AmCham Business Briefing

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AmCham Business Briefing – Tuesday 5 August 2014    

Tanya Plibersek, Deputy Leader of the Opposition, Shadow Minister for Foreign Affairs and International Development

In large ways and small, the history and future of Australia and the United States are knitted together.

From General Douglas MacArthur’s decision in 1942 to make his base as Supreme Commander South‑West Pacific in Brisbane, to the individual ties between our people and our troops.

MacArthur told Curtin:

“… we two, you and I, will see this thing through together . . . You take care of the rear and I will handle the front.”

That’s an example of a very large connection.

Ambassador John Berry captured beautifully a smaller, more personal bond between the US and Australia in his recent speech to the National Press Club.

John explained that his father fought during World War Two as part of the 1st  Marine Division in the battle of Guadalcanal.

After the hardship of six months’ fighting, they were sent to Australia to rest and recuperate, and were reminded, he said, that there was good left in the world.

Ambassador Berry said:

“When the ships carrying the Marines arrived in Australia, they were met by a band playing Waltzing Matilda. It was the sweetest sound any of them had ever heard. So profound was this event that to this day, whenever and wherever the 1st Division Marines ship out, they do so to the sound of Waltzing Matilda.”

Our shared history goes back before the Australian Federation in 1901. The 1854 Eureka Stockade was a character forming moment for Australia. Among the rebels there were two hundred Americans, the Independent Californian Rangers.

Years later, the strategic links that developed in World War Two continued and deepened with the ANZUS treaty in 1951 and have remained tight ever since.

In recent years, Australian leaders have worked closely with their US counterparts.

Prime Minister Paul Keating persuaded President Bill Clinton of the importance of creating a leaders’ summit for the Asia Pacific Economic Cooperation forum.

Prime Minister Kevin Rudd was key in President Obama’s thinking on forming the G20 leaders’ summit in 2009.

You might remember the news footage of Prime Minister Julia Gillard throwing a football around the Oval Office with President Obama – to the consternation of their staff, but without breaking anything.

Our business links are also close. The US is our third largest two-way trading partner in goods and services, totalling $55 billion a year. The US is the largest investor in Australia.

Our links are long, they are deep and they are sincere.

As well as our enduring history of shared values, our commitment to democracy, our good understanding of one another, we share some challenges.

In the United States, hyperpartisanship is preventing America from fulfilling its role as the “indispensible nation” that plays such a big part helping build peace and helping solve problems globally.

In Australia, there are times when we’re taking a short-sighted, short-term approach to similar problems, problems such as climate change and inclusive economic growth, instead of working internationally to address them.

Working together to tackle global challenges

Australia has historically played a larger role on the world stage than would be expected from our population of 23 million people. We’ve helped shape global institutions of cooperation such as the United Nations, the World Bank, and the International Monetary Fund.

As a small nation in terms of population, we have always understood that some problems are too large for us to tackle on its own. So we have been keen to enlist support from others.

Australia played a key role persuading the United States and others to elevate the status of the G20 group of major economies to tackle the Global Financial Crisis, because Prime Minister Kevin Rudd and Treasurer Wayne Swan understood that co‑ordinated global action would be required to deal with the threat of the worst economic down turn in three quarters of a century.

I’m worried that in both the United States and Australia at the moment there are some who put short-term domestic political gain above these coordinated efforts to meet the large challenges that face us as a globe.

The challenge of hyperpartisanship in the United States

Partisan politics in the US Congress is as acute as any of us have ever seen.

The refusal of the Congress to support the UN Convention on Law of the Sea (UNCLOS), and reforms to the voting rules for the International Monetary Fund are a couple of examples of hyperpartisanship. Neither is particularly controversial on its own. Yet for what seem to be political reasons they’re stuck in the Congress.

There’s also the more complex question of the Congress’s response to the Trans-Pacific Partnership (TPP).

The TPP is the key economic element of President Obama’s ‘pivot to Asia’. It could be a catalyst for binding countries together more tightly – reducing trade barriers among most of Asia’s major economies and reinforcing rules on free and open trade.

But support for the TPP among both Democrats and Republicans is weak, and China is seeking its own trade agreement with its neighbours in the region.

Congress’s failure to agree on changing the rules of the International Monetary Fund to give a greater say to Asian countries weakens the argument that as Asian countries grow, their responsibility to take part in global institutions also grows. Critics in China, Indonesia and Singapore see this as a sign that the West will never let them share real power in global institutions.

The UN Convention on the Law of the Sea, which the US Senate has refused to sign, defines the rights and responsibilities of nations in using the world’s oceans. The US already abides by these very rules. There’s nothing controversial about them and the US is prepared to do the right thing, but the refusal to sign up sends a signal that the US doesn’t want to be bound by the rules it says we should all live by.

When we’re asking other nations to abide by a rules-based international framework, it is important that we show that we value and support that framework ourselves.

A multilateral rules-based system is our best hope of reducing conflict. But countries have to feel they have a say, that they have buy-in to those systems. They have to feel that they’ve had some say in how the rules have been developed and how they are applied.

The US has been at times the leader and proudest advocate of establishing and following those rules and norms, and it would be a shame for short sighted domestic politics to undermine that proud history.

Short-sighted, short-term politics in Australia

In Australia, we’re making some similar very short-term and ill-advised decisions.

The G20 meeting in Brisbane in November provides two examples.

In its efforts to shape the agenda for the G20, our government refuses to put climate change and inequality on the agenda.

This government is arguing that climate change is not a critical issue for the economy. It’s not a credible argument.

During the World Economic Forum in Switzerland in December 2013, Prime Minister Abbott said that adding climate change to the agenda of the G20 was “clutter”.

Nobody expects the G20 to be the meeting where people make binding commitments or talk about exactly how each country is going to reduce its climate emissions, but what the G20 can achieve is a statement that the G20 members understand that this is a pressing economic issue.

By contrast, the US is setting a very good example on this issue. The Americans want climate change to be on the agenda. Every European ambassador I’ve spoken to is keen for it to be on the agenda.

More than a billion people now live in a country or region that has a price on carbon pollution.

President Obama's plan actively encourages cap-and-trade programs to be developed and implemented by American states and industries.

California, the world’s 8th largest economy, has had a cap and trade program since the start of 2013. More states are moving in that direction.

Two highly respected former Secretaries of the Treasury – Robert Rubin in the Clinton Administration and Henry Paulsen, who served President George W Bush – have both endorsed a price on carbon pollution in recent weeks.

To have world leaders talking about equality, inequality, the brake on economic development that comes with growing inequality, wouldn’t suit the domestic political agenda.

The G20 should also address inclusive growth – which means tackling inequality.

It’s predictable perhaps that I would argue the moral case against growing inequality, but there is also an ever increasing weight of evidence for the economic case that inequality retards growth.

Nobel Prize winning economist Joseph Stiglitz points out how inequality weakens economic performance.

He argues that high inequality is causing huge waste of human talent, because the poor and increasingly the middle class lack access to good education. Inequality leads to lost productivity.

He argues that inequality fosters financial crisis.

He argues that inequality lowers consumption and demand – because the very rich save more than they spend.

He argues that high inequality reduces tax revenue – as the very rich are pretty good at reducing their tax.

Thomas Piketty’s exhaustive research shows that this inequality gap is getting much larger.

The International Monetary Fund published a paper which showed that lower inequality drives faster and more durable growth, and redistribution is generally benign in its impact on growth, except when taken to extremes.

The OECD is not noted for its radical approach to economics. Yet its research shows income inequality in OECD, rich world, countries is at its highest level for the past half century. The average income of the richest 10 per cent of the population is about nine times that of the poorest 10 per cent across the OECD, a seven-fold increase from 25 years ago. There are some very unequal countries in that group, whose inequality is disguised by those average figures.

The communique from last year’s G20 meeting stressed the importance of balanced, inclusive and sustainable growth. But after the G20 finance ministers’ meeting here in Sydney, in February, the word ‘inclusive’ was dropped.

So we see that there is a retreat from this idea of inclusive growth.

Inclusive growth is not a partisan agenda, when you have the IMF and the OECD talking about the benefits of reducing inequality, it’s not a fringe issue, it’s mainstream.

The reason it’s not on the agenda for the G20 is because the reception of this year’s Budget has been very poor, and the reason why it’s been poor is there’s a general perception in the community that it’s not a fair budget.

Conclusion

Australia and the United States are great friends and partners. Part of having a great partnership is our ability to tell each other the truth. We have more latitude to be frank when we support each other on nearly every issue.

We will continue to be involved in each other’s present and future in big ways and small.


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