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Analysis of Australia's Economic Engagement with Asia

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  • Anton Mokbel

Answering Question 2:

“What was regarded as a region peripheral to the centre of world events or as a source of threats to Australia, has come to be seen as an area with which Australia's future is inevitably interdependent.' (Bill Hayden, Minister for Foreign Affairs, 24 October 1983) Critically examine the main political and economic arguments for Australia's engagement with Asia, and the changing forms of this engagement.”

The topic of political and economic arguments for Australia’s engagement with Asia has been discussed keenly in media over extensive period of time. However, no matter who you ask, or what article you read, it is a fact that Australia’s relations with South East Asia and Asia in general went through a significant change over past 20 years. This relationship started with a complicated and cautious view of Asia as a risk. Risk in both direct aggression and military sense, as well as a hazard to Australia’s way of life. Later on, the relationship evolved to viewing Australia as an integral part of Asian society, as a country that should position itself as a strong, reliable and vital partner in region that is able to benefit from growth in the area and, in turn, benefit the region itself.

There are numerous political and economic arguments for Australia’s engagement with Asia, Australia economy is connected to economies of other countries in the world and prosperity of Australia nation depends on where Australia will position itself in future. Politics in this age a highly influenced by economic factors and are usually mended and driven by economics, hence I will start with the later.

As Asia’s economy continues to expand rapidly and Asia is poised to become the powerhouse of the next century as suggested by Dr Emerson (2012), Australia will only find itself more interconnected with these economies, building its own wealth as they grow. Already, DFAT (2013) indicates Australia top 4 export partners are in Asia with China, Japan, South Korea and India accounting for 63% of Australia’s exports in FY2013. The proximity of Australia to Asia and specifics of resources we have will see the economy further integrate with that of the region. As influence of Asia grows so the political motivations to associate Australia as integral part of Asia, early examples include Prime Minister Howard’s policy to position Australia as a key player in the region.

The absolute need to position Australia as a key, central and crucial regional player forced the government to work on policies that emphasise regionalism at times, or fostering bilateral agreements with others according to Capling (2008). Moreover rising dependence of Australian prosperity on growth and trade with Asian economies further stressed the need in forward looking strategy, which culminated in numerous governmental studies, with publication of the “Australia in the Asian century” white paper. The enormous growth in Asian economies has already provided Australia with extraordinary benefits, most notably in mining and energy sectors, and while growth in China seems to be slowing there is no reason why other economies, India for example, are not able to fill any void left by Australia’s main trade partner.

There is absolutely no reason why Australia cannot continue monetising on the growth its neighbours are experiencing. And this incredible growth is only expected to continue, with multiple sources and studies, including The Standard (2012), indicating that by 2030 Asia will become the economic centre of the world. It is expected that closer to 2030 Asia’s GDP will exceed GDP of the United States and Europe combined. As a result of that middle-class consumers population in Asia is expected to be the largest in the world.

Even as some economies in Asia start to moderate in growth, as their middle class grows so will the demand of this wealthier population for higher end goods and services. A diverse range of products can be exported, starting from education to health, organic food to wine. According to the Commonwealth (2012) the global centre for economic and wealth gravity will only continue shifting to the region.

The signs are already apparent, Australian educational sector has been a net exporter to Asia, turning this country into Asia’s classroom according to Griggs (1993). Full Fee paying students are contributing over A$1.1 billion a year into Australian educational sector. As the wealth of these economies grows, we can only expect growth in demand for high quality, unbiased western education. This is reinforcing desired position of Australia being a certain bridge between the East and West, positioned in the East with a robust Western system of education, culture, economy and customs. In addition to tertiary education numerous student arrive to Australia to study English or attain vocational and school qualifications. Australia has been successful so far in its approach to internationalise education (Beazley 1992). Students from overseas are becoming not only an important source of knowledge and cultural exchange, they are also important in funding Australia’s university system. The growing importance of international students, and their dollars, has resulted in a significant shift in Australian politics. As Asian wealth grows international competition for students grows as well, these resulted in need to streamline and relax requirements for entry into the country. There is a noticeable change in requirements to obtain international student visa to travel and study in Australia, a large number of requirements have been streamlined, the procedures simplified and processing times improved significantly.

Politics, including such sensitive issues as entry requirements into Australia, once again have been significantly influenced by economics, according to Treasurer Swan (2012) the Asian century is the time for Australia and Australian education to shine, however further changes needed to stay competitive in international market place. The government is in continuous discussions with educational institutions on how to become more competitive and how to attract more students to Australia. Australia utilises a number of tools to be visible and attractive in this regard, including road shows and expos in Asia, significant investment in advertising overseas and direct involvement of government and relevant institutions in promoting Australia as the “place to be” to gain high quality, world class qualifications while still enjoying unique, relaxed, western and prosperous country. A simple visit to most university campuses will be enough to show tremendous success Australian Educational sector is enjoying.

There is another sector that is already benefiting from this interaction, and is expected to grow vastly if properly marketed. Larger population and wealthier pockets means demand for more food and better nutrition. According to Cooper (2012), Australia’s proximity, vast size and smaller population means that Australia is poised to become a case of a food basket for Asia. From personal experience and news, we can see that the potential benefit for the food industry is apparent. Recent interest of international investors and conglomerates in Australian companies like Graincorp only proves the potential of wealth that can be generated by food industry here. And there is a clear push from Federal Government to boost the potential of this industry and simplify the process of investment and export. If the success of beef industry can be replicated in other sectors of food industry there is a clear potential of lucrative income stream for both the government and investors.

Away from economy, moving to a purely political view, there is an argument that issue of national security is paramount, independent of economy and always comes first. My argument however is that as economical dependency grows the national security issues are softened to accommodate these new economical realities, if not adjusted entirely. It is no secret that Australia is a major beneficiary of Chinese growth. According to The Economist Intelligence Unit (2009) while growing in its dependency on China, Australia still looks to America as Asia’s sheriff. For a while, Australian government had the urgent sense of a growing problem as China is reshaping Australia’s trade and investment structure, drawing the country into a China-centred Asian orbit. This didn’t sit well with a strong historical security connection between Australia and America. The absolute need to avoid any conflict, in order to balance the relationship between two major partners, is one of the reasons of Australia’s push to build regional organisations that will include two powers. One of the possible outcomes of availability of such organisations like Asia-Pacific community is that they will act as some sort of tribunal or forum where conflicts and issues can be resolved peacefully and without major impact on economy, security and national interests. My argument here that while historically Australia had extraordinary ties with America, and will continue this relationship in foreseeable future, economic reality dictates the need to find a middle ground and move away from blindly following policies of the US (Capling 2008) to balancing its act as Asia in general, and China in particular, are not seen as an enemy, but as a vital and important partner. Over last decade, Australian Government has been implementing policies showing that Australia’s interest, wealth building and long term survival will be better served by developing and implementing a more independent and balanced policy from that of Washington.

To further elaborate on this point, we have seen numerously how foes of yesterday became friends as economical relationships between countries increase in complexity, interdependence is established and mutual economic benefit becomes the main driver of politics. Examples abound, Germany and France as one, closer to home Australia and Japan are a great example. Not that long ago Australia and Japan were adversaries and the relationship was that of an occupier and the occupied. According to Sato (2008) Australia put forward a request for a harsher treatment to occupied Japan, demanded stricter and tougher assurances. These demands were so harsh that United States was not willing to accommodate them. While these demands were understandable due to the deep scar Australia received owing to Japanese actions in World War II, the situation started to change slowly. Economical ties grew, Japanese economy underwent a “miracle” growth and countries became closer. Australian relationship with Japan extended to the degree that they have become undeniably some of the strongest partners in Asia-Pacific region. Japan was a strong supporter of Bob Hawke’s proposal in establishing the APEC initiative, as mentioned by Terada (2000), and arguably, the reason why this organisation managed to survive the initial resistance it received from other Asian nations. In addition, Japan put tremendous pressure to facilitate acceptance of Australia into East Asian Forums, see Marris (2005). Due to these changes very few people on either side could perceive the other party as a threat to national security, stability or way of life. The mindset has changed completely aided by recent history, political and economical dynamics between the two nations.

There is no reason why Australia cannot foster similar relationships with other countries in Asia that will result, akin to Japan, in obtaining an ally, a trading partner and major supporter on international arena. Moreover, the situation is much more favourable with most of the nations in the region. Unlike Japan, with exception of Indonesia, there were no obvious or direct security confrontations with any of the nations. This provides a more favourable ground on building more robust relationships that are based on mutual trust and benefit.

China is repeating the economic “miracle” of Japan, already becoming, in certain sense a prosperous, much larger, healthier and more vibrant economy. Japan has been pushed to sidelines in everything but political relations, starting with the significance of trade with Australia, to the number of international students and tourist visiting this country. There is a significant progress today compared to where we were even a decade ego, previously it was debatable if Australia will ever be considered as part of Asia, today that is not the question. However, there is still a long way to go to build mutual trust, foster common understanding and create strong, allied links.

Often uniqueness of Australia hampered relations with Asia, however being different is not always bad. Australia is still and will remain very different to other Asian countries. Dissimilar attracts, and by leveraging this uniqueness Australia travel, tourism and hospitality industry flourished. We have seen increase in Japanese tourism that benefited Queensland economy enormously, and this is slowly starting to replicate with other Asian countries. Australia boasts unique natural landmarks, beautiful scenery and a very different environment to Asian countries. Australia is working hard to promote and capitalise on growing wealth of Asia. Large advertising and sponsorship campaigns are launched across Asia, with Tourism Australia taking a A$14 million campaign across four Asian markets that are most lucrative at this stage, being Hong Kong, China, Korea and Malaysia as pointed out by Sudhaman (2005). Offering a unique and compelling position, Australia is capable of benefiting significantly from Asian tourism. Even when taking competition of other, more traditional, tourism destination in Europe and US, Australia is able to gain an upper hand by emphasizing its Asian location, proximity, uniqueness of natural assets and friendliness of population. In addition, Australia offers significant amount of services available in tourist native languages due to true multiculturalism and multilingualism of local population.

Owing to massive growth of wealth and large population in Asia, Australian Tourism industry could become the largest service export of the country. If WTTC (2013) assumptions are correct, by 2020 almost half of the travellers around the planet will originate from Asia. There is a potential for Australia to receive around $115 billion in overnight spend from tourism by 2020 if proper policies and marketing are done (Tourism Australia 2011).

Conclusion:

Arguably, economic benefit is the main driver behind all the politics and the main reason why governments enter into alliances or build common organisations. From analysis above Australia could benefit tremendously from repositioning itself as a strong, active and friendly Asian nation while retaining the specifics of its Western culture and way of life. Building closer relationships with Asia should prove positive on multiple vectors impacting almost every sector of national economy.

Over past decades Australia has already been benefiting from the mutual relationship with Asia. Trade numbers increased dramatically with main Australian trade partners shifting from Europe and North America to Asia. Strong industry links have been built including financial, political and cultural. Tremendous number of industries benefited from this, with mining and energy historically benefiting from our proximity to Asia. And, it is expected, that they will only continue to do so in near future. Educational and Health sectors are becoming a major source of wealth locally by exporting the service overseas. Australian educational sector is already becoming one of top recipients of international student fees, and there is no reason why Australian health system cannot benefit from international clients akin to US, Canada, Switzerland and Germany. Additionally, the government along with the tourism sector are promoting Australia as a unique destination with aspects of both Europe and Asia, this is where uniqueness of Australia and its dissimilarity from Asia can be capitalised the most.

Politically, as stronger economic ties are forged and trust fostered among nations, Australia is posed to reduce any risk to its national security, be that from direct aggression or passive hostility. When governments see the benefit of being with other nation, when this benefit translates in more robust trade, wealthier electorate and stronger economy, governments tend to put differences aside and look for solutions in peaceful, civilised way. And these are just few of numerous positive reasons of Australia benefiting from stronger ties with its neighbours.

Bibliography:

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Capling A. (2008). Twenty years of Australia’s engagement with Asia. Tokyo. The Pacific Review, 21:5,601-622.

Cooper, (2012). THE push to turn Australia into Asia's food bowl. Brisbane. Queensland Country Life

DFAT publication (2014). Composition of Trade Australia 2012-13. 1-235. Canberra. Australian Government Publishing Service.

Economist Intelligence Unit, The (2009). Asia politics: Australia's Chinese entanglement. New York. EIU ViewsWire.

Emerson C. (2012). Australia's trade with Asia will rise significantly. Wagga Wagga, N.S.W. The Daily Advertiser.

Griggs T. (1993). Australia: Oz becomes Asia's classroom. Sydney. Asian Business 29 Nov 1993:10.

Marris, S. (11 Apr 2005). STATE OF THE NATION. Canberra. The Australian.

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Standard, The (2012). AUSTRALIA'S proximity to Asia is a clear advantage. Warrnambool. Fairfax Media Publications Pty Limited.

Sudhaman, A. (2005). Tourism Australia ads roll into new markets. Honk Kong. Haymarket Business Publications Ltd.

Swan W. (2012). FED: Education will boost Asia links: Swan. Sydney. AAP General News Wire.

Terada, T. (Apr 2000). The Australia–Japan Partnership in the Asia-Pacific. Contemporary Southeast Asia. Vol22: 175-198.

Tourism Australia, (2011). Whole of government working with industry to achieve Australia’s tourism potential December 2011. Canberra

World Travel & Tourism Council (WTTC) (2013). Economic Impact of Travel & Tourism

Mid-Year Update. London.


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