Cross Post: Alan Oxley – The G20 is an irrelevance

Last year, John A. Allison, CEO of the Cato Institute in Washington, released a book which cogently explained why the impact of the global financial crisis was prolonged: governments propped up businesses the markets had marked down as failures. Preparations for the G20 Summit in Brisbane suggest governments have still not worked this out and continue the search for complicated strategies to boost growth. Officials seem even to be resorting to numerology and Lego economics.

For example, Joe Hockey recently announced G20 officials were just 10 per cent away from agreement on 700 measures to boost annual global growth by 2 per cent. He was not kidding.

And that agreement was also to start a new global organisation to fund infrastructure and create the building blocks for future prosperity. A new fund will not produce new infrastructure. Risk is the problem. There is plenty of money around, but until governments privatise and deregulate, investors won’t move.

Regretfully, this is about the best the G2O can come up with. So its default strategy is more meetings of – business (B20), labour (L20), civil society (C20), a G20 think-tank and even a Girl 20 meeting. This second-order hoopla contrasts sharply with the intense negotiations among hundreds of officials over the last two years to construct the Trans-Pacific Partnership Agreement. It can lay fresh foundations to boost growth among 12 nations that produce 40 per cent of global GDP. This surely should be where Australia should focus its resources. We can have little impact on China’s growing financial problems, the EU’s financial and monetary muddle, or management in Washington of the US money supply, all of which will shape the short to medium term global economic landscape.

TPP aims to do more than just reduce conventional trade barriers. They are already low worldwide. Future growth depends on opening up services and removing barriers to investment, both heavily regulated across Asia. This should have be the business of the WTO. But a large number of economies outside the Asia-Pacific region don’t want the WTO doing this. So the US, Japan and another ten economies, including Australia, are applying the basic rules of the WTO with the prospect of building the biggest free-trade agreement in the world and underpinning economic expansion in the Asia-Pacific region.

PROTECTIONIST COMPLAINTS

 

Unions, environmental, public health and anti-intellectual property activists and protectionist industries have denounced the TPP. Their common complaint is the negotiations are secret. That is puerile.

No talks, among people business or governments, can succeed if conducted in public. Their real interest is to reserve the right to use heavy-handed regulation to advance their own narrow interests. For example they stridently oppose inclusion in the TPP of a right for investors to trigger legal challenges in international fora if the foreign state fails to meet commitments to reduce restrictions on foreign investment. It is known as ‘Investor State Dispute Settlement’ (ISDS). “Why give foreigners a right to challenge the Australian government when domestic businesses don’t have that right?”, they ask; because Australian businesses will win the same right to see commitments to liberalise honoured in the markets of the other 13 TPP partners.

Australia agreed to such provisions in the FTA recently completed with South Korea. Australian business groups and international trade lawyers support it.

The sentiment is resurgent protectionism. With high tariffs gone, unions now want restrictions on foreign investment. They don’t want foreign investors in union strongholds, such as health and education, who will be less intimidated than Australian management. They also are disinterested in opportunities for our services businesses to expand in foreign markets.

Our Asian and Pacific neighbours understand better that removal of restrictions on investment and services in their economies will boost growth.

With negotiations to open markets in the WTO stalled, momentum to create broad ranging free-trade agreements to boost growth in east Asia and the Pacific is growing. Trade officials throughout the region now anticipate the TPP over time will morph into a region wider agreement embracing including Korea, China, Taiwan and all major Asian Pacific economies. With its focus on liberalising services and investment, a platform for a new wave of prosperity will be laid.

This is where Australia’s international economic interests should focus.

The G2O should be regarded as the Rudd irrelevance it always was.

Alan Oxley is principal of ITS Global. This op-ed first appeared in the Australian Financial Review.

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17 Responses to Cross Post: Alan Oxley – The G20 is an irrelevance

  1. Blogstrop

    They don’t want foreign investors in union strongholds, such as health and education, who will be less intimidated than Australian management.

    The G20 will come and go, just another junket making some feel important, but IR remains!
    Australian management is intimidated because of the recidivist IR package that Gillard implemented.
    It’s time this country was told repeatedly and honestly that IR is a problem, was a problem in the past and will hobble the nation into the future unless dealt with properly, without the usual scaremongering cries about da evil Work Choices. IR is the next biggest scam after AGW and RET.

  2. Tel

    No talks, among people business or governments, can succeed if conducted in public.

    What you are saying there is “We will do what’s good for you, but if you could see what we were doing you wouldn’t like it so best that you don’t know.”

    I don’t accept that argument. I mean, we are going to find out sooner or later, presumably the intention is that by the time people figure out what they are in for, it’s too late to do anything. That’s basically what went wrong with the EU, and it has been anti-Democracy ever since. Sure, we can point out that Democracy has a few problems, but officially that’s the system we work under, and as Churchill pointed out, a lot of other options are worse.

    You are right that the G20 is an irrelevance, but it’s an expensive irrelevance, and the last thing any of them will admit is they are the problem.

  3. Elizabeth (Lizzie) B.

    There is plenty of money around, but until governments privatise and deregulate, investors won’t move.

    Or they will ask for a government handout to cover the risk, which just compounds the problem.

  4. They don’t want foreign investors in union strongholds […] who will be less intimidated than Australian management.

    Meh. Toyota are total pussies.

  5. johno

    Thank goodness someone is finally saying it – the G20 is irrelevant.

    With high tariffs gone, unions now want restrictions on foreign investment.

    The 21st century equivalent of Labor’s 20th century White Australia policy.

  6. Peter from SA

    For example, Joe Hockey recently announced G20 officials were just 10 per cent away from agreement on 700 measures to boost annual global growth by 2 per cent. He was not kidding.

    Joe shouldn’t worry about the last 10%. Why not push the magic button now and increase growth by 1.8%?

  7. Rabz

    It’s time this country was told repeatedly and honestly that IR is a problem … without the usual scaremongering cries about da evil Work Choices

    Another ‘policy’ area that’s been tossed into the ‘too hard basket’ by Abbott and his team of mediocrities.

    As someone who works in this field, believe me, the Fair Work Act and Commission are absolute abominations.

    Rudd and Gillard should have been hung, drawn and quartered for this act of economic vandalism.

  8. Tel

    Joe shouldn’t worry about the last 10%. Why not push the magic button now and increase growth by 1.8%?

    Because there is no magic button, and the 10% is just a bullshit excuse. If these bozos had any idea how to boost growth they would have done it years ago. Australians are perfectly capable of investing, building, inventing, or anything else that needs doing, we just need the opportunity to do that without repression in the form of crushing taxes, regulation, and other rubbish dumped on us mostly by the G20 itself (and yeah, by the unions, and the greens as well, and even the UN).

    Foreign investment can only hide the real problems, at best and maybe create new problems on the way. We are not a third world nation struggling to climb the technological ladder. We have a well educated population, we have plenty of wealth, we have everything we need, except the shit-togetherness to use it.

  9. Gavin R Putland

    Is it true that the TPP will facilitate evergreening of patents on existing inventions? Is it true that the TPP will call for yet another extension of copyright on existing works? If so, why would libertarians have any sympathy for it? Is it a case of “They may be rentseekers, but they’re our rentseekers”?

  10. entropy

    I suspect Peter was indulging in a wee spot of sarcasm at Hockey’s pathetic rhetoric, Tel.

    This will be the narrative of the G20. A colossal waster of money, time and economic disruption to Brisbane, with a long term memory of the mindless protests of the swampies and assorted hangers on*

    As it was far too late to back out of yet another Rudd fiasco, they should have just shifted the boondoggle to Hamilton Isalnd to reduce the economic destruction and mute those that choose to be unwashed by making it just that much harder.

    *The only change to the above scenario would be if some nut job adhering to traditional Islamic nihilism does something abhorrent. Which could in fact happen given recent events.

  11. egg_

    It’s time this country was told repeatedly and honestly that IR is a problem … without the usual scaremongering cries about da evil Work Choices

    Industry’s solution to WHS red-tape is to automate and hire less people – they’re their own worst enema enemy.

  12. Tel

    Gavin, they aren’t even our rentseekers. Take a look at the US/Australia FTA and who benefited from that… mostly US companies that are copyright holders (e.g. Village Roadshow) but don’t produce much and only stimulate some low end retail jobs here in Australia. We didn’t even get access to the US sugar market, it wasn’t “free trade” it was trade the way the US companies found convenient.

    The new agreement will very likely benefit multinational pharmaceutical companies that don’t see Australia as anything other than a place to be milked for government medicare money.

    Stricter IP laws means more complex paperwork for startups and more obstacles to be negotiated in order to do something. It does not assist trade, quite the opposite actually.

    http://en.wikipedia.org/wiki/Tragedy_of_the_anticommons

  13. Chris

    The new agreement will very likely benefit multinational pharmaceutical companies that don’t see Australia as anything other than a place to be milked for government medicare money.

    And we won’t even get the benefits or protections that the U.S. constitution gives them – eg patenting genes in Australia was found to be legal and illegal in the US. I think you’re right – the secrecy is designed to make it so by the time the public know what is in the agreement its to late to change. And Australia is generally a consumer rather than producer of IP. We’ll get screwed.

  14. Gavin R Putland

    Tel @ #1491359,

    I furiously agree with you. Except that by “our” rentseekers, I didn’t mean Australian rentseekers, even if some of the offending parties happen to be Australian. I meant rentseekers who throw money at “libertarian” think-tanks with a view to rationalizing the extension of their own “property rights” beyond libertarian limits.

  15. Fred Lenin.

    The G20 people are no solution to the worlds problems they are a large part of the problems,the real people do not have enough control over their politicians. Government by Referenda would be a solution for the people ,and a major problem for the political class. Who would you rather trust with power?

  16. Tel

    And Australia is generally a consumer rather than producer of IP. We’ll get screwed.

    We have a small but strong software industry in Australia (don’t tell the government please, or they will start “helping” and we will all be screwed, actually recent events indicate it’s already too late and they are “helping” else I wouldn’t be talking openly). Thing is that the Berne Convention style of 50 year protection was always perfectly good for software, and never needed tampering with. Patents are hugely bad for software developers, and back in the days when no one even considered applying patent protection to software we still saw plenty of development effort so there is absolutely zero evidence that patents provide incentive in that particular industry.

    We already have complete ability to trade our IP products (such as they are) anywhere on Earth, and it’s showing success. Don’t touch! Hand’s off!

  17. Pusnip

    Sorry Alan, but even the Productivity Commission found that Investor State Dispute Settlement is little more than a trade lawyers picnic, and that many of Ausralia’s ‘Free Trade (sic) Agreements’ were at best a waste of paper and at worst have sent us backwards.

    With the US apparently demanding even more damaging IP provisions and ISDS, the TPP will struggle to be beneficial to reverse that trend.

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