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"Multilateral Challenges in a Federal Context"

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Fernberg Lecture


Speaker: Peter Varghese AO, Secretary, Department of Foreign Affairs and Trade

Government House, Brisbane


I would like to thank the Queensland Branch of AIIA for their invitation to deliver this sixth Fernberg Lecture.

It is an honour to do so and to follow so many distinguished Fernberg lecturers. None more so than Her Excellency Penny Wensley who delivered the first lecture – and set an unnerving standard of erudition for subsequent speakers.

Indeed let me at the outset acknowledge the outstanding public service of Governor Wensley: a long time friend and colleague.

Penny came to this high office after a trail blazing career as a diplomat. She has filled some of our most important diplomatic positions including Ambassador to the UN in New York, Ambassador to France and High Commissioner to India. She has been among the most accomplished mulitlateralists of her generation. And she has been a great Governor of Queensland.

So as you prepare to leave office, may I, Your Excellency, pay tribute to your contribution to Australian diplomacy and to the advancement of Australia's national interests. And let me also acknowledge the contribution of Stuart. I know in diplomacy how much we ask of – and how little we recognise – the work of spouses and I suspect it is no different in vice regal positions.

Queensland's contribution to international relations

I suspect the main reason I was asked to give this lecture is that I am a Queenslander. I make this observation not to suggest even a hint of provincialism behind the invitation. But rather an expectation on the part of the Queensland branch of the AIIA that perhaps a Queenslander is well placed to appreciate the contribution that this state has made to Australia's international standing over many years.

Now this is tricky territory for a Secretary of the Department of Foreign Affairs and Trade of the Commonwealth of Australia. There are constitutional proprieties which even the most ardent Queenslander must observe.

But while we can only ever have one foreign policy anchored in the external affairs power of the Commonwealth, it is entirely appropriate to acknowledge the contribution Queensland has made to international relations.

For a start there is the contribution of prominent diplomats from Queensland – Governor Wensley, of course, Hugh Dunn, who was Ambassador to China between 1980 and 1984.
And more recently Ian Kemish, our former High Commissioner to PNG who gave this lecture in 2012. There are many others.

Queensland scores less highly when it comes to foreign ministers only three out of thirty eight – Littleton Groom, Bill Hayden and Kevin Rudd.

And even lower when it comes to departmental secretaries of DFAT and its predecessors where, including me, the total is one.

But in this case numbers do not tell the tale of Queensland's contribution.

Consider Papua New Guinea, Australia's nearest neighbour – and a country whose future matters very much to us.

Australian involvement in PNG was actually precipitated by Queensland.

Before Federation, Premier Sir Thomas McIlwraith ordered Henry Chester, the Police Magistrate on Thursday Island, to proceed to Port Moresby and annex Papua in Britain's name.

Chester made the proclamation on 4 April 1883.

The annexation wasn't received well in London, and the British Government repudiated the action.

But on 6 November 1884, after the other Australian colonies promised their financial support, the territory became a British protectorate.

In 1902, after Federation, Papua was effectively transferred to the authority of the Australian Commonwealth.

With the passage of the Papua Act of 1905, the area was officially renamed the Territory of Papua – and Australian administration became formal in 1906.

After the First World War, Australia was given a mandate over German New Guinea as well.

So in a fundamental way, the foundation of Australia's relationship with our nearest neighbour has been defined by Queensland.

I'm not sure whether there are any state premiers who would be so bold as to make a territorial claim today!

Consider also Japan.

When Britain and Japan concluded a treaty of commerce and navigation in 1894, it triggered a broad anxiety across the Australian colonies about the strategic implications for Australia.

Queensland, though, adhered to the treaty by a protocol which allowed this state to accept the limited entry of Japanese businessmen.

In effect, that became the first Australian treaty with an Asian state – even before Federation.

The Commonwealth wasn't happy – and passed the Immigration Restriction Act in 1901, although the origin of that act reflected many other factors.

Queensland's then premier, Sir Robert Philip, was strident in supporting Japan's criticism of the Act – so much so that the Commonwealth at one stage feared Japanese pressure on Britain would lead the King to refuse assent to Australia's first immigration law – and the foundation stone of the White Australia policy.

And later in the 20th Century, of course, long after the Second World War, Queensland, under Premier Joh Bjelke-Peterson and since then, has been particularly strong in building ties with Japan.

Seeking Japanese investment at a time when it was deeply controversial to do so.

And setting up an industry catering for Japanese tourism at a time when the Australian public was far more comfortable with exports of Australian goods to Asia than services exports that actually brought Japanese tourists to these shores!

In our federal system, there is a tension - the tension that is writ large in these sorts of examples - between the different constitutional actors.

We are a federation with a strong national government, under a Constitution that expressly gives the power to manage external affairs to Canberra.

And while you might think that in our system, foreign policy is the sole preserve of the national government, that's only partly true.

The truth is in a range of countries, including here, there are various subnational governments who play important roles.

The Australian states maintain strong independent personalities on the world stage.

That is clearest, perhaps, in trade, where Queensland continues to be a national leader in international engagement.

Forty years ago, Queensland produced about a fifth of Australia's exports, holding the 4th spot in terms of state exports.

Last year, Queensland's share of our exports was still around the same mark, but Queensland had lifted itself to 2nd spot as state exporter.

In the face of the massive expansion of Western Australian exports during that time the states of New South Wales and Victoria have seen their proportion of national exports fall dramatically.

But Queensland has largely held its ground, and has continued to develop its international engagement during that time.

Trade and Investment Queensland has offices in fourteen locations around the world. Victoria has seventeen offices, WA, ten, and NSW, six.

Queensland also plays an important role as a hub for business, education and cultural contact with the South Pacific.

It's the only Australian state which has an MOU on business and government cooperation with PNG.

Queensland has also set a benchmark for international tourism in Australia – and millions of people overseas have Queensland resorts, beaches, rainforests, the Great Barrier Reef and the Gold Coast as their image of our country.

The states and treaty making

Outside of trade promotion, the engagement of states and territories is often also important in the negotiation and implementation of treaties.

While the constitutional power to negotiate and enter treaties rests with the Commonwealth, many treaties contain obligations that cut across areas of state and territory responsibility: from government procurement, to probate, to prisons.

Australia's free trade agreements, for example, include broad-ranging, legally binding commitments on trade in services, investment and government procurement, which apply at both the Commonwealth and state/territory level.

States and territories are closely consulted throughout the negotiation of such agreements to ensure their core interests are taken into account and that relevant state and territory regulations are accurately reflected in Australia's schedules of non-conforming measures.

A treaty, once in force for Australia, will bind Australia under international law in relation to all Australian jurisdictions unless it provides to the contrary (which is unusual). Thus, states and territories have an ongoing responsibility to act in accordance with Australia's treaty obligations.

State and territory laws and regulations must be consistent with treaty provisions, not only at the time of entry into force, but for as long as Australia remains a party to the treaty.

For example, if a state government were to introduce a new restriction on foreign service providers which was contrary to Australia's FTA commitments, Australia would be in breach of its obligations under international law.

States and territories also play an important role in meeting our obligations under human rights conventions. Human rights treaties create obligations over a very broad range of areas – from voting to education to preventing torture.

This creates responsibilities for state and territory, as well as Commonwealth, governments.
Human rights treaties also create obligations to report on progress in implementing and upholding human rights.

About every four years, depending on the treaty, parties are expected to deliver a report regarding their implementation of the treaty and then to appear before the UN to answer questions.

The federal Parliament also takes a keen interest in what states and territories think about proposed treaty actions: all National Interest Analyses tabled in Parliament in relation to proposed treaty actions contain details of consultations with states and territories.

Cities too, have an important part to play in presenting Australia on the world stage.

Only a few short months from now, Queensland will be front and centre when G20 Leaders meet in Brisbane in November.

The G20 is arguably the most significant addition to the architecture of global governance since the creation of The Bretton Woods Institutions.

Its membership reflects economic weight this century, not the world of the 1940's. The group is powerful enough to make a difference and small enough to make decisions.
In Brisbane we will focus on what the G20 can do to lift job creating global growth.

We want to ensure a focussed and practical agenda which embeds the G20's role as the premier international economic forum: having played a crucial role during the global financial crisis the G20 must demonstrate its worth on the big challenge of growth and jobs.

The challenges facing multilateralism

Brisbane's hosting of the G20 provides an opportunity to reflect on one of the key issues facing Australian foreign and trade policy: the growing challenges facing global multilateralism.

Australia is a G20 country. But we can neither bully or buy our way in the world. An international rules-based order is therefore in our best interests, and an effective multilateral system is the surest way to get there.

Multilateralism is not of course an end in itself. Nor is it an alternative to bilateral relationships. Indeed the two go hand in hand.

The stronger our bilateral relationships the better our chances of securing multilateral outcomes. Both are anchored in our national interests.

Bilateral relationships are and will remain the core of our diplomatic statecraft. They are where our efforts to protect and advance Australia's national interest start and often finish.

But foreign policy is more than the sum of our bilateral relationships. We do not live in a world of only two players.

Our external environment is shaped and driven by the actions, needs and interests of nearly 200 nation-states, and indeed non-government and major corporate institutions, that make up our world.

Multilateralism is the practice by which we democratise the rules and norms of international behaviour; the process by which we weigh and value the interests and perspectives of all of our partners, even as we pursue our own national interests.

For most Australians multilateralism means the UN which, it must be said, has a very mixed record. Its political posturing can be frustrating.

Its inability to agree on decisive action can be annoying. But for all its flaws the UN does possess a unique legitimacy and it has played a pivotal role on issues such as decolonisation which reshaped the geo-political map of the second half of the twentieth century.

The truth is if we did not today have the UN we would have to invent it – warts and all.

Before globalisation, multilateralism probably didn't matter too much. In the age of empires, the fate of the empire was the central concern.

One might ally with another, particularly in joint defence against a third, but there was little sense of the global common good – of national interests that were also international interests.

Today's multilateral system was shaped in the years after the second world war. It is in need of reform and refurbishment but that should not blind us to its achievements.

After all, since the Second World War, we have not had another global conflict. We sometimes came close, during the Cold War, but diplomacy and our international system has acted as a vital stabiliser along the way.

Our international economy has undergone significant reform. Trade has been liberalised, globalisation and more open markets have delivered more prosperity and wealth around the world than ever before.

Democracy and the rule of law are much more widespread than they were in the ashes of 1945.

Slowly, we have learned how to work together on newly-identified problems, such as environmental issues, that were not on the radar in the Bretton Woods period.

Surprisingly, even during the Cold War, we were – as an international community – able to negotiate on a range of issues, even when you might have expected conflicts of interest to prevail.

The Antarctic Treaty – an imaginative agreement that not only supports the demilitarisation of a unique and pristine environment, but puts aside competing territorial claims to focus on scientific research – is a fine example of effective multilateralism.

Multilateral efforts have helped deliver other significant benefits. Human life expectancy has gone up. In the time since the Second World War, we have developed more effective mechanisms to help the world's poor –systems that have been able to provide some relief during the worst crises faced by the poorest people around the world.

We have made significant progress on eradicating disease – wiping out or reducing to pockets the spread of diseases such as smallpox and polio. And, with a sustained push, we are close to doing so with others such as tuberculosis and even malaria.

Much of the credit for that, of course, lies with national policies that promote economic growth, as well as the advance in medicine and science over those years, particularly the invention of antibiotics and the spread of immunisation.

But the part of the international system centred around the World Health Organization, and the aid programs that have been a feature of the post-war economic restructuring, have underpinned and supported scientific progress - and have helped get new medicines to the people who have needed them most.

The specialised agencies are the success stories of the UN system: practical multilateralism at its best.

The challenges ahead

But today multilateralism is under intense pressure. We need the multilateral system more than ever, but it is not delivering on our expectations.

Consider trade.

The Doha Round of global trade negotiations is stalled.

But even though we cannot, at this time, see any real hope of a broad, general agreement, we need to take the long view.

The WTO is far from a failure. Its dispute settlement mechanisms allow for countries to find a binding resolution to specific trade disagreements.

And we are seeing new approaches to trade liberalisation negotiations even in the absence of a successful Doha Round, such as the recently concluded WTO Trade Facilitation Agreement and the Trade in Services Agreement currently under negotiation.

Consider security.

We've made progress, certainly. And the UN system has played an important role.
Banning the use of chemical weapons; holding us back from where we could have been in terms of the spread of nuclear weapons.

And last year, with Australia in the chair, we reached agreement on an Arms Trade Treaty, the first multilateral arms control treaty in many years.

But why do we still live in a world in which we see what we've seen during the Syrian conflict?

The UN was established to defend and support global security. Yet still, nearly 70 years after its inception, war and conflict strike time and again around the world.

Chemical weapons are still in use, even a century after the horrors of the First World War, and nuclear weapons continue to proliferate, albeit much more slowly than they would otherwise have done in the absence of a global non-proliferation regime.

More players, novel issues and a changing world

What are the pressures facing the multilateral system?

Part of it is a numbers game. The number of participants in the international system has grown dramatically – from 51 members of the UN in 1945 to 193 members today and from 23 members of the WTO's predecessor organisation (the GATT) in 1947 to 159 members of the WTO today.

To some degree, the international system is showing its age. Many of our structures were designed in the post-war world – and we just don't live in that world any more.

There have been, and continue to be, major shifts in the distribution of economic weight, and resulting changes in the distribution of strategic power.

Significantly, a major new power, China, has joined key global institutions like the WTO, reflecting its appreciation of the importance of trade liberalisation for its exports.

But the increased weight of China, and other emerging economies in institutions like the WTO, IMF and the World Bank, has also brought changes to how these institutions work.

The multilateral system is used to giving developing countries differentiated treatment in trade and other negotiations. But how much sense does that make today when we are dealing with developing economies that are in the top twenty economies?

Driven by our inter-dependence, the complexity and workload of multilateral institutions has changed dramatically, too.
In 1909, there were 37 international organisations. By 2000, the number exceeded 7,000.

There are good multilateral institutions, and those that are not so effective. Some that are ineffective can be explained as having a mismatch between power and participation.

In other words, you can have an institution with many active and engaged participants – but the actual power they have to effect change might be a very different calculus.

This goes to the heart of a basic tension in global multilateralism: the mismatch between national power and global democracy.

Global multilateralism rests on the equality of states. But power resides with the handful of states with the strategic and economic reach to shape events.

The story of multilateralism is the constant quest to expand the reach of the former and constrain the raw power of the latter. It works best when states with power accept that their broader interests are served by a system of international rules and norms which apply to all.

That is the perspective Australia has sought to bring to our current term on the UN Security Council: the only institution with the authority to authorise the use force in dealing with threats to international peace and security.

The Security Council can be seen as an attempt to reconcile the tension between power and participation. Its core is the P5 which have the power of veto and the privilege of permanent membership. But it also includes ten non permanent members serving two year terms.

The current multilateral system is largely an invention of the United States and a clutch of Western European countries. But this is changing, and changing dramatically.

The emergence of new powers in a multilateral world, the increasing pace of globalisation, the influence of non-state actors and the massive wealth transfer from the West to the East have altered the dynamics fundamentally.

Emerging powers are no longer willing to accept outcomes which they perceive do not take their interests into account. Some do not share the core values and interests of Australia and other Western countries.

Some favour state sovereignty over individual rights, and so are wary of interventions in national affairs.
Some favour a greater role for the state, and have shown little interest in taking a leadership role on the global stage.

The multilateral system's ability to deliver coordinated results is in decline as effective action no longer rests in the hands of a few relatively like-minded states, but requires cooperation from an increasingly diverse and more competitive group of states.

The inter-dependence that has come about through globalisation has meant that expectations from the public of the multilateral system are high, but many of the tools that the West has traditionally relied on have dissipated.

The increasing influence and activity of China, India, Brazil, South Africa and a number of other players – like South Korea, Egypt, Turkey, Chile, Mexico and Indonesia – will continue to tilt this power balance.

The United States, too, is adapting its approach. Historically, the US saw broad-based multilateralism, and the edifice of global public goods, as squarely in its national interest.

This was unusual to say the least. There is no historical precedent for a global hegemon to define its interests as best served by a system of multilateral rules underpinned by the ideal of global public goods.

For a country like Australia the post war world would have looked very different – and much for the worse – if the US definition of its interests had been more narrowly framed.

But while the US is still deeply committed to the international order, it is also increasingly attracted to the benefit of smaller arrangements that are not necessarily universal in nature. Like others it is shifting to plurilateral agreements in the face of stalled global negotiations.

The future of multilateralism

What are we to do in the face of the stresses we can see on our international order and the institutions of multilateralism?

Reform is always difficult, particularly when the perspectives around the world on our multilateral institutions are so divergent. But we have seen progress in recent years.

The rapid evolution of the G20 into a leaders meeting in the wake of the Global Financial Crisis and its status now as the premier institution of global economic reform – replacing the G8 – shows we are able to respond to the changes I've identified today.

The growing economic weight of China is already being reflected in the international financial institutions – over the course of years and decades, reform is possible.

Reform of the UN is hard to envisage, but other structures have and are emerging to help us deal with security and economic challenges – like the East Asia Summit, the critical institution in these areas for our region.

We have to balance our desire for universality and common agreement with our interest in progress in the company of those nations who share our views and are willing to act. The balance of effort is moving decisively towards the latter. Smaller so called "plurilateral" arrangements are increasingly displacing global negotiations.


Let me conclude with these remarks.

Much of foreign and trade policy is the work of national governments. But no policy will work if does not have the support of the community.

State governments will inevitably play a role in Australia's external engagement, especially on trade and investment. The more coordinated that is with the national effort the better for all.

There is no neat dividing line between domestic policies and foreign and trade policies.

Our future prosperity, for example, turns on our international competitiveness and, for the most part, that will be determined by the policies pursued by the national, state and territory governments.

Trade agreements will secure us better market access but it will be the quality and price of our exports which will determine whether access translates into sales. And it will be our international competitiveness and domestic assets which will determine whether we can attract the foreign investment we will need to take Australia to the next phase of our economic growth. More broadly, Australians must understand that we are living through a profound transition in our region as economic and strategic weight shifts.

The future will put a premium on policy nimbleness. It will challenge us to recognise what will change and what will continue. It will be as much a test of mindset as of policy.

Australia should face these challenges with a measure of confidence. We bring to it several assets.

Our history and our geography have combined to instil in us a global perspective.

Ours is a society shaped by the values and institutions of the west, intimately connected to Asia, with economic interests across all regions and a community which has found unity around the principles of a multicultural liberal democracy.

Australians also understand the vocabulary of economic reform. Of course none of this guarantees our success and much of it can be overtaken by events outside our borders and beyond our control.

Ultimately the security and prosperity of our region and beyond will depend on our collective capacity to both understand and shape the forces which are redrawing our economic and strategic maps.

No one has a monopoly of wisdom about those forces. But institutions such as the AIIA have an important role to play in helping us all better understand them.

Last Updated: 11 September 2014
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