NewMatilda.com : You have said that the most dangerous part of the world is North Asia within that triangle of unresolved tensions between China, Japan and the Korean Peninsula. Why?

Paul Keating: Simply because there was no settlement after World War II, there was no resolution of issues in North Asia. Japan got tucked under the wing of the United States, the communists in China had their revolution, [and]you know the history of the Korean Peninsula. So there was no resolution and the enmities have gone on ever since.

China is a different State now a rising one. Japan moreover is a declining one, because its population is beginning to shrink. People say the Middle East is the most dangerous place but there are four and a half million Israelis and the Palestinian population is about one and half million that is not 1.3 billion, 160 million, and 73 million respectively, that is of an altogether different scale. And it is scale that creates the problems.

But what evidence have we that the tensions are increasing between China and Japan?

What evidence we have is from anyone who knows these countries, anyone who goes there.

The attitude among young Chinese today is far more vociferous against the Japanese than that of their parents. And the younger members of the conservative Japanese elite, the Liberal Democratic Party (LDP), remain resolutely in the position of their grandfathers about the war in the Pacific, and their attitude toward China and the Chinese. So this is pretty worrying. It’s not just that there is a bit of latent antipathy there, it is growing.

But you’ve talked about an arms race. Are you saying that Japan and China are arming themselves in the event of a future war?

As I said in my Evatt Foundation speech,  the Chinese are certainly arming themselves. They would say that they’re arming themselves in a defensive way because we are complicating any force projection calculations over a future fight over Taiwan.

But as well as that may be, it’s all just going up and up: the Chinese having 2600 combat aircraft 800 of them capable of being ship borne; the Japanese, for their part, asking the Americans if they can buy the F22 Raptor aircraft, which is not a defensive plane; and the development of the substantial Japanese blue-water navy.

If it was just the two of them, you would say lets keep an eye on them. But you have two tinderbox points: Taiwan and the Korean Peninsula. We now have North Korea in a position where it can make nuclear weapons and, should it wish, fire them across Japanese cities all the Japanese cities. This drives the Japanese mad. So it may not be the Japanese and Chinese who end up in some incident with each other but a third party that lights the torch to the trouble.

Do you think there are enough diplomatic efforts being made to stop a future war in Asia?

There are no diplomatic efforts being made. That was my point about the current APEC meeting; that is why I built the APEC leaders’ meeting to begin with. The point of it was to recognise the post-Cold War opportunity for regionalism to have a structure where the Japanese and the Chinese could actually meet each other. Before APEC, before the leaders’ meeting, there was no place. And no structure that was pan-Pacific in the sense that the strategic guarantor of Japan and Korea and the Philippines that is the United States could be present.

It’s all very well leaders turning up in their funny shirts and moving forward gradually with an economic and trade agenda. The APEC meeting is of its essence a strategic meeting anything where the US President puts his knees under the table with the Chinese President, and the Japanese Prime Minister and the Indonesian President is a strategic body.

What do you do with strategic bodies? You use them to resolve strategic issues. And the big unresolved strategic issue in our own world is, what place in the Chinese scheme of things does Japan have in the longer run; and what attitude will Japan take towards China as China becomes the predominant economy in North Asia, other than believing in the US strategic umbrella as the answer to all problems?

There were criticisms of your comments saying that China and Taiwan would never sit down at a table together. How can APEC, quite frankly, deal with this issue?

Well of course you would not be sitting down with the Taiwanese on this. You would sideline them to facilitate the China-Japan discussion. Simple as that. You see there are bilateral meetings at APEC. And trilateral meetings go on. There is no reason why we could not have an executive group within APEC including the US President, the Chinese President, the Japanese Prime Minister and the Indonesian President, perhaps the Prime Minister of Australia, and in that group you could focus on these issues.

This is a furphy about Taiwan and Hong Kong. Hong Kong could be gone from APEC tomorrow if the Chinese decided that.

A piece in The China Daily  last week called Australia and Japan best friends. We have our joint security agreement with China and we have been a loyal partner to the US in the ‘War on Terror.’ We now have a strategic relationship with India as well … and the military exercises of the Quadrilateral Initiative which brings together those countries, and Australia, Japan and the US are having separate talks during APEC. Our defence interests in the last couple of years have very clearly looked to the United States. Can Australia realistically be a mediator?

Let me step back a little from the question and put this context to you. There have been two basic thoughts about Australian foreign policy: there are those who seek to find Australia’s security ‘in’ Asia, and those who seek to find Australia’s security ‘from’ Asia. I am the leader of the ‘in Asia’ camp, and John Howard is the leader of the ‘from Asia’ camp.

When I was the leader and Prime Minister of the ‘in Asia’ camp, I put the APEC leaders’ meeting together. It might seem a bit fanciful to suggest that a country like Australia could bring together countries like the United States, China, Japan but it happened. Just as the Chemical Weapons Convention happened, just as the Cambodian Peace Accords happened, just as the development of the ASEAN Regional Forum happened these are the express outcomes of Australian foreign policy.

So, Australian foreign policy in the hands of an ambitious person could deal with the US, Japan and China on broader stability issues. But of course there has to be cards up for a game like this you can’t be having trilateral meetings on the side with the Japanese. And the problem for Australia is that it has a Prime Minister, John Howard, who basically has most of his eggs in the North American basket.

So do we have an indication that Rudd is willing to look at this in a different way?

Well, at least he understands the issues.

You’re saying his background as a Sinologist …

No, not simply because he speaks Chinese. I happen to like scrambled eggs but I am not a chicken. You don’t have to speak Mandarin to understand China’s issues. Kevin Rudd understands the issues where the current Prime Minister of Australia does not. Always take the person who understands the issues over the one who doesn’t: it is always the shortest way to a solution.

So, I think that Australian foreign policy can still play a more substantial role in the Australia Pacific dialogue but Australia would have to have good intentions towards everyone to be effective at a table.

Good intentions towards everyone, meaning?

The Chinese, the Japanese, the Koreans, and the Americans.

Keating at the APEC meeting in Bogor, Indonesia in  1994

You’ve mentioned that the inability of Europe to accommodate the interests of a rising Germany started a cycle of conflict including World War I and World War II. I quote: ‘the world has never seen the rise of a major new power without a war.’ What is currently in place to prevent that happening again in Asia?

We have seen recent significant redeployment of the US military into East Asia; we’ve just had reports of a US build up in Guam; we’re seeing a military build up of Japan; support for Taiwan independence; pressure for an embargo on Chinese goods by the EU and the US; currency revaluation pressure; and a long war that has prevented Chinese access to energy. Couldn’t we argue that international politics is doing nothing to prevent simmering Chinese resentment and belligerence the same sentiments that were in Germany prior to World War II?

I think you can argue that. The great problem for the world is that at the end of the Cold War the Americans cried victory and walked off the field. Four American presidential terms have been more or less wasted the two Clinton terms, and now the two Bush terms. There was no new structure built in recognition of the fact that the Cold War bipolarity had gone. So the US should be trying to build a structure where it is the first amongst equals, where it actually helps bring China and India into the world. And not continuing to push away the Russians.

And in this way we would actually have an alignment by these States of their foreign and defence policies with their economic policies. At the moment the economic policy of China and the defence structure of China are different. The Americans were so successful with liberal internationalism during the Cold War, but right at the penultimate moment of their success they abandoned it in favour of a militant unilateralism of the kind we now see. That means there is no structure.

The world is run unrepresentatively, that is the principal problem. You have half of humanity in India and China but they are not in the power game. The world is still set up on the template of 1947 in the G8 you still have States like Italy and Canada. Now I happen to like Italy and Canada, but you wouldn’t have them there at the expense of China and India. But we do.

So when 11 September 2001 came along, the American Republican elite took from that the wrong message, in my opinion, instead of trying to set up a more representative world structure. We don’t have an international structure which reflects the post-Cold War world we now live in.

You have talked about easing China into the world. But isn’t the reality that China doesn’t want to ease into the world at all.

That’s a wrong judgment by you. Of course they want to ease into the world. That’s why they joined the World Trade Organisation they want to be in the world.

Sorry the emphasis was on easing into the world they are very ambitious.

Ok, they are growing very strongly 11-12 per cent per annum you could hardly call that easing. But look where they started from. The last time China was really powerful was at the end of the  17th century. You can say most of the  18th century, all of the 19th  century, into the  20th century they have had misery, and in the  21st century they have made a great leap. Of course they are growing rapidly, and the base of the Chinese economy is picking up, but it’s not doing more than Japan did in the 1960s really.

So what you mean by ‘easing’ is: slowly allowing it to be part of the international system?

To be a part of the international economic trade and payments system and having a strategic place that recognises China’s unique entitlement as the largest continental power in North Asia.

John Mearsheimer wrote an article called ‘Conflict Is Inevitable’ about future US-China tensions and Aaron Friedberg and others have cast doubts on economic interdependence preventing future tensions between the United States and China. What is your view of this? Because America is starting to talk very long and hard about China and its economic and military power …

I do not think China is going to be a military threat to the United States. It certainly will be a commercial threat of a kind, but then the Chinese, reasonably wise as they are, have now decided with their mercantilist policy of reserves, to recycle those reserves into US dollar assets and have lived with the ignominy of the US dollar assets falling in value by 30 per cent. In many respects, it is not much of a policy: you work hard, you make wealth, you invest it in US dollars and you lose 30 per cent. At least you would have to say that there is a co-operative if not jovial quality to them.

They are part of the world, they are part of the monetary system now and they are part of the world saving system.

I think more than anything else they want recognition that they are not simply a former agrarian State getting two big for its boots rather that they have a right to lift one and a quarter billion people, a quarter of humanity, from poverty. And attempts by anybody in the US or Europe to hold them back are as foolish as the attempts made by Russia, Britain and France, to question the legitimacy of Bismarck’s creation of Germany at the end of the 19th Century. And we all know where that led us.

You said quite a while ago that this was going to be the Asian century. Do you still believe this and if so, how should our foreign policy be placed?

Population is a principle driver of GDP. And that means this will be the Asian century. This will be the Chinese century.

If you look at the last couple of hundred years, you could say the first half of the 19th century belonged to Britain; the second half belonged to the east coast of the United States; the first half of the  20th century belonged to the United States especially its west coast; the second half of the  20th century belonged to Japan, and the first half of the  21st century will belong to China.

One way or another it is clear to me that the Asian economies 80 million Vietnamese, 1.2 billion Chinese, 160 Japanese, 200 million Indonesians this is going to be the growth focus of the world. It’s not going to be the Western economies, it’s not going to be Europe. This will be the growth place and all the more reason why the US will have drag along rights with the Chinese; drag along rights for growth and prosperity from China. So jerky movements would be most ill-advised.

I don’t take this simplistic view that economic interdependence means that there will be no strategic rivalry of a military variety. I don’t think that is true. World War I makes that point pretty well.

But how has the emergence of China changed the international system? What are we seeing with the emergence of China and India?

We’re seeing the development of a multi-polar world whether the American Republicans like it or not. The question is: does the US have the humility and wit to shape that world to best serve its longer-term interests?

In other words, is it able to shape the world so that in 20 years or 30 years from now when it is not the only dog on the street but when there are other large States with big populations sitting beside it.

Will those populations say as the Europeans say to the Americans: ‘in your magn
animity at the end of World War II with the Marshall Plan, you gave us back our civic life and civic progress.’ Will Chinese and Indian people be saying that of the United States in 20 or 30 years time? Or will they come by their position despite them? That is the big question for the United States.

US Pacific commander, Admiral Tim Keating recently said that Chinese leaders offered to carve up the Pacific into Chinese and American spheres a notion the Admiral rejected. The Chinese said ‘Here is what we’ll do: you’ll take care of the Eastern Pacific, we’ll take care of the Western Pacific, and we’ll just communicate with each other.’ Keating said he rejected the plan. It seems the Pacific is becoming an interesting theatre, and we’re obviously a part of that.

I wouldn’t take too much notice of admirals and commanders they all like big ships and big fleets. Go to governments and the heads of government in making the shape here.

There was an epiphany at the end of the  20th Century few people expected: the fall of the Berlin Wall and the dissolution of the Soviet Union. The Reagan and George Herbert Bush Administrations did everything in their reasonable power to facilitate that event. And they facilitated and helped it very well. Since then, what have we seen?

Nothing. Nothing from the Clinton Administration, nothing from the Bush Administration. Nothing. The problem is that we have now lost 17 years.

Meanwhile China is now a larger economy. It is about 6 trillion of GDP. It is about the same size as Japan but Japan is growing at 1 per cent, and China is growing at 11 per cent. India is coming up, as are parts of South America, and Russia. It is just incompetent for the United States, having managed the post World War II world so well, to run off the field when foreign policy and structural dexterity really mattered.

But we haven’t seen any leadership in challenging the United States in the last couple of years, we have seen in my view in the ‘War on Terror’ Britain, Australia, so many countries go to America’s aid. Has there been much challenging behind closed doors?

No. The last big idea in the world belonged to Helmut Kohl and François Mitterrand, trying to divine a common market in Europe a European community, a European Union with a single currency and a single constitution. That was the world’s last big idea.

There haven’t been other big ideas since. There could have been, but middle power countries like Australia rolled over, seeing most things American in terms of the current Administration. And we just don’t see the Statecraft being applied and brought to bear in the world anymore. The whole notion of Statecraft has disappeared.

Many have talked about strategic hubris overcoming China as well as an implosion within its borders. What’s your view of how the Chinese are managing the vast problems and many issues they have to deal with?

They are managing quite well. I think in terms of competence, they are the best government in the world. There is no doubt about that. There is no OECD government within coo-ee of it. Imagine giving the French Government or the United States Government the Chinese problem. They would not know what to do with it.

So let’s say we give the Chinese strong marks for trying. The problem is that China is a patchwork quilt of prosperities. China is not just one place. There is prosperity in various places in China and this puts a tension across the whole State. The Chinese Government understands this and it is seeking therefore to develop the centre and the west of China so that all the prosperity is not simply in the eastern provinces. This is hard to do.

In Britain and the United State at the beginning of the industrial revolution, people in what were essentially agrarian societies moved off farms into cities, and we ended up with quite small farm communities able to produce food through increasing productivity. The problem the Chinese have is that they’ll have 600 million people on the coast in the cities, they’ll have about 800 million in the hinterland of which probably 400 million maximum will be produce food. So there are 400 million people surplus to requirements in China. This has never been true of the US or Britain.

So what do you do with those people? Well what they do with those people will tell us a lot about Chinese unity and cohesion.

But at least this is a government in China which is thinking about and trying to deal with this problem.

What about the idea that in the lead-up to the Beijing Olympics, the US might put a bit of pressure on, and there is the chance of a Chinese strategic mis-step an inability to contain the idea that this is their century?

I can’t see it in the immediate future. None of us have crystal balls, but I don’t think so. The problem is that if the growth continues as it is and the wealth continues to compound on the eastern seaboard of China, can they hold the polity together, and the answer is: we don’t know. We hope so.

People worry about a burgeoning China, but they may well worry more about a divided China. We’ve got to hope that, as a nation, they keep their act together and keep their country together. In that way at least, we are dealing with a unified whole with whom we can do business.