Address to Brookings Institute - Alliance 21 Project

The Alliance between the United States and Australia is a central pillar of Australia's foreign policy and national security. Today I will speak on a broader theme, but of relevance to this Alliance of two open liberal western democracies.

I will address the importance of the nation state itself and some of the contemporary challenges – for while there have long been predictions of the demise of the nation state, there are new and even more dangerous threats to its continued existence and survival.

Indeed, in my first speech to the Australian Parliament in 1998, I spoke about the pressures I then saw facing the state, largely brought about by globalisation. The revolutionary social change sparked by the digital revolution (and this was pre the wifi, iPhones. The rapid expansion in unrecorded intra-firm trade across national borders, making it harder than ever for states to regulate – and tax – corporate activity. The shrinking significance of geography and increasingly porous borders for goods, capital and labour

It was my view then that the challenge for the nation state was to adapt, to harness the great possibilities and promises of globalisation.

But today pernicious forces have come to the fore and wield greater power than ever that threaten to undermine the nation state.

To globalisation's opportunities, we must now add transnational threats.

Foreign terrorist fighters claim caliphates – a mediaeval construct form of fiefdom that is a platform for further territorial conquest.

Groups like Da'esh – also known as ISIL – claim territory, engage in extortion and people smuggling, yet impose taxes and purport to provide services. This business model is being emulated by other groups – a franchise of terrorism that can be established in unstable, volatile locations.

Transnational crime, the drug cartels, corruption, and cybercrime are also challenging the role of states. I'll leave for another day the impact of pandemic disease, environmental degradation and financial instability.

The challenges we face are borderless. Yet the world is still divided into, and defined by, and to an extent constrained by, jurisdictions.

I believe the nation state, despite the challenges we faced, will persist, overcome, and indeed thrive as the organising unit through which nations realise their values and advance the rules based international community.

I will focus on some of the main challenges we face – common, collective challenges, whether born of globalisation, accident or ill intent and discuss how we can respond – working together as nations, and individually, each taking our share of the burden.

Through our United States alliance and separately; with like-minded partners; Britain and France, Indonesia and South Korea, Canada and Belgium, and others the world over – we must be prepared to lead and to adapt.

The Westphalian system will turn 367 years old this year. It is striking to think that, despite the transformation of the world scientifically, technologically, socially, and industrially in that time, and the changes that have taken place within the governance of nations, this system has persisted.

It has been modified, with international law, norms and organisations continuing to be developed and advancing.

Yet many of the basic elements of the system are unchanged.

The United States and Australia cherish certain values. Our systems enshrine citizenship and democracy. We believe, fiercely, in certain things - the rule of law, equality before that law, property rights, individual freedom, democracy.

It is the vehicle of a nation state through which we give expression to these values and organise to defend them, where necessary.

At the international level, it is the system of nation states that has – on balance – been the foundation of humanity's efforts to build peaceful, safe and prosperous societies.

With all its flaws – and some nation states embrace systems, values and strategies that many of us find shockingly flawed – it remains the case that it is an international system based on nation states that has allowed us to improve greatly the circumstances of much of humanity in recent centuries.

Yet today there are serious challenges to the sovereignty of the nation state.

Many of these challenges are due simply to change - whether technological, social, economic or political.

Corporations, for example, have long been indispensable engines of our global economy, and now, in many cases, rival countries in terms of their economic power.

Consider this: if you rank the top 100 countries and companies by GDP and revenue, only 66 of those largest global economic entities are nation states.

Apple, General Motors, Wells Fargo, Boeing, Procter and Gamble and Microsoft – they're all right up there in the top 100 in terms of revenue.

In – legitimately – striving to improve returns to their shareholders, global companies, big and small, structure their affairs and businesses to minimise paying tax while operating within the law. Tax collectors face tremendous difficulty capturing taxes on revenue from their domestic jurisdictions.

While such corporate behavior is understandable, developing countries are estimated to lose between US$35 billion and US$160 billion in revenue each year because of corporate profit shifting.

Now, if all companies paid taxes on profits in the countries in which they are derived, this would largely negate the need for global aid flows or development assistance.

Global official development assistance in 2013, for example, was about US$135 billion – less than the upper estimate of lost tax revenue.

International aid is one of my responsibilities as Australian foreign minister, so I can't ignore these facts. Governments and business must work together to achieve more equitable outcomes for developing countries.

Continuingly rapid technological and economic change, whether in the form of the social media revolution or the transition from regional and national to global value chains, will require us to continue to adapt and innovate.

Now for the challenges to the sovereignty of the nation state that do come from malevolent actors.

Tragically, the past year alone has been filled with violent examples.

Terrorism is now more global, more dangerous, more diversified than ever before.

Terrorist groups have emerged or grown in Afghanistan, Syria, Iraq, Libya, Nigeria, Somalia and Yemen.

Da'esh (or ISIL) has declared a caliphate - putting whole villages, towns, cities and vital infrastructure in Syria and Iraq under its ruthless governance.

The Haqqani Network – a group of Islamist insurgents opposing Coalition forces in Afghanistan and Pakistan, and allied with the Taliban – continues its criminal operations regardless of borders or governments.

Al Qaeda in the Arabian Peninsula has claimed responsibility for the tragic Charlie Hebdo attacks and continues to plot terrorist attacks around the globe.

Boko Haram has also declared a caliphate, and taken control of large parts of Nigeria, and on a day-to-day basis is seeking to impose its brutal governance over the people living there.

Off-shoot terror cells and individuals – the lone wolf – have staged barbaric attacks – including in Canada, France, Belgium, the United States, Britain and Australia – and we confront the phenomenon of foreign fighters and terrorist trained returnees.

The manifestation of this problem is global. Despite our efforts, terrorism persists as a continuing challenge to the sovereignty of established states.

Its perpetrators have no respect for Australia, or France, or the United States, or Iraq, Russia, China, or any other state.

They have no respect for borders, laws or norms of behaviour.

They believe that brutality and violence is an appropriate and acceptable means to achieve their ends.

Henry Kissinger recently wrote, in World Order, that:

"Zones of non-governance or jihad now stretch across the Muslim world …

When one also takes into account the agonies of Central Africa – where a generations-long Congolese civil war has drawn in all neighbouring states, and conflicts in the Central African Republic and South Sudan threaten to metastasize similarly – a significant portion of the world's territory and population is on the verge of effectively falling out of the international state system altogether."

Then there are those whose motives are financially rapacious rather than political, as is the case of the international crime syndicates and drug cartels. The effect is still insidious in its undermining of the institutions of state.

Crime networks challenge the state by driving corruption, undermining rule of law, and damaging vast numbers of lives.

These twin perils – terrorism and organised criminal networks – thrive in places where sovereignty and national institutions are weak.

This is why Australia and the United States and others try to build or rebuild stability and state effectiveness in places like Afghanistan and Iraq.

We're fighting in the Middle East today for this very reason: to end the opportunities that lawlessness and weak sovereignty provide for terrorist and criminal networks to grow.

Narco-terrorism – the financing of terrorism by profits from illegal drug trafficking – is expanding exponentially. Even as nations like the United States and Australia have stepped up the fight against illicit drugs, criminals have used the internet to open new distribution channels and circumvent state controls. These take time to close down.

In July last year, the BBC reported that illegal drug listings online had more than doubled in a 12-month period, despite efforts to close down operations like Silk Road.

These networks are interconnected, and they make big money.

Forbes magazine has estimated that Da'esh ISIL has an annual income of $2 billion.

Hamas has annual revenue around a half of that – at about $1 billion

Hezbollah: $500 million annually.

International drug cartels collectively make billions annually. These businesses – and they are run like businesses - thrive where sovereignty is weak.

The money they make flows around the world, corrupting and undermining states, as it is reinvested in further illegal activities.

In the last year, for example, it was reported that Mexico's Knights Templar cartel had diversified well beyond drug trafficking, deriving major income streams from illegal logging, mining and extortion.

Australia is part of a multinational campaign to stop drug trafficking and narco-terrorism. In April, last year HMAS Darwin – a Royal Australian Navy guided missile frigate – seized 1032 kilograms of heroin off the coast of Somalia. This is one of the largest amounts of heroin ever seized on the high seas.

Then there is the realm of cyber.

We've long been anticipating the disruptive potential of cyber-crime and cyber-theft.

But recently for the first time we've seen a rogue nation state launch a major attack of unprecedented destructiveness, against a major private corporation.

Presumably North Korea wanted to coerce its target. Ultimately it failed - the film 'The Interview' was shown, and garnered unexpected box office success, but only after significant damage was inflicted on Sony Corporation.

The United States response was swift and crucial in demonstrating that such cyber-attacks against any public or private institution cannot be tolerated.

Such cyber-attacks do not differ greatly from those of terrorism. And like terrorism, they pose a significant challenge to state sovereignty, and to our ability to protect the freedoms we should all enjoy.

Australia, the United States and others have experienced firsthand the immense damage that can be wrought by cyber thieves operating as 'hacktivists'.

Governments face an ongoing battle to secure their networks, the very systems on which we rely to protect the interests of our citizens.

I set out these challenges not because they are overwhelming – they are not. I list them to make the case for action.

The United States has led collective responses to global problems again and again, especially since the end of the Cold War.

It has received its share of credit, but it has been allocated more than its share of the blame when things have not worked out.

This reflects the unique and indispensable role of the US as the world's superpower – with the largest economy and the greatest political and military might.

But the United States should not have to bear alone the burden of solving every challenge that we, as nation states, face.

Australia does not match the US in sheer heft.

What we seek to do is make a serious contribution – at the very minimum, a responsible and proportional contribution to protect the rules based international system.

We are there with our ally and with other partners.

I believe that with the benefit of the Alliance comes a responsibility to share the burdens – both in material terms and in providing creative and proactive policy input.

Australia must face these challenges just as much as the United States.

We have just concluded a two year term on the United Nations Security Council.

Australia came to the role in January 2013 and we were determined that elected members could and should make a difference in strengthening the Council's role in the maintenance of international peace and security.

Of course, we endeavoured to use our term to support Australia's core national security interests, and those of the global order.

We aimed to make a practical, constructive contribution across the entirety of the Council's agenda.

In doing so, we achieved some important outcomes.

In July of 2014, we led the Council's response to the shooting down of Malaysian Airlines MH17 over eastern Ukraine, a criminal act that caused the loss of 298 lives from many nations, including 38 Australian souls.

Our resolution, adopted unanimously as UN Security Council Resolution 2166, backed both a cease-fire in Eastern Ukraine, and a full impartial international investigation, requiring all States to cooperate fully with the recovery and investigative efforts. The remains of all our people have been recovered, we're bringing them home, but our quest for accountability and justice continues.

We were active on counterterrorism, securing Council agreement in November to strengthen international cooperation on combatting terrorism, including tackling the threat of foreign fighters and countering violent extremism.

We co-sponsored a resolution, condemning all acts of terrorism committed by Da'esh and the Al Nusrah Front.

As Chair of three Security Council sanctions committees, we strengthened the Council's response to the threats posed by Al Qaida, Iran's nuclear program and the Taliban, and targeting emerging threats including Boko Haram and Da'esh.

We led Council debate on sanctions reform, boosting engagement from affected countries, enhancing the system's transparency and mobilising more professional support and coordination from the United Nations itself.

We took a leading role in the Council's response to the humanitarian crisis in Syria, securing the adoption of three ground-breaking resolutions within 12 months, requiring the Syrian Government and other parties to the conflict to allow humanitarian access to millions in desperate need.

We coordinated the Council's work on Afghanistan during the crucial period leading into the transition at the end of 2014 from the NATO-led combat mission to Afghan security control.

This culminated in Security Council support for what is called Operation Resolute Support, which will help train and advise Afghan security forces - and in which Australia is participating.

And we played a leading role in determining the Security Council's response to the findings of the UN Commission of Inquiry into Human Rights in North Korea – headed by former Australian High Court judge Michael Kirby – a groundbreaking, harrowing report which no civilized member of the international community can ignore.

With the cooperation of like-minded Council members, the humanitarian situation in North Korea has now for the first time been added to the Council's recurring agenda, for continued monitoring.

Our contribution to global security did not begin with our term on the Council; nor does it end there.

For example, Australia was one of seven co-authors of the Arms Trade Treaty - the first legally binding instrument negotiated in the United Nations to establish common standards for the international transfer of conventional weapons.

The Treaty will help promote security, stability and economic development, including in our Indo-Pacific – our backyard – by preventing the diversion of weapons to terrorists and other criminal groups.

Since the treaty opened for signature in June 2013, 130 states have signed it, 60 have ratified it. It entered into force on 24 December 2014.

Ladies and Gentlemen, the ANZUS Alliance clearly sets out our core mutual defence obligations. However, our broad and deep relationship – as like-minded nation states – leads us naturally to work together to meet head-on these wider threats to peace and prosperity, in the context of our rules based international system.

We are both in Iraq today for example providing assistance at the request of the Iraqi government to defeat Da'esh.

Australia is there alongside the United States – indeed, second only to the United States for the size of our contribution – because we have concluded that it is not only in our national interest to prevent Australian citizens from joining terrorist organisations that are seeking to undermine and overthrow the state system – about 180 Australians known to us at the present time – but it is also in the broader global interest for us to contribute to a coalition response.

Yes, we face considerable challenges to the sovereignty of the nation state.

Yet we are not daunted.

We will not be intimidated.

We can be confident that, as countries like Australia, the United States and other international partners are prepared to step up to these challenges, together we will prevail and prosper.

Moreover, we can be confident that the nation state will endure, as the main institution through which we pursue the prosperity of our people and defend and promote our values and our way of life.