‘The Pivot to Pragmatism: A Clear-Eyed View of the Rise of China in the Asia-Pacific’


Michael Danby MP

Member of the Australian House of Representatives

Chairman of the Parliamentary Joint Committee on Foreign Affairs, Defence and Trade

1 – 2pm, Thursday 8th November 2012

Committee Room 6, House of Commons, London, SW1A 0AA

To attend please RSVP to: Emily.banks@henryjacksonsociety.org

One of the greatest geopolitical challenges facing the West in the 21st century is the rise of China as an economic and military power. China’s role as a “currency manipulator” has become a U.S. Presidential campaign issue, affecting the realms of both domestic and foreign policy.  President Obama has described China as an “adversary” and part of his geopolitical shift in the last four years has to been to focus American influence and military power away from the energy-rich Middle East toward the Asia Pacific. Meanwhile, China’s extraordinary growth has advanced an ongoing internal debate in the West about America’s supposed “decline”. But what does China’s ascendancy really mean in geopolitical and economic terms? And how will it affect the West and its Pacific allies – notably Australia – in the coming decades?

By kind invitation of Jonathan Djanogly MP, The Henry Jackson Society is pleased to invite you to a discussion with Michael Danby MP, Member of the Australian House of Representatives and Chairman of the Parliamentary Joint Committee on Foreign Affairs, Defence and Trade. Mr. Danby will offer his perspective on the rise of China and the ramifications this will have for the rest of the world. He will discuss what we are likely to see happening in Asia in the coming years, what those involved in the region need to keep in mind in the context of China’s ascendancy, and why maintaining the US alliance system in Asia is as important now as it has ever been.

TIME: 1 – 2pm

DATE: Thursday 8th November 2012

VENUE: Committee Room 6, House of Commons, London, SW1A 0AA

To attend please RSVP to: Emily.banks@henryjacksonsociety.org


Michael Danby was born in 1955. He was educated at Elwood State School, Mount Scopus College and Melbourne University, where he was President of the student union and where he joined the Australian Labor Party in 1976. In 1980, for 2 years he was an Army Reservist with the Officer Cadet Training Unit.

Before entering politics Michael worked as a journalist, editor and manager of his late mother’s art gallery. He was first elected as Labor member for Melbourne Ports in 1998, and was re-elected in 2001, 2004, 2007 and 2010. Since his election, his main areas of interest have been foreign affairs, defence and national security, immigration, electoral matters, human rights and the arts. He was successful in stopping the closure by the conservative government of a local Centrelink office which serves 11,000 local pensioners and welfare benefit recipients. He preserved the Australian National Academy of Music (ANAM) from a plan by Labor’s Minister for the Arts to close it.

In Parliament, Michael Danby is Chair of the Joint Standing Committee on Foreign Affairs, Defence and Trade. He is also Chair of the Australia-United States Parliamentary Friendship Committee, Chair of the Australia-Israel Friendship Group and Chair of the All-Party Parliamentary Group for Tibet. He is the former chair of the Joint-Standing Committee on Migration (2007-2010), which produced 4 reports on Australia’s Immigration detention policy. He was a member of the Parliamentary Electoral Matters Committee and became Deputy Chair of the Joint Standing committee on Electoral Matters (2006). In 2010 -2011 Michael was the Special Advisor to the Treasurer on Corporate Philanthropy and the Not-For-Profit Sector.

In 2010 Michael led the first Australian Parliamentary delegation to Dharamsala, where he addressed 5,000 Tibetans on the occasion of His Holiness the Dalai Lama’s 74th birthday. In 2011 he participated in an encounter organised by the World Jewish Congress with 6 leading ambassadors at the UN and later with 20 congressmen at the US Congress. Michael is a member of the steering committee of the World Movement for Democracy. Michael was present at its meeting in Tunis in 2012, where the World Movement for Democracy was in dialogue with Rashid al-Ghannushi and the Ennahda Party – the first democratically elected Islamist Party since the beginning of the Arab Spring.

In 2012 he led a parliamentary delegation of the Parliamentary Joint Committee on Intelligence to Ottawa, Washington and New York, where he attended the International Intelligence Review Conference. The Australian delegation held important bilateral discussions with Sir Malcolm Rifkind and The British Intelligence and Security Committee. In Washington the delegation were hosted by the US Congress’s House Intelligence Committee and its Chair Congressman Mike Rogers.  Michael Danby, as Chair of the Joint Standing Committee on Foreign Affairs, Defence and Trade represented Australia as Australia’s Special Envoy at the inauguration of Southern Sudan in 2011. In November 2011 Michael led a delegation of the Joint Standing Committee on Foreign Affairs, Defence and Trade to their equivalents in the Indonesian and Timor Leste Parliaments. During a private visit to Italy in January 2012 Michael testified to the Italian Foreign Relations Committee. Later that year and prior to Australia’s first attendance at the NATO summit in Chicago he was a guest of NATO in Brussels and the NATO SHAPE headquarters in Mons.

Michael Danby has two children and lives in Elwood with his wife Amanda Mendes da Costa, a prominent Melbourne barrister. He is a keen supporter of St Kilda in the AFL, Port Melbourne in the VFL and the Port Melbourne Colts in the Western Region league.


Jonathan Djanogly MP

It is my great pleasure this afternoon to be introducing Michael Danby, an Australian Labour MP and a chairman of the Parliamentarian Committee of Foreign Affairs, Defence and Trade. Can I say how impressed I am with that, because we have three committees dealing with what you do with in one, which sounds a lot more efficient. He is also the Chair of the Australian United States Parliamentary Friendship Committee, Chair of the Australian-Israel Friendship Group and Chair of the All-Party Parliamentary Group of Tibet as well as a member of the Steering Committee of the World Movement for Democracy. In 2010, he led the first Australian parliamentary delegation to Dar es Salaam where he addressed five thousand Tibetans on the occasion of His Holiness the Dalai Lama’s 76th birthday which must have been a great experience. In 2012, he led a parliamentary delegation of the Parliamentary Joint Committee on Intelligence to [inaudible], Washington and New York where he attended the international intelligence review conference.

He promised to provide a clear-eyed view of the rise of China in the Asian Pacific region. We have seen the prominence of the U.S. relationship between China raising its head on various occasions during the recent presidential election campaign. So, this is a current and highly relevant issue, we are pleased to have you with us. Over to you.

Michael Danby, MP

Thank you very much Jonathan and it’s an honour to address the Henry Jackson Society on this sort of little – unfamiliar giving speeches [inaudible]

I see some faces from Australia, across the world, who I know. I am very pleased to see you all here. I do acknowledge any excellences or MPs who I am not personally familiar with.

I was a great admirer of the Senator Henry Scoop Jackson. Senator Jackson as you know was a cold-war democrat in abysm of the term. He favoured a combination of liberal domestic policies, strong military and a robust foreign policy in defence of freedom around the world. We can only speculate on how different the course of both U.S. politics and world events would have been if he would have won the democratic nomination in 1976 instead of Jimmy Carter. I suspect it would not just have been different, it might have been better and probably an appropriate occasion to congratulate the current President of the United States on his great victory.

My own political position is very similar to Scoop Jackson’s in many respects. My particular personal political philosophy is based on the tradition of Central European, indeed anti-Communist social democracy. This is a tradition I abide from one of Australia’s most influential World War Two University teachers like Dr Frank Knopfelmacher, Czechoslovak exile from both Nazism and Communism.

In the Australian tradition, I suppose, I fit in with the tradition that is known as patriotic labourism represented by our great Prime Minister John Curtin who forged the US-Australian alliance when [inaudible] state in 1942 when Jack and [inaudible] were on their doors and all of our divisions were in the Middle East fighting for the glory of the British Empire but admittedly against World War Two; also the tradition of Bob [inaudible], our alliance with the United States in the face of strong domestic opposition during the First Gulf War.

Today, the government I am a part of, led by Julia Gillard, my [inaudible] the tradition of keeping our forces in Afghanistan despite the high cost in blood and treasure. We’ve lost 40 people there and like Britain we have a great deal of domestic hostility to continue the involvement. Nonetheless, the government feels we’re doing the right things and we will be there, as you’ll be, substantially until 2014.

Same time as those overseas involvements, government is pressing ahead with an impressing reform agenda. Action on climate change with probably the Western country that has the most extensive policy on that, building a national high-speed internet network, a contract with 45 billion Australian dollars and we are also bringing a national disability insurance scheme into play.

Just recently, the Prime Minister released a paper on the Middle East called The Asian Century which set out the objective of subsequent improvement of relationships with Asia, surfacing the economic boom that is taking place there. The focus of the white paper is on data rise and the economic terms of our region including China’s rise and resulting impact on its regional interest and those of its neighbours.

Now, I believe fundamental to Henry Jackson’s view of the world which I embrace was his principal criticism of the Dr Kissinger’s approach to foreign policy, which is marked by high degree of what Kissinger’s called realpolitik and what Sir Jackson calls cynicism. Given our similar backgrounds, that is Dr Kissinger and mine, both our families are from Germany, I can’t help but admire his great achievements as a statesman and intellectually as a great force in foreign politics in the United States; but he’s following in a tradition of Metternich, seeing politics through the prism of power and in terms of the balance of military and economic strength, through contending great powers is not a view, is not the world I see solely in those terms. Dr Kissingers’ German word of belief is a Weltanschauung, worldview, and it was echo-like, the importance of ideals in international affairs and also the notion that a great power’s foreign policy would be founded on principles, not just power relationships. Jackson rejected Kissinger’s view and so do I.

Military and economic strength – prerequisite for a great power but they are not enough. For a great power to command respect instead of fear, it must sustain something in the world. As Bill Clinton rightly said in America’s case: “The world is always been more impressed by the strength of America’s example than by the example of its strength”. The United States has always stood for something and that something is the idea of liberty, economic, political, and social and legislative liberty, whether it would be Woodrow Wilson’s fourteen points or Franklin’s Roosevelt four freedoms or Ronald Reagan’s great speech in front of the Berlin Wall. The United States had its best moments as the world champion of the cause of liberty and we have seen this for the last century.

Now of course, the United States is not invulnerable to criticism, it is often fully insured of its own ideas but as I believe, with the current president it found its way back, which in [inaudible] terms I suppose it’s particularly appropriate, sitting in this building leaves to broad sunny uplands as the great man said. In Jackson died the great chance of facing the United States and its allies confronting the parallel ambition of the Soviet Union and the world Communist movement. For 40 years the US and the system of alliances built by the U.S. constrained Soviet expansionism. Eventually, as we all know the Soviet Union collapsed under the contradiction, the weight under its own contradictions. The Soviet Union proved, as Nazism, in the modern world a genuine lasting power cannot be built on forced oppression. We all know, thankfully, the fate of the 1000-year Reich. Today, the United States, its allies and friends, including prominently the United Kingdom and Australia, face new challenges in the world and one of those challenges is of course militant political Islam. I could devote a whole paper to that but that would divert me from what I am really here to talk about; that is the rise of China from an Australian perspective.

In Australia we have a neighbour; it’s worth saying one thing, because of its implications with China, about our neighbour – the largest Muslim country in the world, Indonesia.  For many years, the so-called realist commentators said that although the Suharto dictatorship was bared it was better than the alternative, which would be chaos and rise of Islamic extremism. Well of course, as we all know, Suharto fell and what we got was not chaos but a stable and increasingly prosperous democracy which under President Yudhoyono was broken aback of Jihadist threats to their country. So, listen, we shouldn’t forget and we should also remember Indonesia’s been growing at more than 6 per cent at the last eight quarters.

We live with China as a neighbour and as our largest trading partner. The rise of China has together with our trade with South Korea, Japan and the U.S. contributed to Australia’s remarkable economic success over the past twenty years. Finding a consistent principled and sustainable way of dealing with China is not a luxury for us, it’s a necessity. The main thrust of my argument today is that those constraining China’s existence and growing economic power do not need to or should not shift away from its support of strategic alliance for the United States. On this side, I agree with our conservative past Prime Minister John Howard. He said recently: “China is our biggest customer and the United States is our biggest ally”. China’s peaceful rise is a welcome, indeed necessary development. It will be strange stage of affairs if the world’s largest country did not aspire to great power status and even stranger if 1.3 billion hard-working productive entrepreneurial people did not achieve great power status. The world in my view needs a prosperous, stable, and satisfied China; not a poor, unhappy, unstable and angry China. Second thing to say is that China is not the Soviet Union and the policy responses from Scoop Jackson’s day are not the exact policies that the West needs to adopt today in dealing with China’s rise. I remind you the Soviet Union was an artificial state, coupled together from desperate nations, an inefficient and unproductive command economy with a parasitic state in power in bureaucracy and of course at worst of times the whole thing was held together by police terror. That is not a parallel to what we see in China today. There are elements of it but it’s not parallel.

Since Deng Xiaoping’s reforms in ‘79, China has developed elements of a free market economy. Hundreds of millions of people have been lifted out of poverty, creating an enormous urban working class and a growing and powerful middle class. China has also for the first time in its long history become a great trading nation, not only with Australia but also with the United States, Europe and Middle East. These radical changes have made China today not only a very different country from the China of Chairman Mao’s day but a different country from the Soviet Union of Scoop’s Jackson’s day. China differs from the Soviet Union in several respects. Importantly for China it is mostly an ethnically united country with a long tradition of centralised government. The presence of minorities like the Tibetans and Uyghurs does not alter this fact.

Han Chinese are 90 per cent of the population of China. China is not going to collapse in the way that the Soviet Union collapsed, nor should we want it to return to division; and chaos of the past is in no one’s interest. Secondly, China is a dynamic and growing economy where the Soviet Union arched about 60 years a stagnant and declining economy. By Gorbachev’s era it could no longer pay its bills for the messy military and security establishments and effectively, to use business terminology, went into voluntary liquidation. In my view this is not going to happen, this is not happening to China where the economy has produced more healthy services, part of which should be invested in the military; and for the first time, disconcertingly, Beijing’s expenditure on internal security outweighs even its burgeoning military budget. I am talking about police and other things they do.

This very success creates problems for the Chinese leadership which the Soviet leaders never faced. China must sustain economic growth to provide employment to its workers and the rising standard of its middle class. They can’t go back to the days of the command economy, no matter what some of the recently defeated nostalgic neo-Maoists would like to think or would like to do. The Chinese regime may be able to supress legal dissent. They have a new phrase for what they call stability preservation but it can’t ignore the economic demands of its population in the way the former Soviet Union could. In order to sustain growth, China must keep trading. It needs markets for its manufactured goods. It needs warm [inaudible] as much as it needs new aircraft carriers and it needs to supply raw materials and energy to flow its industries.

China’s working hard to develop its own domestic energy resources but the fundamental problem of resources is not going to change. The Chinese leadership is not stupid; they understand these facts, they know that the Chinese economy is at least partially hostage to its trading partners. Beijing cannot embark on the kind of adventurous foreign policy that the former Soviet Union did, because China is vulnerable to trade sanctions in a way that the former Soviet Union wasn’t. Cutting of China’s energy imports or its access to western markets even for a short time would create economic chaos in China that would threaten the regime’s grip on power and the benefits that the ordinary Chinese see the regime deliver [inaudible] a rejected view put forward by one of the more apocalyptic commentators; see political and economic military conflict between China and the US. China is not North Korea or Iran. It’s not run by psychotic fanatics.

As we speak, the 18th congress of the Chinese Communist party is witnessing Xi Jinping from the [inaudible] fraction of the leadership assuming power. I predict, with a small leadership of the standing Chinese Politbureau and an inside into his attitude [inaudible] committed himself to part the orthodoxy when he said foreigners who have even their fuel and have nothing to do other than pointing their fingers at our affairs; but as if wanting to reassure us all as we are sitting in this room, he also added that China does not spread first revolution, export poverty and hunger, or third -cause trouble for you, and he meant us. What complicates that – but this is the fact of the ideological weapons the Chinese government uses to mend its powers – one of them is Han Chinese nationals.

The Chinese are a proud people and an ancient culture. After a century of humiliation at Western and Japanese hands, they’re sensitive to attacks on China. Perhaps that explains, the recent pattern which you probably would not have seen in Europe you certainly see in Australia, of aggressed comments, particularly towards Australia. Chinese General Ren Haiquan told a meeting of semi-military officials in Melbourne just a month ago that the U.S. pivot towards Asia was ‘an interference which complicated progress towards a new security era in Asia’. Han Chinese nationalism, conveniently directed against internal enemies such as Tibetan or [inaudible], or external ones such as the Japanese, that the Western powers can be used too. What we have to remember is that in China nationalism is hard to control and is particularly a dangerous device or communication. The Chinese government is now riding the tiger of this kind of nationalism and it must keep the tiger fit or there is a danger that it’ll be eaten, such as the Manchu regime of 1911. This dynamic goes a good way into explaining round Chinese attempts to bully its neighbours over the territorial disputes over the South China Sea. Asserting territorial claims into the area that used to pay a tribute to Chinese emperors wields a national sentiment at home and both with the regime standing, but it also damages relations with its neighbours and risks consolidating an alliance of these countries and the West. We in Australia have a close perspective of this development.

We see China as not only a rising power in East Asia but we also see the enormous strides that our new neighbours and trading partners in South Korea, Indonesia, Malaysia, Thailand and Vietnam have made over the twenty years. None of these countries have any desire to be a Chinese satellite. East Asian countries are increasingly welcoming U.S. pivot towards Asia. This is ironic in some places such as in Vietnam’s case. We should remember that the most recent conflict Vietnam has had was with China not the U.S.

Asian Burma is seeking to break free from the Chinese orbit and I think that explains a lot of the recent moves of Burma’s military, towards internal liberalisation and opening towards the West. You can have Hillary Clinton arrive in Myanmar, as they call it, without first freeing some [inaudible].

All but Cambodia in East Asia used the recent April ASEAN meeting to say they wanted a multilateral system dealing with territorial or sea disputes to handle their problems with China. They much prefer it on a multilateral level than at a bi-lateral level. You can see, imagine if you’re Brunei, it’s much easier to deal with China through ASEAN than it is to do country-to-country.

Now some commentators in Australia suggested that China’s rise inevitably means that the U.S. will withdraw from or even be driven out of the Asia Pacific and Australia should accommodate its self-respect by agreeing to become a junior partner in the new Chinese hegemony over the region. Perhaps sometimes Beijing mistakes use of these Australian comments as a national decision. This might explain why shortly after Australia’s victory in election to the temporary seat of the United Nations Security Council, Chinese officials, on the front page of their major financial paper, warned Australia not to always vote with the United States. A Chinese scholar, Weng Xien Hu, working for a foreign ministry institute just funded by the Chinese Ministry Seat, said Australia should not have the same views as the U.S., otherwise it is contradictory to its role on the Security Council.

Now, Australia never said that we are always going to vote for the United States – but that was the advice [comment from audience member] –we did not ask for the advice but we do appreciate their concern. Like other countries in East Asia, Australia welcomes President Obama’s decision not to disengage from the world. We see that American withdrawal after Iraq and Afghanistan is quite natural, but we don’t want it to extend further. China’s been growing mightily over the past 30 years but it is nowhere near being a fully free developed market economy, alone a rival of the United States or even Japan. A semi-private state economy system riddled with inefficient… seasoned by corruption which are a severe constraint on ongoing substantial growth.

China is going to pay a heavy price in the coming decade for its one child policy which will distort severely the demographic work force. I give you two examples.

By 2060, there will be 300 million people in China over 75. Imagine the social security implications of that – and they don’t have the social security that we are familiar with here in Britain, the United States or Australia. Even by 2020, the sex imbalance, the gender imbalance between men and women… There will be, for every 220 men, will only be 180 women. I leave to all of you to work out the implications of that. Corruption is endemic to China, Professor [inaudible], a very prominent Australian academic expert in this area, has talked about the 6 billion dollars that [inaudible] managed to exfiltrate from his humble position as a party leader. And we’ve seen of course party revenge for these revelations. The New York Times leaked some key information by another, criticising the Chinese leadership under Wen Jiabao, the liberal leader in China – that he had a personal overseas fortune of 2.4 billion dollars. So you can see that through The New York Times and other Western newspapers, these various Chinese leaders are playing games with each other and they do it by embarrassing each other about how much money this guy got and how much money this guy stole, and issues of corruption.

The second reason why America’s influence in Eurasia will not be given away to favour China despite its modernisation drive – China is not really in the same military league as the United States. It spends a lot of its budget on second-rate Soviet development. A few days ago, The Times pictured outgoing secretary riding China’s two [inaudible] – Ukranian carrier Nevaria when he was for some reason posted in London at a casino, and now satellite imagery reveals in a nearby shipyard that Beijing is constructing its first locally built aircraft carrier.

As I noted before, China literally cannot afford to provoke serious military crises with the United States because it is heavily dependent on trade and doesn’t want to see their trade disrupted. The profits of the U.S. decline. I like to point out that the U.S. owns China 1.2 billion, what they don’t say is that this is as much a problem for China as it is for the United States. When a debtor falls, he loses the money. I don’t have to draw that to the attention of any German or Greek in Europe. The lessons apply.

The most eminent person in Australia, [inaudible], just pointed out that China’s aggressive policy in Australia is pushing almost all the Asian states towards the United States. When the Chinese Foreign Minister said, ‘China is a big country and other countries are small countries’, there was naturally blowback. Professor [inaudible] commented that given the correlation of forces in the region, which is quite an amusing term which the President used, China has essentially no real friends other than Pakistan or North Korea. Far from reducing its role in Asia, the United States focused on the region. Obama pointedly chose the Australian Parliament to emphasise its role in the Asia Pacific, the so-called ‘Pivotasia’. One manifestation of this is the commitment to 2,500 marines based down northern Australia and another is the expanding right out, which the United States Navy is talking of, deploying both in Japan and being requested for sincerely and admirably by the Philipinos, who, as we remember, kicked out the Americans from naval bases established there little more than a decade ago. I reject the apostles of American strategic cynicism; I also don’t agree with the advocates of appeasement of China.

As a capital-dependent country, Australia seeks to maintain mutually beneficial relations with China, also at the same time supporting those Chinese who suffer for the right advocacy of human rights, whether it’s a religion or speech, even in environmental health theories. How many Tibetans have to burn themselves to death before [inaudible]? Five Tibetan people burned themselves to death yesterday. Perhaps His Kindness, the Holiness of Dalai Lama, shown like a father of the new Chinese leader Xi Wenping, will allow for some softening by the new Chinese leadership of the cruelty with which the Chinese government treats these essentially Tibetan, essentially peaceful Tibetan Buddhists. The Chinese regime should know that it pays a price when it violates basic international norms and its own constitution. It’s quite false to suppose that the U.S., U.K. or Australia speak up on behalf of artists like Wei Ya Wei, a barefoot lawyer or a Chinese catholic bishop or a Tibetan Buddhist; that China will retaliate by not an Australian eye or an LNG. China can afford to do these things and of course they look at it in a very practical way. This has all been demonstrated by some of the top academics in Australia, who deconstructed cost of importing iron or coal or LNG from Australia or Brazil. It’s one third cheaper because of the transport cost from us to them. So, if we pick up on human rights, the Chinese will make a decision based on sound commercial principles.

Finally, let me turn to my original observation. Scoop Jackson was a hard-nosed cold warrior, but he was also an idealist who believed in democracy and freedom, both in the United States and for all the world. So do I. I want to see a free and democratic China, part of a peaceful and prosperous Asia Pacific region. But of course I am a realist and so is the Australian government. The Chinese government is not going to collapse. Nor do I expect the Chinese communist party dissecting congress giving up its monopoly of power any time soon.

I’m optimistic that sooner or later this Chinese leadership will successfully realise the best way to secure a strong, respected, prosperous China, a China that is truly a [inaudible] in every sense. That expression is there to dismantle its apparatus of control by the Chinese people, to express greater freedoms and choose their own government ultimately. If the [inaudible] Burmese generals can finally come to terms to accept that peace is better than conflict, one day the same may come to China. I don’t expect that to happen soon but it will happen eventually. In conversation with the Dalai Lama, he said that we should not expect China to give up its system of governance but we can argue that Chinese people are entitled to good information which starts to lead to a free quest. The Chinese people are owed a system of laws that is fair to them. Those are not revolutionary demands that would be unacceptable even within current China.

A point to conclude – by pointing to a colleague from Prime Ministry, who’s fluent in Mandarin (his access to people in China’s truly remarkable), he pointed out to me the other day that on Sinai Weibo version of Facebook, he has some 700,000 followers. Now, that doesn’t show that necessarily they’re going to elect him instead of Xi Wenping in Beijing, but it does show that the Chinese people are hungry for information and in that way it leads to a peaceful and happier future. Thank you.

Jonathan Djanogly MP

Michael, thank you very much. I believe you have agreed to take questions.

Michael Danby MP

I hope I did not go on too long.

Jonathan Djanogly MP

Not at all, we have 25 minutes for questions, which is great. Who would like to ask a question?

Davis Lewin

Michael, thank you for this masterful overview. Can I ask you, it’s a comment, a little bit on, because I must as I have the opportunity now, the internal political situation in Australia. What I am particularly interested in is – there seems to be a very clear dividing line on the China policy. There are clear battle lines drawn. Tell us a little bit of behind the scenes. How do these lines look? What are the main points of contention? Where do you see it going? And secondly, do tell us, in terms of defence policy and acquisition, what the outcome of this is, what we can expect to see in terms of alliance relationship and so on?

Michael Danby MP

The people who have adjusted to this at least are Australians. Australia is a big, strong, rich country. We have to adjust to this and we are the twelfth largest economy in the world with only 22 million people.  We will grow to 37 or 38 million by 2050. We were 5 million before the Second World War, 11 million in 1966 and 22 now. We have 180 000 people coming in – skilled migrants – every year, and our projected defence acquisitions that are relevant to stability in Eurasia are twelve submarines. These project some safety for the international trading system that is particularly important for the 100 joint strike fighters. That’s the plan.

The current Chinese leadership made very aggressive comments, that we see more often in Australia than perhaps you might in Europe. I quoted a couple of them. The expression is, we let some of them go through to the keeper. I would nonetheless say that there is a section of the Australian body politics that sees only the dollars in relationship with China. Some of them are mining oil and gas in particular, think the Dalai Lama should not be admitted to Australia because it would jeopardise our idle exports; very crude. There is a big dispute over the Australian government decision to bar the Chinese Telecom [inaudible] from bidding for the 45 billion national broadband. It’s the desire to bring fast internet to the home not a node which you can understand in a country as vast as Australia [inaudible] to the quality that exist in Korea, to a country as vast as Australia. Big project. You can understand the [inaudible] been anxious to bid on it and very tough stance of the Australian government. They say they won’t be allowed to bid. Now, of course on the conservative side of politics, there are some people who have said they would ignore the advice of the security service and review this decision. I think the decision of the government, which is even stronger than the British government’s view, indicates as Mr President [inaudible] the correlation of forces lies. Where Australia goes in… all of this is really important in East Asia. We’re very anxious, like most Asian countries, to keep American involvement in that part of the world. I think that it’s a force for peace and stability and I think that’s good for China too. China wants to continue to trade and have good commerce with that part of the world. It’s much better to have an existing system, that we have at the moment, where all of that is able to continue.

The one concern that I would raise is that unlike – and I know a lot of people here in Britain, particularly in this Parliament, I met Mr Cash the other day from the Conservative Party, don’t necessarily value involved systems like Europe, like the European Union, like the Eurozone. We wish we had such an ordered system in East Asia! There is no multilateral system dealing with the disputes between China and Japan over the Senkaku islands. I recently eyeballed the Vice-Chair of the Foreign Affairs Committee and asked him if China’s announcement, that like Tibet, Xingxiang, China Sea was now a core interest, and he very firmly told me that it was. Our strategist decoded what Chinese core interest in the South Sea means, and what it means is UK, American, Indian and Australian submarines have to surface and fly their flags if they cross it through the South China Sea. Now, this is obviously unacceptable to all the countries in our region because in order to guarantee ultimately the military safety of trade you can’t have submarines on the surface. That doctrine has not been enforced by the Chinese government very wisely. So, we’re in a bit of transition and we have to step up to a considerable view of those issues on both sides.

Davis Lewin

What is the word on the internal conversation inside Australia’s party system?

Michael Danby MP

There are advocates of a more appeasing attitude towards China on both sides. There are, particularly in academia, the cold Machiavellian would-be Tally-reigns who envisage an Australian-United States voluntary drawing down power to a Council of Asia, like the Council of Europe; the Kissinger view of the world, but they are not the predominant view, certainly not yet. There is a lot of pressure from Chinese government in Australia for us to adopt a more accommodating view. It hasn’t had any major success. In fact, like British people, we are sometimes very counter-suggestible.

Question 2

It is fascinating to get an Australian dimension. You started off by explaining why you didn’t think China was the same as the Soviet Union. All the reasons you gave were right on that. The [inaudible] of that is not a comparison of it with the Soviet Union but with the Wilhelmine Germany and I think they are in fact much closer and therefore your suggestion on [inaudible] China is so dependent on trade it can’t therefore go too far reminded me of some of the studies that were done in 1908-1910 which made exactly the same point about Germany. Germany was dependent on trade – a modern, capitalist society could not possibly go to a world war and we all know the outcome of that. What I find worrying is the evidence for the opposite of your conversation, which is, despite their dependence on trade they don’t hesitate to push things a long way. We not only got the recent example of the very aggressive response of the [inaudible] we got the still ongoing response here from David Cameron’s very low-key meeting with the Dalai Lama. And the Chinese are still cancelling meetings and retaliating. So, there is a long list of examples of Chinese not behaving rationally. Indeed, we were just talking before you came in, they do not hesitate to lockup Australian citizens on espionage charges.

Michael Danby MP

The Chinese-Australians don’t recognise them as Australian citizens. They have a very Han Chinese view on that.

Continuation of Question 2

My question is: are we right in passively supporting them? Chinese have consistently refused to go along with collectively. No, no, no, we are not dealing with you collectively. Is there not a case to the Japanese, Vietnamese, Japanese, the Philipinos and others, calling the Chinese bluff and calling for international arbitration. If you really think you’ve got such a strong historical and legal claim to the territorial waters then take it to court. But we – the British, the Australians, the Americans – all support a peaceful resolution by going into the international court. I just wondered, it seems to me the current situation we support is a road to nowhere.

Michael Danby MP

I can understand your pessimism with that but I know the Indonesian attitude to Burma for instance; they like to bring along the consensus of people with them. It may take two or three more times for the [inaudible] to advance this policy towards the Chinese and to be rebuffed for the collective to be educated. I don’t believe in forcing East Asian countries towards [inaudible], perhaps we in the West, we are somewhat used to contract negotiations; it’s not the way to do it with Asian countries.

Patience is a virtue. It is very important that they come to their own conclusions with that. Ultimately, what you suggest might be the right way approaching it but I’d be much happier if this was led by Jakarta and Hanoi than by London or [inaudible] or Washington. The one thing I would say, whatever it is the Chinese understand, the Chinese government understands deeds as well as words. If they push the Philipinos too far and the Philipinos do get the Americans to allow a construction of a radar in the Philippines linked with the one in Japan, etc; they will understand that this has been a wrong decision in American strategic inauguration. This is why we in Australia were so pleased with the Americans [inaudible] involved in our part of the world and President Obama has, being a man who has lived a long time in Indonesia as a young man and who used to transit through Australia and Hawaii to home, has a very keen sense of that part of the world. It’s good for them. We’ve got a president who understands. It’s an area of economic dynamism that is important for Europe, for the Middle East, for the whole world because I think the way we are going to get out of the current economic impasse is all going to be drawn on Asian cocktails. Might not be only Chinese cocktails, might be Indonesian.

Question 3

Can I just ask something here. You’ve said that some companies only see dollar signs and you also said that China has no real friends apart from Pakistan and North Korea but here they are, buying their way around the world, owning large amount of African and Australian resources. So, in the short or medium term, does it actually matter they don’t have any friends or is it because they are buying their way to friendship, if you like, or do you think in the longer term it will have an impact?

Michael Danby MP

Well, it’s observable that for instance in Africa that this kind of crude financial arm-twisting kind of policy does not necessarily work. You make friends with the government in Khartoum by building presidential palaces, taking Sudanese oil imports, but then you make an enemy in South Sudan who has a legal right to 70 per cent of that country. I was seconded by the Australian government to represent us at the opening of South Sudan. Words fail to describe what I saw there. Here is a country of 10 million people who have lost 2 million people over the last 30 years with conflict in the North, has only 50 kilometres of sealed road, 42 per cent female illiteracy and everyone was happy! Everyone was looking to the future, so hopeful that it is astonishing. Part of it is based on the fact that they have the right to 70 per cent of the oil resources of Sudan which should develop their country fairly richly. I want to tell you, we have a conference, the African-Arndell conference attended by 3,000 people only a couple of months ago, and the African delegations which come there do so partially because they want an alternative to open, transparent western way of taxing the goose that lay the golden egg, rather than having Chinese to develop the whole infrastructure. We are providing a real alternative to the Chinese model in Africa. I don’t think that should be underestimated either.

Question 4

I think you may have touched on the question I wanted to ask. I start from the British situation where you probably heard, the Chinese state has recently bought 10 per cent of Heathrow. Now, by analogy, does Australia have any stand on it – whether they allow, encourage or disallow purchasing into Australian institutes? I mean you spoke about Telco. I’d like to hear a little bit more about it.

Michael Danby MP

I think you have to be very careful with what you say. I’m not in favour of a discriminative policy towards China based on anything other than security reasons. The reason why I strongly supported the recent Australian government pursuit is bared as we received advice from our GCSQ and MI6 that this was not a good idea and that they would use backdoors to exfiltrate information. There is a bigger debate in Australia which is parallel to what you are talking about. It is in relation to Heathrow and whether Chinese investment into Australia should be supported or whether they are going to buy up all our food. People are talking for instance, there is a recent purchase by a Chinese conglomerate of the most enormous cotton farm in the world, called Cubbie Station and that the Chinese will control it. I must say I am in favour of Chinese direct investment in Australia, very strongly in favour of it. It is absolutely dwarfed by American direct investment into Australia, which is 550 billion; or by British direct investment into Australia, which is, obviously from the last couple of hundred years, 400 billion. The Chinese direct investment, there has only been like 25 billion at this stage. So, I am looking forward to more Chinese investment. I think Europe should encourage it, provided it is in your national interest. That is the criteria which you should apply to it. I think it would be very bad and leading to paranoia in China if for no rational reasons we would reject their right to investment, which we encourage from other people. Is Russian investment preferable in Heathrow to Chinese investment?

Question 5

[inaudible] What are the distractors, if any, between those (America, Australia, Britain) [inaudible] how are we going to resolve it?

Michael Danby MP

For instance, your Prime Minister is over at Abu Dhabi, selling them Tornados, which I am sure the British public would be in general supportive of; preserving the security of energy from that part of the world. But if Britain was to sell advanced military technology to China, which would enhance their military capacity vis-à-vis countries in Asia, which I believe you are not contemplating by the way, that would be a very bad idea. Australia would be against it. I think you shouldn’t underestimate the British-Canadian-Australian-American connection – and New Zealand – widely referred to as the Five Eyes, and that is a defence and security relationship which is without [inaudible] I know. The material we exchange with another really enhances the security. There is an economic cost to that too, if you look at it in terms of cost-benefit analysis. You have to weigh the potential of damaging any short term commercial benefit of some trade deals that did not fit in with any other partner. So far that hasn’t happened. I was speaking with your national security advisor within the Australian parliamentary delegation I was with here in London over the last three days, and there has been no change in European decisions to provide high-tech military items to China.

Question 5 (continued)

What about trade?

Michael Danby MP

I think strongly so in the United States. They argue about Chinese direct investment into Australia but so far the free market economics, post end of the Cold War, we had political convergences as around the world. The left-center party, which I represent, does not favour irrational economic decisions or keeping Chinese direct investment out. There is an argument about the Chinese currency deliberately being undervalued and the president has managed to have firm relationship with China despite having differences. The Americans managed to see the Dalai Lama without any problems. The Chinese currency may come out further in the future but I think the defeat of the ‘ hard-line republican was more of a watershed. Despite some of that aggressive Chinese rhetoric, the relationship between the U.S. and China is very good and we should hope they continue that way whether they have a Wilhelminian future or a communist future.

Jonathan Djanogly MP

Michael, I thank you for coming to speak to us today. Can I just say that your [inaudible] provided a clear-eyed view and that is exactly what you have done. We thank you for the benefit, providing with the benefit of your experience and what I thought was a very thought-provoking speech – and I think that was widely seen around the room. I think, on behalf of members of Henry Jackson, can we say how pleased we were to see the robust approach taken by our Australian ally in an area where it probably needs to be maintained as our relationship with China develops over the years to come. So, on behalf of the Society, can I thank you and I hope you enjoy the rest of your trip.


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