2.1
The COVID-19 pandemic has presented the greatest threat to global health, economy and society since the turn of the last century. This chapter outlines the global implications of the pandemic, as presented in evidence to the inquiry.
2.2
The chapter examines effects of the COVID-19 pandemic on:
global health and health systems;
international relationships and security; and
the global rules-based order and alliances.
Global health and health systems
2.3
The COVID-19 pandemic presents one of the greatest threats to global human health since the influenza pandemic of 1918. Evidence to the Committee made it clear that, in addition to the numbers of cases and deaths directly attributable to the virus, the pandemic will have a wide range of other implications for global health and health systems.
2.4
After the initial outbreaks of COVID-19 in China, some of the worst effects of the virus occurred in developed countries in Europe and North America. Countries such as France, Italy, Spain and UK suffered from large numbers of COVID-19 cases and, after initially appearing to control the virus through lockdowns and other measures, suffered second waves of infections. The US became a world leader in both numbers of cases and deaths from the disease.
2.5
The highly infectious character of the virus led to its rapid spread, in the process exposing weaknesses in health systems across the world. Even in wealthy countries that were expected to have the capacity to cope with viral outbreaks, health systems came under extreme pressure. In March 2020 it was reported that health facilities and staff in northern Italy had become ‘overloaded’ in the space of just three weeks after the virus had begun to spread in the region.
2.6
One early casualty of the pandemic was the assurance that supplies of critical medical goods could be maintained in a global emergency. In particular, an international shortage of personal protective equipment (PPE) emerged very soon after the virus began to spread.
2.7
The Department of Foreign Affairs and Trade (DFAT) told the Committee:
In the early stages of the pandemic, a number of Australia’s major trading partners began imposing export restrictions and licensing requirements on personal protective equipment (PPE), medical products and food.
2.8
The submission from the Royal Australasian College of Surgeons said the Organisation for Economic Cooperation and Development (OECD) had reported that, as early as January 2020, global demand for PPE had outstripped supply and:
…China had to stop its manufacturing and as a result it stopped exporting masks and imported 56 million masks in the first week of January and suddenly became reliant on donations from other countries. The demand rose to 240 million masks per day which exceeded China’s manufacturing capacity by ten times.
2.9
PPE shortages not only affected the capacity of the authorities to limit the spread of the virus amongst the population, it had a devastating impact on the working conditions and personal safety of health care workers. The World Health Organization (WHO) reported:
…shortages are leaving doctors, nurses and other frontline workers dangerously ill-equipped to care for COVID-19 patients, due to limited access to supplies such as gloves, medical masks, respirators, goggles, face shields, gowns, and aprons.
2.10
Action Aid informed the Committee the WHO had estimated, in May 2020, that ‘at least 90,000 healthcare workers have already been infected with COVID-19 across the world’. In the case of Italy, more than 5,000 doctors, nurses and other medical staff had contracted COVID-19 by March 2020 and more than forty deaths had been recorded.
2.11
The weaknesses in health systems internationally were also highlighted when some countries diverted resources from other health priorities in order to deal with the pandemic, but in doing so left other important areas of healthcare under-equipped. According to International Consortium for Sexual and Reproductive Health and Rights:
The COVID-19 pandemic has led to a rapid redirection of health services as countries prepare and respond. In healthcare we have seen resource reallocation and re-prioritisation, decision-making based on fear with minimal evidence.
2.12
The Public Health Association of Australia cited the example of deferred health services, saying:
…Our programs in immunisation, cancer screening, areas of nutrition and many, many other areas have been compromised because all hands have gone to the COVID pump.
2.13
When the pandemic has had such an impact on health systems in the first world, its effects in less developed countries were even more severe.
2.14
The Burnet Institute described the impact of the pandemic in already vulnerable developing countries. This included a rise in the incidence and degree of poverty, threats to food security and disruptions to health services. The pandemic had interfered with the delivery of health care generally, including disease control programs such as for tuberculosis (TB), malaria and human immune deficiency virus (HIV) and immunisation for diseases especially prevalent in children, such as measles.
2.15
Although the COVID-19 caseload in the Pacific has so far been very low, the Royal Australasian College of Surgeons told the Committee of its concerns that ‘if the coronavirus were to reach into the Pacific, [there would be]… potentially devastating consequences of challenged work force capacity and limited treatment options, particularly in Intensive Care Units’.
2.16
Submissions by non-government organisations such as Save the Children and Oxfam argued that wealthy countries should expand their assistance to developing countries to help them deal with the conditions created by the pandemic.
2.17
DFAT provided details of the adjustments to Australia’s aid program the Australian Government has made in response to the pandemic:
Australia’s development response to COVID-19 is set out in the Partnerships for Recovery strategy. The strategy targets three critical areas − health security, stability and economic recovery – of most relevance to partners’ and our own prosperity and resilience. While global in scope, the strategy prioritises support to the Pacific and Southeast Asia − where Australia can have the most impact and where our interests are most directly engaged. This includes redirecting over $280 million from the existing development program to support the critical medical and humanitarian needs of the Pacific and Southeast Asia. The strategy builds in flexibility to respond to needs in partner countries and to support global efforts. It also focuses on the most vulnerable, particularly women and girls.
The global economy
2.18
The most immediate effect of the pandemic on the global economy came from disruptions to the movement of people and goods. COVID-19 revealed the weakness of economies dependent on long global supply chains. The Export Council of Australia explained:
…world trade fell sharply for the first half of year 2020 as the COVID-19 pandemic upended the global economy. COVID-19 has caused widespread disruptions to air and sea freight, and wreaking havoc on global supply chains across Europe, America and Asia which are critical to the supply of goods. The fall out of global supply chains has made visible the inherent weaknesses of the system, exposed a lack of resilience and brought into question the fundamentals and the integrity of global supply chains.
2.19
Analysis from the Brookings Institution, a research institute, argued:
Decades of deep economic integration have restructured international trade and investment. In modern global value chains, production processes are often spread across dozens of firms operating in multiple countries.
But, the analysis continued, the fragility of such economic interdependence was revealed when COVID-19 restrictions were put in place:
As quarantines shut down individual factories and travel restrictions curb the flow of people and goods, the economic disruption will spread, virus-like, through global supply chains. …inventories are already stretched thin, and each new supply chain failure will threaten to set off a domino effect in downstream industries.
2.20
The Perth USAsia Centre summarised the impact of restriction on the flow of goods and services from measures to control COVID-19 as follows:
1
Restrictions on domestic movement has constrained the supply of labour to businesses with nonessential classifications, particularly in the transport and manufacturing sectors.
2
Restrictions on international movement have severely constrained – and in countries with ‘hard’ border closures, entirely suspended – business-, education- and tourism-related travel.
3
Reduced international connections – particularly in terms of air transport – has lowered the availability and raised the cost of freight handling capacity.
4
Enhanced customs and biosecurity procedures have slowed transit of goods through ports.
2.21
The Committee heard extensive evidence about the implications of the pandemic on growth and investment internationally. DFAT informed the Committee:
Despite various governments’ introduction of response packages cushioning employment and business impacts, the effect on economic activity in the short to medium term will still be severe. The World Bank’s June 2020 Global Economic Prospects report forecast a 5.2 per cent drop in global GDP.
2.22
On world trade, Ms Tamara Oyarce from the Export Council of Australia said:
The IMF has forecast that the global economy will contract by 4.9 per cent in 2020, and the World Trade Organization estimates that global trade will fall sharply, by 13 per cent. These concerning projections come against a backdrop of existing global trade tensions, volatility in commodity prices and an already contracting international trade sector.
2.23
Regarding international flows of investment, DFAT presented information that:
The impact of COVID-19 is forecast to reduce global FDI [foreign direct investment] flows by 30-40 per cent in 2020-21, and likely lead to a more contested investment environment with many governments seeking to attract greater levels of FDI to enhance economic resilience and diversification.
The Perth USAsia Centre argued that the supply of capital from major capital-exporting economies in the EU (European Union) and US will ‘become extremely tight’ as recession hits and ‘their stock markets and financial institutions come under strain’.
2.24
The Lowy Institute noted that there was debate amongst economists about whether the economic impact would be temporary or permanent, but the Institute took the view that it is ‘more likely that the world economy will suffer a permanent shock’. Firstly, even if individual countries can return to normal domestically they will still have to keep their international borders closed. Secondly, there could be a financial crisis in developing countries because they lack the capacity for fiscal and monetary stimulus to mitigate the pandemic’s economic damage. Finally, global integration will suffer as ‘businesses will rethink long and complex supply chains, governments will feel compelled to ensure domestic capacity … [and] protectionists will feel empowered’.
2.25
A number of submissions to the Committee stressed that the pandemic would have serious effects on the availability of food for low-income groups. According to the Burnet Institute:
The loss of income caused by the pandemic could increase the number of people suffering acute hunger to more than quarter a billion by December, according to the World Food Programme. In the last four years, conflicts, climate change and economic instability raised the number of people suffering acute hunger … from 80 million to 135 million people. The pandemic could drive 130 million more people into that state by December. More than a quarter of a billion people are likely to be acutely hungry in 2020.
Oxfam Australia told the Committee that existing shortages would be exacerbated:
At the end of 2019, there were already 821 million people living in chronic food insecurity. The UN World Food Programme estimates that an additional 130 million people will be pushed into food insecurity because of the secondary impact caused by restrictions to prevent coronavirus.
Indo-Pacific countries
2.26
The submission from the Lowy Institute noted that the ‘UN Development Program estimates that income losses are expected to exceed US$220 billion across developing countries’. The non-government development agency, RESULTS International, told the Committee:
For countries in our region, the health, economic and social flow-on effects from COVID-19 will dramatically exceed the direct impact. For example, the Asian Development Bank estimates that, even with macroeconomic policy responses to COVID-19 announced so far, an extended containment period for COVID-19 would lead to gross domestic product being 4.7% lower in 2020 than in the base case for South-East Asia and 6% lower than the baseline for the Pacific.
2.27
The impacts of the pandemic in the Indo-Pacific ‘are particularly consequential for Australia’, as noted by DFAT. Many of Australia’s neighbours in Southeast Asia and the Pacific are developing economies and the Department observed that:
…the impacts are likely to be deeper and more prolonged in developing countries, particularly those already fragile, conflict-affected or with weak systems of government. The World Bank predicts COVID-19 could push up to 60 million people into extreme poverty – the first increase in global poverty rates since 1998.
2.28
The Indo-Pacific region is a focus for international concern about the impact of the pandemic on the availability of food, as highlighted by the Australian Centre for International Agricultural Research (ACIAR):
Governments and other food systems stakeholders in the Indo-Pacific region are concerned about emerging risks to food security that are a direct consequence of public and private sector responses to COVID-19. The pandemic is amplifying existing vulnerabilities and exposing new risks in food systems at local, national and regional levels. Understanding these risks will help mitigate future disruptions to food systems across the Indo-Pacific region.
2.29
In the case of the South Pacific the incidence of the virus has been very low, but the economic effects have been severe, as described by World Vision Australia:
For many countries COVID-19 has had far greater economic impacts than health impacts. Even in countries with relatively low caseloads, severe impacts on livelihoods and food security have been observed – for example in Pacific Island countries heavily reliant on international tourism. The drop in global demand across industries from COVID-19 is estimated to slash $250 billion from trade in the Asia-Pacific region, causing thousands to lose their incomes and livelihoods.
2.30
Similarly, the ANU Development Policy Centre told the Committee that the Pacific had mainly been hit by restrictions on the movement of people:
Many countries of strategic importance in the Pacific are suffering as a result of reduced trade, migration, tourism, and the other policy responses to COVID. This is having a massive impact on hardship and poverty. … Based on recent poverty estimates, even a conservative 5 per cent contraction in household consumption could result in the rate of extreme poverty increasing to anywhere between 17 and 30 per cent of the population (in Papua New Guinea, Timor-Leste, Solomon Islands and Vanuatu).
2.31
The already vulnerable state of the economy and the weakness of government services in the Pacific were revealed by interaction between the pandemic and other emergencies. The UN Pacific Regional Anti-corruption Project revealed that:
…already struggling medical services and economy were further battered by Cyclone Harold, a category five storm which affected several PICs [Pacific island countries] in April 2020, killing dozens of people, flooding towns and leaving many homeless. Tensions arose between the safety measures regarding cyclones and those in place for COVID-19. For example, it is nearly impossible to practice social distancing in evacuation centres or to swiftly bring emergency supplies while respecting quarantine restrictions.
Tropical Cyclone Harold was mentioned by Public Services International as an example of the extreme weather events exacerbated by climate change that ‘devastated Vanuatu, Fiji, Tonga and the Solomon Islands, killing dozens, destroying homes and infrastructure and displacing tens of thousands in the midst of the COVID-19 pandemic’. World Vision Australia concurred that ‘recurring shocks and long-term stresses, whether environmental (climate change), economic or social, compound one another, eroding the capacities of households and communities’.
2.32
The pandemic has disproportionately affected the employment prospects of young people and disrupted education in countries where secondary school retention rates are already low, especially in Pacific countries such as Papua New Guinea (PNG). The long-term risks to security posed by such developments were stressed by Oaktree, a youth-focused non-government organisation working in the Indo-Pacific:
Large numbers of youth who are disaffected and disenfranchised through sustained unemployment and a lack of access to education, training, and avenues for self-empowerment, will culminate in serious risk to a nation’s institutions, rule of law and social cohesion.
Human rights
2.33
Measures taken by governments across the world to deal with the COVID-19 pandemic have often severely restricted citizens’ daily lives but, as the Australian Human Rights Commission told the Committee:
International human rights conventions have always recognised the right of government to limit some rights and freedoms under certain circumstances … such as the current COVID-19 pandemic.
But as the Commission also pointed out:
…measures that limit rights and freedoms on these grounds must always be necessary and proportionate to the evaluated risk, and must respect people’s dignity, human rights and fundamental freedoms. These measures should be in place for the shortest time possible and be consistent with the emergency. Ultimately, this means achieving a balance between rights and the restrictions that have been put in place to safeguard populations. That balance is not always easy to achieve.
2.34
The international non-government human rights advocacy organisation, Human Rights Watch (HRW), noted that ‘international law is clear that even amid a public health crisis, emergency measures taken by governments that restrict basic rights must be lawful, necessary and proportionate’. HRW described its work as monitoring whether or not the balance between rights and restrictions had been achieved across the world. The organisation reported that some countries have ‘ensured that states of emergency are time-limited and subject to oversight’, while others have taken on ‘unlimited powers for an indefinite duration’. HRW added that ‘some states have prioritised access to information’, but others had been ‘depriving their populations accurate information on the pandemic’. Others had restricted medical supplies and denied transit permits to people requiring vital medical attention.
2.35
A worrying trend mentioned in a number of submissions was that certain states had deliberately taken advantage of the pandemic to strengthen authoritarian powers. The non-government organisation, International Women’s Development Agency (IWDA), submitted that:
Human rights groups have raised concerns that governments are using the cover of COVID-19 to erode civil liberties. For example, the arrest of a journalist in Cambodia under COVID-inspired emergency legislation for correctly quoting the Prime Minister’s own words on COVID-19 has been widely condemned, and human rights groups in Fiji have raised concerns about surveillance measures and the right to privacy.
A similar view was put by the Lowy Institute who considered that ‘authoritarianism will intensify in Southeast Asia’ as ‘criticism-shy leaders and their draconian security official are seizing the day’ to ‘ratchet up their powers’. And the Griffith Asia Institute noted that the ‘pandemic has highlighted the importance of human rights protections in a crisis’ because some states have used it to exploit ‘opportunities for the consolidation of political authoritarianism’.
2.36
The Committee heard that the pandemic had had a negative effect on refugees and asylum seekers. The Kaldor Centre for International Refugee Law reported that refugees had been affected by COVID-19 related border closures which ‘have left many people trapped in dangerous or precarious situations in conflict zones and transit countries, or stranded at sea’. Some states had carried out ‘summary deportations of asylum seekers who were already on their territory’, while the pandemic had led to ‘increased use of immigration detention’, often in unhealthy locations.
2.37
There was evidence that marginalised groups in some countries had been specifically targeted for human rights abuses as a result of the pandemic. The Kaldor Centre cited ‘xenophobia and anti-migrant sentiment’ and ‘rejuvenated dormant hatred and xenophobia against groups considered “outsiders” because of their religion or ethnicity, irrespective of their citizenship’. There were incidents of migrant workers becoming special targets for abuse.
2.38
The RMIT University Business and Human Rights Centre told of cases where migrant workers in certain countries had been arrested during lockdowns and their accommodation targeted. In one case, migrant labourers protesting about the fact that they were stranded in a foreign country during border closures had been attacked and abused by police.
International relationships and security
2.39
The Committee received extensive evidence about the implications of COVID-19 for international relationships and security. There was a common view that the pandemic had heightened and magnified existing challenges in the strategic environment. For instance, Northrop Grumman Australia, a defence manufacturing contractor, made the case that:
COVID-19 has accelerated geostrategic trends that have been developing over the past few years, both in relation to regional security and the global economy. This is happening at a time when Australia’s major security partner, the United States, is addressing its own response to the virus. Amidst this landscape, Australia’s Pacific neighbours are vulnerable to the economic shock from COVID-19, raising the spectre of failed states or a reduced capacity to respond to external events such as humanitarian disasters.
2.40
A number of submissions mentioned that the pandemic appears to have accelerated US tendencies towards isolationism and a more sceptical view of the value of long-standing allies, the existing strategic architecture and international organisations. Dr Bruce Baer Arnold of the University of Canberra cited:
…disengagement … from international organisations such as the World Health Organization (WHO), World Trade Organization (WTO) and United Nations Educational, Scientific & Cultural Organization (UNESCO).
2.41
The advent of COVID-19 has complicated the various disagreements that have arisen between the US and China in recent years. The Lowy Institute argued that ‘even the race to develop a vaccine is being politicised, as both sides contend to show the world that its scientists are superior’. Each side has also accused the other of being responsible for originating the virus, as noted by Mr Rhys Thomas and Dr Alan Dupont.
2.42
Such growing antagonism has come about in the context of the trade war between the two countries which, according to the Perth USAsia Centre ‘over the course of two years [had] escalated through several cycles of tariff and counter-tariff actions to cover $735 billion of trade between their economies’.
2.43
These developments have taken place in an environment where relationships in North Asia have been evolving in new and challenging ways. Once again, the pandemic has amplified trends that have been evident for some time.
2.44
China’s assertiveness over its claim in the South China Sea and in relation to Hong Kong and Taiwan have been mounting in recent years but, according to the submission from the Shoal Group:
…the COVID-19 pandemic has arguably accelerated the process. China has seemingly taken the opportunity presented whilst regional countries have been otherwise diverted to put pressure on Taiwan, to take a number of the Paracel Islands from Vietnam, to further forcibly push its position around Natuna Island in northern Indonesia.
2.45
Malcolm Davis and Charlie Jones from the Australian Strategic Policy Institute (ASPI) noted that:
There’s a risk that Beijing might see a window of opportunity opening up as the US struggles to manage the impact of the ongoing pandemic on its society and economy…
They argued that this had already been evident in China’s greater assertiveness in the South China Sea and in its imposition of new security laws in Hong Kong.
2.46
Regarding the issue of the South China Sea, DFAT told the Committee that the Australian Government had:
…joined several other nations in publicly expressing concern about recent developments during the COVID-19 crisis, including reported efforts to disrupt other countries’ resource development activities, the declaration of new ‘administrative districts’ over disputed features, and the sinking of a Vietnamese fishing boat, reportedly in a collision with a Chinese coast guard vessel.
2.47
In the view of Dr Andrew Dowse of Edith Cowan University and Dr Sacha Dov Bachman of the University of Canberra, ‘we have seen how China is using trade and foreign investment as coercion against states questioning the pandemic origin or anything else that they interpret as criticism’.
2.48
From the same perspective, the Perth USAsia Centre argued that China is increasingly resorting to ‘coercive trade diplomacy’ and the use of trade-related measures as a form of ‘political sanctioning’ to apply pressure on other countries.
2.49
In a sign of its growing presence in Southeast Asia and the Pacific, China has also leveraged its diplomatic efforts in the region through actions in response to COVID-19. In the case of Indonesia, Mr Don Greenlees told the Committee:
The arrival of Chinese medical aid [in Jakarta] in late March and pledges by both governments to coordinate their response to the pandemic in global fora gave China an edge in what is increasingly seen as a zero-sum competition for influence in the region between China and Western countries. China’s aid was useful as well as timely.
‘Grey zone’ threats and cyber security
2.50
The Department of Defence, in its 2020 Security Update, drew attention to the need to respond to emerging threats from ‘grey zone’ activities by states during the pandemic:
Grey-zone activities are being adopted and integrated into statecraft and are being applied in ways that challenge sovereignty and habits of cooperation. … ‘Grey zone’ is one of a range of terms used to describe activities designed to coerce countries in ways that seek to avoid military conflict. Examples include using para-military forces, militarisation of disputed features, exploiting influence, interference operations and the coercive use of trade and economic levers. These tactics are not new. But they are now being used in our immediate region against shared interests in security and stability. They are facilitated by technological developments including cyber warfare.
This argument was supported by Dr Adam Findlay of the Griffith Asia Institute, who submitted that:
Part of this increasingly clear agenda [of emerging threats] are numerous instances of ‘grey zone’ competition, ‘including economic coercion, diplomatic intimidation and cyber penetration’.
2.51
The Committee received evidence that the spread of the COVID-19 pandemic had revealed Australia’s vulnerability to such threats. For instance, Dr Dowse told a Committee hearing that there is:
…the potential—and, to some extent, the reality—that actors, including nation states, may opportunistically take advantage of the pandemic to further their own objectives through the employment of such activities. Australia must learn lessons in terms of the threats of disinformation, foreign influence, lawfare, cyber-exploitation, economic coercion, and disruption of our fragile supply chains. …we believe that more can be done, especially in the coordination of efforts to counter hybrid threats and in mitigating the impact of disinformation from state and non-state sources, as well as assessing what can be done to increase trust in supply chains supporting critical infrastructure.
2.52
Evidence to the Committee particularly emphasised the growing threat of cyber attacks as businesses, governments and individuals make greater use of remote sources of information and communication in the wake of the pandemic.
2.53
This was emphasised by Sapien Cyber, who argued that ‘disruption of critical infrastructure services through attacks on underlying OT [operational technology] is a highly likely form of such grey zone warfare’. There are increased cyber risks associated with the pandemic because COVID-19:
…introduced another layer of vulnerabilities when organisations across Australia transitioned into remote work from home arrangements. This rapid shift to remote operations stretched an already under resourced national cyber security capability across a newly expanded attack surface.
2.54
DFAT stressed the need for increased vigilance in the face of new types of threats:
We need to remain vigilant in mitigating increased threats to our security arising from the COVID-19 crisis. Impacts such as greater use of cyber technologies for remote work, increased economic hardship and uncertainty regarding accurate information sources in this challenging time are factors that play into a heightened threat environment.
2.55
Regarding the perspective of business, the Defence Teaming Centre told the Committee of the concerns conveyed to the Centre by small and medium enterprises (SMEs):
The recent surge in state-based cyber activity on Australian targets is of increasing concern to SMEs. When asked about supply chain integrity and cyber security, many companies respond with comments about the level of investment the business has made in firewalls. Many businesses lack response plans, audit and incident reporting procedures or monitoring services to detect whether a system compromise has occurred. Most SMEs lack the resources and know-how on what needs to be implemented and how.
2.56
Similarly, the Law Society of NSW Young Lawyers contended that, in countries such as UK and US, there had been an ‘increase in attacks on critical or COVID-19 related organisations’ and in Australia:
…the transition to working from home has increased vulnerability to these attacks, whilst the increase of cyber attacks during the pandemic indicates that malicious actors are exploiting these vulnerabilities.
2.57
The submission by Northrop Grumman Australia maintained:
The COVID-19 pandemic has seen states act in opportunistic ways to leverage the uncertainty and employ hybrid warfare tactics to further their interests in the region. This represents a more pressing risk than perhaps was originally recognised, and requires that Australia is equipped with the capabilities – including intelligence, surveillance and reconnaissance (ISR) and cyber assets – needed to provide situational awareness to counter grey-zone tactics and other aggressive activities that fall short of our traditional understanding of conflict.
2.58
Dr Dupont argued that the threat of cyber attacks is so real that governments need to take a new and different approach to telecommunications policy:
The government would be well advised to take a more holistic approach to telecommunications policy that transcends narrow commercial considerations and places a premium on risk reduction rather than cost reduction, a lesson driven home by the pandemic. Narrow, market-based calculations should be replaced by a more strategic approach that takes better account of the need for sovereign capabilities to improve national resilience, and factors in the cost of relying on systems that don’t pass the democratic values test. Australia should work towards cyber and technology standards that preserve an open, free, safe and secure internet.
The global rules-based order and alliances
2.59
Evidence was submitted to the Committee about the implications of the pandemic for the future of the global rules-based order. Some submissions argued that the pandemic had highlighted existing tensions in global relationships, encouraging a rise in nationalistic, protectionist and unilateral actions by governments. Other submissions revealed a range of views about the role and future of globalisation in the post-pandemic world, with calls for a reappraisal of the current balance between sovereign capabilities and reliance on global supply chains.
2.60
Submissions highlighted the extent of the global and regional implications of COVID-19 and stressed how much the pandemic had exacerbated prevailing international problems. According to the Griffith Asia Institute:
Aside from its devastating human impact, Covid-19 has revealed deep social, economic and political fault lines in and across the global system that threaten longer term stability and order. …the pandemic has accelerated and amplified many of the challenges already in existence and further exposed ruptures in the international system.
2.61
Concerns about damage to the global rules-based caused by COVID-19 and its implications for Australia were raised by DFAT:
COVID-19 is a powerful reminder that Australia’s interests are best served by a multilateral system that promotes collective responses to problems that cannot be solved by countries acting alone. Prior to the crisis, we had entered an era of sharper challenges to the rules-based international order due to shifts in global power, technological disruption and protracted global challenges. Protectionist trends, as well as coercive behaviour and threats to territorial integrity continue to pressure the rules-based international order.
2.62
Dr Dupont expressed similar views about the tendency of the pandemic to heighten existing pressures on the rules-based order:
The COVID-19 pandemic threatens to exacerbate US-China tensions, destabilise global supply chains, increase protectionist sentiment and jeopardise the relatively free and open international trade and communications systems underpinning the rules-based order.
Protectionist trends
2.63
Regarding the rise of protectionism, the Perth USAsia Centre observed that:
As economic dislocation and political tensions caused by the pandemic intensify, governments will come under increasing pressure to respond with protectionist and/or coercive trade and investment policy measures. There is already evidence this has begun. Data collated by Global Trade Alert indicates governments have enacted 411 restrictive trade measures in the first five months of 2020 alone, a dramatic acceleration on even recent trends.
The Centre further submitted that ‘the use of trade restrictions by the Trump Administration in the US is a clear marker of this protectionist trend’ and that ‘coercive trade diplomacy’ was harmful to the world’s economies, including Australia’s. Measures taken by China to restrict certain parts of its trade relations with Australia are ‘an example of using trade for “political sanctioning’’’. Unfortunately, concluded the Centre, ‘it is likely that the COVID-19 crisis will accelerate these protectionist trends in coming years’.
2.64
From a private sector perspective of the rise of protectionism, the Minerals Council of Australia told the Committee:
One impact of COVID-19 has been to accelerate protectionist sentiment in key economies, heightening the risk to sustaining higher rates of global economic growth. … Given the rise of nationalism and protectionism and the tendency of large economies to drive political deals on trade, it has become more important for trading economies to work together to establish effective multilateral trade networks underpinned by a shared commitment to a rules-based order and an effective dispute resolution process.
Nationalistic responses to COVID-19
2.65
In response to COVID-19, there were states that appeared to suspend previously accepted norms of cooperative and multilateral behaviour and exhibited nationalistic tendencies in the face of the pandemic.
2.66
As Quickstep Holdings observed:
…throughout the pandemic, we have witnessed governments around the world impose export restrictions on critical medical supplies such as ventilators and PPE. In line with this trend, governments are signalling their intent to tighten regulations to protect vitally important sectors from future disruption. … While COVID-19 has not triggered this protectionism, it has been utilised as proof to promote nationalistic approaches to trade and economic policies for those governments unwilling to recognise the importance of an open and free trading environment
2.67
The French multinational drug company Sanofi said that export restrictions imposed by overseas governments affected the supply of medical goods and pharmaceuticals:
…increased government restrictions put in place by some countries during the pandemic have affected the flow of personal protective equipment and medicines (from raw materials to finished pharmaceutical forms). These measures have had a serious and immediate impact on the globally integrated supply chains that ensure quality, safety, innovation, and distribution of medicines and vaccines.
2.68
The Advanced Manufacturing Growth Centre (AMGC) described the effect on industry in Australia when countries took unilateral measures to protect their own suppliers:
Australian manufacturers struggled to manage their supply chain with full lockdowns in many countries from which raw materials are usually sourced, including China, the United Kingdom, India and parts of Europe.
2.69
In the case of the European Union, emergency regulations were passed in March 2020, placing restrictions on the export of face masks, gloves and other PPE to non-EU countries because ‘existing stocks will not be sufficient to meet demand within the Union’. The regulation was later eased in April to include only protective masks and then completely withdrawn at the end of May. The regulation was reportedly introduced partly in response to national measures implemented by Germany and France, which not only restricted exports to third countries but also to other EU Member States. For two weeks in March Germany had restricted exports of PPE, both within and outside the EU. Both France and the Czech Republic introduced state control over the sale and distribution of PPE. Poland also imposed limitations on PPE exports to EU and non-EU countries.
2.70
Commentary on the EU’s measures at the time of their imposition contended:
The EU’s Implementing Regulation is only the latest set of such restrictions to emerge in response to this public health crisis. Countries around the world are grappling with the COVID-19 outbreak, and we expect public health-based trade restrictions and controls to continue proliferating. Existing restrictions imposed in at least 50 countries vary significantly in form and include such measures as overt export restraints; burdensome paperwork or export requirements that may make exporting essentially impossible (or highly costly); restrictions on the sharing of intellectual property in a way that hinders the sale of medications abroad; and political, social or other types of pressure on local pharmaceutical producers that impose economic or other burdens if they decide to export.
2.71
In addition to restrictions on exports of certain types of PPE to non-member states, the open Schengen zone border arrangements were suspended, ending the previous free movement of people across internal EU borders.
2.72
One analysis of post-COVID responses by some states claimed that ‘the rules of global trade went out the window between February and April [2020] as nations fought like cats to secure supplies of personal protective equipment (PPE)’. Trade in PPE between China, US, Russia, EU and Latin American countries was interrupted and Chinese imports were reported to have caused major increases in global prices for protective equipment.
2.73
The Committee heard evidence of China’s pandemic-related measures. Dr Baer Arnold submitted that:
…it is notable that China in building national capacity has strongly subsidised the production and export of masks and other entry-level medical goods.
According to Mr Simon Lee, ‘in the early stages of the COVID-19 pandemic in China and before its spread to other countries, the PRC [People’s Republic of China] was actively buying up PPE from around the world’, apparently to bolster its strong global market position.
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In late May, the US government invoked the powers of the Defense Production Act giving it the power to direct companies to meet national defence needs, and in early April ordered a US manufacturer to cease exports of PPE to Canada and Latin America. The Canadian Government expressed its concerns about the ban but did not retaliate in kind.
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Quickstep Holding’s submission told the Committee that, in its experience as an exporter to the US, ‘the disruption of Australian supply chains had far less impact on Quickstep’s business than issues impacting US supply chains, as the US managed its domestic health crisis’. This had occurred in the context of ‘America First’ and ‘Buy America’ policies intended to spur local manufacturing’, as well as ‘moves by US defence primes to keep manufacturing work in-house’.
The role and future of globalisation
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The spread of protectionist sentiment and the incidence of nationalistic responses to COVID-19 gave rise to differing views amongst witnesses to the Committee about the place of globalisation in the post-pandemic world. There was the view that globalisation has led to the erosion of sovereign production capabilities in Australia. Other assessments considered that although international economic integration is a permanent fixture of global economics, there is a need for policy adjustments to take account of supply chain problems revealed by the advent of COVID-19.
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Globalisation was seen from some points of view as a positive and transformative series of changes that cannot be reversed. The Lowy Institute argued the benefits of globalisation since World War Two are too great and too deeply embedded to be overturned:
A billion people have been lifted out of poverty, riding the wave of international trade, which grew twice as fast as GDP for half a century. Technology interacted with globalisation to facilitate production-at-scale and efficient supply chains. Comparative advantage — countries should do the things that they do best — was taken to the nth degree. This boosted productivity and living standards surged.
Nevertheless, the Institute thought that the pandemic had altered the global picture in ways that are likely to be evident for some time:
This may be the end of hyper-globalisation, characterised by casual overseas holidays and over-reliance on sourcing foreign supplies instantly. However, a vaccine will be developed in time and the benefits of globalisation are so great that self-interest will see it restored, even if the scenery changes and players switch roles.
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As a defence industry manufacturer, Northrop Grumman Australia proposed that the pandemic had given more attention to thinking that was already emerging:
The trend to pull back from globalisation was evident prior to COVID-19, with some multinationals questioning their reliance in the international arena and considering diversifying their supply chains and to include the repatriation of critical manufacturing requirements. The disruption to global supply chains caused by COVID-19 has highlighted significant shortcomings of the generally accepted models.
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From the perspective of the pharmaceuticals industry, IDT Australia expressed concerns that:
Recent global events triggered by the COVID-19 pandemic have highlighted the challenges associated with globalisation and the resulting fragility and opacity of the world’s pharmaceutical supply chain.
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Other witnesses put forward a similar case in more forthright terms. NIOA, an Australian manufacturer of defence and sporting weapons and munitions, contended:
As a direct consequence of this crisis, a new understanding of national security is evolving – not just in terms of our traditional defence industry but also our technology, health and energy capabilities. People are realising it is time to rethink and reshape our reliance on the benefits of globalisation and restore key parts of our economic sovereignty.
Mr Grant Sheard considered that:
It is abundantly clear that these globalisation policies have greatly exacerbated the economic impact of this corona virus and led to massive disruptions in supply chains.
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A number of submissions called for a balanced reappraisal of current thinking and approaches.
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The international union federation, Public Services International, decried what it called the ‘false dichotomy that the only options for trade rules are either neo-liberal globalisation on the one hand, or, nationalist protectionism on the other’. The organisation argued that a ‘progressive, multilateral trade policy that works in the interests of the people is the only answer to both unfair globalisation and resurgent right-wing nationalist and protectionist solutions’.
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Dr Dupont submitted that:
The US and China’s determination to resolve their trade and tech disputes bilaterally reflects not just their leaders’ preferences, but a global swing in sentiment away from multilateral cooperation as disillusionment with globalisation fuels the rise of nationalism and nativism. However, making the US and China great again can’t be at the world’s expense. Neither unilateralism, nor bilateralism, are panaceas for globalisation’s shortcomings. International cooperation is essential to achieving equitable and enduring solutions to complex global problems.
Trends towards global bifurcation
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Accompanying the debate about the future of globalisation has been a current of concern about signs of a trend towards bifurcation of global relationships. There is a danger that accelerating US-China tensions could have a long-term impact on the pattern of international relations where countries feel pressured into aligning themselves with systems and standards led by either of the two major powers.
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Projecting the potential long-term implications of a US-China decoupling, Dr Dupont presented the view that:
The stronger the separation impulse, the greater the political and strategic implications, as other countries come under pressure to choose between competing US and Chinese systems of governance and technology.
There is a real possibility that the world would divide into two competing trading and geopolitical blocs, much as occurred during the Cold War, except that the bifurcation would be more fluid and diverse. … If the geopolitical fallout of the COVID-19 virus continues to aggravate their relationship, the trade and tech wars may turn out to be only a skirmish in a bigger fight with much higher stakes and costs to both countries and the rest of the world.
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Echoing these concerns, the Lowy Institute said:
The coronavirus has intensified US−China strategic competition and sent bilateral relations into a tailspin. The rivalry, which even before the virus extended to all aspects of the relationship — economic, military, diplomatic and ideological — will accelerate the decoupling of the two economies and deepen mistrust between the countries and their peoples.
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The submission from the Griffith Asia Institute argued that in a world ‘in which China and the US are decoupling’ the Chinese are making every effort to use the pandemic to present itself as an alternative model:
China has used this pandemic to continue to reinforce their international agenda to undermine liberal democracies and promote their authoritarian model of government as a legitimate and alternate system.
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Other analysis has nevertheless cautioned against unbalanced assessments. Richard Gowan of ASPI argued:
While some diplomats and journalists have speculated about a ‘new Cold War’ at the UN, that’s premature. Despite Sino-American tensions, we have yet to see a return to the superpower stand-off and bloc politics that suffocated elements of the UN from the 1940s to the 1980s. The Security Council, which could go for a month or more at a time without meeting during the Cold War, has kept up a busy schedule of virtual sessions during the pandemic.
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A special focus of concern has been a perceived trend towards the bifurcation of internet standards. There is evidence that China is making efforts to restructure internet systems in a way which would increase its control over flows of information. This opened up the prospect of a ‘Balkanised internet’ that created barriers to the free movement of information and opinion across borders. Dr Dupont explained that:
China has suggested a radical change to the way the internet functions to the International Telecommunications Union. … Acceptance of the proposal by the ITU would realise a long-term Chinese digital foreign policy goal — to entrench Chinese standards and technology as the foundation stones of the future internet, since the new global network would be designed and built by Chinese engineers, led by telecommunications giant Huawei. …the world could split into two separate information worlds, one led by the US and the other by China.