Lowy Institute
US presidential race 2016

Once upon a time, people running for office worked on making people like them. Not anymore, at least not in this presidential campaign. This one is all about making people hate the other side, or, more precisely, making sure those who dislike the other major party's nominee don't stop doing so before election day.

As often has been remarked, neither the Democrat or Republican candidate is widely loved. In fact, Americans are more likely to view both Donald Trump and Hillary Clinton in a dim light than to smile benignly on either one. More people dislike Trump than Clinton but it seems a few of these are prepared to hold their nose and vote for him anyway.  Nate Silver from FiveThirtyEight explains it thus:

He’s still at only 37% or 38% in national polls that include third-party candidates. That might seem like an easy number to improve upon, but his favorability rating is only about 35%, meaning that he’s already relying on support from a few voters who don’t like him but may vote for him to prevent a Clinton presidency.

While Clinton is still comfortably ahead in national polling at about 43%, she's lost a few points in recent weeks. Not too much to cause any panic, but clearly the race isn't over yet. Last week, as the Clinton Foundation threatened to increase the perception she was untrustworthy, she kept hitting away at Trump, saying he pandered to racist extremists. Meanwhile, Trump accused her of being 'too ethically challenged' to lead the country.  It's clear both sides believe there is only one route to the White House: attack, attack, attack.

This has been the Clinton campaign strategy for some time. Here's Washington Post columnist David Ignatius, in his role as the Lowy Institute's Distinguished Fellow, speaking to an audience in Melbourne last week:

Clinton advisers told me, back before either convention, 'David we are not going to talk about policy during this campaign. We are going to put 70% or our money and effort into telling the country this man is temparemantlly unfit to be president. That is our message'.

And they have a lot of money to spend. Folks in swing states are being bombarded with ads that depict Trump as a poor role model for children,  a loose cannon who could unleash nuclear war, and a president who would invite the Klu Klux Klan to run the country.. No doubt there are others in the works.

As night follows day, Trump (with the help of newly installed campaign director Steve Bannon) will up the ante on his 'crooked Hillary' message as well.

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Here's a salient reminder of how Bannon views the world, courtesy of David Catanese at USNews.

During a 2013 panel about the conservative movement, Bannon spoke about the insurgent populist wave on the center-right that could easily describe Trump's candidacy.

"It's going to continue to hammer this city, both the progressive left and the institutional Republican Party," he said. "Everything that we see and every trend that we see is very strong to ... really an outsider's voice and an outsider's movement to really take their country back. By the way, I think anger's a good thing. If you're fighting to save this country, if you're fighting to take this country back, it's not going to be sunshine and patriots, it's going to be people who want to fight."

Conservative commentator Hugh Hewitt ranks the attack dog mentality about even on both sides:

Throughout American history some elections have been driven by resentment and revenge. 2016 seems to me to be one of those, ranking with the 1968 vote after a year of tears, misery and war, as well as the “Bloody Shirt” elections following the Civil War.

Only a relatively few voters are marching door to door this year inspired by Hillary Clinton’s or Donald Trump’s personal stories of triumph over long odds or their promises of a new morning in America.

Quite a few are campaigning because they are very, very ticked off at one thing or another — or many things.

Whatever the source of the resentments, the degree of vitriol all around has reached levels not seen since Nixon’s era.

So it's not your imagination; this is a really nasty business, and one that's likely to get even more brutal as the weeks tick down.   

Photo by John Moore/Getty Images

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Revelations in The Australian over the past week concerning the capabilities of submarines being acquired by India from France have stirred interest in how Australia’s future submarines might similarly be compromised. The Indian navy will search high and low to find how damaging the leaked information is to its submarine force. DCNS, the French company concerned, will undoubtedly be doing its own forensic examination as to how such important information found its way into the public spotlight.

A lot of damage control will be taking place; experts can make revealing assessments from seemingly innocuous information. That what's been released into the public domain has reportedly been heavily redacted will be cold comfort to those concerned.

India's Scorpene-class INS Kalvari being undocked in 2015. Photo: Indian Navy

Keeping secrets secret has been a problem forever. It doesn’t only apply to the military. Secrets are the concern of any person, organisation or nation that wants to gain or keep an advantage over another, be it private, commercial, governmental or criminal. It is all about winning – and not losing, however that may be defined. Some secrets have a very long life because of the extraordinary advantage they confer. Being able to read encrypted German messages gave the Allies an enormous advantage in World War II and it took nearly three decades for that ability to be made public. Knowing, in a general sense, where Russian submarines were was a full-time task for the Western powers in the Cold War. Tom Clancy’s 1984 novel and then movie The Hunt for Red October purportedly contained more than hints at the sophistication and secrecy that had become real life for submariners in that period. For those who believed in conspiracy theories, there was a message to the Soviet Union about the superior capabilities of America.

The leak from DCNS may prove to be inconsequential. But it will certainly cause a shakeup of security arrangements in multiple places where such information is held, including here in Australia. We have access to some of the most advanced submarine secrets possessed by America, and now those of France. They will of course be protected, but somebody will check. Anybody who doesn’t think Australia is a target for espionage should take the time to watch yesterday’s Four Corners episode, that highlighted to the public what many in defence and other circles know to be true. Information technology has made it easier for spies to be spies, and for secrets to be stolen. But we shouldn’t forget that Edward Snowden (and ostensibly the individual who took the  DCNS data) were on the inside and would have had security clearances. Disaffected humans are as much a weak link as is the internet, if not more so.

Not knowing a secret has been stolen is potentially a war- or combat-losing situation for those who must rely on the secret being kept. This is the world that submariners live in. If you want to meet truly paranoid people when it comes to keeping secrets, spend some time with submariners.

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Submarines and their crews depend upon secrecy for their survival. They represent an extreme expression of what it means to be clandestine. It is this way for several reasons. Living underwater is not a natural thing for humans. Particularly at great depths in the ocean in a long steel tube that has no windows and depends entirely upon sophisticated technology for life support systems and everything it does. Submariners were really the first astronauts. But it gets worse. The prospect of surviving serious combat damage in a submarine is low. Despite the amount of money spent on submarine escape systems, they are most effective when the boat is disabled, but not damaged by the warhead of an adversary’s weapon that has been designed to deliver a lethal blow. Even peacetime accidents can result in total crew fatalities, such as happened from an internal explosion in the Russian Oscar Class submarine Kursk in 2000, killing 118 sailors.

Submarines use stealth to increase their prospects of hiding, and  finding submarines is an extraordinarily difficult challenge for those doing the hunting. It can involve the use of satellites designed to detect electromagnetic transmissions sometimes made by submarines. Added to this are expensive aircraft (such as the new P8 Poseidon, to be acquired by the RAAF), surface ships with their onboard sensor and command systems and the new Seahawk helicopters used by the RAN. Those in the air and on the sea are supported in real time by hundreds of intelligence analysts sitting in comfortable offices in Canberra whose job it is to get the information to the hunters over a secure communications network before the submarine knows it has been found. 

This is all far from a trivial task, and it gets harder all the time because it is a never-ending game of one-upmanship. The submariners know how the hunters work. Hiding becomes second nature because their lives depend upon it. As an indication of their self-belief, submariners typically refer to warships as ‘targets’. But submarines also participate in the hunting business; it can take a thief to catch a thief. Any compromise of the acoustic signature of a submarine, or indeed any part of its overall signature which includes its magnetic field, infrared characteristics and other properties is a big concern to those who operate the submarine, and a very big plus for those doing the hunting.

Submarines being so hard to find can cause major headaches in any naval operation, but they give policy options to a government in how they can escalate or de-escalate a conflict. That is a primary reason why so many countries are now buying them, and Australia’s region is going to become one of the most densely occupied underwater locations in the world. Having a submarine is very different to knowing how to use it to its full potential. Having secrets makes a difference.

If you want to own something really expensive, buy yourself a submarine. The $50 billion reported cost of Australia’s future submarine program can be considered as the down payment, but the lives of our submariners are priceless, as is the value of our freedom. Our submarine secrets had better be kept safe.

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Australia has drawn criticism for opposing UN negotiations to prohibit nuclear weapons.  Foreign Minister Julie Bishop argues: 'We must engage, not enrage nuclear countries', and dismisses the proposal for a ban as an 'emotionally appealing' approach that would only 'divert attention from the sustained, practical steps needed for effective disarmament.'  Is Ms Bishop right, will the proposed negotiations be counter-productive, will they enrage nuclear-armed countries? 

To be clear, the recent vote by Australia was not against a nuclear weapon ban as such, but against adoption of a report to the General Assembly on the negotiation of a ban.  This report, which was by an open-ended working group of the General Assembly and had been expected to be adopted by consensus, discussed a proposal for the General Assembly to commence negotiations on such a treaty in 2017.  The report does not recommend these negotiations commence, noting there was no agreement on this in the Working Group.  Rather, it recommends 'that additional efforts can and should be pursued to elaborate concrete effective legal measures, legal provisions and norms that will need to be concluded to attain and maintain a world without nuclear weapons', and reaffirms the central importance of the NPT (Nuclear Non-Proliferation Treaty) in these efforts.

It is hard to see how Australia could take exception to this recommendation.  The Working Group discussed the need for complementary and confidence-building measures, such as nuclear arms reductions, nuclear weapon transparency measures, support for the Comprehensive Test-Ban Treaty, support for nuclear-weapon-free zone treaties, negotiation of a fissile material cut-off treaty, and so on.  These various measures correspond to the stepwise approach that Australia has long supported and which is set out, for example, in the 2009 report of the Australia/Japan International Commission on Nuclear Non-Proliferation and Disarmament (ICNND).

Consistent with a stepwise approach, the Working Group report notes that a treaty prohibiting nuclear weapons would be only an interim or partial step toward nuclear disarmament as it would not include measures for elimination and would instead leave measures for the irreversible, verifiable and transparent destruction of nuclear weapons as a matter for future negotiations.  Importantly, the report also notes that a prohibition would contribute to the progressive stigmatisation of nuclear weapons.

It is for the General Assembly to decide whether to commence negotiations on a treaty prohibiting nuclear weapons.  The vote brought on by Australia was premature, the time for a vote will be when the Working Group report is considered by the General Assembly.  We must assume the Australian government will continue to oppose negotiations.  Unfortunately this reflects a simplistic view of the substance and potential value of such negotiations.

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Proponents of a ban on nuclear weapons see the Chemical Weapons Convention (CWC) as an important precedent.  The CWC prohibited development, production, stockpiling and use of chemical weapons, and established a mechanism for the progressive elimination of these weapons.  An essential aspect of the CWC was the delegitimisation of chemical weapons, emphasising that the further development and production of these weapons was incompatible with the commitment to eliminate them. 

A fundamental difference is that countries with nuclear weapons are not yet ready to eliminate them (South Africa, which divested itself of nuclear weapons in 1990, is an honourable exception).  Perhaps more to the point, the political and strategic conditions needed for total elimination of nuclear weapons have yet to be established.  But delegitimisation of nuclear weapons would underscore that modernisation and expansion of nuclear arsenals is inconsistent with the commitment made by NPT parties to the eventual elimination of nuclear weapons.

A nuclear weapon ban is not an outlandish proposition.  Such a ban has already been agreed by NPT parties.  In the case of non-nuclear-weapon states, the NPT bans nuclear weapons absolutely.  In the case of the nuclear-weapon states, a prospective ban is implicit in the commitment by these states to disarm.  Bans have also been agreed for those regions covered by nuclear-weapon-free zone treaties.  Currently there are eight such treaties, applying to Latin America, the South Pacific (to which Australia is a party), South East Asia, Africa, Central Asia, Antarctica, outer space, and the seabed.

The idea of a ban on nuclear weapons is inextricably linked to the question of their lawfulness, whether they can ever be used legally.  This question was considered by the International Court of Justice in a 1996 advisory opinion.  The Court found: 'There is in neither customary nor conventional international law any comprehensive and universal prohibition of the threat or use of nuclear weapons as such', but also concluded that their indiscriminatory nature, destructive force and environmental consequences were such that 'the use of nuclear weapons would generally be contrary to the rules of international law … and in particular the principles and rules of humanitarian law'.  Ultimately the Court decided it could not 'conclude definitively whether the threat or use of nuclear weapons would be lawful or unlawful in an extreme circumstance of self-defence, in which the very survival of a State would be at stake.'  While this outcome disappointed some, the key point is that any use of nuclear weapons must comply with international humanitarian law and it seems extremely unlikely this would be possible.

It seems to be the Australian government’s view that nuclear deterrence is essential to international security, that the threat of mutual annihilation saved us from World War III.  This overlooks the frighteningly large number of mistakes and accidents that could easily have led to nuclear war between the United States and the Soviet Union/Russia.  We can’t assume that good luck will hold forever.  Further, the number of countries with nuclear weapons has grown since Cold War days.  Two of these, India and Pakistan, are engaged in a nuclear arms race today. 

The point was made by the 2009 ICNND report, and by many others, that while nuclear weapons exist additional countries will want them, and the world can never be safe against their use, whether deliberate, by mistake, or by accident.  Combine this conclusion with the compelling legal arguments that use of nuclear weapons cannot be lawful, and the legal obligation set out in Article V1 of the NPT for all parties to that treaty to 'to pursue negotiations in good faith on effective measures relating to cessation of the nuclear arms race at an early date and to nuclear disarmament' , and it is obvious that establishment of a negotiating framework that can lead to further nuclear arms reductions and the ultimate elimination of nuclear weapons must be an immediate priority.

To date negotiations on nuclear arms reductions have taken place only between the US and Russia (or the former Soviet Union).  There is a need to expand such negotiations to include the other NPT nuclear-weapon states (UK, France and China) and the nuclear-armed countries outside the NPT (India, Pakistan, North Korea and Israel).  The UN General Assembly, or a process established by the General Assembly, would seem a good place for such inclusive negotiations.

Obviously, as Ms Bishop says, 'disarmament cannot be imposed.'  But this is not what is being proposed.  Disarmament must be a stepwise process.  Some of these steps are possible in the near term, others will take much longer.  Not all the nuclear-armed countries will be willing to engage at the outset, but there are some steps they will see as being in their interest.  Any steps that can reduce tensions, halt arms buildups, and broaden arms reductions have to be worth taking.  What is needed is leadership and a process.  Establishing a process will focus minds and help create the conditions in which progress can be made.  We cannot afford to oppose any serious efforts to this end.

Photo by Galerie Bilderwelt/Getty Images

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Information warfare (or cyberwarfare) is the fifth domain of combat, after land, sea, air and space. That’s been clear for decades. Barely a month goes by without a major news story involving a major hack. 

The need for secure communications has been with us for much longer, with codes and codebreakers sparring for centuries. Today, supercomputers chomp away at previously unbreakable codes and encryption systems. But new advances in communications technology have taken secure communications to a new level.

The strange effects of quantum mechanics (physics at a subatomic level) have been known to us since Einstein and others began to unravel them at the start of the 20th century. But it’s only recently that the long-theorised concept of secure quantum communications has become feasible. Without going through a physics course, quantum communications allows both the transmitter and the receiver to be sure that a message has not been intercepted, as doing so would upset the fragile quantum structure of the transmission. Having been tested across laboratory desktops, and then large distances on Earth, the most ambitious quantum communications project has now been started by the Chinese.

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Earlier this month, China launched Micius, the world’s first quantum communications satellite. It’s still largely an experimental project, but it is probably the shape of things to come. Critically, it is a major advance in communications technology that has not originated from the US or Europe. China has scored a major goal for its IT industry as well as its space program.

The widespread deployment of quantum communications technology will complicate efforts to bug or intercept communications, both in times of war and peace. From an international relations perspective, it means more secure links to anything from embassies to aircraft carriers. This could increase the centralisation of control for national capitals over their farflung assets. It could also increase the potential for surprise, both diplomatically and strategically. Fear and pre-emption could both escalate.

But are quantum communications systems as unhackable as advertised? Probably not. For sure, the quantum components of the system are secure. But the quantum link is just one part of an overall system that includes mundane electrical components and human operators. Nazi Germany thought that its enigma code machines could not be broken. They were wrong, as the wizards of Bletchley Park demonstrated. There are weaker elements in these new systems, and these will be targeted. Nothing is totally secure.

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Last week I noted that the IMF has lost any hope of monetary policy alone lifting Japan out of its deflationary torpor, but Japan is not the only country where monetary policy has disappointed.

The US recovery has been uncharacteristically lethargic, despite adventurous monetary policy initiatives. European unemployment is still in double-digits, with Italian GDP 8% lower than in 2007. A panel of experts looked at this issue recently at the Lowy Institute; for their take, listen here.

If the recovery from the 1930s Great Depression is anything to go by, deep recessions are followed by strong recoveries as the economy takes up the slack and gets back to potential output: US GDP grew by 8% in each of the three years to 1937. That certainly didn’t happen after the 2008 Great Recession. The recovery was neither rapid nor is there any prospect of getting back to the old trend line. Read More

The first chart below shows US actual GDP growth and successive forecasts of potential growth, each one more pessimistic than the last.

 

This chart shows the same thing for Europe.

 

Monetary policy responded promptly and strongly to the crisis. By the end of 2008, the US policy interest rate was close to zero and others were not far behind (although the European Central Bank (ECB) was tardy). But not much happened. Output growth was consistently below forecasts and inflation remained below target.

The response was to increase the dosage. With the policy rate already effectively at zero, central banks in crisis-affected economies searched for other ways to apply stimulus. Some of this was fairly conventional, at least in the context of a financial crisis. Where financial markets had become dysfunctional because of investor funk, central banks bought assets to restore liquidity in these markets. They also supplied liquidity to banks, including foreign exchange liquidity via swaps with the US Fed. They provided ‘forward guidance’ to assure markets that policy would remain accommodative. The Bank of Japan (BoJ), the ECB and a couple of smaller European central banks set their policy rate at a small negative level.

As well, all four major central banks (the US Fed, the Bank of England, the ECB and the BoJ) began large-scale bond purchases, with the same motivation: with policy rates at zero, they wanted to apply more stimulus. These massive ‘quantitative easing’ (QE) operations were breaking new ground, flooding financial markets with central bank money (‘base money’), buying up 25%-30% of the outstanding stock of government debt. Japan had tried QE operations earlier without much effect, but these massive operations undoubtedly flattened the yield curve. Just how much this stimulated output is debated, but it certainly boosted share prices and depreciated exchange rates, both supportive of domestic growth. Inflation, however, remained stubbornly below target and the recovery remained limp.

Last weekend, the world’s central bankers met for their annual high-powered get-together in Jackson Hole, Wyoming, with these vexed issues on their minds

There wasn’t much resolution of the unsettled issues.

Some believe that monetary policy did as well as could be expected. After all, every economics student knows that monetary policy is not very effective in stimulating an economy; ‘like pushing on a string’, or so they say. The crisis environment didn’t help. The epicentre of the 2008 crisis was the financial sector, which is always slow to recover, dampening financial intermediation. Both banks and over-leveraged borrowers have to restructure their balance sheets, and prudential regulators (having been caught out in 2007) imposed more capital and regulatory requirements on the banks (and hefty fines for banks’ earlier transgressions). As a result, the financial system (though awash with base money) didn’t expand credit.

On top of this, fiscal policy was tightened in the aftermath of the 2008 crisis. After just one burst of fiscal stimulus in 2009, budgets were reined in because of debt fears (some would call it debt-phobia). America, for example, reduced its budget deficit by an amount equal to 5% of GDP. Assuming a budget multiplier of one, this fiscal consolidation took 5% off growth, spread out over a four year period. Austerity in Europe was probably harsher, and Europe also had to cope with the 2010 collapse of the peripheral economies, starting with Greece.

What lessons should monetary policy-makers take from this experience? There is nothing approaching consensus here, but here’s my take.

The mistakes of the 2000s were many: overly-low interest rates, irresponsible lending to NINJAs, ineffective prudential supervision, over-leveraged banks relying on flighty funding, and credit rating agencies prepared to hand out AAA ratings on demand. All this came home to roost in 2007-08. 

The balance-sheet repair needed when the bubble burst was profound. To impose budget austerity after just one small shot of fiscal stimulus in 2009 was a very serious policy error. Strong recoveries (not just 1935-37, but the US recovery after the Volcker shock of 1979) require fiscal stimulus to boost demand. Without this, low interest rates have limited stimulatory effect; new investment needs the clear prospect of stronger demand, as well as cheaper funding. The ‘pushing on a string’ analogy is unhelpful: accommodative monetary policy is a prerequisite for recovery. But it doesn’t get effective traction without fiscal support as well. The unconventional monetary policy measures (QE, negative interest rates, and forward policy guidance) are measures of desperation, with modest impact.

When policy interest rates were lowered to zero, central banks (Ben Bernanke in particular) should have said that the monetary instrument was working strongly, but was ‘pedal to the metal’. To be effective in the face of strong headwinds, this monetary stimulus needed to work in tandem with fiscal policy to give the recovery a strong kick-start. Instead, ‘Helicopter Ben’ assured everyone that things were under control: he had more instruments in his policy kit. He let those in charge of fiscal policy off the hook, to make their usual lame excuses for inaction: debt phobia; Ricardian Equivalence; and ‘confidence fairy’ effects. 

In due course the balance sheet repair will be finished. Some businesses will start looking for expansion opportunities. The low interest rates will encourage them to start borrowing again. This is already happening in America. But the new growth trajectory will be far below what seemed feasible in 2007, with economies suffering permanent damage from the long period of labour underutilisation. 

The extensive use of unconventional policies has undermined the beautiful simplicity of inflation targeting. The core tenet of central banking (that governments cannot command the central bank to fund budget expenditure) has been eroded by QE and would be entirely undone by ‘helicopter money’. Unsurprisingly, the Jackson Hole symposium pondered more radical changes to monetary policy to try to restore its effectiveness; economists are never short of sure-fire panaceas. The Economist joined the clamour, with a confused editorial advocating nominal income targeting as the new ‘silver bullet’. 

Few central bankers will acknowledge the asymmetric nature of their power. They are able to stop an inflationary burst, albeit painfully (the 1979 ‘Volcker deflation’ in America, or the 1990 ‘recession we had to have’ in Australia). With competence and some luck, central banks may be able to maintain inflation close to target in good times. But when the economy falls into a deep hole, monetary policy shouldn’t be expected to carry out the rescue alone.

Photo: Getty Images/Archive

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  • World Bank President Jim Kim has unsurprisingly been nominated for a second term, 10 months before his first term comes to an end, as the Bank is in the middle of major and controversial reforms he has enacted. 
  • Lant Pritchett has called out the Obama administration for not embracing an 'open, merit-based, and transparent' process for the position yet again. William Easterly reminds us of this gem he wrote when Kim was first nominated in 2012.
  • What do development NGOs in Australia use the internet for? The simple two-word answer: 'chasing donations' according to a new paper from Sachini Muller and Terence Wood.
  • A team of Stanford University researchers have used a new and unconventional measurement tool that draws on machine learning and (day and night) satellite imagery to predict economic wellbeing in poor countries. A summary of their research paper is available here, and the project website is here.

  • Justin Sandefur from the Centre for Global Development has written a commentary and critique of this new approach.
  • This visualisation tool charts the evolution of economic freedom over the past 30 years.
  • The Centre for Global Development also has a podcast with development wonk Duncan Green discussing ‘how does change happen’?
  • The Guardian details the plight of indigenous communities across the world that are being evicted from their homes in the name of conservation.
  • Finally, for all of you Twitter fiends, the BBC Media Action Insight Blog has a list of who to follow in the International Development space.
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By Nicholas Welsh, an intern in the Lowy Institute's International Security Program.

In April, Prime Minister Turnbull unveiled the National Cyber Security Strategy, outlining five key themes of action to improve Australia's cyber-security capabilities and meet the dual challenges of 'advancing and protecting our interests online'. Just over three months later, the collapse of the census website, attributed (at least in part) to a series of distributed denial of service attacks from international sources demonstrated why we need such a strategy. 

Cyber-crime is a difficult challenge for any government. The anonymous nature of the internet makes it difficult to find the individuals behind online activities, and the legal hurdles to convicting perpetrators (particularly if they are suspected to be overseas) are considerable, given cyber-laws vary greatly. The National Cyber Security Strategy will help to ensure Australian cyber-defence capabilities are, at the very least, in step with global technological advances But national-level defence can only go so far in a realm where Australia's geographical isolation and border protection efforts are, in essence, immaterial.

The third of the five themes, titled 'Global Responsibility and Influence', seeks to partner with international law enforcement and intelligence agencies to 'build cyber capacity to prevent and shut down safe havens for cyber criminals'. With the proximity of the INTERPOL Global Complex for Innovation (IGCI) established in Singapore in 2014, Australia and the Asia-Pacific region finds itself in a somewhat unique position to combat the rise of cyber-crime on a level beyond the national. The IGCI's cyber-focussed mandate and capacity building role complements the goals of the strategy nicely, but the extent to which the IGCI has, over the past two years, installed itself as indispensable in all cybercrime matters is debatable.

Since the IGCI's establishment, the Australian Federal Police Force (AFP) has embedded officers in the Singapore complex, allowing them to use an extensive network of cyber expertise and personnel training programmes, both for regional and domestic benefit. Despite such benefits, the lack of any operational mandate for the IGCI means that bilateral (and increasingly multilateral) relationships between national police forces remain more valuable, and so cooperation and intel sharing among regional state law enforcement agencies remains compartmentalised.

Governments around the world commonly reference the difficulty of tackling a transnational issue like cybercrime alone and push a narrative of cooperation between national law enforcement agencies, as evidenced in the third theme of the cyber security strategy. In this context, the IGCI, which offers a pre-existing structure to facilitate the construction of a multilateral, regional framework for tackling cybercrime, would seem to be an under-used resource on Australia's doorstep. Even without an operational mandate, the central coordination role that the IGCI could play in organising and sharing cybercrime intel equally among regional law-enforcement agencies has the potential to provide the Asia-Pacific region with a technological and informational advantage that states lack when acting alone. Read More



While the current lack of extensive regional engagement with the IGCI may be in part due to its youth, the greatest hurdle to creating such a regional framework would be, as ever, political. Technological advances in the cyber-sphere are dual use by nature; increases in one state's capacity to combat cybercrime could be seen as a threat against another's cybersecurity. The IGCI is a non-political entity but it will still find it hard to convince governments the benefits of integrated cooperation to combat cybercrime outweigh the risks their own security will be undermined in the event of a state-sanctioned cyber-attack. Emphasising the reverse of the dual-use argument would be key. Any expertise gained by tackling cybercrime can also be applied to improving national cyber-defences, just as much as it could be used to improve offensive cyber-capabilities.

At this stage it looks unlikely the IGCI will evolve to have an operational mandate in conjunction with its coordination role. Transnational policing operations remain bilateral and multilateral, and so AFP regional engagement must seek to maintain and improve these individual state-level relations. However, the capacity for combating cyber-crime offered by the IGCI offers a potential regional coordination mechanism unique to the Asia-Pacific region. Given that the publicity of the census collapse has brought cyber-security to the forefront of public debate, investing in the development of such a mechanism is looking increasingly attractive.

Photo courtesy of Flickr user Tom Blackwell

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Contrary to what American Nobel Prize winning economist Joseph Stiglitz claims, the Euro was, and is, no mistake but rather an indispensable part of one of the world's biggest economic powers, the European Union. 

Let’s recall why the single currency was introduced in the first place. The global economy is increasingly characterised by transnational chains of added value and the respective financial flows. This is especially true in Europe, where products like German cars are in fact a composite of deliveries from multiple countries, emanating from companies large and small. The Euro greatly facilitates such production processes by eliminating currency risk for all involved and allowing better comparison both inside multinational companies as well as between competing providers. Individuals, including tourists, profit from clear and comparable prices, as well as hassle-free currency usage across national borders (accommodatingly open thanks to the Schengen Agreement). 


It is often said, including by Stiglitz, that the common currency left European nations with not enough levers to pull when a crisis hits because it has taken away their ability to control exchange and interest rates. That’s turning things on their heads. Given the aforementioned transnational character of our economy, no country with a respective currency (except, to a certain degree, the US) has been able to control the two rates independently for quite some time now. The best examples are two Western European economies outside the Eurozone but clearly dependent on exchange with it: Switzerland and the UK. Their interest rates cannot escape worldwide trends and their exchange rates have to fluctuate around the Euro, lest they risk crippling manufacturing ability (by an overvalued Swiss Franc) or purchasing power abroad (by an undervalued Pound Sterling).

Within the Eurozone, the common currency has finally allowed a clear picture of what countries do, or don’t do, especially with regard to structural deficits resulting from clannish to outright corrupt economic and fiscal practice. Again, claiming that the Euro has allowed weaker economies in Southern and Eastern Europe to indebt themselves too freely is turning things upside down. Because of the common currency their grave structural deficits have now come to light and cannot be explained away any longer by ‘specific national traits’.

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Historically speaking, Southern Europe had to be kept in the Western, broadly non-communist and later non-authoritarian realm after World War II, just as Eastern Europe after the implosion of the USSR. However, in both cases old and corrupt structures either remained in place or were replaced by new oligarchic ones. The respective adjustment process will take time and is often threatened by popular revolt (either genuine or fanned by populist irresponsibility) but is now finally underway thanks to the Euro. Shining examples of successful restructuring and adaptation can be seen from the three Baltic states to Ireland and, to a lesser degree, Portugal and Spain. The current equilibrium between expansive monetary policy (by the European Central Bank led by an Italian) and Northern, especially German fiscal prudence, as applied through the Councils of Ministers, appears just about right to bring the more notorious fiscal sinners into line, without creating too much hardship.

That the introduction of the Euro also had political reasons is undeniable; as if there would be any economic and fiscal decision in the public realm taken without regard to hard political facts. Such facts (wisely foreseen by those who created the Euro and defend it now) are, first, the declining global importance of Europe. Only as an economic bloc held together by the Euro can the EU effectively act on the same stage with other heavyweights. Without a strong EU, no TTIP, and thus no level playing field with the other new (and prospective) mega-regional trade agreements like NAFTA, the TPP and RCEP.

The second and probably most important political reason for an ever stronger and more united EU lies in facts laid bare since the end of the Cold War in Europe but conveniently overlooked by both the European side of NATO (eager to cash in on a peace dividend) and a US government still convinced of its ability to intervene anywhere, anytime. To put it into somewhat sweeping terms, the ‘Democratic Burden’ to counter and, where necessary, oppose the ever more visible authoritarian axis from Beijing to Moscow to Ankara must also be carried by Europe. Just as the respective discussion is heating up in the Asia Pacific on how to manage the inevitable decline of America's presence in the region, a unified Europe must turn away from the problems of its past and start shaping its future in a radically different world.

Normally Stiglitz is precisely the type of economist looking beyond ‘pure economics’ and is equipped on his journeys into political writing with an infallible moral compass. How he can be so wrong on such a monumental question is hard to explain. 

Photo: Getty Images/Ralph Orlowski

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Earlier this week The Australian reported that it had seen detailed specifications for the Scorpene-class submarine made by DCNS, which is also contracted to make twelve submarines of a separate  design for Australia. Shashank Joshi wrote on the regional impact: 

If The Australian’s investigative reporter is correct in asserting the raw data passed from French shipbuilder DCNS to companies in Southeast Asia and Australia, there can be little doubt that it is, or will soon be, in the hands of Chinese intelligence and, soon thereafter, Pakistan. Vice-Admiral A.K. Singh, a retired Indian submariner who served as head of the Eastern Naval Command, told The Wire that, in his view, 'this has saved the Chinese and Pakistanis 20-30 years of espionage'.

The Scorpene-class INS Kalvari being launched in Mumbai in 2015. Photo: Indian Navy

The Olympics wrapped up this week with Shinzo Abe in a Mario costume. Though often hyped for political effect, there was a noticeable disconnect between the Olympic success and the domestic politics of both the US and the UK, argued Nick Bryant:

Britain voted to leave the European Union partly because of fears about immigration. Yet its hero of the Rio games, as in London four years earlier, was Mo Farrah, a Somali-born athlete who has emerged over the past four years as the face of British multiculturalism…

Across the Atlantic, Donald Trump, in promising to make America great again, has repeatedly said that the US doesn’t win anymore. Yet Team USA dominated on the track, in the pool and at the gym. It came away with its biggest medal trawl since 1984, when its tally was artificially inflated by the Eastern bloc boycott.

Richard Lennane wrote a scathing critique of Australia’s attempts to derail a UN meeting in Geneva last Friday:

Australian diplomats called a vote they knew they would lose, split their already modest support base in half, and enraged more than 100 other countries that had been ready to agree to a painstakingly negotiated compromise. For its trouble, Australia gained precisely nothing, and seriously damaged its credibility and influence. If it sounds like a diplomatic train wreck, it was.

Last weekend saw the departure of campaign chairman Paul Manafort from Donald Trump’s presidential campaign. James Bowen:  

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As things stand, there is still plenty of wild conjecture on the nature of Trump’s end game and how it relates to his increasingly chaotic campaigning. After all, Manafort’s resignation – which we can safely assume was a wholly forced departure – was also attributed by many to Trump’s desire to more fully embrace his stream-of-consciousness electioneering style.

Would the election of Hillary Election represent US foreign policy ‘returning to normal’? Don’t be so sure, wrote Hugh White:

Clinton is after all a professional politician through and through. There is no evidence that she has ever allowed foreign-policy convictions to override political calculations, and no reason to think this will change now.

That means we should expect Clinton to shape her foreign policy to neutralise the threat to her nomination in 2020 from the left of her party. So forget Hillary the hawk. To consolidate her Democrat base, she will be even more cautious abroad than Barack Obama has been.

A new RAND Corporation report into how a hypothetical US-China war might play out was an admirable effort to analyse a scenario often considered taboo, but the study has some flawed assumptions, wrote Crispin Rovere:

The authors note that Chinese policymakers are one of their intended audiences. This aims to ensure that miscalculation owing to overconfidence in China’s military capacity is avoided. Unfortunately, in attempting to enhance the deterrent effect of America’s Pacific forces, RAND makes a number of assertions that paint an overly rosy picture for the US.

Adding yet another layer of complexity to the security situation in the South China Sea is the prospect of floating nuclear power plants. John Lee

China’s first floating nuclear power plant is expected to be operational by 2019, and will likely be deployed to the South China Sea to support China’s outposts and oil drilling operations.  CNOOC, the state enterprise which owns the mobile oilrig that deployed to disputed waters with Vietnam two years ago, has signed a contract for one such platform; another 20 are reportedly in the works. 

Susanne Schmeidl wrote on Afghanistan's slow decline:

Finding refuge in the country's urban centres is no longer the best survival strategy given the various insurgent elements (Taliban, splinter groups and Daesh) have proven their ability to infiltrate the heart of Kabul and other cities. The band-aid approach of international military forces seems to no longer be working and the peace process is on a road to nowhere. Those fleeing violence have few places to go.

Next month G20 leaders will meet in Hangzhou. Fergus Hanson wrote on why the G20 should consider encouraging global norms for online conduct:

The internet is now so central to the world economy (McKinsey estimates it contributed US$2.8 trillion to world GDP in 2014) we forget how weak the norms are governing behaviour online. In several areas these behaviours threaten to degrade and limit the internet’s future contribution to global growth…

The G20 now has the opportunity to build on some of the progress made in 2015 and expand its engagement into new areas. In the most recent G20 Monitor, I propose three issues it could usefully grapple with.

Hugh Jorgensen outlined how G20 leaders should go about adding migration to the agenda for next month’s leaders’ summit: 

I have co-authored a piece in the latest G20 Monitor that lays out some more specific options available to G20 leaders on migration issues at the upcoming leaders Summit in Hangzhou. In general, the piece argues that the G20’s engagement with migration matters should be discrete but clear, that the G20 Hangzhou Summit should seek to give the maximum possible momentum-boost to the UN Summit on Refugees and Migrants taking place in New York on 19 September, and that the G20 should consider how it can best support the outcomes of the UN Summit at the G20 Hamburg Summit in 2017.

And David Gruen and Sam Bide argued for a stronger stance from the G20 on global trade:

There are signs around the globe of rising protectionist sentiments. Partly, this reflects the perception that the gains from trade have not been broadly distributed, particularly in some advanced economies. China has elevated trade as a key issue for leaders to discuss at Hangzhou. G20 Trade Ministers have also called for improved communication of the benefits of trade and are seeking analytical support from relevant international organisations. A key part of this is improving the evidence for how trade lifts GDP, and also how key groups, industries and regions are impacted.

Earlier this month Indian PM Narendra Modi extended his greetings to the people of Balochistan, outraging Pakistan’s leaders. David Brewster examined the geopolitical implications of the move: 

Narendra Modi laid down the gauntlet to Pakistan, sending a clear indication that India may be prepared to destabilise Pakistan’s fractious Balochistan province in response to perceived threats. While this represents a very significant change in India’s public posture towards Pakistan, it is important to understand the message was also directed at China.

Finally, Emma Connors chronicled the political legacy of Roger Ailes:

In recent years the 76-year-old Ailes was usually discussed in the context of Fox News, the television empire he founded and where he was largely given carte blanche by Rupert Murdoch because Fox made money hand over fist. That autonomy ended last month, when suddenly Ailes had to go.

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China’s first floating nuclear power plant is expected to be operational by 2019, and will likely be deployed to the South China Sea to support China’s outposts and oil drilling operations.  CNOOC, the state enterprise which owns the mobile oilrig that deployed to disputed waters with Vietnam two years ago, has signed a contract for one such platform; another 20 are reportedly in the works. 

Since China has shown no sign of renouncing its jurisdictional claims within the nine-dash line, it will likely assert control over the maritime space surrounding such plants for their protection.  The recent arbitral award’s finding that several Chinese outposts in the Spratlys are artificial islands, not entitled even to a 12-nautical mile territorial sea, gives China added incentive to interpret expansively the law governing protection of offshore platforms. 

An artist's impression of a nuclear platform. Photo: China General Nuclear

The UN Convention on the Law of the Sea (UNCLOS) allows states to enforce safety zones around artificial islands or installations with a radius of 500 metres.  This is not adequate for protection against safety hazards or deliberate attack, as recognised in a recent report into the security of Australia’s offshore oil and gas sector; a speedboat loaded with explosives or armed men can cover that distance in around 40 seconds.  This is not a hypothetical threat: in 2008, Nigerian militants attacked a platform 120 kilometres from the coast, and  Southeast Asian terrorist groups have a demonstrated intent and capacity for offshore attacks.

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The prospect of a maritime catastrophe could be used by China (or indeed any country) to justify expanded safety zones around its installations.  This would be less controversial than an air defence identification zone over the South China Sea, particularly as safety zones would cover a smaller and non-contiguous area, which might only marginally impinge on commercial freedom of navigation.  Such a move would align with China’s assertion (alongside Vietnam, India and several other Asian states) of rights to regulate foreign navigation through its territorial sea and exclusive economic zone.  It would likely be justified through the same arguments made for a coastal state’s right to prohibit surveying and monitoring activity by foreign warships and aircraft beyond its territorial sea: that these provisions of UNCLOS derive from past state practice that is now out-dated due to technological advance, and that the final text of UNCLOS left the extent of coastal state rights unresolved.

Expansive safety zones in the South China Sea would serve the interests of two powerful constituencies in China: the state oil companies and the PLA.  When CNOOC’s oilrig entered waters disputed with Vietnam in 2014, a three-nautical mile exclusion zone was declared around it, and enforced to the point of collisions and sinkings.  The PLA already asserts ‘military alert zones’ around Chinese outposts in the South China Sea, and is the most plausible driver of China’s 2013 declaration of an air defence identification zone over the East China Sea.  PLA planners have strong incentives to continue deploying power-hungry equipment to the artificial islands in the Spratlys.  The proximity of nuclear plants would have the added benefit of complicating enemy targeting of these outposts in a conflict, given the risk of spreading radioactive waste across a sea that carries a third of world maritime trade and feeds several hundred million people

Such moves would likely be opposed by the US, which has blocked proposals in the International Maritime Organisation to accommodate safety zones wider than 500 metres as an infringement on freedom of navigation.  But US response options would be limited; freedom of navigation operations in close proximity to a floating nuclear plant would be risky, and unlikely to play well in the court of public opinion.  It could be argued that mobile ‘artificial installations’ are properly classified as ‘ships’, which are not entitled to safety zones at all; but since UNCLOS does not define either term, another arbitration might be needed to settle the matter.  Treating a mobile nuclear plant as a ‘ship’ also raises thorny jurisdictional issues around its deployment into other countries’ exclusive economic zones, even leaving aside disputed sovereign rights.

Nor would the US be assured of international support in pushing back against China on this issue.  As noted above, many regional states assert rights to control maritime space beyond what UNCLOS expressly permits.  India reportedly has plans for five nautical mile safety zones around its’ offshore platforms, and Indonesia (which has a long record of disputing foreign navigational rights in its coastal waters) intends to buy its own floating nuclear plants.  The Australian government report cited above recommends a concentric safety zone system around offshore platforms, including a five nautical mile exclusion zone.  Expansive safety zones may well become a contentious issue between countries that see them as ‘creeping jurisdiction’ undermining the navigational freedoms enshrined in UNCLOS, and those viewing them a proper evolution of coastal state rights that were incompletely defined in UNCLOS.

Nonetheless, the first mover is likely to be China.  It is of course possible that foreign opinion could steer China away from its higher risk options around mobile platforms in the South China Sea, even if the artificial islands are here to stay.  Optimists can find a precedent in China’s approach to testing anti-satellite capabilities: international outcry over the results of the first test may have influenced the adjustment of subsequent tests to reduce collateral space debris.  But as for most aspects of dealing with China, effective engagement is likely to require some flexibility in approach.

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It’s been another grim week in Afghanistan, one in which the continued descent into chaos is likely to prompt more Afghans to flee their country even though they know competition for a satisfactory end to a refugee journey is tough and getting tougher.

An attack by gunmen on the elite American University in Kabul (AUAF) on Wednesday has left 12 dead, 44 wounded and many traumatised students. Nobody has claimed responsibility for this attack, though some in the Afghan government suspect the Haqqani wing of the Taliban. Zalmay Khalilzad, former US Ambassador to Afghanistan, Iraq and the UN, believe the attack was evidence of the Taliban's hostility to education, but it also fits with the Taliban's desire to rid Afghanistan of foreign invaders and influences (many of AUAF’s staff are foreign and the language of instruction is English). For Kabul residents it was one of many attacks this year, evidence the Taliban is specifically targeting densely populated areas to prove its superiority over Afghan government forces. It's a strategy that has created a great deal of uncertainty and stress in the lives of many.

As it happens, I can put a human face to the AUAF attack. One of those injured was a dear friend and long-term colleague, who once wrote (under a pseudonym) for the Lowy Institute in the Afghan Voices Series. A Pashtun from Kandahar province, part of the Taliban’s heartland, and deeply religious, he would fit the profile of many young men that might join the insurgency. Except he did not, he chose to become a journalist and researcher, using words to tackle problems, not arms. He studied at AUAF because he could not get the education he wanted anywhere else in the country. For me, he epitomises the indiscriminate war insurgency is waging on civilians in Afghanistan

While the AUAF attack was reported around the world, the international media misses much of what goes on in Afghanistan; and there is a lot going on. The International NGO Safety Organization (INSO) counted 16,287 security incidents (intimidations, robberies, abductions, improvised explosive devices/suicide bombings, small arms fire, etc.) across the country in the first six months of this year. That's an average of 77 such incidents every day. INSO ranks Afghanistan second in terms of incidents involving NGOs (the Central African Republic is first). Given this level of violence, it is not surprising the flow of Afghan asylum seekers has not slowed. They remain the second largest nationality (after Syrians) seeking a safer haven (or perhaps simply a more predictable life) in Europe.

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Consider recent events in Helmand, in Afghanistan’s South, the province that produces most of the country's opium poppy. Two years after David Cameron declared ‘Mission Accomplished’ in Afghanistan (Helmand used to be the under the auspices of British Troops), the Taliban has come close to re-taking nearly the entire province. On Tuesday, more than 100 US troops were sent in to support the beleaguered Afghan National Security Forces and prevent the province’s capital, Lashakar Gah, from being overrun. The ‘Support’ mission, which NATO transitioned into after closing the door on the International Security Assistance Force (ISAF) at the end of 2014, has been forced back into active combat. A day after foreign troops went back into Helmand, a US solider died in this profound mission-creep. How long this ‘temporary development’ will last is anybody’s guess. It is unclear if the Taliban timed its siege of Helmand to coincide with the 97th Anniversary of Independence from the British Empire, which featured on a Taliban website, or if this was simply a perfect coincidence. Either way, people are fleeing the violence. Some sources on Twitter say 30,000 have left.

Meanwhile, the northern city of Kundunz, briefly captured by Taliban last year, is once again on the verge of being overrun. The insurgency pushed its way into neighbouring Baghlan province, with districts being conquered and some lost again in the stand-off with Afghan forces. Hundreds of people have been displaced by fighting in neighbouring districts. 

The fighting also continues in various other provinces, such as Farah, Faryab in the West, Uruzgan, Zabul in the South, Loya Paktia provinces in the Southeast (Paktia, Paktika), and of course beleaguered Nangarhar in the East where Afghan security forces fight the Taliban and Daesh (the latter two are fighting each other). The Afghan army recently announced via Twitter that Shinwari tribesmen have pledged support to Afghan security forces, although it is unclear if they would be fighting as part of the Afghan army or alongside, as an increasingly large number of pro-government militias are doing. The latter course, of course, creates problems of accountability. This was demonstrated recently when the Junbesh militia, loyal to First Vice-President Rashid Dostum, was accused of human rights abuse against civilians during recent fighting in Faryab.

All of this demonstrates that the Afghan army is engaged in a multi-front war that it is not managing well. By enlisting help from an increasingly colourful array of militias, the army has made life more difficult for civilians, no longer between just one rock and a hard place but between many fighting groups. The major armed forces on either side of the conflict are weakening, Afghan National Security Forces are being outmanned by a rising number of militias – some with very lose affiliations – and the supremacy of the Taliban has been challenged by splinter groups and Daesh.

Finding refuge in the country's urban centres is no longer the best survival strategy given the various insurgent elements (Taliban, splinter groups and Daesh) have proven their ability to infiltrate the heart of Kabul and other cities. The band-aid approach of international military forces seems to no longer be working and the peace process is on a road to nowhere. Those fleeing violence have few places to go. Internationally, Afghans feel they are viewed as less worthy asylum seekers than Syrians, as the following image tweeted by @LPaktia illustrates. In a situation as volatile as this, no longer welcome in Pakistan , where can Afghans in search of safe havens turn? International actors who will gather in early October for the Brussels Conference on Afghanistan conference have much to consider.

 Photo by Haroon Sabawoon/Anadolu Agency/Getty Images

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Most participants in this Interpreter debate on the G20 agree the forum needs more committed political leadership and a doubling of existing efforts. 

But what if strategically minded political leaders aren’t convinced the G20’s agenda enhances their domestic standing? If leaders are expected to take time out of their busy schedules for annual discussions that they do not find to be especially pressing or productive, might they not be tempted to de-prioritise the G20? 

For example, recent political events in G20 member states like the United Kingdom (Brexit), the United States (Trump), Turkey (an attempted coup), alongside impending elections in France and Germany, have all been tainted by growing concerns about migration. Migration may be a geopolitical issue that lies outside the G20’s traditional agenda, but many of those fortunate enough not to live in G20-land may find it curious that world leaders could attend such a high-powered meeting and leave substantive discussion about migration (forced or otherwise) off the formal agenda. 

Yet in 2015, during the Turkish G20 presidency, there was resistance to a push led by Turkey and the EU to ensure migration was recognised as a global problem in the Antalya Summit Communiqué. While there are sound arguments against the G20 poking its nose into policy quagmires like global migration management, the idea that G20 leaders could assemble in Turkey, presently home to two million refugees from Syria, and not acknowledge the fallout from unregulated cross-border flows of people, is politically naïve. And although migration did eventually make it in to the Communiqué, it was through a fairly general and open-ended clause.

To that end, I have co-authored a piece in the latest G20 Monitor that lays out some more specific options available to G20 leaders on migration issues at the upcoming leaders Summit in Hangzhou. In general, the piece argues that the G20’s engagement with migration matters should be discrete but clear, that the G20 Hangzhou Summit should seek to give the maximum possible momentum-boost to the UN Summit on Refugees and Migrants taking place in New York on 19 September, and that the G20 should consider how it can best support the outcomes of the UN Summit at the G20 Hamburg Summit in 2017.

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Balancing the agenda at the Hangzhou Summit so that leaders can maintain a strong focus on pressing economic matters while still having time to discuss migration concerns (without getting bogged down) will not be easy. The difficulty in getting this kind of balance right is why it is common to see pieces calling for the G20 to simplify its work and stick to its original raison d'être: restoring global economic growth to pre-crisis levels and boosting the classical drivers of growth in order to stave off another global economic crisis. 

Yet if the G20’s important conversations about global economic challenges ultimately result in outcomes like the revision of technical financial standards and adjusted banking capital ratios (which appears to be the case in recent years), then it seems fair to question whether annual G20 summits are achieving economic results that could not have been attained by finance ministers and central bank governors working on their own. 

When Glenn Stevens writes that the G20 ought to adopt a ‘simpler’ and more ‘achievable’ agenda, as well as devote ‘at least as much energy to discouraging bad ideas’ as to ‘advocating good ones’, I am reminded of his concern expressed in 2008 (pre-GFC) that converting the G20 into a leader-led process would be a ‘mistake’; ‘if you’ve got a heads of state meeting … they’ve got to go home with some great triumph in their bag … it is less likely that you can actually work hard over a number of years on quite important fundamental things’. Whether Stevens’ still feels this way I do not know, and his premonition does offer a plausible diagnosis of the apparent malaise felt by many working on G20 issues.

Either way, the G20 is now a leader-level forum. And as former Canadian Ambassador and a key background player in the G20’s creation Paul Heinbecker has observed, leaders can only discuss technical matters relating to financial regulation for so long, or else ‘the G20 might die of boredom’. Given the Sisyphean task that is lifting the global economy out of its current rut, it should hardly be surprising that leaders occasionally want to put non-traditional items like migration onto the agenda. And even the legendary Sisyphus at least had the benefit of knowing the precise rock he was doomed to push up the hill before it inevitably crashed back down upon him. In contrast, the G20 cannot even agree upon which fiscal or monetary policy ‘rocks’ the global economy most needs to be pushed.

Yes, the G20 does have a ‘Christmas tree problem’ (whereby every new host wants to add a new bauble to the tree) and yes, the G20 should focus on promoting strong, sustainable and inclusive growth. But it is somewhat contradictory for G20 analysts to insist that the strength of the G20 lies in the unique political capacities of leaders, only to then insist that leaders ‘do not get distracted’ by the most pressing political issues of the day. There must be a space for leaders to do a little of both.

Photo: Getty Images/John Moore

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It seems that Trump’s lousy polling and chaotic campaign mean Clinton will win in November. Most assume we can then relax: we know Hillary Clinton from her time at State, and she will be reassuringly orthodox – more orthodox indeed than Barack Obama. US foreign policy will be back to ‘normal’: a strong military, robust alliances, free trade and decisive interventions wherever the US-led global order is challenged.

Well, maybe, but don’t bet on it. Predictions of the kind I’m about to make are inherently fallible, but there do seem good reasons to question our confidence here. The 2016 Presidential campaign has changed the landscape of US politics in ways that will resonate long after November, and impose big new pressures and constraints on Clinton’s approach to many issues, including foreign policy. We can see how these pressures will work if we put ourselves in Clinton’s shoes and reflect on what will most likely be her top priority from the moment she becomes President: re-election for a second term in 2020. 

The events of 2016 mean her biggest threat in 2020 will come from her own side. To see the scale of this threat, imagine what would have happened this year if her rival for the nomination had not been Bernie Sanders but, say, Elizabeth Warren. If someone as unlikely as Sanders could run Clinton so close, imagine what a more poised, articulate, electable, female Presidential candidate like Warren would have done. It’s a fair bet that she would have beat Hillary to the nomination, and, against Trump, be set to win the Presidency. She must be kicking herself. 

So already Clinton must worry that Warren, and others like her, will be thinking about challenging her for the Democrat nomination 2020. Normally, of course, an incumbent can expect to be nominated unopposed for a second term, but these are not normal times. And Clinton is not quite a normal candidate. If she proves as uninspiring and lacklustre in office as she’s been in the campaign, and if she sticks to polices which so many of her party so obviously reject, she will be very vulnerable.

No one will be more aware of this danger than Clinton herself, and from Day One it will shape her policies – including her foreign policies. She is after all a professional politician through and through. There is no evidence that she has ever allowed foreign-policy convictions to override political calculations, and no reason to think this will change now.

That means we should expect Clinton to shape her foreign policy to neutralise the threat to her nomination in 2020 from the left of her party. So forget Hillary the hawk. To consolidate her Democrat base she will be even more cautious abroad than Barack Obama has been.

And she will be able to do that all the more easily because of what’s happening on the Republican side of the aisle. Even if the GOP rebounds swiftly from the defeat that now looms, it will be a very different party, especially on foreign policy. Trump’s success has revealed how vulnerable the party’s Reagan/Bush/McCain orthodoxy is to his ‘America First’ brand of muscular isolationism.

Ambitious Republicans looking to 2020 must already be sketching for themselves a foreign policy stance that captures this appeal while avoiding Trump’s many negatives. So Clinton will face much less pressure from the traditional right on foreign policy than she ever has before.

So what might we see instead? On trade, we can assume her repudiation of the TPP is permanent, and the temptation to step back from free trade to protect US jobs will grow much stronger. It will mean lower defence spending, and less willingness to bear costs and risks to reassure allies. It might mean for example, that a President Clinton would disappoint those who hope and expect that she would reverse a last minute No First Use declaration by President Obama.

It would mean no big new initiatives or commitments in the Middle East, and great caution about allowing strategic rivalry with China or Russia to grow. It would mean, in other words, a continuing and perhaps even accelerating stepping back from the muscular global leadership which has been the core of what Obama so memorably called ‘the Washington Playbook’. It would mean that US allies like Australia would need to reassess their assumptions about American power – perhaps not as quickly as if Trump wins, but very thoroughly nonetheless.

We will need to remember that two very different kinds of bad outcome loom in Asia: one where the US and China becomes bitter rivals or even go to war, the other where America’s influence in Asia swiftly declines. The only kind of good outcome is one where America avoids both war and withdrawal. That’s got to be possible, but America’s next president seems less and less likely to be able to get there.

Photo by Melina Mara/The Washington Post via Getty Images

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This column will appear fortnightly on The Interpreter. 

National security 

If one thing is clear from the foreign investment debate after the rejection of Chinese bids for NSW power distributor Ausgrid it is that this issue can’t be treated like an 'on water matter'. That’s the phrase Treasurer Scott Morrison popularised in his old job as immigration minister when refusing to talk about the operational details of turning back of asylum seeker boats to Indonesia.  The sheer weight of money made from China by some of the Australia’s richest people from mining to property means Morrison’s old pull down the shutters approach can’t apply to the sudden sea change in what Chinese investment is now acceptable. But more significantly, two of the country’s top security strategists and protagonists in the China debate are both calling for more openness about the reasons for national security-based foreign investment decisions. Read the Australian Security Policy Institute’s Peter Jennings here and listen to Australian National University’s Hugh White on Radio National Saturday Extra here. When these security insiders want the public brought more into the discussion, Morrison’s comment at his press conference that he was the only person present cleared to know what was going on looks out of the money.

Refugees

 And on the subject of on water matters, 12 August may well be the day the ground shifted under 15 years of divisive and deadly debate about asylum seeker boats. That was the day an unusually introspective former prime minister Tony Abbott conceded in a speech he had been wrong to destroy the then Labor government’s proposed Malaysia refugee swap deal when he was the opposition leader. But on the same day in a joint op-ed piece four of the country’s highest profile advocates of the refugee cause – Frank Brennan, Tim Costello, Robert Manne, and John Menadue (again on his own blog separately here) – supported  the controversial, John Howard-era policy of turning back boats to Indonesia. The plan to swap asylum seekers for official refugees from Malaysia arose from the Houston report which, while dated, is still a good place to start charting a way through this mess. Abbott's mea culpa on the swap deal just as the Brennan group tells the liberal left the Australian community wants the security of turnbacks has paved the way for a new approach. That would see more regional cooperation, the resettlement in Australia of some people from the troubled and costly Manus Island centre in Papua New Guinea and less political sparring over firm action to deter the people traffickers.

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Going abroad

Despite Chinese investment into Australia grabbing all the headlines, there has been a flood of new research on that other sort of foreign money – outbound investment.  This is timely given how returns from offshore investment may play a greater role in national wealth given slower growth at home. It also raises questions about data collection and aid priorities under commercial diplomacy. The latest findings from the third International Business Survey run by Austrade, the Export Council of Australia and the Export Finance Insurance Corporation shows the most popular markets for international business are the US, China, New Zealand and the UK. But the countries with the best growth potential are China, US, India, UK and Indonesia. This survey is now a bountiful source of information about how Australian business sees the world. It follows this other very useful Austrade work which goes beyond Australian Bureau of Statistics numbers on offshore investment by looking at the results of 2000 companies. And rounding this out Ian Satchwell at the UWA/Curtin Centre for Exploration Targeting says in this study that government data doesn’t properly capture the scale of Australian mining interests abroad particularly in the equipment, technology and services area. He says these METS businesses are more resilient amid the commodities bust. And he says better understanding of this mining company global reach would help inform commercial diplomacy activity in countries needing help with sustainable mining and better governance.

Bougainville

Resource management now looks set to be the key to a peaceful self-determination vote in this province which has been estranged from PNG over three decades. Rio Tinto and PNG prime minister Peter O’Neill have injected new tension into the vote with Rio exiting the Panguna copper mine and O’Neill possibly undermining the prospect of it being revived under a new government. Australia will inevitably carry the can for a failed state if Bougainville tries to break away but can’t reap the benefits of its most valuable resource.  Dan Flitton reports Bougainville rebels are already demanding Australia pay the bill for remediation work for which Rio is refusing to take responsibility. O’Neill’s rhetoric about giving former Rio shares to landowners rather than a future Bougainville government is ironic given the tensions over paying LNG royalties to landholders closer to Port Moresby, including from Exxon.

Stepping up

Foreign minister Julie Bishop has been rattling the tin with business ever since she decided to make corporate participation a hallmark of her new commercial diplomacy. Now we have a scoreboard of sorts with the first round of joint government-business investments under the Business Partnerships Platform. Business has invested $10.2 million alongside $3.8 million from the government aid program in Indonesia, Papua New Guinea, Myanmar, Vietnam, Pakistan, Nepal and Kenya.  Look forward to some nice compliments from the foreign minister for Cotton Australia, Mastercard, Unilever, Base Titanium, Cotton On, Digicel, Pou Chen Group, TPS Food and Intrepid Group.

Photo courtesy of Ausgrid

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Iran’s relationship with Russia has been characterised as many things, ranging from a ‘marriage of convenience’ to a ‘long-lasting alliance’. In reality it's a  pragmatic working relationship forged between two countries that  have faced similar political and economic pressures from the West. The increasingly vitriolic exchanges of the past week, however, suggest that both are finding the relationship harder to manage.

As two leading anti-US states with an alternative vision of a world order, Russia and Iran developed ties in multiple sectors. For both countries, working with the other has been a useful counter-balance to US dominance. Economic ties between the two helped each to weather Western-imposed sanctions. In the military sphere, Moscow provided Iran with equipment it couldn’t get from the West and conducted joint-military exercises in the Caspian Sea. Shared foreign policy goals in the Middle East – including keeping Assad in power in Syria and pushing back ISIS in Iraq – led to intelligence cooperation. Russia is also Iran’s sole nuclear provider, committed to completing Iran’s Bushehr power plant and supplying fuel for its first 10 years of operation. A number of other plants are planned.

But now it seems leadership in each country is weary of the other.

The Russians are not perceived well in Tehran. In the nuclear field for example, Iran has repeatedly accused the Russians of being unreliable. Moscow also firmly supported efforts to prevent a nuclear-armed Iran, despite its feelings towards the West. In the military sphere, Moscow dragged its feet in the sale and delivery of the S300 air defence system: signing a contract in 2007 but not making its first delivery until April this year. Economically, and particularly in the energy sphere, the two countries are competing for a bigger slice of a shrinking pie. Both want to increase oil exports and Iran has long-term plans to boost natural gas exports to Europe in particular: traditionally, Russia’s market. Iran’s negative feelings toward Russia were part of the reason why it pursued the nuclear deal to begin with: it needed other partners.

But it was the conflict in Syria that simultaneously brought Russia and Iran closer together and highlighted the differences between them. Their shared goal of preserving the Assad regime saw them work more closely together; coordination and dialogue increased. But each sides perceived the relationship differently. Read More



Tehran thought it had the upper hand; that in Syria at least, it was dictating the terms of the cooperation. After all, it was Iranian men involved in the fight on the ground and gathering intelligence. From Iran’s perspective: Russia ‘only’ provided air cover for their fight. For its part. Moscow  felt it was useful to cooperate with Iran because it didn’t want to lose the privileged position it had pre-nuclear deal. But it firmly (and perhaps more accurately) saw its role as that of a bigger, more powerful and more capable friend coming to the aid of Iran, a regional powerhouse that needed help in its own backyard.

When it became apparent that Tehran wasn’t in charge, the Iranians were taken aback. They were surprised when Russia did not inform them that it had agreed to a ceasefire with the US, when Russia temporarily halted airstrikes against the al-Nusra Front in May, and again in July when Secretary Kerry and Foreign Minister Lavrov announced an agreement – the contents of which were not shared – to cooperate on respecting the ceasefire.

This trend was only reinforced when Russia announced that Iran had allowed it to use the Hamedan base for its bombers on the way to Syria. Given the Iranian constitution explicitly prohibits the establishment of a foreign military presence on its soil, some in Iran, including parliament, were less than impressed. Defense Minister Brigadier General Hossein Dehqan criticised Moscow for 'showing-off' when it leaked the news, and said that the decision to sign a treaty for strategic military cooperation with Russia was made by the 'system', and was none of the parliament's business. Various officials have since downplayed the event; the Foreign Ministry announced activities were halted, while the speaker of parliament Ali Larijani stated Russians were just refuelling their bombers.

Why, given Iran’s frustrations with Russia, did Tehran give Russia permission to use its base? Likely because it was counter-balancing recent Gulf Arab efforts to court Moscow into their camp and because, ultimately, Tehran knows it needs Moscow in Syria. But the very public spat following the leak demonstrates this is not an easy relationship.

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