Commentary | 16 November 2014

A successful summit still leaves Abbott miffed

A successful summit still leaves Abbott miffed

Mike Callaghan

Australian Financial Review

16 November 2014

Please click here for the online text.

  • Mike Callaghan

A successful summit still leaves Abbott miffed

Mike Callaghan

Australian Financial Review

16 November 2014

Please click here for the online text.

  • Mike Callaghan

Executive Summary

It was a successful summit. But Tony Abbott must feel miffed about how events unfolded in Brisbane.

After running a tightly focused agenda and landing some substantive outcomes, the issue he did not want to cover, climate change, took centre stage. Moreover, President Putin’s attendance was a distraction. Putin may have received the cold shoulder from some leaders and left early, but he seemed to be as belligerent as ever and berated those countries who had imposed sanctions on Russia. Not a positive for a forum focused on cooperation.

Was this bad luck or bad management? Putin was bad luck. In the case of climate change, however, more deft management by Australia in the lead-up to the summit could have avoided the Prime Minister appearing to be caught-out and isolated by the China-United States emissions deal on the eve of the summit. In addition there was the US pledge to contribute $3 billion to the Green Climate Fund and Japan’s pledge to contribute$1.5 billion.

But there were many positives.

There was progress on strengthening global growth, increasing infrastructure investment, modernising international tax laws, liberalising trade, advancing financial regulation and strengthening energy collaboration. Australia can rightfully take credit. Australia gave the G20 a clear objective – increasing global growth and creating jobs. While the aim of restoring growth had featured in past summits, the adoption of a growth target put some teeth into the issue and signalled that if G20 members want stronger growth, then they need more ambitious reforms. And saying the aim is to increase global growth by an extra 2 per cent is something the public can understand. It provided the G20 with a clear political narrative.

While some of the reforms outlined in the Brisbane Action Plan appear to be general statements of intent rather than specific policy measures, it is a vast improvement from similar action plans released at past summits. Some countries seemed to have been pushed beyond their comfort zones to tackle difficult policy areas. Of course implementation is the key. The challenge is evident in the case of Australia, where many of the 2014 budget measures that are stuck in the Senate are part of our growth plan. Then there is the US. What value do you place on the US commitment to comprehensive immigration reform given President Obama’s difficulties with Congress?

But a positive is that the G20 has called on the International Monetary Fund and the Organisation for Economic Co-operation and Development to prepare a regular report on each country’s progress in implementing their reforms. If the reports are taken seriously, it could be a significant step in strengthening G20 accountability.

Increasing infrastructure investment was an Australian priority. The establishment of the Global Infrastructure Hub has been highlighted as a stand-out achievement. What exactly the hub will do and how it will relate to the World Bank’s Global Infrastructure Facility remains to be clarified. The infrastructure hub will make a contribution to increasing infrastructure investment. But things need to be kept in perspective. To say it will unleash trillions of dollars of private financing into infrastructure is an exaggeration. The challenge many countries face to increase infrastructure investment is to improve their investment environment, undertake through infrastructure planning processes and pick the right projects through transparent cost-benefit analysis.

Australia got lucky on trade. The recent deal between the US and India, which resulted in India removing its objections to progressing the WTO Bali trade facilitation agreement, removed a major stumbling block. If India had continued to veto progress on the Bali agreement though the WTO, anything coming from Brisbane on trade would have been hollow. Again the challenge is to follow through with the commitment to implement Bali in full and conclude Doha.

On tax, ending bank secrecy with the introduction of the automatic exchange of tax information between countries is a major achievement. And progress has been maintained on combating corporate tax avoidance and evasion.

There are no quick fixes here but the Brisbane Summit managed to maintain political momentum on the Base Erosion and Profit Shifting (BEPS) initiative by the OECD.

Notwithstanding these outcomes, climate change took centre stage. And this was an opportunity missed. If Australia had not been so negative as to whether climate change would be discussed in Brisbane, it could have seized on the US-China deal and claimed that Brisbane was an important step in building momentum towards the UNFCC negotiations next year. As it turned out, the impression is that the US-China deal overtook Australia’s management of the G20 agenda and Australia reluctantly agreed to the words in the communique on climate change.

Overall verdict, a successful summit.