 Thank you and welcome to the Lowe Institute in Sydney. This is our first public and very happily in-person event here in our first city for 2021. For those of you who don't know me and I think I've recognised almost all of you here today, I'm Alex Oliver, I'm the Director of Research at the Institute. I'd like to begin by acknowledging the first Australians on whose traditional lands we meet and pay our respects to their elders past, present and emerging. Welcome to our distinguished guests, members of the Sydney Consulate Corps, and our wonderful Supporters Circle members who've generously supported us throughout a difficult 2020 and are back this year in our very socially distanced event hall at 31 Blystry. It's great to see your familiar faces unmediated by Zoom or a Webex screen, but also a big welcome to those of you in Australia and abroad who are unable to be here with us in person, but who are watching on YouTube or listening to our podcast. We're delighted to have you as part of our growing audience in these online and socially distanced time. Before introducing our panelists this evening, I want to say two brief things about the events. First is an admin issue and that's as always we will devote about 20 minutes at the end of the hour together to questions from you, the audience. So I'll start with one or two of my own, but please start thinking about your questions because that's often the most interesting part of the evening. Secondly, we've been holding these year ahead events in Sydney and Melbourne for a few years now. We actually had our first one in Canberra this year and they're among our most interesting and well patronized events. And the theme of the event is of course the year ahead and it's always interesting to reflect about the opinions and thoughts we might have offered last year and how correct a set of predictions our experts might have offered back in February 2020. Back then the pandemic was beginning to spread its tentacles outside of Wuhan and Australia had closed its borders to China. The Ruby Princess had not yet docked at the passenger terminal in Circular Quay. New South Wales and Victoria were emerging from a summer of smoke and fire devastation and we were assessing the damage and thinking about the implications for climate and energy policy and our approach to environmental disasters. Few in Australia or even the world guessed back then at the severity of what the coronavirus was about to unleash on us around the globe. It is a quote variously attributed to the physicist Niels Bohr, the movie producer Sam Goldwyn and baseball legend Yogi Berra, but the wisdom is the same. It's tough to make predictions especially about the future. So with that important proviso let me introduce our panelists to give us their thoughts on what this year might deliver with all the caveats that that entails. Roland Raja is our lead economist and director of our international economics program and the multi-year project on global economic futures. Roland together with our two of our other economics and political economy experts will be releasing a paper shortly on the economic trajectories of the major global powers the US, China, EU and India and how that will shape the balance of power in the world. Roland is a former ADB de-fat and reserve bank economist and the author of several important low institute studies on China's so-called debt trap diplomacy in the Pacific. Indonesia's economic trajectory and policy recommendations for assisting Indonesia in the Pacific through the economic crisis this year. Jonathan Pike leads our Pacific research program since joining the Institute in 2015 from the Development Policy Centre at ANU. He is an economist and public policy expert and one of Australia's and indeed the world's leading experts on Pacific politics, political and economy and development. He is the architect of the Pacific agemap together with research fellow Alex Dayon and it's become the global resource for developing funding, attracting development funding to the Pacific. He's given formal evidence this year at no less or this last year at no less than four parliamentary inquiries on the Pacific including to the UK Parliament's inquiry into British foreign policy. Peter Sy, not last but not least, is making his first public appearance back at the low institute after spending several years in the private sector as group chief advisor on the executive leadership team at Virgin Australia. Peter first joined the Institute in 2016 and authored the 2017 Lowy Institute Analysis Understanding China's Belt and Road Initiative which has become one of the world's most consulted and popular pieces of research on the Belt and Road Initiative. Previously he was a journalist at the Australian Spectator, the agent Sydney Morning Herald. He has also worked at the Australian Treasury on the Foreign Investment Review Board Secretariat and we're really pleased to have Peter back here in Sydney at Glyde Street working with us. So I'm going to go to Roland with a hard question and that is about the economy this year in the world, not just the United States and China but also developing economies. At the end of the Trump presidency the coronavirus is still peaking in many parts of the world. What has happened to the global economy and the biggest economies of the world since we last met? Thanks Alex and it's great to be here for a live event after a long hiatus. On the global economy I think obviously last year we went through a very steep recession which we are now just in the process of climbing out of and very much in the early days of the recovery process. I would say in general I think we are seeing some positive signs that the outlook might be more optimistic I think than even what we might have thought just say a few weeks to even a month ago or so. So to start with some of the big economies I mean the US economy we know they were hit very hard by COVID they didn't handle the health aspects of COVID-19 particularly well under Donald Trump but at the same time they rolled out pretty big fiscal and monetary stimulus in order to support the economy so the economy didn't actually do that bad last year. It contracted only by three and a half percent for 2020 overall actually one of the not so bad performers on the economic level last year and now if we look forward things are starting to look more optimistic one of course the US is now getting under control the virus right the vaccine rollout is going reasonably well and that's a very important element to the recovery but the other element is the Biden stimulus. Now Biden is clearly going after a very big fiscal stimulus package 10 to 13 percent of US GDP is in the works that's very very significant some you know central left economists like former Treasury Secretary Larry Summers is even talking about the potential for the US economy to even overheat and start to experience too much inflation as a result of the amount of a stimulus that the Biden administration is looking to push through the economy. I'm personally less worried about inflation I mean for a variety of reasons a little bit of inflation would probably be a good thing in the current context you know interest rates going up a bit actually would probably be a healthy thing for US monetary policy and the overall macro policy mix and one thing that we did learn from the the Trump administration's time albeit I would say inadvertently is that running what they call high pressure economy like really juicing demand is very important to getting wage growth going again and particularly for disadvantaged groups and minorities and lower skilled the lower skilled segments of the labor market where I do think we'll see something though is that there's going to be really big spillover benefits from this as well for the rest of the global economy through the trade channel in terms of US demand for the rest of the world's exports a lot of that of course is going to fall on Asia who's being in Asia it's going to be China and it's going to be a Vietnam so they're going to be running even bigger trade surpluses with the United States this year I would say and that of course could be a source for a future tension quickly in China's economy obviously we know China was a source of the virus but they have done quite well in terms of suppressing the virus that's been the key rather than stimulus to their pretty good recovery they actually were able to eke out positive economic growth last year and I think this year again they're going to continue to recover quite well but they're also going to get this extra bump and support from actually the Biden stimulus through through the trade channel EU EU didn't handle the pandemic too well on the health front also didn't do as much fiscal stimulus support as say the United States did so their economy did worse last year probably going to recover slower this year their vaccine rollout also not going as fast as the United States but one I think very important positive element is what's happening for the developing world so last week we saw the G7 announced they're going to put another seven billion dollars at the the WHO's I think it's the COVAX initiative or the ACT accelerator initiative which COVAX is a part of which is going to be providing the vaccines to the developing world that's a big increase in funding it's not enough more needs to be done there's issues around vaccine supply timing hoarding these sorts of things but I think it's a very positive sign that while unfortunately the developing world might be towards the back of the queue they're not going to be left to be too far behind the rich world and that's obviously important when it comes to you know avoiding new mutant strains of the virus spreading prolonging the pandemic and getting in the way of recovery so I think that's a very positive step on that front as well which leads us to the Pacific because obviously vaccine access to vaccines is going to be critical to the Pacific as well your patch of the world Jonner has been generally very successful at keeping the pandemic at bay just give us a brief recap of how the various Pacific islands managed last year and what comes next for them thanks Alex and yeah echoing your sentiments it's great to be here it's very novel to be back here in the flesh I mean I spent so much time on zoom in the last year I'm just waiting for my cat to walk along the stage any minute now but in all seriousness the Pacific has done it's historic how great a job the Pacific has done in combating COVID-19 and the health impacts of COVID-19 these countries reacted very swiftly with foresight to close themselves off from the outside world you know that it's not too distant a memory for them just how devastated many of these countries were by the 1918 measles epidemic sorry Spanish flu epidemic and more recently measles has affected countries like Samoa to devastating effect as well so you know they acted swiftly they cut themselves off from the outside world and many of these countries remain the only countries in the world that are COVID remain COVID free but this hasn't come without a dramatic cost to these economies we Roland has led something excellent work looking trying to look at the economic impact that is these measures have taken and will continue to take as we remain as the borders remain shut and it's pretty devastating you know we're looking at a lost decade of development for the Pacific if more action is not taken very quickly to help stimulate these economies so some numbers you know Fiji has experienced a 23% economic contraction last year Vanuatu expects to lose 60% of its formal sector employment opportunities Cook Island similar numbers you know these are numbers like that happening in Australia we would see societal collapse you know so it's a testament to their traditional welfare systems to other parts of these societies that they are holding together through this but I don't want to understate just how tough it has been to protect their communities from this devastating virus now not all of them have done so well Papua New Guinea seems like we don't really have a good handle on what's going on up there and there's going to be a lot of work to be done in the future to help curb COVID-19 in that country which is already dealing with other really significant health issues. Whilst COVID's been going on the Pacific has not been sitting in stasis there's been a lot of geopolitical interests there's been a lot of Chinese activity there's been a lot of internal regional issues that have been hashed out very publicly so last year we had at the end of last year we had a big blow-up in Papua New Guinea politics and the Prime Minister Marape who just recently came to power he looked like he was going to lose it and we had two months of political disarray as people were moving from camps and the opposition eventually had enough numbers people moved back no one could coalesce around an opposition leader it all got very messy and we landed almost right back where we started with James Marape cleaning on to power but he's clearly made a lot of deals that has you know left him diminished in that role as Prime Minister in a time where PNG does need some strong stable leadership so this is the sort of normal course of politics in PNG because you know we do have this same ground this pattern of sort of leadership changes after the first 12 to 18 months yeah I mean or is it exacerbated by COVID yeah look it's no I don't think COVID had a whole lot to do with it is part of the political structure of PNG there's weak political parties people jump from parties very very willingly it's much more about systems of patronage about identity about regionalism it has far less to do with yeah any political or ideological identity so things move very fluidly there and you know we did have some a period of stability through Samare and O'Neill years because they were so these were such effective leaders and in coalition builders and but it's a very challenging political environment you know you'd never I would not wish being a PNG politician or my worst enemies because it is such a tough job that these guys have but anyway that's in that's all in the past I mean this year we've already hit the Pacific has you know hit with a bang and it's all about regionalism at the moment we so I'm trying to rush through this because there's a lot of context but the Pacific Islands Forum is the region's peak political and economic body made up of 18 members of Pacific Islands sovereign nations the territories of New Caledonia and French Polynesia and Australia and New Zealand this has this organization has been around for 50 years it is very important for pan Pacific culture and identity purposes it has a lot of symbolism to it but it's also very important practically because it's the forum in which all leaders can get together in the Pacific yearly to discuss really thorny issues and then reach consensus on these issues to then speak to these issues on a global stage this is one of the main the forum is one of the main reasons that the Pacific has spoken so outspoken on climate change fisheries in the past nuclear non-proliferation the list goes on the the head of this organization the secretary general is a very coveted position in the Pacific there's been this gentleman's agreement that it rotates around the subgroups of Polynesia Melanesia and Micronesia in the past and the Micronesians were adamant that it's their turn the Micronesians often the smallest and less populous states that feel marginalized in these regional fora to begin with there's a lot of historic animosity in the in the forum and this kind of did blow over as a result of COVID because the Micronesians were adamant it was their turn they put up a candidate but because they couldn't all meet in the usual slate of meetings that you would expect in 2019 no one no one else coalesced around that candidate so we ended up with the secretary general race with five candidates from all subgroups being backed by their governments it was a real mess and we ended up and then to bring it all to a head in February this year we had a leaders meeting on zoom the first time in 50 years of this organization the leaders meeting has been done digitally and well it we couldn't have had a worse outcome you know we we ended this thing this organization prides itself on consensus and we had to after a 16 hour marathon meeting at two in the morning we went to a runoff vote down the line between Cook Island's former prime minister Henry Pooner and the Micronesian candidate Gerald Zachiers from the Marshall Islands we we it was a secret ballot nine eight vote so you know the region has split right down the middle on this one and and you know and Henry Pooner the Polynesian candidate got up this has led to huge fallout in the Pacific the Micronesians had already threatened that they were going to walk if their candidate didn't get didn't get in and they followed through on that threat so five members of this 18 member group has decided we're out of here and you know this couldn't have had a worse time for the region you're dealing with COVID dealing with geopolitics dealing with the economic recovery dealing with climate change the whole this whole year is going to be about trying to save Pacific regionalism and how do you do that when you can't meet in person so that's going to be a defining issue for this year and you know I think there's a way through it but it's going to take a lot of work from all parties to to pull the region back together again I'm going to come back to you afterwards and talk about what this means for Australia in the way Australia deals with the Pacific is obviously very important for us too. Peter Australia has gone from the fridge to the freezer in a space of just a few short months really we were in the fridge last year as a result of a couple of years of tensions as foreign interference and influence legislation or 5g decisions have been various takeover takeover and foreign investment decisions on China but it was probably the federal government's call for an investigation into the origins of the coronavirus that that really froze us out. China are our largest trading partner and now one of our most problematic relationships what's your assessment of the state of China-Australia relations and prospects try not to be too negative. Well as Alex alluded to last year I worked on two issues aviation in China I don't know which one was more traumatic for me and so I think this year I mean last year was quite interesting because you know when I reported commodity price people talk about there used to be a floor price as last year's we were watching and as I was watching the unfolding of the events I thought oh that got to be the lowest the point but then you know next day the news something else happened so I'm just wondering like what is in store for us this year I think I mean I've been told not to be too negative but I just think if you think about there potentially some other flashpoint potentially come out this year if you think about the parliament and past the foreign relations bill and one of the seen as a firmly are seeing the government's cross hairs probably the Victorian government's Belt and Road agreement and remember this is kind of a signature policy for the Chinese president and if that one get cancelled I doubt there will be a very positive reception of that news and if you think about there potentially some foreign investment review board decision coming up and you know given the kind of a track record so far of a rejection and that might not play down really well and given the new Biden administration has the particular big focus on human rights issues like Xinjiang Hong Kong and etc so if they are kind of a further more formal compliance or even sanctioned potentially on Xinjiang Hong Kong related issues you just say they're kind of a further room for for things to get worth in a way I think so far if you look at a trade relationship the you know the kind of the really boring iron ore price kind of a cover up the trouble in a way because you know we're talking about a record high iron ore price a bit of a replay I think for 2008 and 9 but I think on the other hand you you're so on a quieter cross-spectrum trade sanction against a lot of Australian industry which something you know I have never seen before I mean China does practice kind of economic use economic state crafting in a negative way which is instead of a rewarding I mean there's a you know punishing people through punitive moves it happened previously with South Korea with the Philippines but it's usually quite limited in the scope but this is for the first time we've ever seen something this across the spectrum so you know like I don't really kind of see a circuit breaker in a way because traditionally a change of a government offers a circuit breaker but if you look at the the China policy here in Australia is largely bipartisan so a lot of legislations on foreign interference foreign relations bills passed with the ALP support and you know often the ALP makes some criticism of the government policy but not not in a very stark way so there's kind of across the party across bipartisan support so there's no immediate I can't see any shops you know circuit breaker and there's actually just a lot of rooms for kind of the escalation this year so not not a particularly in up-bid assessment but this is kind of the the the sad geopolitical force we have to deal with that euphemism is right up there China's economic state crown so thanks for that John I'm going to come back to you now not on the question of the Australia relationship which we must get to but that is China in the Pacific and its presence in the Pacific and you mentioned that there was a bit of sort of geopoliticking going on throughout the year but its presence in the Pacific pre-COVID was very clear and obvious President Xi at the APEC and and China's diplomacy there China's infrastructure projects in the region its offers of development and even budget assistance it seems to have been strangely absent during the COVID period or at least to an external observer so what do you attribute that and is China you know backed off on the Pacific or is it just in abeyance yeah so look as you said in the lead up to COVID China was really on the march in the in the Pacific you know you didn't need to be a geopolitical analyst you just need to go to these countries and walk into any town and you'd see trades people everywhere business people in every capital satan enterprises operating across the board building infrastructure and delivering Chinese aid and and then at the political level politicians from all countries were getting flown in getting the royal treatment in Beijing there was a real seemed to be a concerted effort of engagement with with the Pacific on behalf of China this wasn't didn't go unnoticed Australia and others really did respond and I think earnestly the Australian government's response to not just China China's engagement but also just what I think perceived by the Morrison government to be a lack of attention on the region writ large beyond geopolitics led to a major step up of our own engagement so you know it was a great time to be a geopolitical analyst on the Pacific you know job security was looking great but but you know it was a real frenetic time for the for the region and yeah it culminated with the G's visit to Papua New Guinea at APEC and he spent like five days in the country and it was anyone all anyone could talk about afterwards with how great that G guy was and you know he really gave a lot of time to the region that they've never really seen before of people of that stature in the world so yeah it was really seeming like that there's a real shift to foot and then COVID hit and it seems like China has really retreated into it unto itself and they don't like hearing this but you know you just have a look at the commitments that have come out from Australia New Zealand multilateral agencies the World Health Organization and you know missing in all of that and in the substance and what and the extra support being given to this region is really doing it tough is China you know that they do talk about some PPE diplomacy that them they've done some some meetings that they've had between the Ministry of Health and Leader and you know ministers from around the Pacific but it's all such tokenistic effort compared to the footprint they have in the Pacific today you know they need to take greater responsibility for this presence that they are trying to claim in the region what about vaccine diplomacy so yeah this is I mean that does that mean Australia and others should be complacent if they want to you know build continue to build their own influence in the region I don't think so I mean we've heard all these news stories recently just in Papua New Guinea about Daru and setting up some major fisheries facility or some mega city you know just talk to anyone who's been to Daru tuberculosis is you know a no-go it makes that whole region a no-go zone it needs a huge amount of work and assistance before you can even get to talking about these sorts of things China's that are out there in the media so there's definitely activity and I think we've been I have to think that China's not going to come back to the region once it but now that it can refocus and the next battleground will be vaccines so you know as as Roland mentioned the risk for the developing world is that that does be so far at the back of the line it's going to take so long to get access Australia has made commitment to finance the vaccine rollout in the Pacific so is New Zealand I mean logistic challenge physical challenges aside there are enough backers the World Health Organization and China that there will get access to vaccines but who's going to get there first you know we've only just started doing our jabs here this week and so but then it raises all sorts of other questions like because the economic recovery is going to be so linked with a travel bubble being established with Australia and New Zealand if any of these Pacific countries take the China vaccine is that actually going to be approved in Australia or even recognised so you know if Solomon Islands takes the China vaccine are we ever going to let are we ever going to establish a travel bubble with Solomon Islands there's really some really interesting questions out there but also these countries you know it really is down to a race who's going to get there first and that's going to be the strongest consideration of all I think and so that has to be a consideration in the rollout in Australia of our own vaccine program is not you know not doing us all first before we can start thinking about the Pacific if we want to you know maintain our position in the region um you talked about battleground so I'm going to go to a big battleground which is in your territory Roland um non-resident fellow Bonnie Glazer from CSIS in the United States said in an early analysis series that we did on the impact of COVID internationally said that the pandemic will accelerate the trend of reducing the independence of the US and Chinese economies so decoupling what what what happened in 2020 and what what what do you see happening with that prediction of decoupling yeah I mean I think it's it's very much a mixed picture I mean I think you know it's it's easier to assess what's happened since Trump basically launched the trade war with China which was you know broadly all about decoupling and what we've seen I think is you know if you're talking about sort of wholesale decoupling of trade and investment flows for example then what we've seen is some decoupling a really very partial decoupling and quite mixed a really quite quite a mixed picture so for example if you look at a trade flows right so trade between the United States and China has gone down both in both directions but let's get some relativities here China has gone from being 20 percent of US imports now it's it then it became 17 percent of US imports so that's a meaningful change as an economist you go that that's something but if you're talking about decoupling it's not really a big difference right and now since COVID actually COVID reversed that China's now back up to 19 20 percent of US imports now there's a range of sort of temporary factors you know people are at home they're going to be buying electronics and stuff that enables work from home and China happens to produce a lot of that stuff for example China also recovered reopened quicker than others so they're they're the supplier on the other side when people need stuff so there's some temporary factors there but the point is pretty partial picture on the trade front China in the meantime is trading more with other countries as well right it's it's exporting more to other countries other than the United States and those other countries like the EU or ASEAN Japan they're exporting more to China when the US is exporting less right so the trade picture pretty partial and mixed investment well Chinese investment into the United States basically collapsed as a result of the trade war but US investment into China stayed pretty high now it did collapse because of COVID but I'd say that probably it's going to return right there's still that interest in terms of investing within the Chinese market and that's sort of FDI foreign direct investment if you look at what we call portfolio investment so financial investment stocks and equities and bonds that sort of thing actually the flows in the China are at record highs right and that's got to do with the fact that actually US investors are very high interest in what they would see as diversifying their portfolio into the Chinese market on the other hand China is actually only very gradually been opening up its market for that type of investment so there's a lot of a way to go on that front so financial integration is actually going ahead full steam so if you look at that trade partial and probably ending but that that required really high tariffs under the from Trump Biden's not going to get rid of them necessarily very soon but he's not going to increase them so that's basically played out investment flows into a China or still continue flows from China to the United States basically stored and then financial flows that's actually accelerating so I'd actually say there's not a lot of decoupling actually going on of course that's at the broad sort of wholesale level if you look at technology for example it's a very different picture you've got the sanctions on far away you got the semiconductor controls and all technology to do with semiconductors and if you look at the investment flows as well would be look within just the technology sector it's completely zeroed out in both directions so obviously the technology side of things rare earths critical minerals sensitive supply chains like PPE expect decoupling there but it's very selective not broad-based Peter staying with China what's happened to Belt and Road your paper five years ago now is it when at the time there were predictions of more than one trillion expenditure by China on Belt and Road its plan its grand plan to create these alternative economic structures its global influence new standard setting in its favor individual projects of 60 billion or more what happened what has happened to Belt and Road it's not something that we've heard a lot about in the last year obvious reasons I think yeah Belt and Road is probably arguably the kind of most significant signature policy for the Chinese president but you know kind of unveiled many years ago but has since run into a variety of issues I think I remember the time when I was doing my report I interviewed people there were some Chinese financiers and bankers explaining to me why they are kind of a bit of a reluctance to invest in developing country why they prefer to kind of invest in buildings in the cities of the cities and in Toronto it's for good reason it's to do with sovereign risk to do with the ability of this country to bear the cost of this massive infrastructure project I think perhaps a really good case to illustrate is China-Pakistan economic corridor is probably one of these flagship projects for long time and you know China's you know Pakistan's one for China's very few allies in the world and so there's strong military political relationship but the missing element is always this economic relationship so at a time China promised to invest something about 60 billion dollars in Pakistan this whole stream of infrastructure projects Port Guadal and also a lot of energy projects and etc so I think reason these runs into kind of a fair bit of a trouble in the sense because I think the total amount of being investors around about I think 25 billion dollars just a little bit under the kind of allocated you know 60 billion dollars I think for a couple of reasons you know first one is very much to do the Pakistan's you know kind of economy it's it has a persistent issue it's a balance of a payment it's a kind of a physically unable to support and a large infrastructure investment on that scale and also they're kind of a geopolitical force as you play as always because I remember when I was kind of a talking to the Indian colleagues about the kind of a whole Pakistan project and their their whole reception is you know as you know as long as Pakistan's in and India's out so that was like reaction five or six years ago you can imagine now the reaction of the the kind of Indian analysts and commentators on the Belgium road project so there's a kind of a confluence of a kind of an economic inability if you can describe that way to support the infrastructure on our scale and also the kind of a geopolitical forces against it since then if you look at a Belt and Road I think initially I mean even here at home you can see the opinion of a Belt and Road hardened over the time initially people were kind of a doubtful about its benefits that were delivered but over the times kind of hardened into a kind of a resolute opposition to the project because it's largely seen as a geopolitical project to expand China's influence so there's a kind of whole host of factors kind of against Belgium road but it's kind of because it's you know kind of a stretch you know into so many geographic areas in part in some parts of the world it goes well you know kind of in the Central Asia investing road and energy projects but I think China runs into the issue like any other investors in the developing country it's basically runs into the ability of the host country to afford it and also I think China has a reputation as the infrastructure builder you know like bridges you know like you know airports and etc but the problem is China finds out like anyone else you know to replicate success you know in a different country in a different environment dealing with kind of tribal politics dealing with labor issue in these countries dealing with a skilled workforce so it's actually quite hard to translate China's accumulated experience of infrastructure building in a different parts of the world if they had trouble in Western Australia building on in all mind you can imagine the trouble they would have in Africa and the impasse world building bridges and etc so these are quite quite a huge challenge because all the kind of administrative advantages and etc that China would be enjoying at home it's quite hard to replicate abroad so kind of in the short the you know the Belgian road kind of you know kind of losing a sting a little bit just basically by the by the fact that a lot of the countries along the Belgian road have a kind of limited financial capacity to take on the projects that China is kind of thinking about and but you know like this is such you know President Xi spent a lot of his personal political capital on this project I think this would keep going would keep going and but I think will be you know the China is probably kind of marketed by reality a bit about the difficulties in the financial restraint so it has to scale back its ambition perhaps will not kind of admit it so openly but is also kind of a pandemic as well playing to all that I'm going to go to you for questions very shortly and why I'm thinking about them I'm going to ask the burning one which is so refreshing not to have talked about Donald Trump incessantly through every event which is I think what we've been doing over the last few years it's only actually been one month since the inauguration of President Biden and and there you go we've only mentioned his name once but what are the implications of US policy for US policy under Biden for Australia for the Asia Pacific I'm going to ask you first Roland it was just days after President Biden signed the order to re-enter the 2015 Paris Agreement John Kerry said that United States was proud to be back in the global climate discussion and we've got to bring an unprecedented global finance plan to the table so that sounds big and in fact I think I think he actually used that word we're going to do something big so what kind of climate policy of the United States will the United States have and what does that mean for Australia yeah I mean I think it's very clear that they want to bring a lot of ambition to climate policy both domestically but the key thing particularly for Australia is they want to put the pressure on other countries to also do their bit as much as possible now there's going to be an obviously a diplomatic element to that but there might also be some hard economic elements as well one of the interesting things we can we can talk about later perhaps as there was interest is around these carbon tariffs so the european union for example is quite advanced and it's thinking they want to apply carbon tariffs because they're looking to do more ambitious climate mitigation at home and they're worried about carbon carbon leakage via imports from from countries that are not doing enough right and the UK now is also thinking about that and Biden in his pre-election campaign was also talking about doing something like that although we haven't heard as much about it since that time so that'll be an important element I think of the agenda the other element though of course is climate finance and it's a bit unclear exactly what they're going to do they're talking that they're going to do something really big but they haven't really revealed what the details of that will be exactly for me I think a few things to think about just in terms of climate finance or of course one is that the need is very very big you know developing countries is what we're talking about climate finance to developing countries that now they need the money and if they're going to decarbonize they can't do it on their own and there's also a strong economic argument as well because a lot of the times it's cheaper to mitigate and reduce emissions in some of these countries because they don't have all this infrastructure in place and it's often about new additional meeting new and additional energy needs and that sort of thing for example I think one really important element is going to be whether or not it's going to be truly additional money so there's already an existing pledge from the rich world to provide a hundred billion dollars a year in climate finance to the developing world now we're notionally according to the OECD at 80 billion dollars a year now in climate finance the target is a hundred for the next few years or some time around now so it's broadly there actually was 2020 it was a 2018 number was 80 billion but all that money has come from existing aid budgets so none of it has actually been additional and when you think about it that money is to not actually necessarily help that country but actually to serve the purpose of global mitigation right so it's not actually about helping that particular country reduce emissions for their own benefit it's actually for the global benefit so you're actually taking something away from these countries so I think that's going to be a real test is there going to be additional money put on the table for climate finance and then thirdly I think there's an opportunity here to of course link it to the recovery from COVID-19 in terms of having a green recovery and we know that you the most best way to deliver the kind of recovery stimulus that we want to see invest in infrastructure things that are productive invest in things then they create a lot of jobs a lot of opportunity there in terms of green infrastructure and of course greening the recovery is a good thing in and of itself let's come back to greening but just quickly Jono the US in the Pacific so I actually think the Pacific did pretty well out of the Trump administration you know in the time that what attention span the Trump administration had there was some of it going to the Pacific you know that there was more aid they committed to more Coast Guard patrols and plugging in and helping support fisheries management they they provided more diplomatic support and diplomatic profile in the region and you know emissions like even here in Canberra one of their key priorities was to support the Morrison government step up in the Pacific this is like unheard of for me and so yeah clearly people in Washington were paying attention and the biggest prize was in the North Pacific where the US really has this hegemonic role in these three compact of association nations Palau Federated States of Micronesian Marshall Islands they are entitled to all sorts of privileges like the United States Postal Service visa free access to the United States they can all enlist in the US military all these different benefits that do cost the US a lot of money to provide and it's a lot of the legacy of nuclear testing colonialism also you know there's a reason for this this compact relationship but these were all set to expire in the next few years five years ago when talking to US officials they would say why are we spending all this money in this part of the world what a waste of money you know it's so expensive to have this relationship which gives them you know strategic control over these massive seascapes and now you talk to American officials and they say man what great value for money these investments are and that's not just thanks that's you know largely thanks to China but I think equally thanks to the administration actually paying attention so we're seeing a full reversal of the compact renegotiation you know they're going to get the money that they they expect and want and this relationship can continue to the benefit of both parties so you know at a minimum I hope the Biden administration will do what the Trump administration was doing and you know of course on top of that you have the reverse step on climate change that you know the Pacific are the canary in the coal mine for us here they are at the front lines of fighting the adverse effects of climate change and so that of course is going to the Biden stance on climate change is going to make him a lot of friends in the region so you know I think we entered the administration on a good note and hopefully that you know the song will keep going. I'm pretty sure one of you is going to ask about the Biden administration's approach to China so I'm going to go to you don't let me down have I got a question from somewhere if I could just ask you in relation to the Chinese embargoes on Australian trade they've actually proved singular ineffective and not just because of iron ore the only only areas that I've looked at where they actually showed significant effect and some of it were very short term is in relation to wine barley and lobsters I'm not sure about timber but for the rest of them really the effect has been almost zero in fact a number of the other commodities are at record high prices world prices in Australia we're taking full advantage so that having by and large failed what do you think China's next move might be yeah it's quite quite interesting in the way I mean depends on how you define the policy goal is I think the policy goal is I think with any kind of economic statecraft you use you try to change the policy I think in a way that you probably have already about the kind of grievance list handed out by the Chinese embassy I think this across spectrum trading bar goes actually design Australian government to shape Australian government's decision making process I'm not too sure whether that's kind of designed to change the commodity price but in a way to change the Australian government to force the Australian government to change the certain policy stance but if that's the goal that has failed in the way because there's kind of a bipartisan support for the current policy and also I have to do a bit of a plugging for the low opinion poll but you know you can see the opinion poll you know regarding China's really kind of nose dive so the kind of a popular opinion also hardened so in a way that the trade embargo didn't work out worked in a way intended to so that can be described as so that's how I see the whole trade embargo policy in wine it's there's a short-term effect in barley the effect in lobster is there but probably won't last for long everything else copper being the most absurd but I think if you look at it I mean the sector that being here the hardest is really across the agriculture so that across the board I think dropped by you know don't quote me on a figure I think around about 25% so I think the overall the trade probably reduced by about a 4% I think that the gap has really been masked by the iron ore price which is kind of going through the roof at the moment I think I agree at the the broad level I mean there's going to be different impacts in different sectors of the of the you know particularly like you say wine and lobsters and this sort of thing at the macro level which is more where I focus trade diversion has been a big part of it it's exactly what you would expect or any economists will tell you right particularly when we're dealing with what you'd call homogenous commodities in other words it doesn't really matter well where you sell them as long as you sell them and in none of those markets is is it the case that China is a dominant buyer on its own right not dominant enough at least even say for coal and things like that so there has been a lot of trade diversion I think there has been some impact but the point is it's much smaller than anyone is talking about so if they've hit maybe about 20 billion dollars worth of our exports in terms of annual value going to China have been affected by these trade sanctions you might hazard a guess that you're only going to see ended up like three four billion worth of damage what is that a few tenths of percentage point of our GDP and in particularly a lot a lot of that is coal and a lot of the minds are include foreign ownership so then when you look at the impact for Australian citizens even further diluted so I think the economic impact I agree with you is very very minimal we know and you know as Peter outlined the political impact as well has been quite counterproductive so I think it's it's an all-round fail for China on this front I'm not sure what demonstration value it has to anyone else watching this I mean I think if you're a smaller Asian country you might feel like you probably don't want to go through it but you've also seen that it's not actually that bad so the lessons that others might take away from it are unclear it's pretty hard to see how this is a win for China in my view but I think the key point is damaged lesson we thought our political institutions also more resilient and I think it's interesting to think about how we might interpret that for our so quote unquote dependence on China right can we be dependent on China I don't I don't like to use the word dependent interdependent but can we be interdependent on China and be fine politically because even when they try and squeeze us it doesn't work or should we not be dependent on China because we don't like them doing this you know these are interesting question looks like the the dueling economists the three of you actually agree own goal another question now we have it's great to see we have basically equal gender representation here so ladies we're putting it to you send us a question consul general thank you very much Alex and gentlemen a fascinating discussion I really enjoyed it and lovely to be back in person just noting on the trade diversion front on the Irish consul general and that Australia is in going into the 10th round of negotiations with the European Union on a free trade agreement a very stable market and 450 million wealthy consumers ready to buy lots of Australian wine perhaps even 1.2 billion dollars worth and I was interested in the kind of brief discussion where we touched on the impact of the pandemic on democracy a lot of your discussion was about the economic impact we've seen some governments use the pandemic to shut parliaments to say no protesting for example and I was just wondering if you had any reflections on the potential impact of the pandemic on democracies and the progression of democracy as well if that's not a wishful thing thank you interesting question consul general what I guess what I would say in response to that is that the reaction of the democratic world has been it's it's been quite quite overt and noticeable hasn't it so the various the various efforts to put together a d10 I think the British d10 that's slightly different makeup from the American d10 we sat in on some closed meetings with with officials from the American d10 countries in the middle of the year and that the effect on democratic freedoms is obviously resonating in democratic in established democracies very dramatically now my colleagues might have something to say about the less established democracies but the work that we've done on on democratic decon deconsolidation which was starting already I that's a that's a sort of a technical term I suppose for the political economists who are just who are studying the the erosion of beliefs in and commitment to democracy around the world and they're looking at the effect of democratic deconsolidation in more recent democracies and they're the ones that are the more vulnerable and they're probably also the ones that have been harder hit that's a generalization but many of them have been harder hit by the academics I expect that to be exacerbated and there are a lot of initiatives now both at the government level which I've mentioned that the the d10 Australia's own efforts with the Quad of course that's a grouping that's a democratic grouping now it's styled as a security grouping but it's already talking about expanding its remit and it already has had finance ministers meetings it's a foreign ministers meetings and it looks like there's a leaders meeting coming up shortly the readout from the last Quad meeting which is only last week it looks like there'll be leaders meeting very shortly so that is a democratic grouping as well as a security grouping and it looks like it's going to expand quite a way out of its original conception which was security in the end of pacific so I don't know if anybody else want to talk about that so I think where where this is really most relevant is in the South East Asian region and we have colleagues who focus on that area and unfortunately can't fit the whole brain power of the low institute on the stage it would fall apart but it's definitely relevant for the South East Asia it's also has some relevance in the pacific where using COVID restrictions they have curtailed some political practice and even personal liberties like many countries still have curfews that they've had for months and months and months and never do not seem to be ending and you know that gives some stability to the country but is all used being done under the guise of COVID so you know it's an issue for the pacific but I think it's greatest issue in South East Asia but we're definitely seeing slippage of democratic norms across the board in the developing world and our research fellow Lydia Khalil actually wrote a really fascinating paper about China's digital authoritarianism and she wrote it and finalised it actually during the first few months of the pandemic and she's got some great case studies in there about China's export of its sort of digital systems to to countries in the Middle East in Europe and parts of Southeast Asia Africa and South America as a sort of an export of its authoritarian control accelerated you know that's the word of them 2020 wasn't it accelerated by the pandemic sorry I was just going to add my two cents on that is really that what is interesting to me as an economist is you've had this really steep recession right a complete collapse in so many economies particularly in the developing world pacific Southeast Asia and you haven't really seen that great a political sort of backlash or reaction to that particularly when you're talking about these developing countries where unlike here they don't know they don't have job keeper they don't have job seeker there's no bailout waiting for them right they have to wear this basically and take it take it on the chin and you know from people that you speak to the more of the political our colleague in the political science Jono on the pacific I think that the consensus is that you know for now there's a bit of a sort of it's not our government's fault you know the pandemic is beyond our control sort of effect but you know I think you wait a couple of years and the recovery is not going to go very fast particularly these countries don't get help to enable that recovery to go faster people will forget why they're suddenly living in abject poverty and just remember I'm living in abject poverty and the governments can't do anything about it and so I think it's probably getting at worse in the coming years sorry thanks role any other question especially from the ladies come on okay I'm going to have to obviously hold up our side yes one more question I think we have time for hello I'm Tim Ford from retired soldier and peacekeeper and now working with the United Nations Association of Australia I'm interested in in what we're going to predict is going to happen multinational we've seen some countries close their borders and a lot of nationalization go on in the last year we've also seen the value of holy cultural and people working together so I'm wondering where you think that's going to go and particularly what Australia might be doing about it multiculturalism well I mean I'm I'm not sure I have anything particularly informed to say other than you know I hope that we will return to you know this similar sort of high immigration policies of the past personally and and open acceptance of multiculturalism I think as people we talk about it sometimes in the institute as people that work on international issues not being able to visit not being able to sort of you know talk to people in the regions and you know cultivate professional relationships and friendships like like we used to it does affect your ability to understand the rest of the world and what's going on I think you know that's already palpable and if that continued and if that was damaged then I think it would really be you know a big hit and a loss I think for Australia I think the fact that we have managed the pandemic well and our economy is going to come out of this pretty strong all right so I'm a little bit more optimistic on the immigration that's going to return to our country at least the demand is going to be there people are going to want to come here as an economist we look at things and immigration is very cyclical and the Australian economy is doing better than other economies people want to come here and I think that's going to be the case again the question is whether or not you know we're going to be letting them back in so look below institute was also the host of Scott Morrison's infamous speech where he came back from the UN general assembly railing against negative globalism so I do I am skeptical about the the lengths at which the Morrison government will re-engage wholeheartedly in multilateralism but then his speech was was counterbalanced by Maurice Paine give me one of her most substantive speeches at the ANU last year where she really doubled down on Australia's commitments to multicultural values and you know the rules-based order and all of the other uh all those other ways to describe the the international system that we were a part of so yeah so it I mean they I don't think they've quite got their messaging right on this I don't think they quite know where they stand on this but I'm fully with Roland here that hopefully you know it is a reminder about yeah well you know I think you know we're gonna have to go back and do some more thinking about that one you've left us with a dick on that one I'm afraid well it was a very notorious speech it hasn't been revisited and negative globalism as something that was sort of an ephemeral idea and and to be fair to the government I think probably its approach to multilateralism for example through 2020 was was pretty embracing sorry Peter did you did you want to finish up as the last comment for the night well perhaps just kind of one last comment I think really why it comes to multilateralism I think now is the Biden administration coming back reclaiming the American leadership and one of the things he promised he would do is to reinvigorate some of the multilateral mechanism I think kind of a very kind of interesting in terms of last year is a year kind of a dispute between China Australia but if you look at some area potentially that can work is actually in terms of the WTO because for the first time the government is actually kind of a taking China on Bali issue I think probably one of the best way to resolve some of the dispute is actually through the WTO the multilateral mechanism and also kind of is actually strangely enough is also in China's interest because China has been so far one of the biggest of beneficiary of an open global trading system through WTO actually China has actually not bad record why it comes to actually adhering to WTO adjudication so actually if there's any way to resolve the kind of a trade dispute is not too bad it's actually a good mechanism but it can take a very long time so if you're looking for some kind of immediate relief perhaps it's not the kind of a preferred platform to have your kind of a dispute resolved but it is kind of a multilateral you know mechanism is actually good so I think in terms of the country won't work together I think WTO is actually about as a good platform as you can get you know for for for kind of free trading country like Australia and also for China that you know world's largest exporter of the manufacturer of goods so it's actually strangely enough in both in China and Australia's common interest to keep WTO ticking over and performing his job so just on the note of a positive optimism thank you um but I think that puts us right on on an hour and we like to end promptly and on time so you can all go home I want to thank our panellists Roland Raja, Jonathan Pike and Peter Sy thank you to the audience for joining us for a discussion about what treats might be in store for us in 2021 2021 but don't hold us to it there was lots that we didn't talk about tonight I had a heap of questions of my own we've got COP26 coming up at the end of this year in Glasgow that's the one that was postponed from last year we didn't talk much about US foreign policy under Biden and I'm sure you're going to get plenty of that from the Low Institute this year there were many other things we didn't talk about the developments with Facebook this week which in this last week which were resolved I believe today just a couple of hours ago we can talk about development throughout the year as well more about development in the Pacific we actually have some upcoming events we've got our next director's chair podcast which will be released early next week and I'm delighted to see that our executive director Michael Fuller Love will be interviewing Francis Adderton the secretary of the Department of Foreign Affairs the first female secretary Department of Foreign Affairs and Trade and formerly Australia's Ambassador to China so that will be a fascinating discussion we've also got an event for International Women's Day Secret Women's Business at this stage it'll be screening on the 4th of March and details coming later this week so we hope we can you can tune in to that we look forward to seeing more of all of you throughout 2021 here at 31 Bly Street thank you very much for coming