HADLEY GAMBLE: Once again, good afternoon everybody, and welcome to this very exciting panel with the World Economic Forum and CNBC News. My name is Hadley Gamble, and thank you so much for joining us.

Now, today we’re in the middle of the fourth industrial revolution and technology is changing everything; it’s changing how we work, how we live and certainly even how we relate to one another. The future is all about communication, and let’s face it, right now what we have is some serious failure to communicate.

Now, in terms of the multilateral world order that we’ve seen since the Second World War – it’s being ripped up and countries are going it alone. They’re going it alone on trade; they’re going it alone on defence as well, and truly failing to address so many of the issues that are pressing today, including climate change, global humanitarian crises and serious income inequality. Globalisation 4.0 is really about addressing these shifting balances of power. It’s really about creating an architecture, whether it’s geostrategic, geo-economic or, frankly, the way that we communicate in the future to address these problems.
I’d like to introduce our panel. Julie Bishop is a Member of Parliament for Australia. Bill Burns, of course, President of the Carnegie Endowment for International Peace. Yoriko Kawaguchi – visiting professor and Fellow and the Musashino Institute for Global Affairs in Japan. Miroslav Lajcak, the Minister of Foreign and European Affairs of the Slovak Republic, and Susana Malcorra, who was formally the minister of foreign affairs in Argentina. Welcome panelists.

I’d like to kick off now with Julie. We were talking just a little bit earlier in the greenroom about what’s going to happen next to address the challenges of the future. What has to happen – whether it be geostrategic; geo-economic; it’s about rules-based orders that have to be upended – where do we go from here?

JULIE BISHOP: During my time as Foreign Minister of Australia, between 2013 and just the other day I observed a significant convergence of challenges that is overlaid by the fourth industrial revolution. So, while we’ve got technological advances disrupting the way we live and work, at a pace and scale unprecedented in human history, we are also seeing some geopolitical, geostrategic trends that manifest in ways that challenge that rules-based order. By the international rules-based order, I mean that network of alliances and treaties and norms and conventions underpinned by international law that evolved since the Second World War, and I think it is noteworthy that we are meeting today, on the 100th anniversary of the end of the First World War, which was followed by the Second World War, and after that the nations of the world came together and said, “we need a framework to guide how our nations behave and towards each other”.

My challenge is, to nations that are seeking to undermine that rules-based order, or to nations that say, “we can go it alone or we can cherry-pick which parts of the order we will accept or be guided by and which we will not”, what is the alternative? And I am yet to see an alternative model that can deal with the challenges of global cooperation, global competition, and some of the issues like climate change. I would say to those leaders and policy makers that are critical of that international rules-based order, “what would you put in its place?” Why not embrace and defend and uphold the international rules-based order but adapt it; make it more flexible; make it more able to deal with the changes in relative power – the shifts in power relativities – to deal with the mass movement of people, displaced people around the world, to deal with issues like the rise of populism and protectionism and nationalism that have short term benefits, maybe, for short term political advantage, but history has shown, have a detrimental impact.

So I think the starting point has to be to appreciate what it is that the international rules-based order has delivered in terms of the growth in human development and the fact that we have avoided a third global conflict, and that standards of living around the world have lifted – hundreds of millions of people have been lifted out of poverty – and what parts of that order need to adapted and adjusted? I am not part of the debate that supports throwing the order out. I don’t believe there is a model on the table that can replace it, but we have to take into account the changing power structures and relativities to ensure that that order can be resilient and continue.

[Questions to other panelists]

HADLEY GAMBLE: So as foreign powers continue, of course, to jockey for position, as they’ve always done, where does that leave institutions like the UN, like NATO – how damaging is this going to be? Because at the end of the day, what we’re trying to do today is to set the agenda for what we’re going to be talking about in January at Davos.

Julie, if you want to weigh in, in terms of new rules?

JULIE BISHOP: Well, interestingly, when Bill spoke about enlightened self-interests of the United States, I was wondering if that was just a very diplomatic and elegant way of describing President Trump’s “America First” policy. Of course, all leaders should put the interests of their nation first, but this hard-edged unilateralism that we are seeing from the United States means that the president is focussed on a domestic agenda, but that also means there is a vacuum, and let’s face it, nature abhors a vacuum and its consequences. And one example was the Transpacific Partnership, the TPP-12, and in fairness to the Trump Administration – both incoming administrations, either a Clinton or a Trump, were against the TPP for, I would suggest, domestic purposes. But once the announcement was made that the US was pulling out, the other nations – the remaining eleven – resolved that it was in their interest to pursue this plurilateral arrangement, in accordance with the WTO rules, and that we would go ahead regardless. And it’s now going through the respective parliaments of countries as diverse as Canada, Mexico, Malaysia, Vietnam, Australia, Japan.

I think that the institutions – in this instance, for open, free, liberalised trade – can continue. It just takes leadership of nations to say: this is in our interests, collectively, and we will pursue it. There are newly empowered nations that are reluctant to embrace the institutions that evolved from the Second World War. You know, the World Bank or the IMF or the WTO. I think it is incumbent upon us all, particularly nations who have benefited so much from this order, to lead the charge for reform that takes into account the changing world in which we live. And again, as I think we have all collectively said, it’s not a question of throwing out the old order and bringing in a new, it is a question of ensuring that the very best aspects of that order that have benefited the majority of countries should be upheld.

[Questions to other panelists]

HADLEY GAMBLE: And speaking of that urgency, Julie, when we talk about what needs to happen next – we have a US President whose own Department of Defence called climate change the single greatest threat to the future of stability globally, and at the same time, he wouldn’t sign the Paris Climate Accord. So, how do we bridge that kind of disconnect?

JULIE BISHOP: There are a couple of issues that I wanted to pick up on that I think might answer that question. We talk about social media and the fact that everyone virtually can have access to a platform to voice their discontent – voice their views. It does become an echo-chamber, and this is where politicians have to show leadership. I have seen in my own country, where politicians have responded to an online campaign that didn’t represent good public policy, that didn’t represent the interests of the nation, but they were spooked into thinking that that’s what the Australian people thought collectively, and therefore they would adopt what turned out to be a populist policy. And we are seeing this rise in populism in some unexpected quarters around the world. This has to be resisted, because, yes, of course we need to be elected – if we’re in a democracy we’ve got to be elected so you want attractive policies – but you have to sit back and think, am I doing this because there is an online campaign, or because it has short term political advantage; or am I actually doing it because it is right and it is the long term benefit of the country or the region that I am concerned about?

Professor Thomas Sowell has that three-point test to determine whether something is populist, and we can apply it to climate change, we can apply it to trade. First, what are the competing policies that you put forward? So, you are about to adopt a populist policy – is there a better alternative? Secondly, what’s the cost? What is the cost of this populist policy you are putting forward in terms of resources, people, capital, you name it – because populism doesn’t actually worry about cost too often. Third, what’s the evidence? What’s the evidence base to support this policy? I add a fourth. My test is, what could possibly go wrong? If you have that four point test, and politicians have the courage to embrace that, then we would see much of the – I suggest – short term populism policies fail. And you’d see leaders acting and politicians acting in the interests of the country. That applies to many of the challenges that we see today that are being answered by these short terms populist responses that have a long term detrimental effect, And we have seen it. How many times does history have to show us what industry subsidisation does, or what protectionism and closing markets does? Or what unaffordable support for a welfare state does for a nation?

That is a debate we have to have.

[Questions to other panelists]


JULIE BISHOP: I think history has shown that for a nation to reach high income status, it is more likely to do so if it is a representative democracy. There are some exceptions, and I think we’re sitting in one, so there are some exceptions in the world. But the majority of nations that have reached high income status have done so as representative democracies – and I think there’s a lesson there. The point that Bill raises on technology being- there’s a positive and a negative – is where the international rules-based order comes into play again. We need rules of the road, whether it is in cyber or physically, we need to have a set of rules by which nations are responding, how they behave, and how they behave towards each other. So, however the technological revolution unfolds, we are still going to need a framework of rules, without which, well, it would be chaos. So, I think our debate at Davos must also keep that in mind – that, sure we can talk about the fourth industrial revolution, but at the end of the day, it needs to be encased in a set of rules.

– Ends –