TRANSCRIPT: LOWY INSTITUTE Q & A
TRANSCRIPTION: PROOF COPY E & OE
DATE: 9 AUGUST 2012
TOPICS: Asia Pacific; Defence Budget; Defence Capability; China; US Force Posture.
QUESTION: Thank you Minister. Very much interesting today's lecture. It's very important. You describe the changing strategic environment in Asiaand the Pacific. And I'm also interested in your positive strategy by using a word such as engagement, dialogues. But at the same time I think it's also important keyword, hedging. So what impact do you think these changes will have on the hedging in terms of the defence policy in Australian military in this region?
STEPHEN SMITH: Thank you very much for your question. I'm often asked what it's like to be Defence Minister, having previously been Foreign Minister, to which I say perhaps with tongue in cheek that being Defence Minister is like being Foreign Minister, it's just you have assets, cash and capability.
So part of any country's strategic engagement necessarily requires engagement, diplomacy, practical cooperation with friends and partners and neighbours. And all of this is done to build relationships, to end up with the desired outcome which is peace, security, stability and prosperity. So everything we do has that as its ultimate objective.
But, at the same time - and you've referred to a word as a keyword which I never use because it's not Australian policy - you've referred to the need for any country to also contemplate defence military and combat capability, for a number of reasons: for self-defence, for engagement in conjunction with the regional or international community to, for example, stare down international terrorism and to help ensure that international norms are applied.
And so Australia is a country which on the one hand wants to ensure peace and stability and investment and security and prosperity in Australia and in our region, but on the other hand has a Defence Force which we want to be capable to carry out the priority tasks that I have referred to.
And, as I said in my remarks, the fact that Defence itself and the ADF itself engages internationally is actually both a strategic asset and a strategic necessity.
As a general proposition I am, and Australia is, optimistic that what we have seen for a long period of time now, relative peace and stability and security in our part of the world - the Asia Pacific and the Indian Ocean Rim - will continue. But that will only continue if those key super powers have a positive and constructive bilateral relationship one to the other, and we continue to do things which enhance those relationships and also support and enhance both regional and international institutions.
And in that context I've said previously that the addition of the United States and Russia to the East Asia Summit, which now meets at leaders' level - so prime minister and president level - foreign ministers level, and also defence ministers level - but because we're defence minister we use a different acronym, ASEAN Defence Ministers Plus, you've now got an institution, a regional institution [indistinct] regional architecture in our part of the world where all of the key players are in the same room at the same time, able to have a conversation both about stability, peace and security but also investment and prosperity.
Capability can be used not just for self-defence or for operations; it also can be used for stabilisation and for humanitarian assistance and disaster relief. And one of the very good - one of the very large potential that we have in future years is to continue to enhance our engagement with our friends and partners in the region on humanitarian assistance and disaster relief, including for example with China. And in November of last year we engaged in a humanitarian assistance and disaster relief exercise in Sichuan Province with the PLA in China; the first occasion we had engaged in such an exercise.
So capability can also be used for that purpose which is an unambiguously good thing to do in addition to peacekeeping both regional and in the United Nations, and also for self-defence purposes.
QUESTION: Thank you for your speech today Stephen. Following the recent federal Budget there's some concerns expressed from parts of allies, including the US, about Australia's Defence budget relative to GDP, and perhaps in particular our Defence budget on a relative labour basis recognising that Australia's labour component in Defence is perhaps a lot higher than some of our local peers.
I've got two questions. Firstly, do you share some of those concerns expressed in parts in the US about Australia's Defence expenditure.
And, secondly, do you think the Australian public has the stomach or the appetite or the appreciation of the challenges ahead of us over the next 10 to 20 years, both in your term and future governments' term, to perhaps raise our Defence expenditure by levels in excess of GDP just to retain the status quo, particularly with large capital expenditure on things like, you know, fifth generation fighters, et cetera?
STEPHEN SMITH: Well, the forward estimate years in the May Budget of this year essentially see Defence spending at 1.5 to 1.6 of GDP. As a Defence Minister obviously I would prefer that it was closer to two per cent, but GDP is not the only measure. We continue, for example, to remain in the top 15 defence spenders. We continue to vie for Canada for thirteenth or fourteenth position.
For the first time in the 2009 Budget the four year forward estimate for the Defence Budget topped $100 billion. We're still at $100 billion. And we remain in the top handful of countries in terms of Defence expenditure per capita, per head of population.
And when we went through the Budget where significant fiscal weight was upon us together with every other Commonwealth department and agency, we did a number of things which were very important. We ring-fenced our overseas operations so there would be no adverse consequences for our deployment to Afghanistan, the Solomon’s or East Timor; we ring-fenced the kit and resources to those who were deployed or about to deployed; we ring-fenced the enhanced practical cooperation activities with the United States. And so we - and we ring-fenced military numbers so there would be no reduction in military numbers. So we placed some important barriers, and we continue to provide for our core capability found in the 2009 Defence White Paper.
It's wrong to assert or suggest that the United States has raised this as a matter of concern. I have spoken on three occasions to the United States Secretary of State for Defense. I gave him the courtesy before the Budget was announced of letting him know of our fiscal difficulties, to which his response was essentially, Stephen, you think you're an orphan; I'm taking nearly $500 billion, I'm taking nearly half a trillion dollars out of the United States defense budget over the next 10 year period. And, as Leon Panetta said at the Shangri-La dialogue in Singapore in May, we are now living in a new fiscal reality where we have to balance the fiscal reality with the national security reality.
So the last time I spoke to Leon Panetta was when I arrived in Honolulu to visit Pacific Command a couple of weeks ago, and I spoke to him. And we again touched upon this issue, and his attitude is entirely the same. We are all going through these difficulties. He made the point to me that he regards Australia's contribution to the alliance and generally as being a first-class one.
So I've seen suggestions or reports by others, by commentators and former officials and journalists that there is concern that Australia is not putting its shoulder to the wheel so far as the alliance is concerned. This is not the view of Australia. More importantly, it's not the view of the United States administration. I've also, for example, seen suggestions today that somehow what we have done in the Budget is to place our personnel on the frontline at greater risk. This is an assertion which has no basis to it.
We have ring-fenced our Budget constraints and fiscal restraints from our operations overseas. And indeed, so far as Afghanistan is concerned, when my predecessor John Faulkner was minister, he instituted a program to expend an additional between $1.5 billion and $2 billion on force protection measures in Afghanistan.
So I see a range of assertions. They don't stack up. What is my attitude to, or what do I think the Australian public's attitude to Defence expenditure is? My own judgement, when I speak to people in the community about defence and national security matters, is that they value highly Australia's view that it takes an independent judgement about these matters and makes judgements in its own strategic and national security interests.
The Australian public do value highly the alliance relationship we have with the United States, because very many of them lived through the experience of World War Two, the historic basis for the alliance with the United States; not a Cold War alliance, as I've seen some people ascribe to it.
The Australian people want governments to do two things - national governments to do two things: to protect and defend the national security interests of the Commonwealth, and to protect, defend and enhance the economic security interests of the Commonwealth and its people. And they're smart enough to understand when fiscal restraint is required to ensure a strong economy, and no-one should be under any illusions that a strong economy doesn't help Defence or the Defence Organisation or the Defence Force. A strong economy does help defence, and a strong economy, both here and in our region, certainly helps our national security interests.
QUESTION: Minister, thank you for your speech. Earlier this week in this very room, Paul Keating I think launched or presided over the launch of Hugh White's book on what we should be doing in the future. And, as you know, Hugh White wants a concert of nations, including China, and for the United States to back off a bit and stop appearing to be the imperial power that can go right up to the borders of China without worry.
Do you personally, or do you as a minister, think that this would be a very good outcome in the long-term for Australiato be a country that is comfortable with a concert of powers, including China and the United States?
And if so, how - what sort of signals do we give China with bases, and you don't call them bases, but I think the definition is they probably are, of having marines in Darwin, and having Cocos Islands possibly, and in Western Australia?
STEPHEN SMITH: Well, a lot in that question. When I was on Paul's staff, I tried to put words in his mouth, but never with much success.
So I won't try and put words in his mouth now.
I've seen some of the remarks he made here, but I haven't seen them in their entirety. I will do that as a matter of course, firstly. Secondly - but I understand the gist and the substance.
Secondly, I haven't read Hugh's book. I will read Hugh's book. From the reports I've seen and from the comments I've seen Paul make about the book, it is a much more sophisticated contribution than an earlier contribution Hugh made, which was to the Monthly, or the Quarterly, which was widely interpreted as a suggestion to the United States that it should leave the Asia-Pacific alone. So I'll read Hugh's book.
So as a consequence of not having read Hugh's book, and as a consequence of having learned on staff not to put words into Paul's mouth, I'll speak in my own terms, which I, did in the course of my remarks and do in the paper.
I am, and the Government is, optimistic about the emergence of China. We have a comprehensive bilateral relationship with China. We started off 40 years ago; this is the fortieth anniversary of diplomatic relations, and it has always augured well for us that we were an early recogniser of Chinawhen it wasn't quite so fashionable to do so. And that is to the eternal credit of the Whitlam Government.
So we have benefited from early recognition. We then had an economic relationship, largely off the back of minerals and subsequently petroleum resources from my own state of Western Australia, but now it's much more comprehensive than that. And with Chinese Foreign Minister Yang in 2008, as Foreign Minister he and I did the first strategic dialogue between Australia and China.
So we have a comprehensive relationship with Chinaand that continues to grow.
As I've said inAustralia and in China, there is nothing inconsistent with a comprehensive and growing relationship with China and our military alliance with the United States.
And in terms of how we see, or how I see, how the Government sees China unfolding, we're positive and optimistic about that. We do think it is crucial that Chinaand the United States have a deep level of engagement. And the challenge now to avoid strategic competition between China and the United States is to make sure that their level of bilateral engagement at the strategic, at the defence, at the military, at the political level, is of the same level as their economic engagement.
We have a comprehensive economic engagement with China. We also need to grow our military-to- military and defence-to-defence engagement.
But even more importantly so, as I said in the paper, that is the challenge for the United States and China and, equally, that will be a challenge as India rises.
In terms the enhanced practical cooperation that we are effecting with the United States, and these were as a result of work that I did with two Secretaries of State for Defense over two AUSMIN meetings, one in Melbourne with Bob Gates and one in San Francisco with Leon Panetta, where we are providing the United States with enhanced access to our facilities, off the back of a Status of Forces Agreement which has been in place since 1961.
So this is being done pursuant to longstanding access to Australian officials by US Defense Force personnel.
We think it's sensible to enhance those engagements. We've seen marines go toDarwin. That has already opened up the prospect of doing humanitarian assistance and disaster relief exercises with Indonesia. It's also seen the President of Indonesia say that in due course he sees the potential for such exercises to be either observed by or conducted with China, and I welcome that as well. And we are about to start a conversation about enhanced aerial access, and down the track, as the Indian Ocean Rim rises, enhanced naval access to HMAS Stirling.
Just on Stirling - a slight digression - there was a report last week or the week before from a United States independent think tank which suggested home-porting of US ships in HMAS Stirling. This was not a US Administration paper or policy, it was an independent think tank required by Congress. And I saw a few days after the independent think tank report came out, one of its authors saying you need to understand that that suggestion was just something that we put on the table, it wasn't even a formal recommendation to Congress or to the Government; so sometimes things get a bit ahead of themselves.
I disagree with your assertion or throw away line or analysis that these are US military bases. We don't have US military bases inAustralia. We have joint facilities, the obvious one of which is Pine Gap, and that serves us and our national interests very well. For the rest it is access to our facilities, and that's been done in an open and transparent way, as it's been occurring frankly since 1942.
Let me finish on this point. If you're worried about 250 marines in Darwin, or indeed if you're worried about that growing over a five or six year period to 2500, you're not really worried about 250 marines, you're not really worried about Australia, you're worried about the relationship between theUnited States and China. And that goes to the heart - as I said earlier, goes to the heart of peace, stability, security and prosperity in our region.
If the United States and China don't get that bilateral relationship right then we will have a problem, and that's why we say to China and we say to the United States, advisedly to both of them, the most important thing is to get your bilateral relationship right and to grow the bilateral relationship at a political, strategic, military and defence level, to the same level that you now have on your economic arrangements.
SPEAKER: Thank you very much for at least boosting Hugh White's book sales by a couple.
STEPHEN SMITH: By one. No, I chose my words carefully. I said I'd read it, I didn't necessarily say I'd buy it.
SPEAKER: Martine, I think you had a question.
QUESTION: Martine Letts from the Lowy Institute. Minister, just building on that last point, we are not alone of course-
STEPHEN SMITH: Hugh's book.
QUESTION: [Laughs] Not on Hugh's book, on the question of the relationship between China and the United States, and how that will inevitably affect the strategic future of our region. This is not a preoccupation that only Australia has. It's obviously one which a number of other countries - all of the countries in the region face.
Can you share with us a little bit whether you've been having these kinds of conversations with your colleagues in ASEAN, in North Asia, and whether there is a kind of a group there that can usefully transmit those kinds of messages to the US and China? What are your thoughts on that?
STEPHEN SMITH: In terms of that analysis, and Australia's analysis that at the heart of security, stability, peace, investment, prosperity in our region and in the broader Indo-Pacific for the first half of this century, that the United States-China relationship being the most important aspect of that and starting point for that, I say that publicly and privately wherever I go, whether it's Australia, the United States, Singapore for the Shangri-La dialogue, or indeed to China itself. I said the same thing when I was recently in Beijing.
But you're quite right. To use a Leon Panetta expression, we are not orphans in coming to this analysis.
And, in the course of this week, we've seen publicly an extensive conversation about that very relationship. So neither China nor the United States are short of any free gratuitous advice about how they should conduct themselves and that reflects the central importance of how the international community and how China and the United States adjust and adapt to what I describe as these changing strategic influences.
I'm told by people who would know that when the Cold War was at its peak or its trough, depending upon your point of view, whilst there was very little economic relationship or engagement between the United States and the Soviet Union, there was intense political mil-to-mil defence-to-defence cooperation, consultation, coordination. And post-Cuban missile crisis that made absolute sense because the risks were too great.
Now you've got Chinaand the United States with an inextricably interwoven economic engagement. The challenge for Chinaand the United States, and the challenge for other countries to urge them on is to take their political, strategic, military, defence relationship to the same level as their economic engagement. If that occurs, then whilst there will be adjustments as a result of change in strategic influences, we will continue to see prosperity, investment, trade and peace and security in our part of the world.
That's, in my analysis, the challenge for the first half of the century. I might be in a minority of one or two, including your own Rory, but I think in the fullness of time, in the second half of this century, we will findIndiain the same position. So, asIndiaemerges, again adjustments need to be made to these - to the strategic circumstances as a result of the rise of another great power.
QUESTION: Minister, there's a whole list of questions I have here that we might have to leave for your next speech at the Lowy Institute, but there's one I'd like to ask before I hand back to Martine.
You've sketched a period of great change in the Defence Force. You're talking about a new force posture, not only in our country but in the region. You're talking about an army that is entirely changing the way it's structured, a navy that's entirely changing its platforms. How concerned are you about the challenge of maintaining professionalism, morale and the ability to respond to those regional stabilisation [indistinct] that we seem to always need to [indistinct], whilst all this is going on?
STEPHEN SMITH: Well, in my experience the ADF and the Defence Organisation will respond positively and enthusiastically to those challenges. We don't want to make the same mistakes that were made in the aftermath of Vietnam or where we didn't think strategically about where to now for defence, national security and the ADF, and we reduced military numbers.
But General Hurley, the service chiefs, the secretaries, I think we're all at one in recognising that with challenges always come opportunities. So, with a drawdown from Afghanistan that we've essentially been engaged as our highest tempo operation, a land expeditionary force in the Middle East, for 10 years. Afghanistan, Iraq, back into Afghanistan.
And that - as I indicated that has consumed focus and resources. And I made the point one visit to PNG since 2004 and eight visits by me over less than a two year period to Kabul and Brussels. So that drawdown provides opportunities.
At the same time we are going through a significant change of platform, particularly in Navy but also in Air Force. I'm absolutely confident that the Chief and the [indistinct] and the Secretary are up to the task. That's not to say that we won't have difficult judgements or choices to make.
We do have to make judgements about how we go through the current period of fiscal restraint. How do we preserve our core capability? How do we make adjustments for the future? There will be, potentially, a residual in Afghanistan that - if, for example, there's the right mandate or authority then we may well have a Special Forces contribution there for training or for counterterrorism purposes.
But as that drawdown occurs and the drawdown also occurs fromEast Timor and the Solomon’s, new opportunities, new challenges are presented.
The force posture report, whilst there were some sceptics when I first launched it, has now been embraced enthusiastically because it does bring home some of the opportunities that exist and some of the challenges that exist for the ADF on Australian soil into the future.
But I've never seen members of the ADF walk away from a challenge or be enthused about something that might give them the chance to put their skills in practice, whether that's humanitarian assistance and disaster relief in our region or indeed on our own soil, or whether it's a peacekeeping exercise or whether it's a security or stabilisation operation in our own region or further afield.