Interview with Honourable Alexander Downer

Alexander Downer was a former Liberal Foreign Affairs Minister under the Howard Government. Serving from March 1996 to December 2007, he is the longest-serving Foreign Affairs Minister in Australian History.

 State Magazine had the opportunity to interview Mr Downer on his thoughts of the Australian-China relationship.


STATE: How would you characterise the current state of the Australia-China relationship?

“Well I think it’s been a lot better – I think the problem with the relationship is that it has been ambushed by too much politics and not enough diplomacy. So there hasn’t been a consistency in approach by Australians in China, and I think in diplomacy, you always need to try to be predictable and consistent as best you can. It’s not always possible, but you should always try. I think diplomacy has been a little untidy in relation to China, so I think that needs some work”.

STATE: First focussing on the economic aspects, what have been the main advantages that Australia has gained over the past 40 years in aligning itself economically with China?

“I’m not sure about aligning ourselves with China, but China is an enormous market for Australia and that really speaks for itself. China is also a very important source of imports – the exports obviously generate export income, jobs and prosperity in Australia, but the imports are being underestimated. We get from China everything from cheap clothing to cheap technology, which if wasn’t for China, would be a great deal more expensive for us – therefore this would have a negative effect on our living standards.

To put it the other way around, the relationship with China has had many positive benefits for the living standards of ordinary Australians. I suppose the third aspect of that is investment – we now get a lot of investment from China. It’s not in the scale of Britain or America, but we do get investment from China and that’s obviously very beneficial to Australia as well. Whichever way you look at it, this is a relationship that has made a solid contribution to the very high living standards, which on average, Australians enjoy”.

STATE: During Mr Abbott’s recent visit to China he made the comment that it would “rarely be in Australia’s national interest to allow a foreign government or its agencies to control an Australian business”. Why do you think Mr Abbott and others in the business community have expressed some concern about Chinese state owned enterprising be allowed to own or have a stake in Australian owned companies?

“I think with the public, it’s a bit of an issue. There are people in the community who have some concern about it, so he wants to communicate the message that he is in touch with public sentiment. Having said that, I don’t think Mr Abbott has any intention of fundamentally changing Australia’s attitude towards investment from China. To put in place more restriction on investment from China has potential to limit wealth-creating opportunities in Australia, but it’s more than that – Australia used to have an open economy in order to maximise not only wealth through exports and imports, through trade and through investment, but technology transfers.

For example, China is very important these days – let’s not forget there is a very important source of technology. The Chinese investing in Australia can bring significant technological benefits to our country. It is important that we are open to Chinese investment, and I think on the whole Mr Abbott is, but he’s coaching his work carefully in order to demonstrate that he’s in touch with some sort of concern that is out there in some sections of the community about Chinese investment. But on the whole, there’s nothing to worry about”.

STATE: Are the mining tax, carbon tax likely to reduce Chinese investment in Australia?

“If by definition they are going to have a negative effect, the intention of those taxes is to target Chinese investment, let’s not try and pretend that the objective of the carbon tax is to reduce economic activity – that’s what the Government wants to do. So if so far as the Chinese want to invest in carbon industry in Australia, they are less likely to because of the carbon tax.

The mining tax is slightly different because its impact is less draconian – this only applies to mining, but if you make mining less profitable, you don’t need to be an economist to work out that there will be less investment in this area. This would mean less Chinese investment full stop. That is the objective – to impose costs. The government is deliberately imposing costs deliberately on these industries because it believes it is the appropriate policy, regardless of whether it is or isn’t – people have their own opinion on that”.

STATE: What can Australia be doing to further improve the Australia-China economic partnership?

“The overall partnership needs to be improved by introducing a degree of predictability and consistency. Not having Ministers and Prime Ministers run around and making entirely unpredictable and often ill-considered politically motivated statements. Instead, inject a degree of certainty and predictability in the relationship. I don’t mean bowing to China, and I don’t think grovelling to them is great policy; I think we should be quite frank with the Chinese and tell them where we differ from them and where we don’t.

We should be quite clear in articulating the sort of relationship we want with them. I think it’s the sort of lurching from a type of “panda-hugging” indifference to China on the one hand, rather than to going out there and beating up over them on all sorts of issues in a very brutal sort of way. That sort of unpredictability and unsophisticated approach to the relationship will just make the Chinese roll their eyes and think “these people are difficult to deal with” rather than thinking “okay, we have differences with these people on human rights, political systems and economic issues”.

You have to appreciate they have a mature relationship with us and they are able to discuss their differences in a grown up way. I think that’s how we should deal with China – I don’t think we should have any allusions about it, and I don’t think we should cower to China or anything like that, but I think we should be predictable and consistent, not erratic or political in the way we deal with China”.

STATE: There has been some concern raised that the new American military base in Darwin will harm the Australian relationship with the Chinese. Do you think this is likely?

“No I don’t – it won’t be a base per se, troops are just going to be rotated through Australia. There will be 2,500 I think initially, and that is going to work up towards three or four thousand. The point I’d like to make is that we have an alliance with the United States and we need to go to Beijing and make this perfectly clear to the Chinese. Understandably Australia would have an alliance that would go back to the First World War; maybe even before, depending on how you would define the beginning of an alliance that formally goes back to the 1950’s.

We have a long-standing alliance with the Americans and that is not going to change. That alliance will be there indefinitely into the future. So you’d have to deal with us as we are – we are not going to change the way we are in order to deal with you, but we are happy to deal with you, but we are not going to pursue a policy that’s containment of China. If we want to do something with the Americans, we will do something with the Americans. The only thing I am saying is that always tell them what you are going to do; people always appreciate that.

For example, “we know you’re not going to like this, but this is what we are planning to do, and it’s going to be announced in three days time”. Dealing with a relationship in that way is much better than hitting them with surprise after surprise, but having said that, it’s a management issue rather than a policy issue. In policy terms, I think the Australian Government was right to do what it did – the Chinese don’t like it because they don’t like alliances. If you think about it, it’s obvious why not – they don’t like the Americans ever penetrating through the region. They just have to understand the world as it is, not how they’d always wished it would be”.

STATE: Is it possible to balance a relationship with China and America?

“When we were in government, it was a problem to start with, and we had long, comprehensive and very frank talks with the Chinese about it. We explained to them the do’s and do not’s of the relationship, that we want to work with them, we didn’t support containment of China, we did support engagement with China, and we supported extending the relationship beyond just an economic relationship, but they had to understand that we had our own friends as well. They have their friends – we aren’t a member of the Shanghai Cooperation Group with Russia, and whoever else is in the Shanghai Cooperation Group, and they are not a member of the Western Alliance. We were perfectly frank with them – we wanted to explain to them how we saw the relationship develop. I think they really appreciated that and I think they found us very good to get on with. We had very good personal relations with the leadership in China at the end, and when the government changed, I’m afraid Australia started all over again.

The response of the present government has been a bit crude, unsophisticated and a there’s a little bit of playing politics here in Australia, using China as part of a political game. I don’t think that has put Australia in as good a space that should be in that relationship. Let me make it absolutely clear – there is no reason why we can’t get back to where we were five years ago, and have a really good and constructive relationship with China. Yet, at that time, the US alliance has been as strong as it has been at anytime in Australian history. We can get back there again, no problem”.

STATE: How do you think Australia should approach China’s claims over the South China Sea in our dealings with the Chinese?

“I think we should make sure that we explain to China and the region that the solution to this problem is one of sharing, not one of absolutes. There are competing claims, and we don’t make any judgement about the rights and wrong of those claims – we should be arguing for something a bit different. You can have your different claims, but the interests of countries relate to the resources potential of the region. What the region should be doing is sharing those resources, and not trying to take everything for themselves. China is the only country that has the capacity to do that. I think that is our position and we should make it clear – we shouldn’t be equivocal about it, and we should encourage the Americans to take exactly the same position. We should encourage the Americans not to send out mixed and equivocal messages on this issue”.

STATE: What challenges do you think lie ahead for the Australia-China relationship in the next 40 years?

“There are so many unknowns within the next forty years, and to speculate on what exactly would happen would be foolhardy. I ultimately think that we should aim for a steady relationship with China. In the next forty years, the Chinese economy is certainly not going to keep growing as it has done in the last few years – it’s clearly not going to happen. In that sort of the period there will be significant downturns as well as some strong periods in terms of the Chinese economy.

Those downturns will put pressure on China internally, and how that will be managed will be one of the next important issues in terms of China and in the way we respond to the way they manage a completely different economic environment will be important as well. We don’t know when that is going to happen and we don’t know how badly affected China will be when its high-rate economic growth will start to drop off. But they will start to drop off, by the way. The demographic of China are quite negative, that is because of the ‘One Child Policy’ that they’ve had for a few decades now, and it’s one of the fastest ageing populations in the world. So this is going to put a lot of pressure on China in the next few years.

It’s hard to tell when exactly this will kick in, but perhaps after 2020. So I imagine after forty years it will be a very complex relationship that will have a lot of ups and downs to it. What we are to aim for is a stable relationship based on mutual respect – making sure we support our own interests that include our not just our economic interests but other interests, and make sure we make the most of the relationship. If things change, we will have to deal with that in the circumstances that arrive”.

STATE: In your capacity as foreign minister what was your experience like when meeting with Chinese ministers and officials? What were some of the highlights?

“Well I suppose we rarely oversaw the explosion in the economic relationship. One of the highlights of that was negotiating the LNG contracts to sell LNG to Southern China. We negotiated the granting of banking licences to Australian banks to operate in China. Most things are just taken for granted now, but they are important developments. We encouraged greater student exchanges; particularly we got the Chinese to designate Australia as one of its preferred student exchange destinations.

We also got China to designate Australia as a preferred tourist destination, so we get lots of tourists now from China. I think have overtaken the Japanese tourists now, or at least caught up. Politically, we essentially articulated a paradigm that should be the fault position of Australian Government in managing the relationship with China. When we came to power the relationship with China was nothing like as important as it is today, because China’s economy was much smaller, and China’s position in the world was much less. At the time we came to government in 1996, we articulated the way of managing that relationship, and I think that should be the default position of Australian governments. I hope the Australian Government gets back to that type of relationship with China rather than the very patchy relationship it has had over the last three or four years”.


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