CHICAGO - The economic expansion and growing political influence of China and India is a benefit, not a threat to American leadership and the global system, Australian Prime Minister John Howard said.

The economic expansion of both nations is swelling the ranks of the global middle class and will lead to greater political participation and envioronmental stewardship, he said.

Australian Prime Minister John Howard speaks at the Chicago Council on Foreign Relations in Chicago May 17, 2006. [Reuters]

"China's rise is one of the defining phenomenon of our age," Howard said in a speech to the Chicago Council on Foreign Relations. "We see it as good for China, good for Australia, good for the world."

However, China must contribute more to the institutions that underpin global prosperity and security and the international community must work to build on shared interests and widen the circle of cooperation if China is to be a "constructive member of the international system," Howard said.

"It is not only China that needs to adjust to changing realities. The international community must also acknowledge that China is determined to succeed and to reclaim its place in the global order," Howard said.

"A constructive dialogue between the United States and China, which allows frank and open discussions, will contribute greatly to regional peace and stability."

Howard said he anticipates that India will play a greater role in regional affairs and that India's recent agreement with the United States on nuclear issues will "provide greater transparency and contribute to reducing nuclear tensions in the region."

"With an increasing intersection of interests, I envisage our two countries developing a close economic and security partnership," he said.

Howard reiterated Australia's commitment to stay the course in Iraq and warned against American isolationism.

"I know that there is a view among some in America that you are too much involved in the world," he said. "It is vital for America's interests as much as those of the rest of the world, that America not retreat."