 Pacific Partners Program and the Southeast Asia Program here at CSIS. We recognize there's a lot of competition for your time in Washington right now, so we're pleased you could come to join us to talk about Southeast Asia, excuse me, about Australia. This event is being live webcast through CSIS's website. There's Twitter information up there, but it's at Southeast Asia DC, Pacific Partners DC, at CSIS, and hashtag CSIS Live. Our guest today, as I think you all know, is Dr. Martin Parkinson. He's the Secretary of the Treasury in Australia. We're delighted you joined us. As the Secretary, he also serves on the board of the Reserve Bank of Australia, Chair of the Advisory Board of the Australian Office of Financial Management and various other statutory bodies within Australia. Before taking this job, he served as Secretary for the Department of Climate Change from its establishment in December 2007. Earlier, he was Deputy Secretary of the Treasury and served as Co-Chair of the G20, G20 deputies process, and he just mentioned that he also lived in Washington. I guess you worked here at the International Monetary Fund, and he might have picked up a little bit of an American accent when he lived here. He also studied at Princeton where he got his PhD. Dr. Parkinson, please, we're delighted you could join us. Thank you. Thank you very much, Murray, for that kind introduction, and I must say what a pleasure it is to be here, and particularly to have old friends like, well, I won't say old, friends like John, longstanding friends like John here today. It's an absolute privilege for me to address you this evening, and I particularly want to commend the Centre for its Specific Partners initiative. It's a great way to bring Australians and Americans together to speak on issues not just related to our two countries, but to a region which we have strong mutual interest. I noticed in the past six months alone, you've hosted the Australian Foreign Minister, Ms Julie Bishop, twice, the Australian Communications Minister, Malcolm Turnbull, the Australian Attorney General, Senator George Brandis, only last week, and Australia's G20 Sherpa, Dr Heather Smith. So in six months, that's a fairly heavy hitting bunch of Australians, and that's a reflection of the high regard with which the Centre is held in Australian policy circles. Now Ms Bishop's already spoken to you about the importance of US-Australia relations, so I'm not going to cover that. I want to talk about a broader topic today, which is the challenge of economic cooperation and its underpinning global architecture in what is an increasingly pluralatural world. Now it may be considered unusual for a Treasury Secretary to present on a topic more commonly reserved for foreign affairs officials. In fact, as my friend, the Secretary of Australia's Department of Foreign Affairs and Trade, Peter Varghese, recently remarked, it's a most dangerous situation, a Treasury Secretary with a worldview, and one not to be encouraged. And that's a quote. But jokes aside, the issues I'm going to talk about today can't be ignored by domestic policy makers. The global backdrop, economic backdrops changing, these changes inevitably have implications for the global environment and its architecture, in which international economic cooperation is meant to play out. And hence it has an impact on how we think about domestic policy choices. So what do I mean by the backdrops changing? Let me identify briefly four key pillars behind the global economic reshaping which is currently underway. The first is the advance of technology. The Industrial Revolution broke the link between the size of a country's population and its ability to project economic might on the world stage. Advances in technology that occurred in Britain and Europe allowed a relatively small part of the world's population to wield outsized influence. Today, the much wider dispersion of cutting-edge technology and productivity advancing processes is leading to a return to the pre-industrial revolution paradigm, where the size of a country's population is itself a driver of geo-economic and geopolitical importance. In other words, technology in the hands of the many is restoring the link between population and influence that was broken down by technology in the hands of the few. While the developed world in many ways still has an absolute technological supremacy, the democratization of technology is helping facilitate the rise of the emerging world. Now, with this return to the pre-industrial revolution paradigm, population and demographics, which is really the second pillar of change, has become increasingly important. This matters a lot to the developed world because we're characterized by an aging educated workforce and a more or less stable population. For developed countries, our aging populations will detract from future income growth, and the aging of the median voter may inhibit the willingness to embrace structural reform. In contrast, the demography of many, but not all, China being an obvious exception, so the demography of many emerging economies will by and large accelerate their development. In fact, in some instances, population is magnifying the effect of that first pillar as a dynamism and innovation engendered by large and increasingly better educated populations, provide emerging economies with greater opportunity to take the lead in technological advancement. The third pillar reshaping the world is sustainability. Partly due to climate change, we're seeing a change in the distribution and relative importance of resource endowments worldwide. With that comes new opportunities for conflict or cooperation, for example, over food, over energy or over water security. As implications of climate change become clearer to countries, it'll be increasingly important to integrate climate change mitigation strategies and energy security policy into broader foreign and economic policies. Diversification into alternative energy sources will become more attractive, and given the importance of energy in modern economies and who controls it, this kind of democratization of energy will change geopolitical and geo-economic dynamics. Now, this intersection between the democratization of technology, the changing demographics and the growing importance of resource sustainability brings me to what's really the most interesting of these pillars, which is the fourth one, the shift in the global economic center of power from west to east. Now, the center of economic gravity, which had shifted from Asia to the west since the Industrial Revolution, is now returning to the Asia Pacific. In the case of China, its embrace of market forces has unleashed the economic potential of its large population, and that transformation is far from finished, no matter what you might read in the popular press. In the 30 years since reforms began, China's share of world output has increased almost eight-fold in an economy, in a world economy that has itself increased five-fold. The economic growth experience in Asia will also generate sustained growth in average incomes in these countries, reinforcing aggregate growth. It'll continue to lift millions out of poverty and millions more into a growing Asian middle class. Based on quite plausible projections, by 2030, the Asian middle class could expand to around 3.2 billion people. That compares to around half a billion in 2009, and that would be more than the rest of the world's middle classes combined. By 2050, four of the five largest economies in the world are projected to be in Asia, China, India, Indonesia, and Japan, the only one that won't is the United States. But it's not just a story of a shift in the global economic center of power from the Atlantic to Asia. It's also one of dispersion. The world where there was a clear center, single center, has changed. In addition to the Atlantic and Asian centers of growth, lesser but still influential hubs are emerging elsewhere, such as in Latin America. In 1950, emerging and developing economies represented three-quarters of the world's population and one-third of global GDP. Today, they count for 85% of global population and 50% of global GDP. In fact, last year was a little noticed fact, but last year was the first time ever in the modern world that the emerging and developing economies reached half of global GDP. Now, before I go on, it's important to note a caveat. The drivers I've outlined here project a convergence of emerging with developed economies. However, this is a potential. It's not preordained. For this potential to be converted into an actual outcome requires good policies, good institutions, and the conventional facilitators of growth. Moreover, the demographic dividend faced in countries like India and Indonesia is a huge opportunity, but will it be a huge opportunity in fact? We've seen in North Africa and the Middle East the double-edged sword that a large young population can present. So if a country's economic institutions cannot generate strong and sustainable job growth, the prospective dividend can quickly become, as some might put, a time bomb. Similarly, if institutional arrangements don't ensure that economic growth is reflected in the overall living standard improvements expected by the lower and middle income end of the population, their expectations are still going to adjust to being global citizens, but they'll find that they're disappointed. And that has a real potential to destabilize growth and derail that convergence that I was just talking about. So when I talk about these four sources of drivers of change in the world, particularly the fourth one, it's a process that's underway, but no one, not the advanced economies and particularly not the emerging economies, can afford to be complacent about it. And that's something that we just have to keep hammering away in each of our countries. Now, given these changing global fundamentals, what are the implications for international cooperation and the global architecture? First and foremost, despite the changing shape of global influence, or indeed in fact, perhaps even because of it, the need for economic cooperation, collaboration between countries is vital. Today, the intricate networks of trade, finance, people and confidence channels that link us have created a world where countries economic circumstances and policies don't simply affect itself. It's not necessary to cite examples in support of this as the years since the onset of the global financial crisis have bought this starkly into conventional wisdom if it wasn't already there beforehand. Now, in such a world, international cooperation is essential. It's important that countries identify the commonality of interests, take action to mitigate negative spillovers and recognize the potential benefits of collective action to provide global public goods. Comparing the interwar period with the post-World War II era, the lesson is that global growth and stability requires this coordination. And it was true after World War II, and it's even truer now given some of the challenges that we're grappling with, and I'll come back to those in a moment. Now, while the importance of international cooperation remains unquestioned, the changing backdrop is presenting challenges to that global architecture. That architecture was set up under a transatlantic hegemony, and as the hegemonic status has changed, the system has become strained, and the inability to adjust is resulting in growing fragmentation. The very use of the word architecture, which implies a relatively fixed, well-defined and uniformly accepted set of global institutions and conventions, is indeed arguably increasingly misleading. One factor challenging the architecture is the simple fact that global power is shifting and dispersing. As power spreads across multiple centers and hubs, new institutions naturally spring up to represent them. Also, what we're seeing is that these centers are themselves more heterogeneous groupings than previously. Asia's a clear case in point. The Asia-Pacific region represents an area of more divergent interests, values, cultures, and histories than, for example, Europe or North America, and this diversity can naturally engender multiple forums to reflect it. A second factor challenging the global architecture, though, is the faltering progress being made to reform the traditional global institutions. The emergence of multiple centers with stronger and more divergent voices is both a cause of and a response to this faltering progress. Common endorsement can no longer be achieved simply through shared interests and the values of a small number of countries. Emerging powers are increasingly unwilling to accept outcomes from processes in which they have not been meaningful participants and they do not necessarily share the core values and interests of the traditional players. But this faltering progress is also partly due to hesitancy from the larger players that is the pre-existing large players to commit to taking the lead to make global cooperation more successful. Here in the US, the belief that global multilateralism is in America's best interests is arguably being increasingly questioned. Indeed, as Richard Haas has noted, the US has two coexisting but contrary inclinations to try to do too much and too little in foreign policy. And I'd argue that that dilemma is actually not restricted to foreign policy but goes further. Moreover, as Haas also notes, and I'll quote this, American political dysfunction is getting in the way of the US restoring the foundations of its power and doing what it can and should do to make sure that the economic foundations of all that it does in the world are secure. The unwillingness of Congress to progress IMF reforms is a striking example of Haas's thesis. I have to say just as a diverge for a moment, I'm always struck when I come back to the United States, how little understood in the US political context is the damage that the US's inability to deliver on IMF reform is doing to the US's international stature. You cannot underestimate how much this is being seen elsewhere in the world as a really big problem. And yet Congress just doesn't seem to get it. And the White House has to think about its domestic political calculus, yet the rest of the world is watching closely. And indeed, so closely, Treasurer Hockey, so the Australian minister said yesterday at the re-inventing Bretton Woods Committee, how profoundly disappointed he was on the US Congress's failure to pass the necessary legislative change. And indeed, not just to pass it, but not even to have any pathway forward by how we might be able to bring these reforms to conclusion. And indeed, as a result of that, the International Monetary and Finance Committee and the G20 will actually have their first ever joint session tomorrow morning to discuss what can be done in the absence of US leadership. Now, at the other end of the transatlantic axis, Europe is characterized by introspection as countries struggle to come to grips with the aftermath of the global financial crisis, the failure of many countries to progress structural reforms after the creation of the euro and the consequence of an aging population. This introspection, when you marry it with the failure of US leadership, is allowing those European countries, particularly those small European countries, opposed to modernizing the global architecture to avoid facing today's economic and strategic realities. Meanwhile, the emerging powers themselves are still only taking tentative steps towards a leadership role in providing global public goods. Despite their desire to exercise influence, so far they've been conserved even what they bring to the table with agendas that are relatively inward looking, due partly to the challenges some face in transitioning from emerging to advanced economy status. This hesitance, though, is making it easier for others to leave the architecture unchanged with little short-term political cost. The problem is it may be little short-term political cost, but I think it's actually an increasingly large long-term political cost. Now, to the extent these actions are generating complacency about the suitability of the current architecture, that complacency is seriously misplaced. The growing number of voices and the absence of meaningful progress at the global level are resulting in a preference for issues to be addressed in sub-global fora. This is taking a number of forms. As the most obvious form, regional multilateral groupings are common. These groupings with more formal institutional structures, processes, and membership, to some extent replicate at a regional level the structures of the global level, but they do it with fewer voices around the table and more commonality among the members. What we're seeing also, though, is a range of less formal arrangements, sometimes described as softer governance and coordination. One approach has been the creation of issue or context-specific pluralateral groupings with constrained membership based on shared interests and a predisposition amongst those members to work together. Formal and legal requirements may still exist, but the key is that their commitment and shared interests allow faster progress on an issue or initiative, sometimes on the basis that the final agreement is open to others to join at a later day. Another trend is towards pluralateral groupings based on voluntary participation and without strong ex-ante expectations of outcomes or initiatives. These groupings are designed more to facilitate the exchange of views and dialogue and they create a stronger, more coordinated voice in larger forums. When necessary, they rely primarily on peer pressure to achieve outcomes. The result of this is the emergence of a large, loose, and evolving web of overlapping fora, institutions, and arrangements, each with slightly different emphasis and with slightly different key players. And that sits both below, but also within the global architecture. So in this world, is economic cooperation at risk? And if so, how do we ensure that it continues meaningfully? First, I'll just be clear. I think global multilateralism delivers benefits that cannot be achieved through a network of bilateral, pluralateral, and regional arrangements. While its ability to address new issues may be facing challenges, the existing architecture of global institutions forums and agreements provides a stock of rules and standards that still underpin international behavior, including in those sub-global forums. Also, given the global interconnectedness I described earlier, it's vital we retain effective global economic dialogue that recognises the spillovers, both positive and negative, that stretch so prevalently across today's world. This includes the need for global cooperation to address challenges that, in terms of their nature and potential impacts, are truly global. To paraphrase Huss again, the world faces a number of global challenges, climate change being a prime example, where there's a significant gap between the scale and nature of the challenge and the scale and nature of the global consensus and the arrangements put in place to manage it. Closing this gap through effective cooperation is the only way to address these global challenges, whether they're the provision of public goods, security stability or the prevention of public bids, such as the impact of climate change, we've got to find ways to actually, we've got to find ways to cooperate differently so that we're actually able to address these issues. Now, there is a temptation though to try and insert every major global issue into those fora that work reasonably well. This is almost certainly a recipe to undermine what is actually effective. Instead, if subject specific fora, such as the World Trade Organization or the UN Framework Convention on Climate Change are not delivering, a key focus of effort should be on renovating those bodies to make them more useful. It's also important to note that the current architecture, though, reflects at its core a set of values for which the traditional powers stand. While some argue this is part of the issue, those countries ought to see that it's in their interests to retain those institutions that are best able to build on those values. Though when I say retain, what I also mean is that they have to adapt to the new global backdrop and ensure that they're fit for purpose. In other words, without adaptation and evolution, retention of those institutions will not equate to retaining their existing capabilities. Now, a recent model of global cooperation for which Australia sees significant merit is the G20. The G20 represents around 85% of the world economy, 75% of global trade, and two-thirds of foreign direct investment. It's a naturally well-placed to be a key global economic policy-making body. However, its strengths are broader. Its representation is designed to be regionally balanced and reflective of the global economy as it is today. While its less formal structure allows both flexibility and frankness in discussions, we've seen the strength of the G20 in the midst of the global financial crisis. As bad as it was, the crisis would have been much worse if not for the leadership and actions taken by the G20, which moved quickly to help stabilise financial markets and support the global recovery. And following the crisis, the G20 remains relevant. It's continued to press for domestic policy shifts from members, such as Euro Area Structural Reform and the easing of austerity measures for renminbi appreciation. And as we're being seen now with the crisis in Ukraine, the G20 recognises that countries will need IMF support at critical junctures. It was the G20 that pushed for substantial increase in IMF resourcing to ensure a strong global safety net, and it's the G20 that's been pushing for reforms to IMF governance to ensure ongoing legitimacy and credibility. In saying all of that, though, it's important to acknowledge the G20 has its own shortcomings. One criticism is that it is less effective as its agenda has become broad and unwieldy. If you look over the history of the G20 from when it was established in the late 90s through to when it became a Leaders Forum in 2008, it had a narrow and focused agenda. Once it became a Leaders Forum, it became a plethora of issues put on that agenda to the point where some members would even describe the agenda in recent years being a bit like a Christmas tree. It was hung with ornaments. The problem is that it was so hung with ornaments it wasn't actually doing a lot in delivering on each of those issues on the agenda. Now, the fact that the agenda has become broad and unwieldy is something that our G20 fellow members made very clear to Australia that they wanted Australia to deal with as we were the chair in 2014. In our presidency year, we're running a tight agenda focused on promoting private sector-led growth and building global resilience. We fully expected, and indeed I have to admit, our seeing push back on our attempts to narrow and focus the agenda. We will, however, maintain the discipline we think is necessary for the G20 to function effectively and to deliver in those areas where it can best make a real difference. In short, under Australia's presidency, forum shopping and efforts to bring other issues into the G20 will be strongly resisted. In the same vein, the quality of debate and interaction among ministers has become characterized as less robust than it was in the past, leading to less effective policy outcome. To address this, we've introduced innovations to the G20 meeting to facilitate genuine debate and discussion on policy issues. In short, we're trying to create a forum where leaders get to be leaders. Given its depth and reach, the G20 is an important role to play in steering the global economy and we're committed to helping it secure that role. However, despite the importance of global fora, we also have to accept that the world we're living in isn't going to just be characterized by global fora. We've got an emerging importance of an ever-growing network of sub-global engagement and that's unlikely to reverse. As such, countries need to be creative and flexible how they balance their commitments and interests to ensure they engage meaningfully across the sub-global and global platforms. This engagement's important. Countries need to remain involved at all levels on all issues. It's important for the forums themselves. The trend towards regional and plural-actual engagement risks undermining international cooperation, potentially engendering regionalism and nationalism that could inhibit global efforts when they're required. But at the same time, if we're clever about it, this plethora of sub-global agreements and fora can actually be a way that supports international cooperation. To achieve that, though, what we've got to get is to ensure that global and sub-global fora coordinate and maintain linkages across the web of interconnections I talked about earlier. By doing that, we'll actually be able to ensure greater consistency across the frameworks. And so one outcome would be that those sub-global efforts both strengthen and complement, rather than undermine the global efforts. Now, before I wrap up and go to Q&A, let me just make a couple of comments about the Asia Pacific. As an area not traditionally heavily involved in the global institutions, and one with disparate interests, values, and cultures, the Asia Pacific's a region where this regional and plural-actual engagement's especially important. As such, it provides a good example of the sub-global network that I've just talked about. The Asia Pacific's network of fora and arrangements has grown significantly over recent decades. This has been spurred by those broader global economic fundamentals I outlined earlier, as well as region-specific factors like financial volatility experienced in the Asian and global financial crises, a growing sense of common opportunity in the Asian century, and a response to the shifting power relativities that are evolving quickly and significantly. Achieving cooperation in this environment, particularly cooperation that complements global efforts, is both challenging but possible. Regional fora, such as the Asia Pacific Economic Partnership, APEC, the East Asia Summit, and the Association of Southeast Asian Nations, ASEAN, provide established vehicles for region-wide cooperation. APEC's institution of voluntary commitments without binding agreements has provided a solid basis for collaboration and dialogue, and made progress in areas where difficulties with formal treaty ratification may otherwise, and in the case of the US, have presented hurdles. Meanwhile, ASEAN has strongly encouraged its members to recognize their commonality of interests and strengthen their voice in larger forums. Plural lateral arrangements have resolved in cooperation where arguably progress would not have occurred through traditional vehicles. For example, voluntary initiatives like the Trans-Pacific Partnership and the Asian Region Funds Passport, which is an initiative aimed at facilitating cross-border recognition of mutual fund products, were driven initially by a subgroup of countries, like-minded countries, but who started with the view that a group of countries with common interests can get together and begin to push this and others can join as they wish. So, they're both examples of things where it's been done at a regional level, but it actually complements global efforts, but important thing is they're not exclusionary, and that's a really critical issue, that these sorts of things, if they're to work, have to be open to others to join. Now avenues for linking these four with larger ones are also in place. For example, the rotating chair of ASEAN has a permanent invitation to the G20, while under Australia's G20 presidency this year, symposiums will be held to discuss areas of complementarity between the agendas of the G20 and APEC, and in fact, are being held next week in Shanghai and between the agenda of G20 and ASEAN. While this is only a brief insight into the web of these fora and institutions, it provides a taste of how the growing trend towards sub-global fora does not automatically have to present obstacles to international cooperation. So, let me conclude. The global backdrop has changed significantly. This has had major repercussions for the environment and the mechanisms for international economic cooperation. Partly in response to the global institution's failure to adapt, a growing web of sub-global overlapping fora institutions and arrangements are emerging that on the face of it present a risk to international cooperation, and yet at a very time when international cooperation is increasingly needed. However, I believe this is not an insurmountable challenge. If we approach it the right way, we can strengthen the existing global architecture. If we remain creative and flexible in how we engage with this web and if we approach it as providing a compliment rather than a threat, international economic cooperation can be stronger than ever. If we don't, the costs from reduced cooperation will be large, permanent, and felt by all countries. Thank you. Martin, thank you very much for that interesting and insightful analysis of some of the shifts that are taking place in the global economy and the implications of that for the economic architecture, the global economic architecture. I think many of us in this room probably agree with you wholeheartedly on what you said about Congress's need to move on the IMF. I guess we should take excerpts of your speech and send it over to Capitol Hill. But as you know, they're a little bit distracted up there, but anything, we need a lot of help in getting their attention on these kind of issues. Now I was gonna ask you slightly, before I open it to the floor, I was gonna ask you a question. I'm not sure if you've thought about this part, but there's increasing emphasis, or cleasing clarity that the economy is becoming more digital and a lot of things are, a lot of the economy that used to be bricks and mortars is now happening in a different sphere and a lot of companies are not functioning with any on-shoring anywhere, except maybe in the cloud. And I don't know how you think that, if you've thought about how that is gonna change the global economy and the architecture, that international architecture. And if you have, I'd appreciate hearing about it. Yeah, I think this is a really interesting challenge. It is increasingly the case that the way in which the business community is evolving is highlighting the fact that the global tax system, so the basis of national tax systems and then the double tax agreements, which links them together, has not kept pace. There's a term in Australia, the double Dutch IRA, and it basically refers to the capacity of firms to sell a product, so digital firms to sell a digital product in Australia. The Australian consumer believes they're buying it from a firm that's operating in Australia. It's shipped from a warehouse that happens to be in Australia, but rather than the value add being attributed to that activity, the value add is in fact being attributed somewhere else. And the way the funds are transmitted from Australia to the point where that value add is supposedly occurring takes it typically through the Netherlands and Ireland and then into the Caribbean. Now, this has actually triggered one of the most interesting examples of international cooperation that I've seen. And that is the global commitment to action on base erosion and profit shifting, so-called BEPS agenda, which is being, we're work's being done in the OECD and will be delivered to the G20 in September. And we anticipate that by the end of the year we'll have global commitment to a set of principles. Now, turning that from principles into action requires you to go back into your domestic legislative agenda, domestic legislative context, and that will be interesting to see whether countries will be able to do that. But this is clearly an example where everybody can see that the whole global tax system is predicated on the fact that if you don't tax the profit, then I do. So one of the two jurisdictions, either where it's where the valuators created, so where the production occurs or where the consumption occurs, will end up doing the taxation. And yet what's actually happening is no one's taxing it. And the reason no one's taxing it is because there's arbitrage opportunities between the national tax systems. That could quite easily be fixed, but we would have to go to Congress to do that. There'd be a very simple fix and it would go a very long way to addressing the US's continuing budget deficit. But I won't go into that. The other thing, though, I would note, though, is that even if we fix this, the digitization is leading to two phenomena. One is the idea that countries should engage in negotiations about opening their borders. It's becoming increasingly less relevant to the world. Most trade now occurs within firms. It occurs within identified supply chains. And so it's not really the case that Australia is trading with the United States. It's really that General Electric is trading with General Electric within a supply chain. But because of the way we think about it, we actually still say, well, this is activity that's done the US and this is activity that's done Australia, whereas, in fact, it's really part of a global supply chain and GE could just as easily tomorrow shift it to Malaysia and the UK. So we've got to get ahead around that. The other thing that goes back to the tax issue, even if we fix the BEPS challenge, we will still find ourselves in a world where there will be increasing pressure to lower corporate tax rates because this digitisation and the reliance on capital and intellectual property is going to lead to incentives for capital to move even more than it does today. And the only way countries will compete, therefore, is actually through changing their corporate tax structures. Now, what that'll do is shift the nature of the debates around the structure of taxation within countries and where, in fact, I'm starting to have that debate in Australia just now. I'm gonna, we're gonna open the floor. You got a question, identify yourself, please, and ask a question, please. I'm gonna have a microphone, sorry. Thank you, I'm Barry Wood from RTHK in Hong Kong. Mr. Parkinson, when you were speaking here in October, you spoke about 73 or more work streams in the G20. No, in the Financial Stability Board. Within the G20, you said there was far too many things coming beneath the leader's eyes. And you were gonna streamline that process. So I'm keen to ask you if Australia will not ask the usual guests from the region and will not have the permanent guests like Spain making this, in other words, you spoke the streamlined agenda, how so? So, well, I think there's two issues. One is streamlining attendance and the other is streamlining the agenda. The issue of attendance is not really one that's in the gift of the presidency because it's been an outcome of decisions that the membership has taken over the last few years. So we haven't attempted to streamline attendance. What we have done is changed the nature of some of the interactions. So, and this will become public later in the year. So that leaders are able to spend more time with one another talking about the politics of reform. But what we've really done is actually move a lot of things off the agenda. So that there's really three sets of issues on the leader's agenda. One is essentially the growth agenda. I'll come back to that in a moment. The second is trade and the third is energy. And that's it. So there is a lot of work that still goes on in the G20 but we've decided these are the three areas that we wanna bring up to leaders this year. Now the growth agenda is actually quite a complex one because it goes to issues such as financial regulation. So the 74 work streams I mentioned was a criticism of the Financial Stability Board and the point that that question had just raised was in October I said if you've got 74 priorities you've got no priorities. What we've done is we've sat down with Mark Carney and the FSB and we've identified four areas which were the four areas that were identified in Pittsburgh in 2009 as the priority ones. And we've said we're gonna finish these by November. And they're Basel III, to be to fail over the counter derivatives markets and shadow banking. And I'm pleased to say that the FSB membership has actually thrown themselves into this whole heartedly and I think the prospects that by the time we get to November we've actually landed those four things are pretty good. We've also under that growth agenda have the base erosion and profit shifting and I think again we'll have a set of principles that everybody will sign up to by the time we get to November but then the hard work will come how do you actually convert that back into national action. The third thing around the growth agenda goes to investment and how do you create a better environment for private sector investment? What are the inhibitors to investment? How do you encourage greater investment in infrastructure? The role of the private sector in infrastructure. And so there's a lot of meat in that and that was a particularly strong focus of the discussions in Sydney and February. The fourth element though is the one that I referenced in the talk which is if you want a growth agenda then you better make sure your institutions have evolved and adapted and that means IMF reform. It doesn't stop at IMF reform but IMF reform is the first cart in that train and the fact that we are not making progress because of Congress is as Treasurer Hockey said profoundly disappointing but it's led to an evolution. We are seeing as said in the speech for the first time ever the IMFC and the G20 will have a joint meeting tomorrow morning and Minister Tharman, the Singaporean deputy prime minister who's the chair of the IMFC and Treasurer Hockey is president of the G20 have together been lobbying Congress and I think this will only continue and it's an interesting phenomenon. So lots of evolution in that, in the G20 context but as I said in the speech, still a lot of pushback. Some of the members aren't happy with this approach and they need to be brought along. My name is Harrison Fenton, I'm a student from the University of Melbourne and a youth delegate with an organisation called Global Voices but on that topic of power shifting from west towards east and that broad general theme I was wondering Dr. Parkinson what you saw Australia's role as a relatively large developed Western economy in the region whether you saw us as a bridge between east and west during that transition. Australians love to think of themselves as a bridge. Bridges get walked on. So the classic one is you often find you give these speeches and someone they've just thought of the issue and they say what can Australia do to help bring China and the US together? Doesn't need, the US and China don't need Australia to come together. So what's our role? Our role is best to be an exemplar for other countries. So to be economically successful with an open trading system, sensible approaches to regulatory regimes and delivering inclusive growth in Australia and doing it in ways that others in our region can see and learn from what we've done, both our both the good things and our mistakes and that they can share in prosperity. And I think if we move much beyond that then the dreaded word hubris comes to mind. Courtney, back there. Christy Hughes from Reuters. When you're talking about options for IMF reform in the short term, is it appropriate to consider things like an ad hoc quota increase for non-US countries or a non-renewal of the new arrangements to borrow or even just giving the US a bit more time say until the end of the year? All interesting options and they'll be discussed tomorrow morning at the IMFC G20 meeting. So I don't want to presume what will come out of that. But they're all legitimate options to be considered. Good afternoon, Dr. Parkinson. Winston Thompson from the Embassy of Fiji. Can I turn your attention to your immediate neighborhood? Because one of the consequences of the climate change phenomenon that is taking place is going to be climate change refugees in some of the low-lying island nations. In Australia, being the big brother in the region would have a distinct role to play as this phenomenon works through in the next couple of decades. Can you comment on Australia's role in this? Thank you. Look, that's an issue that we're quite alive to and we have been for some time. Now, climate change refugees, for those of you who aren't immersed in this, it doesn't necessarily arise because you wake up one day and there's water slopping around your ankles as the sea level is risen. We're seeing it already in some of the island, small island countries where you are seeing floodwater inundation of freshwater wells. So there are challenges emerging for some of those countries just in the provision of potable water. It is...if climate change plays out the way the scientists believe, then it will be inevitable that there will be climate change refugees in our region and it will naturally fall to Australia and New Zealand to welcome many of those because of our historic links with the countries and the people of the region. We do quite a bit at the moment in terms of helping countries in the region try and adapt to these changes and a lot of it, in fact, is this adaptation... You can say it's due to climate change, but it's actually really its adaptation to deal with potential natural disasters. Now, whether the climate change is caused to natural disaster or not, we're still going to get cyclones and the like in the region. And so dealing with those sorts of challenges has been a key part of our engagement with countries in the region for quite some time. Thank you. Zhang Peng from Embassy of China. I have two questions. First one is about bilateral. As you know, there is a national security review under the Ministry of Treasury in Australia when Chinese companies invest in mining sector or telecommunications sector. Sometimes there is national security review and in the past few years, for example, the Chinese company Huawei, when they invest in Australia and here in the United States, the US administration and congressmen even raised the concern that Huawei cannot invest in Australia because United States China allies and Huawei has some security concern here in the United States. So they raised the concern to the Australian government and administration. My question is that what is the new administration in Australia about the Chinese investment in Australia and do you have any suggestions about how can Chinese investors better to enter the Australian market in terms of national security? This is the first question. Yeah, so the first thing is to just clear up the confusion. There is no national security test. There's a foreign investment review board arrangement and our approach to foreign investment is blind to country of origin. What it is not blind to is the ownership structure of the firms. So state-owned enterprises, whether they're from China, Singapore, Qatar, UAE are treated the same. So there's no distinction about China vis-a-vis anyone else but anybody state-owned enterprise will be treated in exactly the same way. When it comes to Chinese investment in Australia, China has been the most rapidly growing investor in Australia over the last few years and no Chinese investments have been knocked back by the foreign investment review board. Some have been, there have been discussions which leads the proponents to withdraw them and restructure them, but none have been rejected. Now you mentioned Huawei. Huawei was not a foreign investment case. Huawei was about the sale of technology into the centre of the national communication system and that was a separate issue. That was a national security issue and the Chinese government knows our views on this and understands and that has not ever been an issue with them. More generally around foreign investment policy and China, we have just signed, we've just reached agreement with Korea on an FTA and in that there are changes to the treatment of Korean firms, privately owned firms that invest in Australia. Korean state-owned firms will be treated exactly the same way as Chinese and Katari and Singaporean and Bahraini and you name it, state-owned firms are today. Now we are also in the midst of negotiating an FTA with China and indeed Prime Minister Abbott is in China today. Not surprisingly, foreign investment rules and other issues are on the agenda for that FTA and we understand the Chinese government's position and the Chinese government understands our position and we just have to see how the negotiations go. In terms of changes to the regime by the new administration, what they have done is required purchases of agricultural land irrespective of by whom that is whether it's by state-owned enterprises or private enterprises now to go through the foreign investment review board process but I think a threshold of $15 million but for state-owned enterprises the threshold zero as it is for any other state-owned enterprise investment. So there's not been any dramatic change. There's been a small fine-tuning but we recognize that policies have to evolve over time for the changing circumstances and the same way we think of other elements of our policy and that why we think of foreign investment too. We'll make you the last question where we're gonna end up, but please. Thank you, John Lipski from CICE these days. Secretary, the G20 leaders have defined their role as providing the primary venue for leader-level discussion of financial and economic policy issues. This year is the first year that this discussion will take place in the context of political and geopolitical strains of consequence among some of the key G20 countries. Obviously the situation in Ukraine but also in your region the territorial disputes between Japan and China among others. How important or how limiting will these political strains be with regard to leader-level engagement, effective engagement on political, I'm sorry, on economic and financial issues in the G20 context? Yeah, I honestly don't know, John. I can say that in the context of the finance ministers and central bank governors, those issues have not caused, they've not impacted on the discussions at all. What we have tried to do with the leaders, and I should have said this earlier in response to a questioner from Hong Kong, one of the things that the G20 has done this year, which it has never done before, is commit itself to delivering a quantitative target increase in global GDP. So in Sydney, finance ministers and central bank governors committed to raising GDP by 2% over and above where it would otherwise be within five years. Now, to put that in context, that's $2 trillion of additional global GDP. And depending on the split between employment and productivity, it could be 20 million plus jobs, additional jobs globally. What we will be seeing in Brisbane will be countries presenting their growth strategies about what they're going to do to contribute to that target. And that will be a really good test for the G20 because G20 finance ministers with this commitment and what they're talking about tonight and tomorrow are raising the cost of failure. So if the G20 doesn't deliver, the cost on the institution will be more marked than if it hadn't of made this commitment. And I think that's really been something that sees the imagination of finance ministers. And one of the things that ministers will be doing tonight, in fact, as we speak, they will be talking about the lessons they've all learned about how to drive reform. And partly what we'll be doing with the leaders is actually having the leaders talk about how do you drive reform in your countries? And that's what I meant with the reference to we're trying to create a situation where leaders can be leaders. As you heard me in October, one of the consequences of an FSB, it's a financial stability board having 74 priorities, meaning they have no priorities, is that finance ministers were doing, we're almost doing the work of technocrats and leaders were almost doing the work of finance ministers and the process was being dumbed down and was being mired in an agenda that was being set by the standard setters themselves. And what we've done is we've lifted that up and what I thought was the best set of discussions amongst ministers and governors in many, many years in Sydney. And indeed, many of the ministers and governors actually said that to us subsequently and we're aiming to try and now replicate that outcome in the leaders process. Now it takes countries into places where there's some discomfort. You've got to talk about what's worked but you've got to talk about also what's failed and why and what role the political process and indeed as a leader, your own decisions may have played in that. But if we can pull that off, I think if we can pull that off and we don't get derailed by any of these geostrategic pressures that you've raised, I think we'll end up with a pretty good outcome. But I've got my fingers and my toes crossed. Well, Martin, thank you very much. This was very insightful, engaging conversation. You took us all to areas that we don't often go, which was really very helpful. So thank you and thanks for adding to the list of cabinet and senior officials from Australia that have come to CSIS in the last six months. Really appreciate it. Please join me in thanking the Secretary. Thank you. Good.