For those of us in Australia and around the world who thought that globalisation and the free trade push were a never-ending positive cycle, recent political developments in the United Kingdom and United States have been a wake-up call.
There is no doubt that people, particularly those at the lower end of the income scale, have felt left out of globalisation and missed the benefits of free trade.
That’s reflected in the Brexit decision and in the vote for US President Donald Trump, and Australia has not been immune to levels of anti-foreign rhetoric.
So if these developments are a wake-up call, what’s the take-out for leadership?
There are three key things that require focus from political, business and community leaders to enable the next phase of global trade in the digital era.
1. Continue to make the case for free trade
Australia’s prosperity as a small, open, trade-dependent economy relies on freely trading with the rest of the world in commodities and increasingly, services.
While other major economies can turn inwards, especially the US with its talk of ‘America first’, that’s not in Australia’s interests.
I would argue that it’s not in US interests in the longer term either, but they’re perhaps better placed to manage in that mode for a period of time.
In the latest Director Sentiment Index – a sample of the Australian Institute of Company Director’s 40,000 Directors – 57% of Directors are confident in business growth, despite Brexit, the Trump administration and concerns over European economies.
However, Directors are concerned about the shift to protectionist policies and believe government should push back against protectionism and continue to pursue free trade.
Asia will continue to be a trade focus for Australian companies, with 35% of our merchandise exports going to China and a further 40% to other Asian economies. However, there are opportunities in a free trade agreement with Europe and for one with the UK once they leave the EU.
It might be the subject of an interesting debate at the conference to consider what the UK’s priorities will be once they leave the EU, and what that means for Australia. I’m also interested in the discussion around the opportunities for growing two-way trade between Australia and Germany. Is the opportunity bilateral or is it via trade with Asia?
Australia is largely a commodity exporter rather than a manufacturing exporter, but 70% of our GDP is in services, so that must be a focus for any future trade agreements. Large law firms like King & Wood Mallesons and accounting firms like PWC and KPMG demonstrate the potential for Australian firms to operate on a global basis. Where Australia has other strengths in services, including in tourism and education, it’s a matter of identifying models for sustainable expansion into Asia and globally.
2. Have a conversation about how we can get better at sharing the benefits of globalisation and free trade, and better support workers in disrupted industries
It feels like we have entered an era of populism, whether it’s of the right or left, and whether it’s in Europe or America or Australia, there are some superficial answers being offered to very complex questions.
It’s easy to tell people that these foreign companies or someone ‘other’ than us is taking our jobs - this is much easier to understand than explaining the impact of artificial intelligence, robotics and the fourth industrial revolution.
There was an industrial revolution which took away a lot of the more low-paid manual jobs but what we’re faced with now is an enormous revolution where high-paying jobs are also in danger and may disappear.
The changes that are happening are global and the pace of change is rapid. Australia might have been an island in another century, but we’re not now.
Unfortunately, many people have stopped listening and part of that is the income gap between the beneficiaries of globalisation and those who feel left behind.
This requires serious attention and it’s also important that business, political and community leaders explain what’s happening to people’s jobs. That must be a dialogue with people, not talking down to them.
Companies do a lot of good work contributing to the community and there has been strong leadership in supporting workers to make the transition to new industries. For example, Toyota is to be commended for its investment over the past two years to retrain staff for the next phase of their careers given the company will no longer be manufacturing in Australia.
3. Ensure companies are prepared to manage through ongoing disruption
Markets can change quickly and we all know that whatever industry we are in, disruption is occurring, whether it’s the taxi industry being run over by Uber, the hotel industry seeing Airbnb coming at them or banking being transformed by digital platforms.
There should not be a company board, whether it’s listed, government or private, saying ‘we’re fine, everything will go on as it is’. Everybody is seeing change and disruption, and seeing that ramped up.
What’s essential in this kind of operating environment and what leading companies are doing, is ensuring they’ve got a diverse skillset.
Gender is one part of that, but it’s also about companies experiencing change ensuring they’ve got people around the board table who’ve got experience in rapidly-changing industries, who know how to lead people through change, who understand overseas trends.
It’s also an issue if you’re a business with clients in Asia and you’ve got a board made up predominantly of white Anglo-Saxon males of a certain age. Or do you have on the board people of Asian heritage or who understand Asia, which could include people from Australia who have spent a large part of their working lives in Asia?
In this regard, we’re seeing a change, but it’s still changing quite slowly. It’s one thing to go into a local market and get local advisors on board as consultants or contractors but it’s another to have people around your board table who deeply understand the markets you’re operating in.
The shifts that are happening in business at the moment are significant and they are global – and we do need to heed the wake-up calls if we’re to successfully navigate the period ahead.
We haven’t reached a tipping point, but we’ve reached an interesting point and the 2017 Asia-Pacific Regional Conference will hopefully see key business leaders and politicians argue the case for both a continuation of free trade but also for all of us getting better at sharing the benefits of that trade.
Elizabeth Proust will be speaking at the 2017 Asia-Pacific Regional Conference as part of a panel on ‘The Future of Global Trade Agreements and the Resulting Opportunities in the Asia-Pacific.’ AICD members receive 30% off registration with the code AICD455.
Speakers at the conference include Prime Minister Malcolm Turnbull, German President Frank-Walter Steinmeier and Thomas Lembong, Chairman of the Indonesia Investment Coordinating Board.
The AICD selected as state finalist for Australian Export Awards
The AICD is one of three organisations who will contest for the NSW Emerging Exporter Award in 2017. The awards ceremony and presentation will be held on Wednesday 25 October at the Star in Pyrmont.
“The competition is extremely tough and we are thrilled to see a number of new names recognised for their tremendous efforts. It’s fantastic to also see the diversity of the companies that entered the awards this year. To acknowledge and celebrate the success of NSW companies is an important part of encouraging more companies to think global. We congratulate you on being named a finalist in the 55th Premier’s NSW Export Awards ,” Lisa McAuley, CEO of the Export Council of Australia.