RAY SUAREZ: The island continent of Australia may be 8,000 miles from the West Coast of the United States, but a year ago it was the center of the world, as the site of the summer Olympics. The nation of 18 million people, once a British colony, used the occasion to show the world its ethnic and cultural diversity and to prominently showcase its native aboriginal population. Australians and Americans have fought side by side in five wars since World War I. And today in Washington, Prime Minister John Howard observed the 50th anniversary of the formal alliance between the nations, the so-called ANZUS Pact. A ceremony was held at the Washington Navy Yard.
PRESIDENT GEORGE W. BUSH: Australia is a strong and peaceful presence in East Asia and the Pacific. Australia's a generous land, mindful of the struggles of poor nations, always helping when and where it can. Your government and your good people are an example of democracy, individual liberty, and the virtues of free trade amongst all nations.
RAY SUAREZ: Later, at the White House, Howard met with President Bush to discuss trade and other issues. Australia wants a free trade agreement with the United States, but the Bush administration has not yet committed to that idea. Two months ago, Secretary of State Colin Powell and Defense Secretary Donald Rumsfeld made an unusual joint visit to Australia to discuss forming tighter security bonds among countries on the periphery of China, including Japan and South Korea.
But since that visit, members of the opposition Labor Party have warned against being drawn into an anti-Chinese alliance. Australia's major security issue is to prevent the possible collapse of its next-door neighbor, Indonesia, with its population of over 200 million people. Two years ago, when Indonesia ended its occupation of East Timor and chaos ensued, Australia took the lead in forming an international force to restore order. Australian troops still are the largest component of the UN peacekeeping force there.
JOHN HOWARD: The government has left me no alternative...
RAY SUAREZ: Howard's right of center Liberal Party controls parliament, and new elections may be called within weeks. Even as Australia has emphasized its role as an Asian nation and absorbed more than 800,000 ethnic Asians, immigration issues remain a flashpoint in domestic politics. The government's poll ratings have jumped since it refused to admit a cargo of more than 430 mostly Afghan refugees on a Norwegian ship off the Christmas Islands. After a week of diplomatic maneuvering, a deal was worked out for Australia to pay for the refugees to go to New Zealand and the Pacific island nation of Nauru.
JIM LEHRER: Now to Prime Minister Howard, who joins us for a Newsmaker interview. Mr. Prime Minister, welcome.
JOHN HOWARD: Good evening, Jim.
JIM LEHRER: On this Afghan refugee situation, why did you not allow those people into Australia?
JOHN HOWARD: Well, because they were illegal immigrants. We're very happy to take refugees and on a per capita basis we take more refugees than any country except Canada, but if you allow illegal immigration of that type to interrupt the refugee flow, you really are allowing those people to go ahead of others who may be assessed by the UNHCR as being more in need of refugee acceptance into Australia.
JIM LEHRER: Even 430 people would have made that big a difference in a country as large as yours?
JOHN HOWARD: I mean, that wouldn't have been the end of it. There are estimates of thousands of people wanting to come to Australia. And we have a very large coastline. It is an island continent. If you continually have the situation where we're seen by people smugglers as being an easy touch, the number of people wanting to come will grow rather than diminish.
JIM LEHRER: What do you say to those who say there were domestic political ramifications of this, that if you had not been approaching a probable election you might have taken a different turn?
JOHN HOWARD: Well, I would say that we can hardly be accused of having arranged for a vessel out of Indonesia to founder and be picked up by a Norwegian fighter. I mean, those circumstances were impossible to organize; that's what I'd say to them.
JIM LEHRER: But there is no question, is there not, that your decision was politically popular in Australia? The majority of the Australians did not want those people to come in?
JOHN HOWARD: Well, whether it ultimately turns out to be politically popular or not is beside the point. We did it because we thought it was the right thing to do, and we did it against the background of having taken refugees on a very generous basis, indeed, a more generous basis, than many of the countries around the world that have presumed to criticize us for what we've done.
JIM LEHRER: On your trip to Washington, this unwillingness of President Bush to start free trade negotiations immediately, that must be a great disappointment to you?
JOHN HOWARD: No, I understand there are domestic political reasons here in Washington for that. I mean I'm a realist. I appreciate the domestic political challenges of fellow leaders. He's got to negotiate...
JIM LEHRER: Everybody has them, in other words.
JOHN HOWARD: Of course they do. I have them. George Bush has got them. You have got to be realistic in this business. And he's got to negotiate a mandate, a trade mandate from Congress, a trade promotion mandate. Right at the moment, those negotiations might be compromised by any commitment in principle, but once that issue is resolved I would hope that we'll return to the question of looking at the possibility of a free trade agreement between our two countries. I think there could be a lot in it. And I hope when the other issues are resolved, we can get back to it.
JIM LEHRER: Why is this important to you in Australia?
JOHN HOWARD: Well, because there's a great complementarity between Australia and the United States. We're both modern, sophisticated, highly educated, very progressive economies. Obviously there's a huge difference in size. But things like Internet usage and those types of things are almost as high in Australia as they are in the United States. On a per capita basis we're very similar. I think there is great potential. There will be a lot of hurdles particularly in the area of agriculture. We may not in the end find it worth the candle. But we've got to at least have a go and see if we can find the basis of a mutual agreement.
JIM LEHRER: What would be in it for Australia? What would be the advantages of having a free trade agreement with the United States?
JOHN HOWARD: Well, access to an enormous economy.
JIM LEHRER: What is it that you have that you can't sell here now in an open way?
JOHN HOWARD: Well obviously we would like some progress on agriculture.
JIM LEHRER: Like what? What products?
JOHN HOWARD: A whole range right across the board. But when you have a level of sophistication and technological skill, which is very similar, I think the potential is enormous. We get a lot of investment from the United States. The U.S. is our largest foreign investor. We invest quite a bit back. So I think it's a natural fit for the future. And when you have a close relationship, as we do with the Americans, it's always a mistake to sort of just sit on it and assume that it will look after itself. You've got to...like friendships, you have to keep good relationships in good repair.
JIM LEHRER: What is the relation...the economic relationship between Australia and the United States beyond trade? How do you....
JOHN HOWARD: Well there's a lot of linkages in the financial sector. I mean many of the banking houses of America are operating in Australia and of course it comes back the other way. You take an organization like News Corporation that started in Australia.
JIM LEHRER: That's Rupert Murdoch's organization.
JOHN HOWARD: Of course. So it goes both ways.
JIM LEHRER: Now our economy, the U.S. economy right now is having its problems. What's the state of the Australian economy?
JOHN HOWARD: Very strong at the moment. We're actually growing at a very strong clip. I think if things go as predicted, the next calendar year we could grow faster than any economy in the industrialized world. We've had solid growth of around, average around 4 percent for the last few years. We have a big budget surplus. We've seen employment growth although our unemployment rate is still higher than yours. Right at the moment the outlook in Australia economically is very strong indeed.
JIM LEHRER: How have you escaped the problems...even Japan which is closer to you and the other problems in Asia, how have you escaped this...the economic roll of the dice here?
JOHN HOWARD: A number of reasons. One of them is we've run a very flexible exchange rate. We're able to shift a lot of our exports out of Asia to North America and Europe when the Asian downturn hit a few years ago.
JIM LEHRER: You were selling things to Asia, things went bad and you went boom.
JOHN HOWARD: We shifted quite a bit, not all of it but we were able to avoid the hit from Asia. And on top of that we've reformed our tax system and taken about $3.5 billion Australian a year out of the costs of our exports because we have an across-the-board value-added tax now, a goods and services tax; and that doesn't apply to exports. That's given our exporters an enormous boost. We've reformed our waterfront, which has made our export sector a lot more efficient. So a lot of those things have come together to enable us to absorb the shock of what happened in Asia. Now obviously we're watching what is happening here in America because America is the dominant economic power in the world.
JIM LEHRER: So it could hurt you in the long run?
JOHN HOWARD: Well, everybody can be affected, but we've done everything we can domestically to insulate ourselves against it, and the omens at the moment are very positive for Australia economically.
JIM LEHRER: All right; the security issue. You and President Bush observed the 50th anniversary of the military alliance today. How do you read security threats in your part of the world? What is it that....
JOHN HOWARD: We don't think anybody is waiting to attack us but we do live in a region which is very unstable. There will, I think, be in the future I think be the potential for outbreaks of political and domestic instability in our immediate region. We've seen a lot. We've seen East Timor; we've seen Bougainville; we've seen difficulties in Fiji. We do live in a more unsettled region. Paradoxically it's more unsettled since the old divide between the Soviet Union, what used to be the Soviet Union and the United States has disappeared. So you do need to have a defense position which protects your continental position but also gives you a capacity to help when help is needed in the region.
JIM LEHRER: What is your view of China as a threat in your part of the world?
JOHN HOWARD: Well, I think... I tend to take a positive view about the relationship with China and the relationship between China and the United States is obviously critical to stability in the whole region. Our urging is also for very constructive dialogue. I think that's the president's view too.
JIM LEHRER: Richard Armitage, who's Deputy U.S. Secretary of State, made a speech in Australia last month and caused a stir when he said, "Australians must understand that being in this military alliance with the United States means being willing to fight and to die." A lot of people jumped on him. What was your reaction?
JOHN HOWARD: Oh, I didn't jump on him. I know Rick Armitage very well. He's a passionate devotee of the Australian-United States relationship. He was, you know, expressing the passion of his feeling. I don't think any of us envisage a situation in the near term where fighting side by side in those terms is going to occur. But, remember, in the past Australians and Americans have fought side by side. By the strength of our alliance have to avoid the necessity of it happening again.
JIM LEHRER: Some people interpret that as his saying, hey, we may have to come to the aid of Taiwan against China. We want Australians there by our side and we're going to ask for it. Did you interpret it that way?
JOHN HOWARD: No, I didn't interpret it that way. I just interpreted him as...it was a dramatic and rhetorical way of emphasizing what a close alliance means. And we do have a close alliance. I mean, there is no country that we're closer to in a strategic and ideological sense.
JIM LEHRER: So from your point of view he was telling you what you already knew, is that right?
JOHN HOWARD: He was expressing the reality that it's a very close alliance and a very close friendship. Neither he nor I, or indeed anybody, wants to do anything to provoke a conflict between China and Taiwan. It's in everybody's interest to engage China in dialogue. It's in everybody's interest to reach out consistent with defending our own values and our own system and our own position. I mean, we have a pragmatic approach to the Chinese. We're very different. We tend to focus on the things that we have in common rather than the things that divide us.
JIM LEHRER: But you don't have any problems with the Chinese now, any outstanding controversy?
JOHN HOWARD: No, no, we don't. In fact, there are hundreds of thousands of Australians of Chinese descent particularly living in Sydney and other major cities. We have a very different philosophy. I mean, we're an open democracy; China is not. But what you do in a situation like that is focus on where you can move forward together.
JIM LEHRER: You don't see them...when you sit down at your desk everyday, as a potential enemy of Australia?
JOHN HOWARD: No, I don't. I don't think anybody wants to attack Australia. But we do live in a region that has the potential for local instability in a number of spots. That's a very different world in a way from what it was a few years ago.
JIM LEHRER: All right. Mr. Prime Minister, thank you very much.
JOHN HOWARD: Thank you.