proud of my little Nana and celebrate having a small stake in a community with 5,000 years of wisdom. It is one of many that make up the tapestry that is Australia. To quote Gandhi, I do not want my house to be walled in on all sides and my windows to be stuffed. I want the culture of all lands to be blown about my feet, that my house as freely as possible, but I refuse to be blown off my feet. Australia allows all people and religions to sweep about its house like the wind, but for that to succeed its feet must be planted in democracy, the rule of secular law, free speech, freedom of association, human rights and equality of the sexes. Only on that firm foundation can we truly prosper. Thank you. Let me begin by saying I completely agree with everything Gay has just said that saves me a great deal of trouble in your time. Look, I'm supposed to be here, I suppose, as the China person on the panel, so I'll talk probably a bit more about the China side of things, particularly the China-US relationship, but naturally how that relates to Australia. And obviously, if I'm talking about China, if I'm talking about the US, I'm still talking as an Australian, so that's there anyway. Having said that, I really didn't want to do this because I thought it was a bit early and there's such a lot that we don't know and I've got Confucius looking over one shoulder and I've got Lardzah looking over the other shoulder and the Confucians are telling me that, you know, you know, knowledge is knowing what you do know and what you don't know, and I know there's a lot that I don't know. And old Lardzah, or Drangzah maybe is even more scary, he's just saying okay, the one who speaks doesn't know at which point I should really pull up stumps and just walk away. I'm not going to do that, but don't say that you weren't warned. It's not modesty, you know, this idea about being too early, because if you look at the various tergifications through which the US-China relationship has already been, I think that very much proves my case. And this is of enormous importance to us because there's no relationship between any two other countries in the world, which matters more to us in Australia than the sign of US relationship. I mean, but very crudely, if it's going well, then we're pretty happy. If it's not going well, we start getting toey and start saying things like, well, we don't have to make choice and everything, it's going to be all right, you know, like, you know, Christmas pantomimes when you're invited to bring Tinkerbell back to life by saying, yes, she lives, she lives, you know, there's a bit of that. But then I also thought maybe this is actually going to be part of the normality that we're dealing with, this shifting back and forth and this lack of certainty and this lack of clarity. Maybe this is part of the thing we have to understand about Trump, certainly Trump as a person, and bits of his administration. So maybe in that sense it's not actually too early, after all, if we were to wait until there was complete clarity, and we really understood what we were dealing with, we would probably be waiting forever. Whether it's stability, I do see it being on the Chinese side. It's a rather curious thing in a way, I think that the two countries, two major countries anyway, probably dealt best so far with the Trump administration, have been the sort of rivals China and Japan. I think both Abe, who's not somebody I always terrifically keen on, but nevertheless I think Abe has handled the relationship with Trump in a very, very effective way, a rather uncharacteristic way actually for Japan, being as forthright and engaged as he has been himself as an individual. And it's worked I think quite well for Japan, although there are still plenty of problems there that have been vastly surprised in that relationship as well. And for the Chinese too, I think they've actually been remarkably constrained or restrained in their reactions to a number of things which, under other circumstances, one might have thought would bring forth pretty testy sort of reactions coming out of Beijing. Going back to the election period, I think it is clear that perhaps the Chinese were less alarmed by the prospect of a Trump administration than some of we were. Perhaps they had less of the democratic concerns that some of us have, the ethical concerns, indeed the aesthetic concerns that worried us about the prospect of a Trump administration. They have stronger stomachs, I find, generally. They quite like the idea of a transactional relationship, a chat with a business background, and that tied in quite well with the Chinese political traditions of real politic, albeit real politic appropriately packaged with the sententious Confucian maxims, or Marxist-Leninist, Mao Zedong, Xi Jinping, etc., etc., maxims. But they thought they could do business. Also they didn't like Hillary. They really didn't like Hillary. You know, she snook at them in Hanoi, raising the South China Sea business that various other occasions when she made it quite clear that she was going to be pretty tough on China. And some of the people in a prospective team were likewise. And so he was elected and they seem probably less alarmed initially than we did. However, before too long they may have been beginning to wonder whether they hadn't made a miscalculation, realizing that Trump was not actually just another conservative Republican. Trump was a bit different. They started to look at some of the people who was getting onto his team. I won't enumerate them, but one of them, probably the scariest one of all is already gone. Didn't even quite last last a month, which was a good thing. But more people more specifically focused on China. There are a number of names, but the one that immediately comes to mind is Peter Navarro, responsible for a number of books and movies about China, all of which contain generally three words China, death and war in various combinations. There's a wonderful article about Peter Navarro for those interested in the National Review, 14th of April, entitled Trump's Nutty Economic Professor. And that tells you really all you need to know. Now so far Trump, Navarro has been remarkably quiet, but you know he's still there lurking. There was the telephone call from Tsai Ing-wen in Taiwan to congratulate Trump, and that was a bit of a president-breaker. I think possibly more president-breaking was Trump's subsequent tweets on the subject. And some of my friends in Taiwan were terrifically excited and happy about all this to start with as well. Hang on a second, you know, this may not end all that well for you after all. And I think so far history is showing that that is the case. In those tweets, by suggesting that everything was up for bargain, everything could be negotiated, in fact I think that made, should have made people in Taiwan less settled rather than more so. And I think that Benny has rather dropped now. And then there was all the other talk about Taiwan, China, sorry, as a currency manipulator, the threat to imposed tariffs, and so on, and so forth. But China, the interesting thing, my point is that China did not react, to overreact, to any of these things, even including the Tsai Ing-wen phone call and the subsequent tweet. You know, China was very measured. They allowed, you know, sort of trained attack dog of global times to get in and yep, yep, yep, and bite little bit here and there. But at the top levels where it really matters, China was steady as she goes. And on the one hand you had Xi Jinping, at the global level, speaking in, you know, quite remarkably stable terms at Davos, at Boao, you know, China reaffirming the importance of globalization, very much the message that, you know, odd things may be happening in Washington DC, but, you know, we're looking after things as best we can. And on the other hand, too, in terms of specific policymaking vis-a-vis the United States, you saw a very firm hand on the tiller in Beijing, an extremely effective team with Yang Jiechi, the senior foreign policy person of the State Council, former foreign minister, and Cui Tiankai, the Chinese ambassador in Washington DC, who's been asked, he was asked, told to stay on at least for another year to provide continuity in that relationship. Cui, again, is an extremely able fellow. He was in charge of Australia, Interalia, quite a few countries at one stage, and I remember asking what China's grand strategy was, and he said, China's grand strategy is not to have a grand strategy, which, A, was intelligent, B, sounded rather doused, and C, I think, was not altogether true, certainly not true now, but it was a good thing to say. He's a really smart guy, and behind Yang Jiechi, behind Cui Tiankai, there are a lot of people in China who really do understand the United States very well now. They understand how it works, and they can be patient. They know who to talk to up to a point. And we've also seen the interesting role being played by Sun Enlau, Kushner, now, who seems to be adopting a very, very Jesuit approach. As many of you will know, the Jesuits trifle these smart people, and in their early engagement in China, they realize you go to the top, you don't go to the bottom, you leave people down below for rubbish like Franciscans or Dominicans, but smart Jesuits go for the top. You aim for the court, and here we have Kushner using this very Jesuit approach, going straight into the heart of the Trump family. And with Kushner, and it's working. I mean, you look at the Thanksgiving party, you know, Christmas events, the role that Kushner's been playing, including Mar-a-Laga, and so on and so forth. Of course, we can also say that many people in the United States who have a very, very good understanding of China, I mean, sometimes it gets embarrassing to hear people talking about, you know, perhaps Australia can play a bridge role between the US and China. Come on, you know, that's an enormous relationship in depth and in breath. We can be useful from time to time, but you know, there is an enormous amount of ballast built into that relationship, not just at the economic level, at many other levels. The trouble is though that right now, within the US administration, that many really senior important positions in State Department and elsewhere that have not been filled, and that's part of the problem with the Trump administration. It's non-effectiveness at that level. Recently, they put a chap called Matt Pottinger in as the senior Asia person in the National Security Council, and that's good news, but Matt is just his former Washington senior journalist in Beijing. But there are a lot of positions there in State in particular that haven't been fulfilled. So if people in China want to, who do you go to? You're not actually altogether short, who do you go to? I think that's one reason why such a lot of efforts is going into the Trump family at the moment. But anyway, we saw this come to fruition. I think this desire for positive engagement stability, particularly on the Chinese side, come to fruition at the Mar-a-Lago meeting. I mean, the various people came up with various criticisms, but I think by and large, it went pretty well. And as Australians, we should be glad that it went as well as it did. And we should be glad that there is some sort of a relationship, at least for now, between the two men. Because again, speaking as a historian, I would always tend to dismiss the importance of the role of personalities and personal relationships. But as somebody who's been a working diplomat from his day of lives, I can assure you that these things really do matter. The fact that leaders like each other or feel they can have a degree of trust or have a degree of respect is really important. So with very holding, crossing everything I can possibly cross and take a big breath and say, so far so good at that level with the United States. One of the problems is that the current good, reasonably positive relationship, so much of it does seem to depend on what happens on the Korean peninsula. And there, as I said, we're dealing with the little fatty Kim, the least attractive of a line. Let's hope he doesn't produce one even less attractive than he is. This is very, very problematical. And of course, all the other issues remain, the economic issues, the whole raft of issues, haven't even got on the things like human rights. And you name it, all the problems are always there. None of them have gone away. And even there, unexpected problems arise. And this goes back again to Trump's own personality and the way he expresses things. Trump comes back, he says, yes, Xi Jinping's a rather good chap. It turns out this North Korea stuff is more difficult than I thought it was. Who would have ever thought of that, eh? I mean, for instance, he told me that actually China knows a lot about it because China used to run Korea for centuries and centuries. Well, now, of course, China's got a big problem with the ROK because all these people in the ROK hang on and plenty of people in the DPRK are feeling exactly the same thing too. Now, I'm pretty certain that Xi Jinping didn't actually say that. But he may have gone into a brief account of the complicated and close relationship between China and the various bits of various Koreas over the centuries. And Trump chose to interpret this as being told that, yeah, we used to run them for Yonk, so, you know, whatever. So there's a problem and didn't expect and didn't need. And in the meantime, I said, you know, people like Navarro dogs still waiting to bark. For us in Australia now, closer to home, we're in the unusual position. I think we're actually, China seems clearer than the United States. And that's never been the case before, as long as I can remember. We have a better stab at understanding what China wants, what they're trying to do, how things work. Then we do understand what precisely is going on in Washington, what is likely to come out of that administration. I mean, there are certainly adults, very responsible people, even within the Trump administration. And some of them are trying very, very hard to reassure us and others that, you know, it's steady as we go. But if we look around the region and look around the world, it seems pretty clear that people aren't so sure, not just people here, but people in many other countries, in the region and beyond. And at the same time, the One Belt, One Road initiative is attracting a great deal of attention. That, in fact, is what China's grand strategy is, if it works, but that's a separate issue. People look at OBOR or BRI, as it's now called, with some with weariness and skepticism, some with a good deal of enthusiasm and interest. The city of London, only day before yesterday, said that, yes, we're in this, this is terrific. The Germans, the French and others have expressed enthusiasm, as well as people scattered all along India, of course, has a different view, but India will always have a different view. This is a big deal. And it's something that's really quite important. And here is China now, you know, moving regional and global agendas in a way which didn't used to be the case. You can say that Xi Jinping comes up with a lot of slogans, things like communities of common destiny and China Dream and peripheral diplomacy and, of course, Belt and Road and so on and so forth. But nobody else is really coming up with very much at the moment. TPP didn't cut the mustard and has died to death anyway, despite what Abe and one or two other people might still hope. I mean, in that regard, Arsep is looking more prospective and Arsep is not a Chinese idea, but it does include China. And that's a good thing from our point of view. Certainly Arsep is looking a lot more prospective. There's a syndicated article which I read, I read it in the Bangkok Post, but it's in many other newspapers. Just yesterday, quoting a senior Asian diplomat in Beijing, said senior Asian diplomat, said to the journalist, everyone wants to be China's friend now with Trump in office. Now, that may be an exaggeration and there may be all sorts of reasons why people say they want to be China's friend right now. I think it's quite complicated, the motivations are various. But I think by and large, it is true and it is something that we need to take seriously here in Australia. So where does that leave us? At the government level, I see very little evidence of a strong feeling that we need a major rethink. I mean, maybe arguably the fact that we're going to have a foreign policy white paper, that could represent that major rethink. Just talking to a lot of my former colleagues, they just don't quite get that sort of visceral sense of things are really different now. And it's not just because of Trump. It's because of the way things have been changing as Hugh has been telling us for quite some time now. But we still plug away with many of the old nostrums about the rules-based order and shared values and not needing to choose. And I think Julie Bishop's speech in Singapore, not all that long ago, was a very good example of that. Now, there's nothing wrong with those things. Per se. But I think they demand a far more granular interpretation of precisely what it is we mean when we say those things and what is going to be the impact of following such a line. What I ask you, where is the sense that things really are changing and that more than ever we need imagination and adroitness as perhaps we never have since the end of World War II? Now, obviously, the return of China, I've said the return of China rather than the rise of China, that the return of China to more prominent role causes challenges and some concerns as well as many opportunities naturally goes without saying. And this would be the case regardless of who won the US elections. But the fact is that Trump did win. And that's a really big event with many potential risks. And so far again, I think at the government and some major think tank levels, the main response seems to be, well, if it really is a big deal, we'd better not say so. And so let's just try to get closer than ever to the Americans and to the Trump administration to prove our worth. In short, don't forget about this. And really cuddle up as hard as we can to this very quirky, very problematical man so that he can save us from whatever sticky situation he gets us into further down the line. Now, I'm a big believer in the US alliance, but it seems to me that this is one of those moments when it might have provided us with an opportunity to say, let's just stand back for a little bit and see precisely what is it in the alliance? What's in it for us? Not just how good can we be, how many apples we can get from a teacher, but what is really in it for us? Because there is a lot in it for us, but we have to think more analytically more seriously and this provides us with an opportunity to do that and put it in the context of China and not other China, but all the other important relationships that we have in the region as well. If you look at the visit by Premier Li Keqiang, and I'll be winding up in a minute, again, I thought it was one of those things that it was okay, but there were things that could have been done a bit better. Two things that the Chinese wanted, one was the extradition treaty. One was to have some of our northern development projects put in within the framework of the Belt and Road Initiative. The extradition treaty was probably not a great idea in the first place and been around for a long time. Arguably should have tried to turn it off sooner. Otherwise, we could have signed it and I'm pretty sure that nobody, even with the extradition treaty, nobody would be sent back that we really didn't want to send back anyway. There are such things as lawyers and courts and things like that. But more than that, the Belt and Road thing, and again, talking tales out of school, I understand at least some of my friends in DFAT didn't have a problem with that, but at some point the decision was taken that, no, well, this is all part of China's grand strategy and we'd better be careful and let's not form this trap, which enabled then the New Zealanders to pick up what we could have picked up and now New Zealand's being touted around the places, the first advanced Western industrial country to do this. I didn't think it actually necessarily means all that much, but I don't think we would have lost anything by saying, yes, we want to be part of Belt and Road Initiative. There were no dangers there. We wouldn't lose anything. And sometimes, and I think both in dealing with China and Japan, that there are things of a symbolic nature, which perhaps more important to them than they are to us, cultural difference, which we can give without any loss or any damage to ourselves, which then becomes money in the bank for us when there are things that we particularly do want to get in more substantive nature out of that relationship. But anyway, that's the way things are. Others, outside government, outside the major think tanks, including our own chancellor and former Prime Minister Keating, have certainly given different views from those of the mainstream, both in characteristically forthright language. And I'm glad to have served under both Gareth Evans as Foreign Minister and as Paul Keating as Prime Minister. Glad and proud to have done so. But that's probably why I'm better off now being here at the ANU. So I'll leave it there. Thank you. Thank you. Thanks for the invitation, guys. And it's a real honor for me to speak on this really distinguished panel. So my job really is to talk about the economic relationship. So I'll spend a bit of time talking about the Australia-China economic relationship. And then what I think Trump means for this. And for the second half, not good. I think it's all downside risks for us. Mainly. Look, I'll start with the headline numbers that I'm sure we're all aware of and why China, or how important China is for us economically. China is our most important economic partner by far. Accounts for 27% of our trade over a quarter of our goods trade. 32%. So almost a third of our merchandise exports go to China. 15% of our services exports go to China. And almost a quarter of our imports are from China. So I'm sure you're well aware that China features as the major contributor to our trade and investment relationship. It's just always useful to remind ourselves of those numbers. We rely on China for our standard of living. That's the bottom line. So the natural resource trade is very important. Chinese investment into our natural resource sector is also very important. I'll come back to that in a second. Tourism and new services there, including higher education, which we here rely on a fair bit of ANU, but across the Australian community. China is our largest source and is growing rapidly. That doesn't mean it's all rosy. I think there are areas underdone. And as Richard and Gabe pointed out, we do need to sort some things out on our own. Get our debates right in Australia. Two big things stand out to me immediately. One is Chinese investment in Australia and how to remain open to Chinese investment while protecting those interests we want to protect. And how to reassure the community that we're receiving Chinese investment that is not a security, national security threat. And just like in previous waves of new foreign investment from the United States and Japan, the community is going to be anxious. It's a new source of foreign investment. But we need this for our economy. Our savings are deficient for what we want to develop in Australia. And the One Belt One Road has already been mentioned, but we did not sign up to the MOU. And I think we missed an opportunity here to really embrace early on, but more importantly, shape the Chinese approach to us in the region through their One Belt One Road strategic initiative. And it's an MOU, a non-binding MOU. So it's important and I'll come back to this to remember our free trade agreement with China is relatively new. This important trade and investment relationship grew under the framework of the WTO, the global trading system. Before I get to why I think Australia is important to China and explain that, I just want to briefly talk about the economic transition that China is undergoing and how it's complementary to our economic transition. So China's rapid catch-up growth was export-led and heavy industrialization, heavy investment in industrialization. And that was not going to continue indefinitely. So China's economy, the growth model is transitioning to a consumption-led, services-led model. Similar transitions happened in Japan, South Korea and other countries to avoid their middle income traps. So catching up to the middle income is relatively easy, can happen quite rapidly. It's much harder to reach high income than to transition your economy. Now China's undergoing that transition already as well underway and that has in fact largely affected our economy. So the rapid catch-up growth coincided with a caused a commodities boom internationally which we benefited from greatly. Now that commodity boom is over and it's time for us to restructure our economy for broader-based growth. Investment in natural resources peaked in Australia at 32% of all investment and moving away from that to more services and higher value-add manufacturing is all part of the innovation agenda and what we need to do to maintain and grow our living standards. So the transitions are complementary but by no means equal and Australia does and we do from time to time punch above our weight and I like to think we do when we heard a bit about this from Richard as well but we're very small as I've heard Peter Dreistel tell it really our importance is the importance of being unimportant. So how can we make a difference? Well and why are we important to China such a large and growing economy who is rightly focused on the United States for example? Well I guess the first thing is the natural resource trade not to underestimate that that underwrites China's continued development and industrialization and in fact even at the height of the commodities boom we accounted for about 40% of Chinese iron ore imports. We actually account for more now with the price lower we're a much more competitive supplier than the rest of the world we account for 62% of China's iron ore imports. So we're a more important natural resource supplier and that's across coal as well as other strategic raw materials. So I think that's the starting point and we can't underestimate that. The other thing Australia is an advanced economy we have advanced western institutions that we share similar characteristics with the United States and Europe and these are of benefit to China to figure out how to relate to better and because we're much smaller I think things like the China-Australia Free Trade Agreement are rightly seen as a bit of a training ground for China. The hard edge of Chinese economic reform is in financial services, other services sectors that's the leading edge of their reforms is exactly the sectors that we were able to successfully negotiate liberalization in China with. So that's where Australia is not a big threat but as an important player in China and for the Chinese help push through their reforms. And it's also a good practice and a training ground for China's economic dealings with Canada, the United States and other large economies. Now thinking about that complementary transition in economic models and restructuring our economy what does the Trump administration and Trump's American mean for this? Well the first thing is it's brought a lot of uncertainty to the global economic system. It's brought a lot of uncertainty to our dealings with the United States and I think that's affected our dealings in Australia with China as well. I think that's one explanation for the one belt, one road debacle of us not signing on. I think in particular two things the first thing I want to talk about is a risk is a G2 agreement between the United States and China. So as Richard said the Americans are very transactional now and so are the Chinese. I think we have to really be careful about a big deal between the US and China and sure we want them to sort out a lot of things but not in a bilateral framework and exclusively a bilateral framework where we've got voluntary export restraints, gas deals that are preferential, all these things that will leave Australia and others picking up the pieces. And another risk of a big G2 deal and even if it's supposed to be an economic deal or a trade deal will include a whole host of non-trade issues. So it could include North Korea, Taiwan as a bargaining chip, currency although we think that Trump has taken currency manipulation off the table. I don't believe anything he says we should just watch his actions. And one example of this is a tweet and we have many tweets we could quote, I enjoy quoting his tweets but this one was quite telling what Trump said on the 11th of April. I explained to the president of China that a trade deal with the US will be far better for them if they solve the North Korean problem. So you can see the geopolitics is getting mixed up with the economics. And finally I want to talk about a risk, a broader risk that Trump's United States brings and that's to the global trading system. So the United States created really the modern international trading system, the rules-based trading system and underwrote it in the entire post-war period for the last 70 years. Now the United States is the biggest threat to that global trading system. The exit from the Trans-Pacific Partnership of the United States withdrawal was a pretty big blow symbolically and very important symbolically of a US retreat, an embrace of inward-lookingness and also campaign Trump. So trade is an area where Trump has done very little so far and we hope he doesn't do too much more but I think this is an area to really worry. Trump threatened 45% tariffs on China, 35% tariffs on Mexico during the campaign and it's not unusual for US presidents to talk this kind of talk during a campaign but what was worrying was Trump named the exact laws he would use to implement these tariffs and the team he has around him, so Richard mentioned Peter Navarro seems to be sidelined for now but the whole team he has of Wilbur Ross as well as Peter Lighthizer who's going to be the new US trade representative have been quite clear that I think in these terms imports cost jobs, trade deficits cost jobs a very mechanicalist approach so we should worry about Trump's approach to the WTO and the new US administration's approach to the WTO. This is not a blip and it's not just Trump it's a systemic crisis in the global trading system. The things that brought Trump to power are deeply structural in the US it's the social safety net that wasn't there that's not there the education system, healthcare the tax and transfer system and there are a lot of unhappy people in the Rust Belt and we have to worry about if jobs don't come back to these people anytime soon and there are a number of scenarios we can think of as the US Fed titans interest rates this year and next year US currency appreciates there's going to be a lot of pressure on manufacturing jobs it's just one scenario there are many other scenarios where approaching midterms if jobs haven't come back to the Rust Belt you can just see Trump reaching for some of those protectionist policies so Australia, China the rest of the world especially in our region in Asia really depends on the rules-based international trading system that's how our economic relationship with China grew under that framework and it doesn't take much to think about the other relationships in the region China-Japan relationship which was the third largest trading relationship in the world there's no bilateral agreement there that's all trade and investment under the WTO so it's got political ramifications as well as economic ramifications of the US turning its back and undermining the global trading system so I think that's a deep interest that we share with China with Japan with Singapore with New Zealand Canada Germany and a lot of other countries that really depend on an open global trading system think about the reforms that we're going through China's going through India Japan and others those reforms are made so much harder with their heart anyway harder with a hostile external environment with markets closing up so I think there's a strong interest to create a coalition of like-minded open economies to put a stake in the global system to double down on the rules-based order and there are very few vehicles to do that that don't involve the United States I think the obvious one given the interest in Asia is ASAP that Richard mentioned the regional comprehensive economic partnership the weight just the sheer weight of the grouping the deep interests that the grouping has in keeping the global system open I think we're part of it China's part of it Japan this is not China led as Richard said it's ASEAN led if we can get a decent agreement here and I think we have to get a decent agreement here I think there's a chance at keeping that global system open and helping it as opposed to turning our back on it so thanks Okay, lucky last as Gay said I have a coming out the other side of flu so I apologise for my slightly croaky voice it's a really great pleasure to be here and thanks Anna and then for bringing us together and I mean always a pleasure to share a platform with my old A&U mates and colleagues but it's a particular pleasure to share it with Gay I thought her remarks before just hit a lot of nails very squarely on the head and I sort of want to start where she finished with the injunction that we need to work out what we want and how we want to manage our relationship with China and we need to work that out realising that China is a country which is quite unlike any country we as a we Australia have ever encountered before it is by far and away by miles the most powerful Asian country we've ever encountered it's the only country we've ever encountered that can compete with our great and powerful friends for a dominant position in Asia and so whatever happens this relationship the relationship we're going to have with China is going to look different and feel different and work differently from any bilateral relationship Australia has ever had before and in exactly this case we've got to work out what these relationships can all look like and it's not going to be easy and the way I want to approach that being true to our title is to ask what Donald Trump means for this and it is worth asking a question why is Trump relevant to the trajectory of Australia's China relations and the way we think about our relationship with China and the answer is very simple and very significant that is because our approach to China hitherto has absolutely depended on a vision we have had of America's power and America's role in Asia our approach to China hitherto is presupposed that America remains the dominant power in Asia and of course if it does then things are easy because of America and power therefore provides a framework an English speaking framework a framework aligned with our values and history and culture and all of that sort of stuff within which the relationship with China has been managed which of course is what we've known hitherto what we've known for the last well particularly so well since 72 but 1972 when the opening to China but particularly since China's rise began in 1980 and it's very easy for us to assume and it's very tempting to assume because it would be so nice if it was true that it's going to remain the case and that as we think today about how we build a relationship with China that works as China continues to grow and so on it's really a matter of thinking how are we going to work with the US or rather use the US to manage our relationship with China for us because that's really what Australian governments have been talking about doing and on you know the anniversary the 75th anniversary of Coral Sea you stand there on the flight deck of the USS Intrepid in New York Harbour it's very easy to think that the answer is in the history that we've had this alliance with the United States which has worked like a switch watch for decades and decades that we've been to every war together and all of that sort of stuff and to think that that provides the answer well unfortunately history is not that easy things do change and things that used to work don't work in the future and that's where Trump comes in what difference does Trump make well I want to start by making a general point and that is that you know we don't want to lose our sense because we become familiar with the fact that Donald Trump is now the president of the United States we don't want to lose our sense of wonder and bewilderment that this should be true that the United States at least of a portion of the electorate that can be bothered to turn out that Tuesday selected as their president a person who repudiated all sorts of things including some fundamental principles of what you might call good manners and decent conduct and all of that sort of stuff amongst other things repudiated what had been regarded as absolutely fundamental precepts of American foreign policy which had been absolutely casting concrete since the end of the Cold War which was that 25 years ago and in particular an absolutely ironclad bipartisan commitment to preserving U.S. primacy globally and in particular to preserving the alliances upon which that primacy was based and Donald Trump just trashed that during the campaign repeatedly not just in one tweet or two but repeatedly and what everyone thought a whole foreign policy establishment in Washington thought was that no person who repudiates that bipartisan consensus in the United States about their role in the world and including their role in Asia could possibly be elected to President of the United States and they were wrong so it's very important conclusion it tells us that America was not the country we thought it was it tells us that America is not the country that the American foreign policy establishment thought it was this is not a country which regards America's leadership role in the world including its leadership role in Asia as non-negotiable it's maybe we want it maybe we don't who knows what's it going to cost us that's a terribly important conclusion and if you think it's just a Trump problem if you think that you know not where Donald will pass and we'll end up with someone normal again ask yourself who is going to be running for office in 2018 in the midterms in 2020 and if Trump gets a second term and don't bet he won't in 2024 will it be someone who runs for office on the foreign policy of Hillary Clinton or John McCain or is it going to be someone who runs for office with a foreign policy looking surprisingly like at least the fundamentals of Donald Trump's Trump is at one level of course a grotesque anomaly but at another level he is a product of deep-seated processes in the US political system and we shouldn't expect those processes won't keep on working and won't keep on producing results which are contrary to what we expect and for that matter what we'd like so you know we're 100 days in there's a big debate about what Trump what where Trump foreign policy is really going to go after everything he said is it one view is that it's going to be a total and unmitigated disaster another view is that it might be okay you know the system will sort of crowd in on him and he'll find he's got no choice but to somehow play by the rules no matter what he said during the campaign and the third view is that actually this could go well he's a bit unusual he's a bit unpredictable but he could have a style which could end up working well for America well I'll give you my view as to which one of those is right in a minute but but I think the starting point is to understand not what Trump might not just what Trump might end up looking like but the challenge he faces because he inherited as he took office a strategic position in Asia a US strategic position in Asia which was in deep trouble he didn't inherit a policy which was running well inherited a policy which began under Barack Obama which identified a serious challenge to US leadership in Asia by China but radically underestimated its seriousness by believing that China could be persuaded to back off from its challenge and go back to accepting US primacy in Asia if the Americans just asked them to and not even asked them very nicely and so Barack Obama stood up in our parliament in November 2011 and asked them that's what the people was all about please get back into your box because we'd rather you did and if you don't you've got no idea what we'll do and it didn't work the Chinese said really let's test that shall we and that's been the story that's what's been happening in Asia since 2011 it's the story of China testing America's hope that the Chinese would get back in their box without being seriously pushed and because that's failed because the Chinese have shown greater result in the United States the US position has weakened and it's become clear if I can put it this way perhaps a little bit more pejoratively than I mean even in Washington it's become clear that there is no cheap and easy way of getting China back in its box it's a very powerful country with very deep-seated ambitions to build a new order a new model of great power relations in Asia and it's not going to be easy to talk them out of it and it's worth asking well what would be needed to succeed what would Trump need to do to succeed in re-establishing American leadership in Asia and therefore re-establishing the conditions on which we're still relying in Australia for the management of our relationship with China well the first thing you need to do is to acknowledge the problem to really clearly identify the fact that China is a very serious challenge that involves saying some things which are absolutely unsayable in Washington that China is going to be the richest and most powerful country in the world in the 21st century nobody in Washington has ever said that there's nobody in power in Washington has ever said it but it's true so you've got to acknowledge that for a start America needs to define what its real interests and objectives in Asia are not just preserving the rules-based order or maintaining American leadership they're just slogans what precisely does America really want to do in Asia and how hard is it prepared to push to achieve it in the face of China's power and resolve what price is it prepared to pay and can the United States then define a role for itself in Asia which meets those objectives at a price America is willing to pay and then implement it which is going to require extremely subtle and sophisticated diplomacy so there's the question that's the question for us about when we think about what Donald Trump's position means for Australia-China relations if the new US president can't do what I've just described he won't preserve US leadership in Asia and assuming US leadership in Asia is the foundation for our model of managing our relations with China is not going to work so does anyone think Donald Trump can do that? I don't and one of the reasons is I think the both the optimists who thought that Trump's model of managing US primacy US foreign policy is good and the middle people who just thought it's okay are both wrong I think all the evidence so far is that Trump's capacity to manage foreign policy is precisely what we would have thought it was from what he said during the campaign he's just what Americans actually elected and there's a long story about that I'll give you this brief version for most people who are optimistic about Trump's ability to manage foreign policy effectively the most important data point so far as Syria and North Korea Syria I think has been way over praised it takes no resolve and very little judgment to launch 59 cruise missiles apart from the else Syria can't hit back and there is zero evidence that the decision to launch the missiles was based on any coherent idea of what the United States was trying to achieve in Syria or what it meant about its broader relations in the Middle East and you know in North Korea I think North Korea in fact shows a very serious weakness in characteristic weakness in Trump's foreign policy that is they talked up what they were prepared to do they had a lot of tough language about using armed force they didn't have a realistic option to use armed force and they're now talking any way back out of it this is a pattern it's what happened with his challenge to one China in the backwash from the Tsai Nguyen phone call it's what happened when Tillerson threatened in his confirmation hearings to block Chinese access to the South China Sea it's what happened on all those trade issues at least so far that Shira was talking about the fact is the pattern we have is of big talk and no action and that pattern is fatal to America's capacity to sustain a strong role in Asia because it's fatal to America's credibility and credibility is the key currency in the kind of power political contest we're seeing so look you know it's possible that under Trump America will build a new and sustainable motives for vending with China which retains a strong U.S. role and a strong U.S. role that we can depend on to help manage our Chinese relationships but it was a long shot before Trump became president and it's much longer now it's more likely under Trump that the United States will either find itself in a conflict with China and that's not a low probability or that it will withdraw from completely from Asia over the next couple of decades or that it'll both will happen it will start off with a war and then U.S. withdraw that's the worst possible outcome so this is a big deal for us the question is not as some of my dear friends and colleagues say do we build a foreign policy which is more independent of America's I don't want a foreign policy that's independent of America's I love depending on America when America works for us when it's dependable as it has been there's nothing wrong with depending on America the problem is pretending you can depend on America when America's posture in Asia is simply not working and that's the problem we face today so we have to think very deeply about the role of America in the Sino-Australian relationship and therefore think very differently about how we can see the Sino-Australian relationship we have to conceive a new role for us in Asia and a new relationship for us with China which does not presuppose that we're hiding behind the skirts of the world's strongest power we have to recognize in doing that that we're going to be dealing with the China which is going to be very strong and very ruthless and it's not to say we won't be able to say no to China on things but saying no to China is going to be very expensive so we have to decide really clearly in our own mind what we're going to say no over and what we're going to go along with and we have to work very carefully therefore exactly as Kay said to define our real principles the real foundations and work out how best we can defend them and protect them to maximize the scope of our independence in Asia which is likely to be dominated by a powerful China this is one of the very biggest challenges in the history of Australian foreign policy and we better start debating it our problem so far is that we haven't really even begun to acknowledge the scale of that challenge