Published daily by the Lowy Institute

The verdict on Australia's economic diplomacy: Must try harder

The verdict on Australia's economic diplomacy: Must try harder
Published 5 Aug 2016 

The Lowy Institute analysis 'Making the Most of the G20', which argues the G20 should be at the centre of Australia's approach to economic engagement, explores many of the themes that will be aired in this debate.

Australia has a choice. It can actively seek to influence international economic events, or it can play a passive role. 

As an open economy dependent on access to international markets, the first option seems the obvious answer. But it involves more than promoting exports and investment. It means Australia throwing itself into international economic engagement in an effort to influence the policy decisions of other countries and the performance of international bodies with the aim of promoting a stable, open and growing global economy. Easier said than done, particularly when there is little immediate domestic political payoff for governments engaging on international issues. 

But if Australia wants to have an impact, it has to apply the Avis motto when it was the number two car-rental company to Hertz: 'we are number two, but we try harder'. Australia is not big enough, rich enough or ugly enough to passively sit back and think it will automatically be involved in all key international forums or have a major influence in international bodies. If it wants to be heard, it has to try harder.

This point was forcefully made to me when, in my capacity as the prime minister's special envoy on the international economy, I met with Larry Summers in January 2009 to lobby for an ongoing G20 leaders' meeting. While the US initiated the first leaders meeting, it was initially hesitant for an ongoing process. Summers, who was director of the US National Economic Council at the time, said that in selecting members of key international groupings, Australia was not an obvious choice. It was not big enough to be there in its own right and it did not represent a region. There were more 'Asian' countries to represent Asia than Australia.

Australia cannot take for granted its membership of the G20. There was no guarantee it would be included when the forum was formed in 1999. Australia had failed in attempts earlier in the decade to join the G10. Peter Costello pressed Australia's case to be in the G20 and in support highlighted it had an agenda on how to reform the international financial system in the wake of the Asian Financial Crisis. Australia had ideas to offer. These were based on the report of the Prime Minister's Taskforce on International Financial Reform that was established by John Howard in 1998. [fold]

In 2008 Australia lobbied for the G20 to meet at leader's level to respond to the Global Financial Crisis. There were other proposals going around at the time that excluded Australia. But Kevin Rudd campaigned aggressively in support of the G20. He followed the Avis motto and 'tried harder'. The then-US Assistant Secretary of State, Kurt Campbell, observed that Rudd's role was 'decisive'.

In the early years of the G20 leaders process, Australia continued to try harder by making many proposals as to how the G20 could operate and by chairing G20 working groups. For example, it was an Australian initiative that resulted in the B20 (the business grouping) meeting for the first time at the Toronto Summit in 2010.

Australia had the opportunity to make its mark when it chaired the G20 in 2014. Its performance was mixed. Australia sought to move the forum away from an ever expanding and increasingly ineffective agenda and focus on lifting global growth. The initiative of getting G20 members to commit to a target of increasing their growth by an additional 2% by 2018 kept the focus on the economy, but it was always an aspirational objective that would not be achieved. Australia over-played the issue, which subsequently led to headlines such as 'Joe Hockey's G20 growth target ends in failure'. This has not helped the reputation of the G20 or Australia. The meetings were well organised and achieved progress on some issues, but Australia's image was tarnished when it attempted to avoid discussion on climate change or have any reference to 'inclusive growth'.

Australia could have achieved more during its term as G20 chair, but maintaining that momentum would have been difficult given the uninspiring G20 Turkish presidency in 2015. There were hopes that China would achieve much as the 2016 chair, but it appears to have adopted a bureaucratic approach, with outcomes likely to be a mixture of procedural and nebulous initiatives. 

The effectiveness of the G20 has declined. At a workshop some years ago, a senior Australian official predicted the G20 would become 'international space junk'; meetings would circle the globe but achieve little. That may be right, at least until the next crisis. But the G20 remains an important forum that brings together major advanced and emerging markets. Given inward-looking and protectionist pressures in many countries, we need every avenue possible to promote global economic cooperation. Australia should continue to seek to improve the effectiveness of the G20.

However, Australia should not be dewy-eyed about the G20 and see it as the only outlet for international economic engagement. If Australia wants to influence international economic developments, it has to try harder in its bilateral relations with other countries as well as in all international organisations and forums. Concerns over the lack of effectiveness of the G20 (along with growing unease with some of its members) could see the emergence of a smaller grouping of key economies. If Australia wants to remain at the top table, it has to continue to 'try harder.' History demonstrates that this involves having a clear, articulated and strategic agenda as to what Australia wants and what it can offer international economic bodies and forums. And most importantly, it requires political leadership.


You may also be interested in