 The subject of Hughes' book fits squarely into one of the central research themes here at the Lowy Institute. The impact of China on our region and the world is, of course, a fundamental question for Australia as we find ourselves closer to the centre of geopolitical action than any time in our history. We need to understand what sort of power China is now, what sort of power it will become and how its future actions, relationships and ambitions will shape Asia and the globe and what, if anything, Australian policymakers and advisers can actually do about it. Our guest of honour today, who has generously agreed to launch Hughes' book, has been at the forefront of the development of Australian thinking and Australia's relationships with China and Asia for decades. He continues to play a prominent role in shaping thinking on public policy on this matter and more broadly on Australia's future in the new global order. The honourable Paul Keating, as Treasurer from March 1983 to June 1991, and as Prime Minister from late 1991 to early 1996, pursued economic, financial and foreign policy reforms that allowed Australia to be prepared for Asia's progress in becoming the engine of global economic growth and increasingly the centre of global strategic weight. At the same time, the Paul Keating government was keenly aware of the importance of keeping our major ally, the United States, engaged in the region, which is also one of the themes of Hughes' book, which led, among other things, to the Paul Keating government's initiative to create APEC in 1989 and the leaders meeting, importantly, in 1992. This is the second time we're privileged to have Mr Keating here at the Institute. In March 2009, he addressed a forum here where he analysed the opportunity offered by the London G20 Summit to reshape the global order. I want to give particular thanks to Mr Keating and also to Blacking Books for choosing the Institute for the Launch, so would you please all join me in welcoming our speaker, the Honourable Paul Keating, to the podium. Well, thank you, Martine, Hugh, I don't know if this is working, it is, ladies and gentlemen. Well, this was my office for seven years, I used to say, well, of course, the Tories wouldn't let me into a club in New South Wales, so I'd have one of my own. This used to be the New South Wales club. At any rate, Hugh does me an honour in asking me to launch this book, The China Choice. And I believe the reason he asked me was not that he wanted to form a Prime Minister to launch his book, necessarily, but at least one who regarded his subject as central to Australia's security and prosperity, indeed central to one of the major, perhaps the major issue in international affairs. As you would expect, Hugh has written The China Choice with great clarity and command of the issues and with his usual nuanced treatment of important threads of argument. He has always been able to get to the nub of an issue with a great economy of words. The style is discursive, even conversational, but the poignancy and economy of words serves to hammer home the points, to rivet them. And Hugh is invariably upfront in his intentions, and he is on this occasion. In talking about the choice to be made between the United States and China on the strategic balance in the Pacific, he makes clear that his book is about America's part in that shared responsibility. He is primarily addressing American policy makers and strategic thinkers. But importantly, he addresses them from what James Fallow's calls in his cover note, a sympathetic but clinically detached perspective. More than that, Hugh says boldly that there is no place for Australia as an intermediary between the United States and China. But he goes on to add it would be wrong for Australia not to try and shape the outcome. Tellingly, he says our main effort should be in Washington. And he says this because Australia is an ally of the United States on which the United States has materially depended. This, of course, is correct. But underlying the comprehensive and erudite elucidation of the many issues between the United States and China lies the great and more profound question, can the established international order assimilate and adjust to the rise of a new and major power? Or will we be condemned to war as Hugh notes of John Mersheim's analysis? We should remember that at the beginning of the 20th century, Europe ran the world, a vast British empire and a German one. Within 40 years, it had torn itself apart, fighting two world wars over the status of Germany. Europe demonstrated it was unable to come to terms with Bismarck's creation, the mere existence of which was an affront to it. Shades here of Hugh White's commentary on American exceptionalism, what he calls the deep questions which reside in America about its role in the world and about itself. Now the issue is Dongsao Ping's creation. Can the world adjust to the restoration of Chinese economic power? Will it acquiesce in the strategic consequences of global economic gravity finding its point of equilibrium in the East? Hugh reminds us that the United States has never dealt with a country which is as rich and as powerful as China, instancing that the Soviet Union was never its economic match. And he says in a declaratory way, correctly in my view, that ultimately wealth is power. In his commentary, he asked why the United States never saw it coming. How did it not see the challenge to its primacy in the Pacific developing? And he answers his own question by nominating September 11, 2001, the time when the United States, at the height of its unipolar moment, decided to lay off its strategic bets in the Middle East, leaving the Chinese to the vagaries of their struggle with poverty. The fact is, the globalization of countries ran ahead of the globalization of strategy. The failure of the United States to understand the dispersal of global power at the end of the Cold War, of the post-colonial blossoming, of the availability of capital and technology, saw it miss the chance to create a new and more representative world order, one in which it would have earned a permanent and exalted place by virtue of its foresight and magnanimity. That moment is now past, and from here on, it's simply hard slog, the cat's being well and truly out of the bag. But not all of us miss that same moment. For two decades, I've been making the point in public speeches that the Industrial Revolution broke the nexus between population and GDP, that once the productivity-inducing inputs of capital and technology became ubiquitous, it was only a matter of time before the great states by way of population once again became the great states by way of GDP. Here, white has long been making the same point. This is the principal reason behind China's restoration to the position of economic primacy it enjoyed before 1800. It's the same reason the Indian economy will be larger than that of the United States by mid-century. Hugh makes the same point in the book in a different way. He says China's workforce is four times that of America's. He goes on to explain that China's output will overtake America's when the average Chinese worker produces just a quarter as much as the average American worker. I think we'd have to all concede that's a reasonably plausible scenario. With his ability to distil a point to its essence, he says economic primacy is just a question of arithmetic. And of course it is. And again, in distillation, he says what is happening in China and India is less a revolution than a restoration, to which I might say quite. When we Australians were running around North Asia in the early 1990s setting up APEC and the APEC leaders meeting, we were doing it not to become foreign policy busybodies. We were doing it because we saw it all coming. The rising might of the former colonial states, thawing from their Cold War status, the productivity, equilibration, the prospect of open regionalism, and the chance to see the United States engage at high policy, and at presidential level with the leaders of China and Japan, were all drivers of our foreign policy initiatives. And China's accession to the WTO in 1997, in which we helped, sealed the deal on China's rules-based participation in the world. Why it took the United States until 2011 to make the so-called pivot back to Asia, to acknowledge the centrality of Asia in the new strategic settings, is a matter of wonderment. We had the United States walking out of Iraq with virtually nothing, having lost many lives and a trillion dollars of fish in its place as the preeminent one in East Asia. It sees its legitimacy arising from its ethnic oneness and an identity. And that for two centuries has been deprived of these. He says that China will not relinquish its even if this leads to conflict. And he goes on to argue that should America try to preserve the status quo and avoid the fundamental change in the relationship, it will be chosen to accept China as a strategic rival. Already, he says, there is an increasing undercurrent of rivalry. He underlines the weight of China's ambitions by our paragraph about whether it was true or not. And I came to the conclusion that it was their forces and adapting their military plans specifically with the other in mind and as being actively reshaped for that purpose, unquote. And he goes on to say Pacific at quite short notice, a salutary warning if ever there were one, a primacy in the Pacific. He sees this boiling down to three options. For America to stay as now and preserve the status quo, to calculate the odds and withdraw or to shift policy and share power in the region with China and other states. I'll put it in his words. That's enough pictures, fellas, you're interrupting me. Okay? In his words, one, for America to resist China's challenge and try to maintain its position of primacy. Two, to concede the field to China and withdraw from any major role in Asian affairs. And three, to stay in Asia but fashion a new role for the United States within a new order in which it maintains a strong presence of the United States. And three, to stay in Asia but fashion a new role that maintains a strong presence but shares power with China. And after laying out these three options, those options, he suggests a clear choice will have to be made on one of the three. Having said that, he argues for the third option, the sharing option. The one that best serves American interests, he says. Indeed, he goes on to say the central idea of this book is that such an understanding is possible today between the United States and China. More than that, he claims it can hardly be impossible for America and China's interests to be reconciled without war. And that that reconciliation can arrive through a new order in which China's authority and influence grows enough to satisfy the Chinese and America's role remains large enough to ensure that China's power is not misused. You're right, then goes on to discuss at length what a new order might look like. Importantly, he argues that in an order based on shared power, the United States remains a central player in Asian affairs. Its power balances and constrains China's, protects American interests and enforces vital norms of international conduct. It will have to exercise its authority within limits acceptable to China, just as it requires China to exercise its power within limits acceptable to the United States, is in the negotiation of those mutually acceptable limits. Reflecting his faith in foreign policy realism, he says new orders of this kind are only built by negotiations between the great powers. And above all else, he says, Washington and Beijing must both agree to do it. And from that point, he argues the first requirement of any negotiation is to accept and acknowledge that your counterparty's objectives are, in the broader sense, legitimate. In this case, America will have to accept that it is legitimate for China as its power grows to want greater authority and influence. Equally, China will have to accept that it is legitimate for America to remain an active player in Asia. And underpinning those mutual acceptances should be the notion that because both countries are so powerful and that neither can hope to win a competition for primacy outright, they do a trade at the point where further gains cannot be justified by the higher costs of rivalry. Hillary Clinton has shone some positive light on the issue when she said on the 40th anniversary of diplomatic relations that roles, and I'll use quote her, roles require adjustments in our thinking and our actions on both sides of the Pacific. We are building a model to strike a stable and mutually acceptable balance, and here's the important words, between cooperation and competition. This is uncharted territory, she said, and we have to get it right. In his book, Hew White takes the cooperation and competition idea and he places it within a concert of power model, sketching out what a concert of power in Asia might look like. And he runs through the concert, which emerged from the Congress of Vienna and which obtained for a century between 1815 and 1914, how Europe benefited from unprecedented expansion of population, wealth and power. He reminds us that that concert was built on one simple understanding, that no country would seek to dominate Europe and that in the event one of them tried, the others would unite to defeat it. Importantly, he says, correctly in my view, that the concert was not founded on any abstract commitment to principles of peaceful coexistence or the brotherhood of man. The only relevant principle was everyone understood that the costs of seeking hegemony outweighed the benefits. This, of course, is an altogether different concept from a balance of power, as a concert of powers requires an agreement. Therefore, such concert has to be created and carefully maintained. He reminds us that the last two attempts at a global concert of this kind, the League of Nations at Versailles in 1919 and the United Nations in San Francisco in 1945, failed. So it is not easy to do and even harder to maintain. But he is right in saying that the code to maintenance is simple, members agree not to deprive one another of the status of a great power. He then puts the question, would building a concert mean conceding a sphere of influence to China in Asia? He then answers his question by saying that spheres of influence remain an important feature of the international order, which they've always done. Going on to add, it would only be realistic to acknowledge that where the vital interests of other state powers were not directly affected, China might be conceded a sphere of influence. This is a version of the often used Keating mantra. Not that I'm saying he lifted it, but that's why I say that great states need strategic space and if they are not provided some, they will take it. If the United States in this context were to either promote a balance of power in Asia or maintain strategic primacy, as until now, China would be denied great power status. As Japan has been so denied in the just on 70 years, it has been a strategic client of the United States. The one thing certain in this discussion is that China will not be emulating Japan. The chance of China becoming a strategic client of the United States is next to zero. Hence the importance of seeking to have the United States recognize that there has been a shift in the economic tectonic plates and that with that shift has come and will continue to come a shift in the strategic balance. For my own part, I have long held the view that the future of Asian stability cannot be cast by a non-Asian power, especially by the application of US military force. A point articulated recently by Zbigniew Brzezinski, a former US national security advisor. The failure of United States wars in Korea, Vietnam and outside of Asia in Iraq and Afghanistan should lead the United States to believe that war on the Asian mainland is unwinnable and that therefore the key to Asian stability lies in the promotion of strategic cooperation. Brzezinski argues, and I'll quote him, geopolitical equilibrium in 21st century Asia has to be based more on a regionally self-sustaining and constructive approach to interstate relations and less on regionally divisive military alliances with non-Asian powers. And he warns that America should not allow itself to be drawn into a war between Asian powers on the mainland. His one caveat being US military engagement only in response to hostile actions directed at states with treaty-based American deployments. With express focus on China, Hugh White says that should America stand firm and turn its back on Chinese claims and on a cooperative structure, there is no chance that China will simply go away and that things as now will keep on as they have been. And what's more, he warns, there is no midpoint between conceding nothing and conceding everything. A line has to be drawn, which he says is a challenge for American statesmanship to identify and identify up front. At what point the United States will stop making concessions and to let China know what will happen if China crosses the line. In other words, the United States has to decide where its vital interests lay in its relations with China and China's role in the world and which of its interests are otherwise tradable. Implicit in this is the United States deciding which characteristics of China are inimical to US interests and pose a threat and which are simply a product of China's scale, economic rise and culture, which can otherwise be accommodated. We need a structure which encourages China to participate in the region rather than seek to dominate it. Indeed, the development of such a structure can provide a region which does allow China to participate but not dominate, which brings me to Australia. Hugh says, and I quote him, if either country, that's the US or China, decides that we have to choose between them than we do. But that's the point. From Australia's position, a choice is what we do not need. And in a cooperative structure, there would be less need to make one. This is why there is every reason to try and face America up to its changed economic and strategic circumstances rather than traffic in the pretense that the rise of a state potentially larger than itself will have little strategic consequences for either it or for us. Hugh White says, for more than a generation, we have got out of the habit of engaging in real serious debate with Washington. Well, how true is that? From the ransacking of Indonesia in 1997 by the IMF to the commitment in Iraq in 2002, the presumption has been that the foreign policy of Australia is somehow synonymous with the foreign policy of the United States. This, of course, could never have been broadly true, notwithstanding the points of coincidence from time to time in our respective national interests. The relatively rapid rise of China will demand clarity in the points of differentiation. Yet the debate around China has carried with it the assumption that Australia has no choice but to support American primacy in Asia against the threat of Chinese hegemony. This assumption, Hugh White says, now needs to be challenged. And I agree with him, it does. All of us in the debate in Australia believe Asia will be a safer and better place with the continued engagement of the United States and the region. Strategically, it is likely to be more peaceful and more settled. And with our trade preponderantly in North Asia and the greater part of that with China, there is every reason to support the development of a cooperative structure between the United States and China in the Pacific. And this must mean recognizing China's legitimacy its prerogatives as a great power and the legitimacy of its government. If we are pressed into the notion that only democratic governments are legitimate, our future is limited to action within some confederation of democracies. While peace may prevail between democratic states, we should take heed of views of people like Kenneth Waltz who argues that the structure of international policy is not transformed by changes internal to states. But arguments of this kind have not slowed critics of China who are quick to invoke human rights and values as though the human condition had not improved dramatically across the Chinese landscape. Even President Obama told us during his visit to our parliament that, I quote him, prosperity without freedom is just another form of poverty. That remark placed a heavy discount on the success of the Chinese Communist Party in dragging its community from abject poverty. For as Hugh says, and I quote him, over the past 30 years, the Chinese government has achieved by far the largest, fastest increase in human material welfare in history. And so it has. A tenth of humanity lifted to a way better life in a single generation. Yet the seemingly perpetual invocation of this human rights mantra attributes no moral value to the scale and quality of the Chinese achievement. And on the question of values, as Hugh elegantly remarks, peace is a value too. Arguing that that value weighs a moral obligation to minimize the risks of war if at all possible. Hugh writes, the China choice is an exceptionally thoughtful synthesis of the arguments and influences which bear upon the coming shape of the Pacific. Against the backdrop of history, he extrapolates the trends and pressures which arise from the United States' primacy in the Pacific as he does from China's position as the ballast power on the Asian mainland. He has done everyone interested in these issues of service but in my view, the United States, a special service. It's with great pleasure that I launch this cogent and persuasive work. Thank you Paul for that extremely generous authoritative, serious, graceful and reverb filled set of remarks about my little book. Thank you everyone very much for coming. I really appreciate you all making the effort to come along, nice to see so many old friends. Scary to see how long I've known some of you and how long we've been discussing these issues. And I just mentioned too, in particular, I'm very grateful to see here because they've had a very big effect on the way I think about these issues. One is Owen Harries and the other is Neville Manning. Their work over many decades, both of them has done a great deal to shape my way of thinking about these things and indeed my way of writing about them. So if what Paul's been kind enough to say about the writing style of the book has anything to commend it then they, I think, deserve some of the credit. Paul has always had the big questions as his natural habitat and there are of course no bigger questions than Asia's future America's role in Australia's place in all of that. And I am honoured by his willingness to put that set of remarks together to come here today to launch a little book. I'm gonna allow myself to say that the kind of issues that I think we face today in Australia and the issues that America and for that matter China face today as they wrestle with these questions are gonna call for the kind of leadership, kind of policy and political courage and imagination that he showed in the governments that he served and led in the 1980s and 1990s. And it's that example, which I so just grew up and where I learnt myself a little bit about the policy business that makes me less deeply pessimistic than I might otherwise be, that we can make this work. That we in Australia can make it work, that the region can make it work. It's perfectly possible for Asia to build a stable new order. It's perfectly possible for the United States to continue to play a strong role in Asia. It's perfectly possible for Australia to find a place in that Asia. But none of that will be possible unless we have some very big changes in the way in which we see Asia working, in the way America's role is conceived and executed and in the way we in Australia manage our relations. And this is, I think, one of the great challenges of Australian history. And that doesn't mean we're gonna have to speak to America in particular in a different way, in a different tone of voice, with a different content to the way we have before. And really, my hope in the book is that it helps to provide the script for that conversation. So let me just say a few thanks. The first is to my colleagues at ANU and the Lowy Institute and for that matter elsewhere around the country, around the world who spend a fair bit of time with me over the last few years talking about these things. And I want particularly to mention my last few years as I've worked on these issues. I've had a lot of debates with my Lowy colleagues. I would be the first to say I've benefited a huge amount from their friendship and support and encouragement and so on. And I should also say that I wanna register my thanks to Frank Lowy and the big difference personally to me and my work on these issues. And I think that really a spectacular piece of philanthropy, of policy-oriented philanthropy. Secondly, I want to thank Murray Schwartz and his team at Black Ink for putting a book out for me, which is a pretty big kind thing for them to do. It's a terrific team. It's much more than just a publishing house, there's real enthusiasm and commitment there. And they're wonderful people to work with and I wanna thank particularly my editor, Chris Feich, who has been with his encouragement and sometimes more than encouragement. I've tried to write a very stark book, a book which sets some arguments out very, very plainly and the Black Ink published had the same characteristic. That means that quite a lot of what I've been publishing and saying and I'm sure this book too has attracted a fair amount of attention, not all of it entirely gracious. So, second lastly, I just wanna thank the many people, including many people in this room, but also more broadly who have not always agreed with me but at least supported me in this debate and that does include, hold off to the ghost writing of actually former Prime Minister's memoirs, looks through the draft with there, they're just in the wrong order. And it's a very profound truth about writing that it's just a matter of getting a bloody things in the right order. Well, getting in the right order is hard work and is quite painful, not just for the person doing it but also for those who are looking on my family. Thank you very much.