Australia's Foreign Economic Policy and ASEAN

8. Conclusion

8 Conclusion Australia’s foreign economic policy towards ASEAN has changed considerably over the past thirty to forty years. The change has not only closely reflected the shifts in Australia’s overall foreign economic policy orientation but at times it also strongly drove those shifts. This chapter reviews the findings and insights of previous chapters. The implications for Australia’s foreign economic policy in the future are also raised. The chapter concludes with a remark that the bilateralist approach as the dominant strategy for Australia’s foreign economic policy is likely to continue for some time. I.฀ THE฀RISE฀AND฀FALL฀OF฀STATE-SOCIETY฀ COALITIONS฀AND฀CHANGES฀IN฀฀ AUSTRALIA’S฀ASEAN฀POLICY To explain the changes in Australia’s foreign economic policy towards ASEAN, the book focused on the evolution of state-society relations. By positing virtual coalitions among state and society actors with shared beliefs on policy ideas (perceptions of causal relationships between policy goals and the most effective policies for realizing those goals) as the 08฀AFEP&A.indd฀฀฀247 12/15/09฀฀฀3:04:14฀PM 248฀ Australia’s฀ Foreign฀ Economic฀ Policy฀ and฀ ASEAN core competitors in the policy process, this book’s approach facilitates a layered analysis of factors affecting Australia’s foreign economic policy and its ASEAN policy decisions. Changes฀in฀the฀International฀Environment฀and฀Shifts฀in฀ Australia’s฀Foreign฀Economic฀Policy An analysis of the foreign economic policy of a smaller state like Australia needs to begin by defining the international structure, or environment, within which the state has to operate. The core policy ideas of state-society coalitions are difficult to change. Yet changes in the international environment may induce replacement of a dominant coalition with another coalition, because such changes in the international environment can act as exogenous shocks that shake the perception of the validity of the dominant coalition’s policy ideas. The protectionists’ domination began to erode in the 1970s when the international economic structure changed drastically after the first oil crisis. The beginning of globalization of national economies was associated with a slide in Australia’s terms of trade from the mid1970s well into the 1980s. During this period, there was continued questioning of the effectiveness of Australia’s traditional economic policy strategy, which was characterized by “protection all round” and the institutionalized wage arbitration system that led to inflationary pressure and low productivity growth (thus, lower competitiveness) particularly in manufacturing. This growing realization of the nature of Australia’s problems led to the emergence of the trade liberalizers as an alternative policy coalition. Another substantial deterioration in Australia’s terms of trade in the early 1980s was the final blow to the dominance of the protectionists. The trade liberalizers replaced them as the dominant coalition in Australia’s foreign economic policy-making and, from the mid-1980s, gradually introduced unilateral liberalization and deregulation of the domestic economy and actively promoted the process of multilateral trade and investment liberalization. The stagnation of multilateral and regional liberalization initiatives in the latter half of the 1990s undermined the belief in the effectiveness of unilateral and multilateral liberalization policies that formed the core of the trade liberalizers’ policy ideas. In these circumstances, some of Australia’s economic partners, such as Singapore and New Zealand, as 08฀AFEP&A.indd฀฀฀248 12/15/09฀฀฀3:04:14฀PM Conclusion฀ 249 well as Japan and Korea, who had previously avoided discriminatory trade arrangements, began to adopt bilateral FTAs as their trade strategy. Yet an initiative to establish an FTA among ASEAN members, Australia and New Zealand was shelved in 2000. These developments impacted on Australia’s coalitional setting and allowed the rise of the bilateralists, who preferred short-term, concrete and reciprocal economic gains from Australia’s foreign economic policy. Changes฀in฀ASEAN฀Policy These changes in the international environment help in some measure to explain the shifts in Australia’s foreign economic policy in general terms. But they are not sufficient to explain the nature, timing and extent of the shifts. Changes in the international environment do not force states to adopt any particular policy at any particular time. Rather, they create opportunities for changes in dominant coalitions. Detailed examination of the core policy ideas of state-society coalitions and the evolution of the settings in which they came to have influence are needed to explain fully how and when changes in international circumstances mattered, especially in relation to...