Australia's Foreign Economic Policy and ASEAN

2. An Analytical Framework

2 An฀Analytical฀Framework As the economic interdependence of countries continues to deepen and become more complex, it is widely acknowledged that it is difficult to draw a sharp line between foreign and domestic economic policies. Both international and domestic factors matter in foreign economic policymaking . Yet how domestic policy processes matter in explaining the foreign economic policies of states remain major questions in international relations theory. An important question is whether individual intention or circumstantial constraints are the primary factor in explaining states’ foreign policy behaviour. This chapter sets out a framework for analysing the formation of, and changes in, Australia’s foreign economic policy. First, the international system is seen as the environment in which a state like Australia, which alone does not normally possess the capability to have a major impact on the international system, must operate. For Australia, international environmental factors inevitably restrict foreign economic policy choice. In most cases, Australia has to react to, rather than try to exercise control over, changes in the international environment.1 Second, while the international environment does restrict the foreign policy behaviour of a smaller state, this does not necessarily mean that the environment forces a state to take one particular approach on 02฀AFEP&A.indd฀฀฀17 12/15/09฀฀฀3:01:17฀PM 18฀ Australia’s฀ Foreign฀ Economic฀ Policy฀ and฀ ASEAN particular policy issues. Rather, the international environment imparts a certain range of foreign economic policy options that a smaller state can pragmatically pursue. Within this range of policy options, a state like Australia, for example, can attempt to realize its policy goals by choosing a policy (or a set of policies) that it perceives as being in its best interest. Third, the state’s choice of foreign economic policy is influenced by how it relates to the domestic society and polity, represented mainly by a variety of societal and political interest groups. State-society relations need to be brought into consideration in the explanation of foreign economic policy formation. As a state tries to implement policies according to perceptions of contemporary and future domestic needs, it has, to a certain degree, to be receptive to policy demands of the societal and political interest groups. But the state is not a mere agent of domestic interest groups. It can play a role in forming policy preferences on how best policy goals can be achieved through certain ideas, knowledge and processes. The concept of “state-society coalitions”, which share basic beliefs in certain policy ideas, in the domestic policy process provides a useful approach to state-society relations. The formation of domestic coalitions and changes in dominant coalitions can cause changes in policy ideas, which in turn will lead to shifts in a state’s foreign economic policy. I.฀ THE฀INTERNATIONAL฀SYSTEM฀AS฀A฀CONSTRAINT฀ ON฀POLICY฀BEHAVIOUR System-level฀Approaches The 1970s saw the emergence of structural theories to explain the relations between the international system and the individual state’s behaviour. “Structural realists” define the structure of an international system as being the arrangements of its parts which are determined by its principal parts, and other states are assumed to act along with these arrangements made by powers (Waltz 1979, chap. 5). Then, they assume that the fundamental principle of the international system is “self-help”, rather than the maximisation of power as suggested by traditional realists (Waltz 1979, p. 126). When “rational” states decide 02฀AFEP&A.indd฀฀฀18 12/15/09฀฀฀3:01:17฀PM An฀ Analytical฀ Framework฀ 19 how to act externally, they do so with consideration and anticipation of how other states react and what consequences it will bring. Relativity of states’ capabilities, or distribution of capabilities, will significantly influence states’ decision making (Waltz 1979, p. 97). If distribution of capabilities changes so does states’ anticipation and expectation, therefore their foreign policy behaviour.2 The point of the structural realists’ argument is that, under the assumption of self-help, states’ behaviour can be explained by the distribution of capabilities alone, which is a system-level variable. In other words, unit-level variables such as states’ attributes and interactions do (or should) not matter when explaining their foreign policy. Cooperative behaviour from states can only be expected when there is a hegemon that is capable of, and willing to, provide and maintain “international public goods” such as security alliances and sets of rules for international economic transactions (Kindleberger 1973; Gilpin...