Australian Government coat of arms

Prime Minister of Australia

The Hon Malcolm Turnbull MP

Speech at B20 Summit

04 September 2016

Hangzhou, China

Prime Minister

E&OE

PRIME MINISTER: I want to say how pleased I am to be here with so many distinguished businessmen and women including the panellists of course and so many from Australia. I can see a few very familiar faces over there very close to the front. I want to acknowledge and thank CCPIT Chairman Jiang Zengwei for his leadership in bringing the B20 together here in this most beautiful city of Hangzhou. I’m sorry I won’t be able to stay here for all of your deliberations. In a previous life I could’ve been a delegate to the B20 of course as a businessman myself who found his way into politics. And I think that perhaps that experience makes me even more determined to say that we should encourage you all and encourage and thank the B20 for its vitally important contribution to the G20 process.

Advice from business leaders about issues that they face helps to ensure that those of us who are the policymakers are focussed on how reforms make a practical difference to decision making.

I’ve been very determined since I became Prime Minister nearly a year ago that we have a very agile approach to policy making. We are living in a world that is changing rapidly. Economic change is operating a scale and pace unprecedented in human history and we see much of the evidence of it here in China especially. But all of that means, just as you have to adopt and adapt your business strategies rapidly and be prepared to change approaches that are not working and to improve them, so in Government we too have to be constantly seeking to improve what we are doing. We have to be as agile as the world in which we live. We have to be digital in the economies we seek to promote. We have to be as committed to protecting the lives and livings and opportunities of the millions of people, millions of families for whom the leaders of the G20 are responsible. We have to ensure that we use all of our wisdom and all of your wisdom and the advice you give us to ensure that within this time of change nobody is left behind.

We were very proud to host a very successful B20 Summit in Sydney in July 2014. G20 Leaders have taken forward many of the recommendations you put forward that day, including as you know the creation of the Global Infrastructure Hub.

Others remain an important part of our agenda, such as ratification and implementation of the WTO Trade Facilitation Agreement.

This year, the B20 Trade and Investment Taskforce identified several themes as a focus for its work, including strengthening the multilateral trading system, ratifying and implementing the agreement on trade facilitation and taking steps toward to a better global investment policy framework.

We support the progress made on trade outcomes this year under the leadership of the Chinese Presidency.

First, dealing with the trade facilitation agreement, G20 Trade Ministers have committed to ratify this agreement by the end of this year.

Recent research by the OECD tells us that full implementation could result in a reduction of trade costs by more than 10 per cent for OECD countries and reductions globally of between 12.5 per cent and 17.5 per cent.

The Peterson Institute estimates that the trade facilitation agreement could increase global GDP by USD $1 trillion per annum and create 21 million jobs. So this is a very significant reform agenda but it requires action on behalf of governments to make those economic reforms within their own jurisdictions to benefit both their own citizens and working and cooperating with others with citizens of all nations and indeed all nations outside of the G20 as well.

Second, on making the multilateral trading system work better, our Trade Ministers have reached a valuable consensus around a set of future actions.

When fully implemented, these will do much to reboot trade growth and strengthen the global trading system. And this was integral to our Brisbane growth ambition.

Finally, the G20 agreement to the Guiding Principles for Global Investment Policymaking are a useful first step in addressing cross-border risks associated with the fragmentation of global investment policy practices given the absence of international investment rules.

Now in terms of challenges, let me now deal with what is a very significant political challenge for us all.

We face a fundamental challenge of restoring public trust in economic reform, in open markets, in trade. We find ourselves in an increasingly complex and integrated global economy. The pace and scale of change as I said earlier is utterly without precedent.

And it is perhaps not surprising that this pace and scale of change, this disruption, has contributed to the rise of populism in many nations and indeed for calls for protectionism.

Now that is a road we cannot afford to go down.

It would be a mistake of historical proportions for the G20 to stand by while scare campaigns – not based on facts or evidence – foster protectionism or indeed isolationism.

The success that we have had, the transformation that we have seen, the hundreds of millions of people that will be lifted out of poverty have had that experience, that extraordinary transformative beneficial experience for them and their families because of a commitment to the rule of law, to open markets, to trade, to the economic reform agenda that you here in the B20 are being committed to. We can’t afford to go into reverse on that.

So we need business and political leaders alike to do more to contribute to a constructive public dialogue on key issues such as trade and investment in order to rebuild this trust.

We need to build constituencies that support flexible and agile economies.

This includes improving labour mobility, promoting and supporting entrepreneurship, and facilitating opportunities for underrepresented groups in our communities to reach their potential. This means promoting transparency in markets, governments and business. It means doing a much better job at explaining to our communities how incomes and livelihoods can benefit from open trade and investment.

No reform is without risk and adjustment challenges but better evidence and reasoned arguments addressing communities’ concern will help us protect those who may be worse off and ensure the benefits of open trade and investment are shared more equitably.

Our economy in Australia is an excellent example of the prosperity that can flow from having open trade and investment settings and undertaking difficult reforms.

Opening our economy to freer trade, bigger cross border capital flows, launching a flexible exchange rate and pursuing labour market reforms were all difficult at the time, but they have given us a flexible and resilient economy when faced with shocks like the 2008 Global Financial Crisis or indeed the recent shock that we have seen from the unprecedented run-up in our terms of trade to match then by a consequential, as some would say, inevitable decline.

Our economy is stronger because we have pursued a range of high-quality trade agreements in conjunction with a strong commitment to the multinational system.

You can look at the past 25 years when Australia has enjoyed the longest period of continuous economic growth. I should note that growth has not been delivered exclusively by trade liberalisation, but trade liberalisation has certainly played a big role in ensuring Australians today continue to be among the richest and most prosperous people in the world.

Now the Australia-China Free Trade Agreement concluded last year has already brought substantial dividends for both countries.

We have estimated $25 billion will be added to our economy through our trade agreements in the next 20 years and the growth benefits are often much larger for developing economies.

The G20 will assist pro-growth trade liberalisation by encouraging the world's leading trade experts to collaborate on strengthening the evidence base to show how specific trade and investment measures support jobs and growth.

Our Trade Ministers' commitment to pursue modelling and analysis of barriers to liberalisation will be very useful in focusing future discussions on areas that would be particularly supportive of growth. This is where feedback and input from the B20 is so important because you understand perhaps better than anybody what those barriers are and can draw them to the attention of the leaders so that we can take the necessary action.

We need also to ensure that in this new digital economy, it’s not perhaps as new as it was 20 years ago, but the digital economy which again I stress the change has been so rapid and so substantial is one that is thoroughly transparent. The new G20 anti-corruption action plan lifts our ambition but there is much more to be done for a global agenda that well and truly puts an end to illicit finance flows and secures budget revenue streams.

A lot of our old laws about transfer pricing and so forth have been thoroughly outdated and overtaken by the digital economy. Now we have taken, my Government has taken in Australia very strong action to deal with multinational tax avoidance. The base erosion and profit shifting agenda of the G20 initiated in Brisbane is of critical importance and we have done more too. We are taking new measures in our last Budget earlier this year to deal with establishing a diverted profits tax – all to focus on ensuring that while we believe in lower taxes and we do have an agenda again in our Budget to reduce business taxes but while we believe in lower taxes, paying taxes is not optional. Businesses must pay tax. Everyone must pay tax. And this is critically important – we want to continue to build confidence in open markets, trade, economic liberalisation. We have to be able to say, to all Australians in my case, to people of the world for other leaders, we have to be able to say to our respective constituencies, yes this is a time of change, yes this is a time of growth but the people that are making money, the businesses that are doing well are paying their share of tax. And that is why it is critically important to have strong cooperation between business and government, between businesses and between governments.

That is a critical element in rebuilding that trust answering the calls for protectionism and isolationism.

You see, we have an expression in Australia which perhaps many of you will understand the metaphor. We have said, and I have said many times, in this time of change you can’t afford to just hide under the doona and pretend it’s not happening. You have to confront the world as it is, not as you would like it to be or as you fondly imagine it might once have been. You have to confront the world as it is and it is a time of rapid change but it is a time where we have seen enormous growth, enormous transformation as people are lifted out of poverty – we need to keep that momentum going. Protectionism, trying to turn back the clock of economic reform, that is the road to poverty. That would be going backwards in every respect. But it is up to us as leaders to build that confidence and a critical part of that as I said is ensuring that while we support lower business taxes, paying tax is not optional – it is compulsory. And we have to make sure that businesses pay the right and just amount of tax in the jurisdictions where they are operating and where they are making their profits.

So I want to conclude by once again thanking the B20 for its contribution to the G20 process. I can say that over the years I have learnt that generally business leaders believe that they know how to run governments better than the people that run governments and often people that run governments think they know how to run businesses better than people who run businesses. Having done both I can say that there is an enormous amount of wisdom on both sides and I think that if we combine together, if we combine together certainly we will be much better informed and better able to run our governments to serve our people and create an environment in which your businesses will be even more successful as you serve your customers, your shareholders, your employees in the years ahead.

Thank you very much.