Shaping inclusive standards and regulations
The ink never dries on the global rule-book; it is always being dynamically and competitively re-written. This threatens our interests in many cases, but it also presents opportunities to advance our preferred vision.
Australia has a deep stake in shaping the world economy's rules of the road. Their scope and content—and indeed, their presence or absence—powerfully determine the extent of stability, growth, inclusion, and fairness in the global economy. As unglamorous as they are, then, international standards, regulations, and governance all bear significantly on Australia's extended interests.
Given the structural power of these settings, the world economy's governance system is a domain of contestation. The ink never dries on the global rule-book; it is always being dynamically and competitively re-written. This threatens our interests in many cases, but it also presents opportunities to advance our preferred vision. For both reasons, we must play an active part in defending and shaping the standards and regulations that support our desired system: an open, inclusive, and predictable world economy.
In that vein, we should aim to play a lead role in shaping:
Technical standards. As emerging technologies such as AI gather pace and potential, there has been a race in international standard-setting bodies to determine the parameters of their use and development. The outcomes of this will be strategically pivotal. For one, it will determine the pathway these technologies take, particularly in terms of whether they will be widely harnessed for corrosive purposes like state surveillance. Further, it will set the pace of strategic competition, granting significant first-mover advantages to the states which shape standards in their industrial favour. Australia must therefore be active, present, and—when needed—competitive in these standards-setting processes. To amplify our influence, we should engage like-minded partners, such as the US, UK, and EU, in coordinated efforts to shape emerging tech standards in ethical, inclusive, and favourable ways.
Tax standards. It is estimated that tax havens collectively cost governments between $500 and $600 billion a year in lost revenue. Given it is a shared and significant problem, Australia has an opportunity to join a growing chorus of states seeking to tackle multi-national tax avoidance. To that end, we should join multilateral calls for a strong minimum corporate income tax. (This will help stem races to the bottom, aimed at attracting the domiciliation of large companies.) We should also continue to push, via the OECD and G20, collective progress on Base Erosion and Profit Shifting (BEPS) measures. Finally, and perhaps most importantly, we should advocate multilateral efforts to establish fair taxes on global capital.
Intellectual Property regimes. Patents, of course, protect legitimate commercial interests. But in many cases, they have also had a perverse effect on inclusive development and health. Indeed, since much of global IP is owned by advanced economies, developing countries must pay significant royalty rates to access the drugs, critical technologies, and production licenses that underpin their health and growth. By some estimates, this reproduces an annual net transfer of wealth from developing to developed economies. Further still, IP rights can stunt innovation more so than incentivise and reward it: long-term, exclusive ownership of new inventions prevents their broader proliferation and adoption. In cases like renewable energy technology, for instance, this could do the world significant, long-term harm. So, while it is important to preserve the legitimate function of IP, we can and should work towards a better balance. At the very least, we should endeavour to minimise the extent to which IP impedes other countries' energy transition or access to life-saving vaccines and drugs. We could help do so, for example, by advocating in the WIPO and the IPCU that states mutually lower the duration of patent protections (which typically 20 last years). That would still incentivise and reward innovation, while also allowing it to proliferate in the public interest more quickly.
Macroprudential regulations. Volatile flows of global capital can create seismic risk for the world's real economy. After the Asian and Global Financial Crises, we know how damaging it can be when debt crises and liquidity crunches plunge the world's real economy into chaos. Beyond the vast human impact, it can take years for countries to repair their fiscal health. This is significant from a national security perspective, too, as it deprives us of the resources we need to spend adequately on defence and climate policy. It is therefore vital that Australia plays an ongoing role in setting the guardrails of the international financial system. The RBA will continue to lead this effort independently, with support from Treasury and APRA, in forums such as the Basel Committee and the Financial Stability Board.
Trade rules. Initiative 3.2.1 sets out how Australia will work internationally in support of the rules-based order that underpins free and open exchange. It also details the ways we plan to advocate for a fairer trade system, which can accommodate the specific needs of developing countries.