High Commissioner's Address at the Deakin Lecture, Australia-India Institute, Delhi

      High Commissioner's Address at the Deakin Lecture, Australia-India Institute, Delhi                                            

 

13 November 2017   

 

                             "Australia and India – natural partners in an uncertain world"

Introduction

It seems that the defining characteristic of the current era is change.

While this is a truism for all eras – the scale and pace of change today is extraordinary.

Every dimension of our existence appears to be moving in new directions, opening new opportunities but also raising new challenges and risks. 

Major shifts in global politics and economics – so called megatrends[1] – are well underway. 

The shift of global power from West to East is one such trend.  The rise of Asian economies is seeing a dramatic shift of strategic weight to this region.

Power is also more diffuse.  We increasingly speak of multipolarity.  And the greater power of individuals – enabled by access to technology – is challenging both the economies and politics of individual states.

These are compounded by demographic changes.  Ageing populations in some countries are contrasted with massive youth bulges in others.  Shifts in global migration patterns and the changing status of women are creating new demands on established systems.

Through it all, climate change will bring profound economic and political consequences.  Averting dangerous climate change will demand global cooperation, innovation and far-sightedness.

We do not know how these changes will play out.  Nor do we know how they will intersect with each other.  And we are right to be anxious about some of the apparent risks these changes create.

In an increasingly interconnected and interdependent world, there is no possible way that any individual person or state can address these issues in isolation.

We need friends, partners and allies.

Australia and India – Natural Partners

Australia and India have long been described as natural partners. 

The foundations of this partnership are our shared values – democracy, open societies, individual freedoms and support for a rules-based international order.

But it has perhaps not been a partnership that came naturally.

For a long time, it was a relationship that was underdone. 

“Potential” was the word most used to describe it. 

I had to smile in recognition when I read a passage from Judith Brett’s (excellent) biography of Alfred Deakin[2], released only a few months ago.  In describing Deakin’s interest in India, she notes that he:

…lamented Australia’s small trade with India.  Australia had no comparative advantage in wheat, but Deakin saw possible markets for dairy, fruit and vegetables[3]…

We tend to make similar comments today – more than a century later.

I do not propose to walk through all aspects of the relationship.  Rather, I want to focus on those areas where we can work together to meet some of the challenges – and grasp the opportunities – that these megatrends present. 

Challenges such as the shifts in power dynamics in the Indo-Pacific.  Maintaining open markets and economies in the face of rising protectionism.  The greater participation of women in society.  And climate change.

Before I launch into that, I want to make one important observation.

We should distinguish between mega trends – which are long term – and reactions to those trends – which are shorter term.

The sorts of things we point to when we describe “uncertainty” in the global environment today – such as the rise of populism and the decline of commitment to trade liberalisation – are all reactions to global changes, rather than changes in themselves.

We have far more scope to shape our reactions than we have the trends themselves. 

To the extent that big shifts in global dynamics brings challenges, history shows us that it is the way we respond that makes all the difference, both to individual countries but also to the collective prosperity and security of the world.

Here, Australia and India have much to share, much to learn from each other, and much to gain by working together.

Working together in the Indo-Pacific

Let’s start with the region we both inhabit – the Indo-Pacific region.

Right now, the Indo-Pacific is witnessing the greatest shift in power relativities in the world.

India is this year celebrating its 70th year of independence. In seven decades:

• Per capita income at current prices has risen from around 250 rupees to over 1 lakh (in current prices)
• Literacy rates have gone from 17 per cent to over 70 per cent
• Life expectancy at birth has risen from 32 years to almost 70 years.

   

All this is due to India’s dramatic economic progress over this period.  Whereas in 1947 India accounted for 3 per cent of the world’s GDP, now it accounts for 8.5 per cent. 

Other countries are also moving ahead.  By 2050, Indonesia is expected to leap into the top 10 economies from its current ranking as 16^th largest.  Vietnam may be one of the world’s fastest growing large economies.

China, too, has benefited as it is projected to overtake the United States by 2030 as the world’s largest economy in market exchange rate terms.^[4]

The same economic success that presents opportunities for growth and prosperity also translates into larger strategic investments in the Indo-Pacific.  For example:

• By 2020, the combined military budgets in our region are forecast to exceed US$600 billion – nominally equivalent to US military expenditure in 2016 alone.^[5]
• This year, China established its first overseas military base in Djibouti. It is expected to build at least 30 new submarines and an additional aircraft carrier.^[6]; and
• India has been the world’s largest arms importer over the last five years.^[7]

It is easy to see how developments such as these can generate uncertainty, anxiety and a risk of miscalculation.

This is why Australia and India are such champions of the international rules-based order.

This is an order that has been underpinned by shared values of freedom and liberty and the principles of international law, agreed mechanisms to resolve disputes and a respect for the sovereign equality of all states – whether big or small.

It has allowed countries like ours to pursue their national interest while managing rivalries. It has provided an environment to stimulate stunning economic growth, innovation and human development.

It is in our shared interest to see this international order endure.

However, it is coming under increasing pressure.  For instance, China’s actions in the South China Sea are confronting the rules we have lived by for decades.  North Korea’s continued missile testing is raising risks to stability in the region. 

A narrow conception of national interests is driving a more transactional approach to negotiations and an inclination toward unilateral action.

Like India, Australia is committed to supporting the United Nations system and regional forums such as the East Asia Summit, the ASEAN Regional Forum and IORA.

They encourage dialogue, set norms and establish a regional architecture to facilitate cooperation.

But it is increasingly clear that these forums have their constraints.  They are not usually quick enough to coordinate responses to the varied and complex challenges we are facing.

So we need to expand our toolkit.  We need ways to build support, cooperation and consensus that are agile, quick and flexible.  In short, we need some imaginative diplomacy.

More and more, Australia and India are participating in small group meetings.  As Prime Ministers Turnbull and Modi said this year, these aim to enhance regional and global peace and security.  These include the trilateral dialogue among Australia, India and Japan, which has been taking place regularly since 2015.

India has recently just held its regular consultations with Russia and China, for instance. Others, such as China, have BRICS (Brazil, Russia, India, China and South Africa) as well as various trilateral forums.

Small group diplomacy will matter more over time in the Indo-Pacific.  Small groups, overlapping groups and minilateralism are important because engaging different countries in different combinations gives us new flexibility in our common aim of increasing prosperity and security in the Indo-Pacific region.

The Indo-Pacific consultations held only yesterday among Australia, the US, Japan and India are yet another part of this ongoing work.  Meetings such as these allow us to shape views and navigate our way through shared strategic challenges with likeminded partners.

All this is happening against a backdrop where Australia’s and India’s bilateral strategic engagement is going from strength to strength.  It is only natural then that we should expand our efforts to help build peace and stability in our region.

Protectionism and Trade Liberalisation

Just as we can work together to manage the responses to the changing strategic relativities in our region, we should also try to manage reactions to the enormous changes brought about by technological change and globalisation.

The rise in protectionist sentiment and anti-trade rhetoric is a deeply worrying trend. 

It is ever more difficult now to strike international trade deals.  The fate of WTO negotiations on a Doha Round is a case in point.

In the face of uncertainty and change, it is understandable that people will want to turn inward.

But all the evidence shows that this is not the answer.  Let me recount the Australian experience.

It may surprise some to learn that Australia was a highly protected economy for most of the twentieth century – from the 1920s to the 1960s.

One of Alfred Deakin’s legacies in the founding of Australia was to establish a framework which dominated Australian policy settings for most of the 20^th Century.  Tariffs and trade protectionism were among the hallmarks of what is now called the Australian settlement[8].

Protection did have the intended effect of increasing the size of our manufacturing sector.  But it also resulted in low productivity, fostered by an uncompetitive economy.

On the surface, on the back of strong international prices for our commodities exports, we appeared to be faring well for a time.  But from the 1970s, no longer shielded by high commodity prices, we were dropping down the per capita income ranks of OECD countries.

This was something of a wake-up call. So the later decades of the twentieth century saw Australia move from being an inward-looking economy to embracing the rigours and the benefits of globalisation, as we carried out a sustained program of trade liberalisation and structural reforms.

Trade barriers fell dramatically.  From the early 1970s to 2000, industry protection, mainly delivered through tariffs, fell from 35 per cent to 5 per cent.

These changes have served Australia well.  They have produced a more competitive and more resilient economy, which has now delivered twenty-six years of uninterrupted growth.  From 1986 to 2016, average household incomes were nearly $8500 higher than they would have been otherwise[9]. 

The lesson here has been that, in keeping with the concept of comparative advantage, Australia has fared best when we have allocated our productive resources to the things we do best.  This frees us to use part of the income we earn to import things we are relatively less efficient at producing.

India, of course, has a much larger population.  And there is a view in some quarters that this means India can satisfy its growth requirements through its large market.

But I think India would be selling itself well short if it were to take this stance.  We can look at China, a country of similar dimensions to India to see an example of the enormous contribution that international trade can make to national economic growth.

For a long time, India was almost on the periphery of the global economy.  It was inward looking operating behind high levels of protection.  Its share of world trade declined from 2.4 per cent in 1947 to a miserable 0.4 per cent in 1990.

Barriers to trade, combined with other uncompetitive economic policies, came at a very real cost.  Up to the 1980s, India’s GDP grew on average only by around 3.5 per cent a year, while per capita income growth averaged around 1.25 per cent.

Since the 1990s, India has, of course, undertaken substantial economic reform.  The economy has become more market oriented, including easier access for foreign investment and reductions in tariffs.

India has reaped substantial benefits from its reforms.  GDP growth has risen to an average of around 6.5 per cent since the 1990s and is projected to be higher still over the medium term.

More recently, foreign investment liberalisation and the introduction of the GST are all steps in the right direction, but it is clear that India will need to take more significant steps to truly reach its economic potential.

In an environment where global competition is becoming ever more intense, holding your economy open to foreign trade or, even, opening it further – seems deeply counterintuitive. 

But the evidence in both India and Australia is that doing so brings longer-term gains.  This is why Australia continues to champion the cause of open trade.  

Regional efforts at trade liberalisation, for example through Regional Comprehensive Economic Partnership (RCEP) and Trans Pacific Partnership (TPP) negotiations, also play a part in strengthening the liberal economic order.

And at the bilateral level, we remain committed to Free Trade Agreements including to concluding a Comprehensive Economic Cooperation Agreement (CECA) with India.

Beyond the CECA, we need to look at all the ways that our two countries can build our economic relationship for the future.  Prime Minister Turnbull has commissioned the development of an India Economic Strategy.

This study, led by an eminent Australian, Peter Varghese (a former High Commissioner to India and last year’s Deakin lecturer), will consider how we can build a strong economic partnership to 2035.

Mr Varghese has already engaged in extensive consultations in India and Australia and will consider 10 key sectors which are most prospective for the bilateral relationship. 

The point of this work is to focus our energies in building a relationship in those areas which are most prospective.  This study is timely and important, and I hope to be able to speak more on it when it reports to the government in the first half of 2018.

Climate Change and Water

While we are on the subject of economic challenges, we should consider another of the global megatrends, namely climate change. 

The impacts of climate change and the actions we take to reduce emissions will have profound consequences for our economies and our societies.

The world is beginning to accept that low carbon economic development is possible – indeed that it can actually be a positive thing.  Australia welcomes India’s leadership in establishing the International Solar Alliance, to which we have signed up and hope to ratify shortly.

Climate change will directly affect the entire nexus between food, water and energy. 

In 2016, the World Economic Forum released its annual Global Risks Report, which named ‘water crises’ as the risk of greatest global concern for the coming decade.

At current water consumption rates, two thirds of the world’s population may face water shortages by 2025.

Both our countries will face significant challenges in ensuring there is enough water to supply our needs for the future. 

Australia is the driest continent on earth after Antarctica.  It is one of the most urbanised and a major agricultural producer.  This means we have had to learn to manage our water resources carefully. Today, we are one of the world’s most efficient users of water.

India has just 4% of the world’s fresh water, but 18% of the global population. Water supply is expected to fall 50 per cent below demand by 2030.  Around 165 million people in India lack access to safe water.

India’s water table is falling, due to over-extraction of ground water in Northern India for agriculture. 

Water shortages are expected to have a severe impact on India’s economy.

Agriculture – which uses 80% of India’s available water – will be hit hard. Lack of water will reduce yields, leading to food shortages and price increases.

Australia has faced similar challenges in agriculture.  We have the expertise and tools to help India mitigate or avoid the myriad water crises it faces.

Interestingly, Alfred Deakin recognised this as long ago as 1893.  Over a two month period, he “visited all the major irrigation works of the subcontinent, including the extensive canal systems of the Ganges and the Punjab and the city water works of Bombay and Calcutta.[10]”  Deakin’s study culminated in a book, titled “Irrigated India”. 

The need for this partnership is perhaps more urgent today than it was then.

I’ve just returned from the Cooch Behar district in West Bengal, where Australia is trialling water-efficient farming technologies and practices.  

Through the Australian Centre for International Agricultural Research (ACIAR), these trials are showing how to improve farm productivity while using water and energy more efficiently, by using conservation agriculture techniques.

The response of farmers to new ways of doing things has been incredibly inspiring.  It confirmed for me how much scope there is for us to work together to solve common problems.

Water cooperation is one of the areas where Australia and India can productively work together for our common benefit.  From policy to technology to commercial enterprise, there is tremendous potential for us to make a real difference to the welfare of our people into the future.

Women in the Partnership – using all our resources

A genuine partnership cannot be partial.  If we are to work together, we must bring all our people and all our assets to bear. 

India and Australia share a commitment to advancing gender equality in all aspects of life – in politics, in business, in education and at home.

We are striving to achieve the Sustainable Development Goals. We work together in the Indian Ocean Rim Association to advance women’s economic empowerment. And as G20 members, we are committed to reducing the gender gap in workforce participation by 25 per cent by 2025.

This is not a side issue.  All the data demonstrates that including women in the economy will lead to better economic performance.  While Australia still has a long way to go, India’s rate of women’s workforce participation been going backwards [27 per cent according to World Bank].  This is despite decades of economic growth and increasing levels of women’s education.

The International Labour Organization says India could add USD 1 trillion to its GDP by 2025 by closing the gender gap in workforce participation.

We can do more to consider strategies to accelerate cultural change.

The first step is to make women more visible in society at all levels.

One strategy is the Male Champions of Change.  Conceived by Australia’s former Sex Discrimination Commissioner, Liz Broderick, this program engages senior Australian businessmen – CEOs of some of Australia’s largest companies, to improve the performance of their companies on gender equality.

They do this because gender equality is not a women’s issue.  It makes economic and business sense.  It builds fairer and more resilient societies.  But they recognise also that it will take the engagement of powerful men in all walks of life to accelerate change for the better.

Big business in India is leading the way in increasing the representation of women in leadership positions.  And I’m delighted to say that I have met many senior and visionary Indian leaders who support the Male Champions of Change idea.

Conclusion

The usual description of a bilateral relationship tends to run through the laundry list of events and activities that preoccupy both countries. The size of trade, frequency of ministerial visits, numbers of tourists or numbers of official working groups and so on.

Australia and India share all those things.

But the test of so-called "natural" partnership is that it can work in many dimensions beyond the usual and predictable.

We are operating in an increasingly unpredictable environment.

The kinds of changes I have outlined – shifts in strategic power, changes to economic structure and relationships, climate change and the role of women – will all fundamentally change our countries and our region.

In thinking about these mega trends and our response, we start to envisage – and shape – the future we want. This shaping comes through conscious decisions about the time and effort we put into our bilateral partnerships, our regional engagement and our people.

And also from our (shared) history, hence the importance of a lecture that celebrates Alfred Deakin

There is no silver bullet solution.  The clock cannot be turned back, and a retreat into insularity is not the answer.

In the face of a backlash against change, we can choose to hold our nerve.  We can embrace change where it makes sense – for example in expanding the role of women.  And we can continue to stand up for those values and principles that will serve us well into the future.

The reason Australia and India can cooperate and enjoy layers to our partnership is because at a fundamental level, we share common values.

This is more than just a talking point. Indians and Australians genuinely look at the world through a similar lens. This creates an important foundation for us to cooperate and build a shared future in a world that is prosperous, stable and secure.

It is an enormous privilege for me to serve as High Commissioner at this time and to shepherd the bilateral relationship in this way.  I look forward to a productive and exciting time ahead.