27 June 2012
DFAT_20120627
Thank you for the invitation to join you this evening - it's great to have an opportunity to meet members of the FCCJ.
As a conversation starter (happy to take questions), tonight I wanted to give you a quick overview of the Australia-Japan relationship as it stands today - and to focus on two areas in particular: the economic relationship and our evolving security and defence ties.
But first, by way of a general introduction, I would note that Australia's relationship with Japan forms the very backbone of our engagement with Asia.
For more than 50 years, a shared commitment to democracy, the rule of law and open market economies - underpinned by striking economic complementarities - have made this our closest bilateral partnership in the region.
This is despite the fact that Australia and Japan differ in almost every aspect of physical and human geography.
Australia is 20 times the area of Japan, with less than one-fifth of the population.
Australia - as I'm sure you are aware - has abundant energy and natural resources; Japan has almost none - but consumes these resources in vast quantities.
And, being in opposite hemispheres, our seasons are reversed - which provides a boon for tourism and counter-seasonal food exports.
The current rise of Asia actually began with the rise of Japan in the 1950s.
From then until this century, Japan was the main engine room of growth for the region.
And this includes Australia: Japanese investment was crucial to the development of many of our largest industries - from the resources and agricultural sectors to services and manufacturing.
Though this decade has seen China overtake Japan in terms of sheer economic size, Japan remains by far the largest rich developed economy in the region.
The economic aspect of our relationship is probably that which is the best-known to the rest of the world - but people are often surprised by the scale of those economic ties.
Japan was our biggest export market for three decades, until it was overtaken - by China - in 2009.
This led some commentators here and in Australia to question the relative importance Australia now places on Japan.
In response to them, I would note that Japan remains a huge, sophisticated and reliable market for Australian exports.
In fact, Japan gives Australia its largest trade surplus with any country - last year that surplus totalled $32.3 billion dollars.
And for those of you unfamiliar with the exchange rate, today one Australian dollar would have bought you about 1.005 US dollars or about 79.8 yen.
As an aside, Australia has experienced a massive change in our terms of trade which is transforming our economy … Back to bilateral story.
Our exports to Japan continue to grow: they've doubled over the past 10 years, from $24 billion dollars in 2001 to $50 billion dollars last year.
So a $32.3 billion dollars surplus - or to give you an idea of what that means to Australia, this surplus is more than our total, two-way trade with India [$20.35 billion in 2011].
And unlike with other countries, we've rarely had any complaint from Japan about this surplus - reflecting the huge importance of what we sell to Japan's economic performance.
As significant as it already is, there is definite scope for our trade relationship to reach a new level - and that's what motivated both countries to enter into the Free Trade Agreement negotiations which are currently underway.
We see good prospects for improving our trade in services if barriers reduced - always find Australian accountants, lawyers, financial industry professionals throughout the world and here.
And good prospects too for increasing our already strong exports of agricultural products such as beef.
Some cynical about the time these take - have to work long and hard if you want quality outcome.
Although China has overtaken Japan as our number one market for exports, Japan remains our most important economic partner when investment is included in the equation.
As I said a moment ago, Japanese investment has been critical to the development of many of Australia's largest industries.
And that remains the case today.
With a total investment portfolio worth $123 billion, Japan is Australia's third-largest direct foreign investor.
It is the largest Asian investor in Australia by a very wide margin.
And it is no exaggeration to say that Australia's mining industry would be unrecognisable were it not for Japanese export demand and investment.
Just last month, Prime Minister Julia Gillard officially launched the Ichthys natural gas project in Darwin, the largest-ever single investment by a Japanese company in an Australian project.
That investment - by INPEX - totals $34 billion. Of a scale that we could not have funded domestically.
And while it's the largest-ever, it's certainly not the only one.
Coal mines in New South Wales and Queensland, iron ore mines in Western Australia and LNG fields off our northern coast have all benefited from substantial Japanese investment.
The same is true of Australia's automotive industry - people are sometimes surprised to learn that Toyota has a manufacturing plant in Victoria.
Japan is similarly important to Australia's agricultural sector - with extensive investment in meat, dairy, forestry and grain producers.
And, of course, Japan too has benefited greatly from all of this investment.
From Japan's perspective, Australia is this country's largest and most reliable supplier of energy.
We are Japan's number one supplier of coal and number two supplier of LNG, and growing fast. In April, we became number one for the first time.
In other words, Australian energy exports are powering much of Japan.
In 2010:
- 97 per cent of the coal and 12 per cent of the LNG used to generate power in the Kanto area was Australian;
- In Kansai, it was 79 per cent of the coal and 17 per cent of the LNG; and
- In Kyushu, 65 per cent of the coal and 40 per cent of the LNG.
So Japanese people - and everyone in this room - should think of Australia every time you turn on a light.
Australia is also a major supplier of many other resources - for example, we supply more than 62 per cent of Japan's iron ore.
Our large resource companies have always shown themselves ready to ratchet up on the supply side to match demand. Just look at recent announcements by Rio Tinto of further capacity increases. This is of course profitable, but it provides Japan with certainty of supply.
We are Japan's largest supplier of beef and a key supplier of other staples - wheat (20 per cent), sugar (27.3 per cent), and dairy products.
In beef, we have shown our long-term commitment to the Japanese market.
In short, Japan's energy and food security is underpinned by Australia.
But as significant as it is, trade and investment is just one aspect of the Australia-Japan relationship.
Another aspect - and one which has been gaining momentum in recent years - is defence and security.
Our shared democratic values and common interests are coming into sharper focus.
We are both key US allies - and we both have a huge stake in the region's peace and prosperity.
Japan has become our closest and most trusted regional partner in efforts to shape the strategic environment in a manner that ensures this peace and prosperity continues.
In 2007, we signed a Joint Declaration on Security Cooperation, which provides a foundation for wide-ranging cooperation on security issues.
That year, we also held our first 2+2 meeting of defence and foreign ministers.
Australia is the only country besides the United States to hold this kind of regular dialogue with Japan.
In 2010, we signed a treaty-level Acquisition and Cross-Servicing Agreement at a 2+2 meeting, which - once ratified - will allow us to cooperate more effectively on disaster relief and in peacekeeping operations.
And a little over a month ago, our foreign ministers signed the Australia-Japan Information Security Agreement - only the fourth such agreement Japan has entered into - and a very comprehensive one.
So those are the frameworks and mechanisms we have in place to enhance our security cooperation.
In practice, Australia's military and Japan's Self Defense Forces have worked together in Iraq, disaster relief in Pakistan and reconstruction in East Timor.
And last year, they worked side-by-side on relief operations here in Japan.
Australia was the only country other than the United States to contribute military assets to Japan's recovery, dispatching a C-17 transport aircraft to Japan to move more than 500 tonnes of relief supplies, equipment, vehicles and personnel around the country.
We dispatched a further two C-17s to carry specialised pumping equipment to Japan to help bring the situation in Fukushima under control.
And I think it says a great deal about our relationship that, at that time, Australia's entire operational airlift capacity was engaged in Japan - keeping in mind that Australia's defence forces are operating in Afghanistan.
This is a measure of the closeness of our security cooperation.
I could speak about the Australia-Japan relationship for hours, but those are just two dimensions that I wanted to draw your attention to - two areas which give you an indication of just how important and active it really is.
So I disagree with the description of the relationship in the FCCJ's notification about this event - as a "somewhat stale marriage".
There's actually great deal of warmth in the relationship.
One example was the overwhelming reaction to the visit to Japan by Australian Prime Minister Julia Gillard in April 2011, at a time when many foreigners were leaving the country.
The Prime Minister visited Minami Sanriku in Miyagi Prefecture, where an Australian search and rescue team operated in the immediate aftermath of the tsunami.
Her visit was extremely well received by the Japanese Government - everyone I've met, from the top down, has expressed their thanks.
And it was also appreciated by ordinary citizens as well - people who very much appreciated Australia's demonstration of support and friendship at such a difficult time.
I'll take your questions in a moment, but let me wrap up by saying it's well-known that this region is undergoing a great deal of change, and that the global economy is experiencing a great many uncertainties..
And this change - and change within Japan itself - will make Australia's relationship with Japan all the more valuable in the years and decades to come.
Japan has been renowned chiefly for the quality and cost-effectiveness of its domestic manufacturing industry, and for the power and skills of its legendary trading houses.
But demographic and economic factors have seen domestic manufacturing industry increasingly investing offshore, and the trading companies become investment vehicles, thus driving the creation of international supply chains and networks of production.
So while we still see "made in Australia" and "made in Japan", we are seeing more "made by Japan" somewhere else, supported by Australia exporting goods and services to Japanese entities in third countries.
These trends bring with them the prospect of further fields of bilateral cooperation opening up - as new complementarities, new areas of shared interest, emerge.
Our bilateral relationship - political and economic - becomes a multiplier for cooperation elsewhere.
Right now we are cooperating closely on some of the most pressing issues of the day - issues like climate change, nuclear non-proliferation and development in the Pacific.
We are working closely together in the UN, the G20 and the East Asia Summit.
The links between ordinary Australians and Japanese are also very strong: there are Japan-Australia Societies active all over Japan; we have more than 100 sister-city and sister-region relationships; and hundreds of thousands of people from each country visit the other as tourists every year.
I haven't dwelt on these links tonight, but in a sense these are the most fundamental of all, providing the ballast to allow us to advance our national interests and goals, and for when there is a bilateral problem
So I don't believe the relationship is a stale marriage at all.
In truth, we're facing a future with as much warmth, excitement and opportunity as newlyweds.
Thank you.