The value of closer trade ties with Asia is now widely accepted by Australian business and continues to drive a relentless focus on FTAs by government. But there’s so much more to do.
The Australian Government’s Foreign Policy White Paper sets out an ambitious trade and economic agenda focused on delivering global opportunities for business, including through Free Trade Agreements (FTAs), resisting protectionism, and broadening and deepening engagement with the Indo-Pacific region.
Negotiations with our key regional neighbour, Indonesia, on the Indonesia - Australia Comprehensive Economic Partnership Agreement (IA-CEPA) were substantively concluded just last month. Australia currently has eight FTAs under negotiation: Negotiations continue for an FTA with Hong Kong, as well as for the Regional Comprehensive Economic Partnership (RCEP) involving ASEAN and its six dialogue partners, and negotiations are also underway for another trade agreement between Pacific Alliance countries. Furthermore, the annual APEC Leaders’ Summit will be happening in Papua New Guinea in mid-November, with an ambitious agenda on inclusive growth and connectivity.
As the latest report on the Composition of Australian trade revealed in early July 2018, Australia’s total trade reached a record $763 billion in 2017.
But why does it matter?
International trade and investment opens opportunities for Australian business to grow beyond our domestic market. Trade agreements can improve market access across all areas of trade — goods, services and investment — and help to drive the competitiveness of Australian firms.
They also benefit Australian consumers through access to an increased range of better-value goods and services.
With growing protectionism and economic uncertainty globally, especially against the backdrop of U.S.-China trade tensions, our commitment to driving international trade and investment is more important than ever.
Asialink, as a leading centre for the promotion of understanding of Asia and Australia's role in the region, is focused – especially through Asialink Business – on driving Australia’s closer economic engagement in the Indo-Pacific.
Helping Australian business to understand better the opportunities that closer trade and investment relationships in the region can offer – and equipping them to take advantage of those opportunities – is one of our highest priorities.
The big question is how can we drive greater, more broad-based engagement by Australian business across a range of sectors in key markets in the region and beyond.
Despite the huge opportunities created by the Government’s efforts on FTAs, we believe there is still more to do.
Here are three key areas where we see Australian business could benefit more through greater awareness of the opportunities the Indo-Pacific region had to offer.
What FTA? And how?
First - while trade agreements play a critical role in making Australian business more competitive, unfortunately, lower tariffs and better market access don’t always automatically lead to greater economic engagement.
When businesses are considering which overseas market to export to for the first time, the presence of Free Trade Agreements rarely factors highly in decision-making. In the latest Australian International Business Survey (AIBS) only seven per cent of businesses surveyed identified FTAs as a key reason for choosing their first overseas market. In fact, many exporting Australian businesses still find it challenging to understand whether and how an FTA would apply to their business; or even if a relevant FTA exists at all.
The first step is awareness. We need to work together to ensure that business – and especially SMEs – are aware of the benefits of trade agreements and how to use them. The Government’s roadshows on FTAs, backed-up by a free online FTA Portal, are a great start. But bringing business into the process of FTA negotiations earlier and in greater numbers will help deliver more relevant outcomes and greater buy-in.
Think services and digital
Four out of five jobs in Australia are in the services sector, which accounts for almost 75% of Australia’s economic performance. However, our services relationship and digital trade continue to significantly lag our commodities trade with Asia, only accounting for around 20 per cent of total exports.
The key to growing our services relationship is to invest in the region. Unlike bulk commodities where you can have long-term contracts and ship from a port in Australia to Asia, you need to be physically close to the end customer to be successful in the services sector, whether that be in financial services, professional services, health care or even the creative industries.
On digital trade, having recently worked for a multinational tech company in Asia, I am struck by the opportunities digital presents for Australian business. All our industry sectors — including manufacturing, services, and agriculture — rely on data and on the global flow of that data. Global connectivity has enabled cross-border economic activity, allowing individuals, startups, and small businesses to participate in global markets.
However, we don’t yet have the same level of sophistication in the global and regional rules for digital trade as we have for trade in goods and services. And unfortunately, we are seeking the introduction by governments across the region of increasingly restrictive policies on data, in particular data localization requirements which limit the flow of data across borders and disrupt digital commerce.
Efforts to develop new rules for digital trade are underway, including in the World Trade Organization, where Australia is helping drive a new e-commerce initiative and in APEC, which has an ambitious digital trade agenda.
In the future, developing those rules and ensuring our companies are able to both access markets through e-commerce and participate more broadly in the digital economy will be vital for our companies to succeed.
Don’t just sell to Asia. Invest there!
We can’t lose sight of the fact that the opportunity for investing in Asia is enormous. Just consider: Australia currently invests more in the U.S. (around $665 billion at end of 2017) than we do in all Asian economies – including China, India, Japan and all of ASEAN – combined at around $390 billion at end of 2017.
The upside of being able to redirect our focus to Asia is profound.
Asialink is working to help Australian business step up and address those issues by building greater awareness of the opportunities, in-depth knowledge of markets and better capabilities to strengthen our trade and investment ties.