Managing the Next Stage of Globalisation

john denton managing next stage

On 11 November, Corrs Partner and CEO John W.H. Denton AO presented to delegates at the 2016 China Advanced Leadership Program (CALP) on the next stage of globalisation.

Run for three weeks on an annual basis, the CALP is a unique collaboration between the Australia and New Zealand School of Government (ANZSOG) and the Organization Department of the Central Committee of the Communist Party of China, and focuses on critical strategic leadership issues facing senior Chinese public sector executives.

Read John’s speech notes below:

For many years the main challenge of globalisation lay in getting market access and building global supply chains. 

That’s why the global community – the community of nations - developed an orderly international framework:

  • Markets in commodities, finance, goods, services, food and energy are all conducted by global rules, though often modified by specific trade treaties.

  • Global standards are now taken for granted, ranging from shipping containers to mobile phones.

  • Global agreements limit and direct national policies, on matters from whaling to climate change.  From how we deliver the mail to where we can land planes.

  • A global system of law is still evolving to cope with global corporate relationships.  A global system of private arbitration was developed to supplement judicial capability.

Why has this all happened?

Globalisation within this orderly framework delivers efficiencies and encourages innovation.

Costs to consumers are reduced and wealth is generated.

And protections are in place for the environment.

Certainly globalisation has helped China achieve something remarkable in human history.

Access to global markets has helped hundreds of millions of people out of poverty within a short time and sustained economic growth. 

From Australia, we see China today as a nation growing in wealth and sophistication, sending thousands and thousands of tourists and students to our shores, providing investment, and taking a greater role in global systems.

Australia has always been dependent on global trade. We are a great trading nation. We will always be a commodities exporter, and we are now focused on lowering the production costs of mining. We are also switching out of routine manufacturing to services such as education, finance, professional services, design industries, tourism and high-end food as well as advanced manufacturing.

We are delivering a vibrant knowledge economy.

Globalisation was never an event. 

It is a process with different stages. Today the focus of globalisation has changed.

Intellectual property and market value are now being added at every level of the integrated production process. 

Supply chains are more accurately described as value chains.

For example, is Apple an American company with a Chinese labour force?

Or, it’s a Chinese product with American know-how and marketing?

Australian companies provide components to Apple, not by exporting them to America, but by exporting them to China.

Local Chinese, Australian and American tech enthusiasts sell Apple products and provide after sales service on the ground.

And Chinese, Australia and American consumers – and consumers right around the world - queue up to buy iPhone 6.

So in China, Australia and America, globalisation looks and feels both global and local.

This new stage of globalisation -- or extreme global integration -- is a great opportunity but also offers major new challenges.

It is going to require a superior level of advocacy and decision making from leaders at all levels. 

Within the global marketplace a failure in any one place can become a widespread disaster very quickly.

A drought in one part of the world can drive food prices higher everywhere.

The financial policies, or crises, of one major nation can drive global tremors for everyone.

So globalisation is not a zero sum game. We all win or we all lose.

This is a world of extraordinary interdependence which can prove fragile in a crisis.

The deeper challenge of globalisation is that, while it is ubiquitous, its benefits have not been equally shared.

Some people have done incredibly well. Many more feel they have been displaced or left behind.

This sense that globalisation has been a false promise has also led to a widespread disillusion with political leaders around the world.

It has challenged or potentially broken what we have known as the citizens’ bargain.  A bargain where citizens accepted the promise made by elites on the benefits of change – believing they would benefit.

We are now seeing a dangerous push to abandon or even reverse the process of globalisation and to punish the leaders that promote it.

This year we have had the example of Britain’s vote to leave the EU.

And now President-elect Donald Trump will take office in January next year. He has made it clear that he thinks American negotiators have done poorly in global trade negotiations. He will stop the Trans-Pacific Partnership coming into force. And he says he will ‘bring jobs back’ to America.

So we are entering an extremely challenging period.

This stage of globalisation is under serious threat.

It could become more not less difficult, for foreign companies to invest in foreign property or businesses, or to establish new businesses within foreign borders.

Both China and Australia are already struggling with the need to preserve sovereignty and meet local aspirations for protection, while achieving the broad benefits of foreign investment and globalisation.

So leaders at all levels need to face up to some very challenging questions.

How will we discourage a retreat from globalisation?

Will we embrace tactics like localisation requirements, export taxes and restraints, non-tariff measures and public procurement policies?

We are seeing a range of regional and bilateral trade and investment agreements in play. Will they continue to go ahead? How can these agreements genuinely contribute to global peace and prosperity?

Will we use currency wars as a tactic?

Or how about trade sanctions and financial penalties – more protectionist measures - deployed as one-off elements of broader geo-strategic power plays?

Can we earn the citizens’ TRUST again?  Can we build a new citizens’ bargain?

The task of leadership is now to deal with very high levels of complexity while arguing for the global system that, whatever its imperfections, will deliver the highest standard of living for people everywhere.

Part of the case for globalisation has to be the real and specific benefits that flow through to people at all levels of society.

If all the benefits of globalisation are captured by a wealthy minority, then the system will fail.

No matter what structure of government a nation has, the people expect fairness.

Citizens can accept a level of inequality but they won’t accept rigged rules that favour the few and not the majority.

So, in Australia or China the scale and types of problem may be very different.

But for all leaders in both countries life is going to be challenging.

Leadership has always had an advocacy role, along with the task of making key decisions.

All of us in leadership positions have a role to play in making globalisation work for everybody, so that globalisation continues to win support and drive growth and prosperity.

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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