Five years of strengthening Australia through trade and investment
Thank you very Philippa for that welcome and indeed to you and your team for hosting us today and you for your commitment and engagement as leaders within Asia Society. To Doug Ferguson, Phillip, the team from Asia Society, I appreciate your hospitality but more importantly your thought and leadership in this space. Can I acknowledge [inaudible] that I see here, many distinguished guests, and of course heads of agencies and to Frances, Stephanie, the Asia Society thank you very much for joining us and for the work that you all do to support me, to support Marise but most importantly to support Australia in terms of our successful engagement with the world.
I too acknowledge the Gadigal people of the Eora Nation and all of Australia's indigenous people, their elders and the fact that across the Indigenous nations of Australia, indeed the first traders of Australia were born.
It's an honour to be here at Asia Society Australia.
Your mission, preparing Australian leaders and our community for a deeper and sustained engagement with Asia, remains so important to Australia.
I am proud of the contribution that my own portfolio of Trade, Tourism and Investment has made to strengthening old and creating new links between Australia and our Asian neighbours.
Over the last five years in particular, our Liberal-National Government has pursued trade agreements that have locked in opportunities for Australian businesses right across the Indo-Pacific region.
And we have created strong inflows of productive capital, from partners in our region and around the world, capital that helps to feed Australia's economic growth, both now and long into the future.
It's important to digest fully the scale of this achievement and what it means. Because the trade rules we have written, and the investment partnerships that we have facilitated, have cleared the way for Australia to continue our now long trajectory of prosperity.
Since the 1980s, successive Australian Governments have opened our economy to the stimulus of international markets and the discipline of competition.
The corresponding achievement of the past five years is to have further opened up our opportunities abroad in equal measure.
We have expanded massively as you all appreciate and know, the proportion of Australian trade covered by Free Trade Agreements or FTAs, – and laid the groundwork for much deeper integration with our most important regional trading partners.
And at a pivotal moment in defining the region's economic direction, we've made a major down-payment in favour of a rules-based system that delivers some certainty to global trade, confidence to invest, a rules based system that stands ahead of "might is right" dominance in some cases.
I thank the Asia Society for this opportunity to explain how we've done that, the risks we face, and what's at stake.
There is little doubt that we live also in a time of uncertainty, that uncertainty is growing in international trade and that presents two in particular, kinds of challenges.
The first is that we can no longer assume that the general trend in world trade is automatically towards openness. In both populist sentiment and in the policy settings of some countries there are movements towards unilateralism at the expense of cooperation or collaboration.
The work of keeping markets open, and of keeping on opening markets, and of the free flow of investment, is simultaneously becoming both more important, but also more difficult or challenging.
The second challenge is that debates about trade have become more volatile. Trade is often an easy, if misplaced, fall guy for societal impacts generated by other technological or economic trends.
Some worry about national interests getting lost in international engagement. However, we in Australia cannot sustain let alone enhance our prosperity simply by selling to ourselves. So we seek the best possible access for Australian business into overseas markets.
Australia best secures our long term national interests by maintaining an exceptionally active and effective trade and investment policy regime.
Others allege that trade is increasing inequality. This too is misguided, in fact Australia has used the economic growth dividend from trade and investment to generate wealth right across our economy, to keep unemployment at historic lows, and to generate the revenues that underpin our generous social safety nets.
These arguments deserve more analysis than the standard twitter commentary that sometimes passes for public debate.
For Australia's prosperity, it is important that we instead focus on the facts.
Trade and investment are overwhelmingly good for Australia.
International trade generates jobs for around two-and-a-half million of us, one in five.
Trade has meant that real income for the average Australian family is higher, by an estimated $8,448, those estimates driven particularly due to trade liberalisation undertaken in Australia since the 1980s by governments of all persuasions.
And thanks to better-value traded goods, those wages, those higher household incomes go further when it's time to buy a car, a TV, a washing machine, a device or many everyday goods.
Like trade, foreign investment makes Australia and Australians more prosperous than we would otherwise be.
For 200 years now, capital from overseas has helped Australia, with a relatively small population, to capture the tremendous opportunities of our big continent and to enjoy a disproportionate share to our population, of global economic activity.
Without steady inflows of foreign capital, our productive capacity, our employment levels and our income would all be significantly lower.
Among the recent investments creating jobs for Australians and boosting our economy are:
- US company Albemarle's investment in Mineral Resources' Wod-gina lithium mine, which we expect will create over 800 jobs and significant flow-on effects for local businesses in WA;
- Equinix and Cisco (of the US) and Zoho (of India), just last week announced separate investments totalling $326 million in Australia's tech sector; and
- Infosys, of India, has announced plans to open three innovation hubs in Australia, creating some 1,200 jobs.
In all, foreign direct investment supports 1.2 million jobs in Australia or 1 in 10. These companies contribute one fifth of total Australian business output, they paid wages and salaries to workers in Australia valued at some $67 billion, and they contribute 11 per cent of Australia's total tax revenue from business.
Trade and investment has given our economy depth and resilience, it has stimulated growth, and it has added to our prosperity.
Much is made, quite fairly, of Australia's 27 years now of continuous, consecutive, economic growth. Less well known is the pivotal role that trade has played in this, contributing an estimated one-quarter of that economic growth alone over the last five years.
Trade will enable that trend of growth to continue. Over the next decade, well over one billion more people across Asia are projected to join the middle class. Their choices will reshape global markets. Australia's reputation as a provider of clean, green, safe and high-quality produce, goods and services stands our exporters in good stead to capitalise on this phenomenon and to continue our prosperity.
This prosperity of course as we all appreciate makes Australia one of the best places to live.
It helps Australians to pursue and realise their ambitions.
And it puts our government in a position and those in the future of different political persuasions, to be able to provide the essential services such as hospitals and schools but importantly an open trade agenda and our economic policies allow us to be able to do that without heaping a mountain of debt on future generations or hiking taxes across the board.
The Government's record on trade and investment
The Liberal-National Government has always been a strong supporter of free and open trade, and our achievements over the last five years have been particularly strong.
Securing the China Australia Free Trade Agreement, which remains the most liberalising trade agreement that China has concluded with any other country.
We delivered the Japan Australia Economic Partnership Agreement, which locked in advantageous terms of trade with the world's third largest economy.
And the Korea Australia Free Trade Agreement giving us significantly improved access into the market of our fourth largest trading partner.
These trade agreements deliver business a more predictable operating environment.
That predictability gives Australian producers confidence to produce year-round for the northern hemisphere market; it gives Australian businesses confidence to scale up and supply internationally.
Australia is the only major developed economy with preferential access into all major North Asian markets.
An even more significant achievement was of course to come.
As our Foreign Policy White Paper anticipated, and events have borne out in spades, we are at a critical point in writing and protecting the rules that will determine the economic direction of our region and indeed the world.
The patterns of interaction that are being established now are going to define how this region is ordered for decades to come.
The Trans Pacific Partnership – with its vision of a region governed by predictable, open, and inclusive rules – has given institutional, legally binding form to Australia's view of regional economic order.
Australia was a leading player in the development of the 11-nation TPP and, with Japan, then Prime Minister Turnbull provided the political leadership that saved the deal after the United States withdrew.
With our TPP partners, we have articulated a regional set of rules of the highest quality. The folly of the US withdrawal is most striking when you consider the high quality, contemporary rules TPP sets in contested areas such as e-commerce and the competitive neutrality of state owned enterprises.
It's no wonder that others are looking to join up to TPP given its world leading provisions, including in areas of services and investments, as well as 98 per cent of tariffs being eliminated in a trade zone worth almost $14 trillion in GDP.
The TPP is an economy-wide competitive advantage in accessing around 500 million potential customers.
An immediate benefit for Australian exporters, the TPP has already resulted in two tariff cut ocurring in short order – one on entry on the 30th December last year and another just a couple of days after on the 1st January 2019. And by way of just one practical example within the TPP, Vietnam has cut its 56 per cent tariff on Australian wine to 41 per cent. That tariff will continue to drop until it is completely eliminated within the next decade. Australian wine exports to Vietnam in 2018 were worth less than $7 million but of course we hope as we see projected economic growth and development of a rising middle class, combined with at the same time removal of those tariff barriers, a type of growth that has fuelled Australia's wine boom into China and elsewhere.
Then there's the breakthrough FTA with our strategic partner, Indonesia. I am thrilled to be here at the Asia Society this week, making this speech straight after the agreement was signed just two days ago.
The Indonesia-Australia Comprehensive Economic Partnership Agreement, or "IA-CEPA", as its inelegantly known is a platform for the closer economic partnership that Australian has long sought with Indonesia. Can I just take this moment to pay tribute to Trudy and the negotiators and indeed all the team at DFAT and our collaborators at Austrade who have helped to make sure that the enthusiasm and the detail for doing this deal was successfully realised and it's a great accomplishment, particularly you Trudy, so congratulations.
Australia and our government unashamedly want to support Indonesia to fulfill its projections We want to support Indonesia to fulfil projections that it can be one of the world's top five economies by purchasing power in 2030. A strong and stable Indonesia is critical to our part of the Indo-Pacific region.
IA-CEPA will enable Australia to deepen economic co-operation, to share in Indonesia's growth and thereby to strategically enhance all aspects of our relationship.
The agreement, when ratified, will provide duty free or significantly improved preferential arrangements for over 99 per cent of Australian goods exports by value.
Indonesia will guarantee automatic issue of import permits for key products such as live cattle, frozen beef, sheep meat, feed grains, rolled steel coil, citrus products, carrots and potatoes.
But this agreement is all about two-way, mutual benefit. That's why both countries have enthusiastically signed it.
On the day the agreement enters into force, all of Indonesia's goods exports to Australia will enter duty free.
Australian wheat is already being transformed into the famous Indomie noodles, and Australian feed grains will soon be used to boost the productivity of Indonesia's livestock and aquaculture sectors. These are win win outcomes for both of our countries. The partnership between our grains industries is strong and deepening and I was pleased on the margins of Monday's signing to see that in action while attending an Indonesia-Australia grains' industry round-table in Jakarta.
Australian steel will see improved access, there will more work in locations like Port Kembla but Australian steel will be used for further coated steel production in Indonesia, providing more business opportunities there as well.
And Australia's largest services export, education, a sector dear to my heart from my previous portfolio, will also receive a boost. For the first time in any trade agreement, certain Australian Vocational Education and Training providers will receive guaranteed access to open majority-owned joint ventures in Indonesia.
Helping to upskill Indonesia's vastly youthful population is a prime example of how this agreement will drive economic prosperity for both nations.
As will investment in mining services, in infrastructure and across the tourism industry. This will all work towards developing Indonesia's economy further and creating jobs there and here.
This is a good agreement both for Indonesia and Australia. It will help to build sustainable exchange, and help us to weather the trade headwinds as they blow from across the oceans of the world.
The Indonesia-Australia partnership is an abiding one. We will have our differences from time to time. But Australia is in it for the long haul and its critical to the success of both our nations that we both succeed.
We also recently concluded negotiations for an agreement with Hong Kong and signed an agreement with Peru, and we're working to bring them into force as quickly as possible.
All of these agreements rest on the body of trade law that 164 nations of the world have agreed to advance and enforce through the World Trade Organisation.
In the last five years, our Liberal-National Government has taken a pragmatic and productive approach to the WTO.
The agreement on agricultural export subsidies should be an excellent result for our farmers and for developing countries around the world.
Another victory for trade was for trade was the WTO Trade Facilitation Agreement to reduce red tape, in which Australia also had a strong hand.
If countries fully implement their commitments under this Agreement, the OECD anticipates an aggregated 10 per cent lift to developed countries' GDP, and a stunning global growth dividend of about 15 per cent.
The updated WTO Information Technology Agreement and recently concluded negotiations for Australia's accession to the WTO Government Procurement Agreement, a critical agreement for companies such as this one, are further success stories.
Currently, Australia is pushing for WTO outcomes on fisheries subsidies, and cutting red tape for services exports.
In the face of both genuine concerns about and the threat of roadblocks being erected to certain WTO functions, Australia is also joining with other leading nations to propose constructive administrative reforms to modernise WTO processes.
In these days when there's a hunger for leadership in trade policy, Australia provides it especially in the consensus-based multilateral economic fora such as APEC, the G20 and the OECD.
In APEC, for example, we have incubated ideas on new frontiers such as digital trade, setting a collegiate, consultative and well linked process for engaging with business in the writing of trade rules.
APEC's work paved the way for the TPP's excellent chapters on digital and e-commerce, and now we're leading the push for near-universal adoption of such high quality e-commerce rules through the WTO. An important element of the Indonesia deal this week is the e-commerce and digital trade provisions that ensure the free flow of data between our countries, the free storage of data among our countries because data of course is such an important and modern commodity that will help fuel business growth and trade growth into the future.
All these international rule-making efforts further our commercial interests today, as well as our longer-term interests in a strong trading system.
In sum, over the last five years, Australia has been enjoying the most successful period ever in opening the markets of our major trading partners, bringing international opportunity within reach of more Australians and Australian businesses than ever before.
At a time when the world's trading arrangements have been and are under more challenge than we've seen for decades, Australia has been amongst the world's most active rule-makers and market openers.
Looking ahead: Trade
But there is more to do, and our government is redoubling our efforts.
We are 100 per cent focused on creating new opportunities for Australian businesses in global markets.
Firstly, Australia hopes to see the remaining four TPP nations successfully ratify the TPP and bring it into force in their countries. Together with our partners we are also looking to consider applications from others who share the high ambition to join in the TPP.
We are working with the European Union to prepare an ambitious and comprehensive FTA with the potential to open up a market for Australian goods and services of half a billion people and a GDP of 17.3 trillion US dollars. And whether the UK is in or out of the EU 28 or the EU 27, the EU will remain Australia's second largest trading partner.
We are well positioned as well though to strike a comprehensive agreement with a post-Brexit UK as soon as they are ready to do so. In the meantime, we have worked to cover all bases so that for example, we have a treaty in place to ensure that our wine exporters can continue to sell Australian wine in a no-deal Brexit, as well as legislative amendments in place to ensure that those same Australian wine exporters can continue with business as usual in a transition arrangement. We don't know the outcome but we've made sure that we are prepared for whatever it may be.
Together with regional partners we are working this year with the ambition to conclude the Regional Comprehensive Economic Partnership comprising 16 Indo-Pacific economies, including 10 of Australia's top 15 trading partners.
That agreement, if successful will be a global game changer. We are implementing the ground-breaking India Economic Strategy, so that we share in the growth of the world's fastest-growing major economy.
Our wide-ranging Economic and Commercial Diplomacy activities, a pillar of our Foreign Policy White Paper, continues to intensify.
Since October 2016, we have facilitated the signing of 15 mutual recognition agreements expanding market access for Australian professionals overseas – ensuring an increasingly important component of Australia's export economy has the best opportunity to succeed.
On top of this we are taking a whole of government approach to tackling non-tariff trade barriers.
And we are helping to build a resilient and prosperous Pacific family of nations through the trade and development agreement, PACER Plus.
Clouds on the horizon
But there are, sadly, clouds on the horizon. And not just from the uncertainty surrounding the economic superpowers, Brexit or other factors.
I proudly and readily acknowledge that trade policy in Australia has largely for a number of decades been a bipartisan endeavour. But this is somewhat at risk.
Labor policy more recently has been influenced by misguided or malicious union demands and others placing obstacles in the way of finalising and legislating our FTAs. Turning their back on the legacy of Hawke, Keating and John Button, Labor under Bill Shorten appears to place pacification of the unions ahead of the further jobs growth that can be fuelled by market expansion for Australian goods and services.
It is hard to believe that we have an Opposition Leader who would have walked away from the TPP negotiations when the US did so. At the time, he described the TPP as "dead in the water" describing government efforts to bring it into fruition as a "waste of time".
Now, eventually they supported TPP-11, but to deliver that support they had to appease the union base and potentially to sell at the cost of future trade agreements, because of baseless fears about issues such as Investor-State Dispute Settlement, or ISDS mechanisms, and labour market testing. I want to address those couple of issues.
There are many countries in the world where the political and legal system is different to Australia's and less predictable. Australian companies want to be able to invest abroad with some degree of certainty that their investments will not be expropriated, that they and their investments will not be treated differently simply because they are 'foreign', and that a certain minimum standard of legal treatment is going to be readily accessible to them.
Surely we would all want those sorts of minimum standards for Australian companies expanding in overseas markets?
That's why we have long negotiated Investor-State Dispute Settlement provisions in our FTAs and indeed in separate investment agreements. Australians investing offshore want those protections. Modern ISDS clauses, such as those in the TPP-11, include safeguards to ensure that the government's ability to regulate in areas like public health is not restricted or the environment, or national security and of course our partners in trade deals want those provisions as well because they want to attract the foreign investment to help their economies grow. These provisions are more often that not, of benefit to those partner nations than they are to Australia, although they provide the protection for Australian businesses. For Australia, they have never been successfully used.
We should remember that regardless of the scare campaign (indistinct) around ISDS, there's never been a successful ISDS claim brought against Australia, but Australian investors have used those provisions, rarely, but occasionally to protect their interests in investments overseas.
Similarly, critics of labour market testing waivers have no evidence to back up their claims that these provisions will harm the Australian economy or work force. In fact, the proof point is in the opposite direction. Between 2013 and 2018 the number of primary Temporary Skill Shortage visas more commonly, formerly known as subclass 457's, that were granted to skilled workers from FTA partners where Australia has waived an aspect of skilled labour market testing for contractual service suppliers, did not increase during that time, in fact the number of those waivers actually declined by approximately 38 per cent despite all the trade agreements that had come into fruition.
Labour market testing waivers in FTAs apply to skilled workers only, despite some of the misleading commentary. There is nothing in Australia's FTAs that allow employers of foreign workers to undermine Australian wages or conditions. All workers in Australia must also meet Australian skills, standards and licencing obligations.
The problem though is bigger than these technical points. Sadly, it seems that when the Opposition speaks on Trade, they are getting the big calls wrong.
Indeed, go back into the Opposition Leader's history as a union boss, he once declared, if you'll pardon the direct quote, that "free trade is bullshit". Then he later spoke out against ChAFTA, endorsing the disgraceful union scare campaign against this historic, job-creating agreement.
And of course I've touched upon the TPP. This recklessness risks putting the gains of farmers and businesses at risk while making it next to impossible to potentially and successfully negotiate future FTAs and they're not the only risks. Australia is a country that sticks by the terms we negotiate in international agreements and we expect our counterparts to do likewise. It would undermine our standing and many others to undo the decades of bipartisanship not just on trade policy but our reputation for being true to our word as a nation, if we were to go out and start to re-write agreements already struck.
I urge Mr Shorten to give Australian exporters, Australian trading partners and our economy, confidence that our word is our bond, that we maintain bipartisanship in this area to give us the best chance of continuing to expand our global footprint of preferential access to trade.
We of course will continue with our ambitious trade agenda as a Liberal-National Government are 10 per cent focussed on creating new opportunities for Australian businesses in global markets.
Looking ahead: investment policy
When it comes to investment too, we need to move forward with a steady hand, we believe this investment will continue to play a part in the future of our economy just as it has throughout our past.
Australia is stronger because we attract investment from all our major economic partners. Contrary to some misconceptions, the United States and Japan are the largest direct investors in Australia, followed by the United Kingdom, then the Netherlands and then China.
Our Government screens foreign direct investments above certain monetary thresholds, and those screening checks have been tightened during our time in office, to ensure that we maintain the national interest and that they are not contrary to national security interests.
We introduced a dedicated focus on investment in a government 2015 appointing the first ever Australian Government Minister responsible directly for investment.
We introduced dedicated investment specialists into Austrade and those specialists are getting real results. In 2017–18, Austrade facilitated 113 inbound investments valued at approximately $4.8 billion helping fuel growth across a number of industry sectors, including services and technology, agri-food, and resources and energy.
This includes focused work identifying and building strategies for growth in high-potential areas such as lithium and lithium-ion battery manufacturing.
The new "Australia for Agriculture 4.0 initiative" which seeks to cement Australia as a global hub for ag-tech and food-tech industries, building on strong investment that already exists from global partners such as Cisco and Bosch.
Our Government's trade and investment over the last five years have been quite unparalleled in Australia's history.
When we came to power in 2013, free trade agreements covered just over one quarter of Australia's international trade.
Today, agreements in force cover more than two thirds of Australia's international trade.
Once current negotiations are completed, preferential trade agreements will cover almost 90 per cent of Australia's trade footprint.
This is a big legacy and we need to appreciate it and build upon it.
We need to do so in the face of uncertainty and to ensure that we continue to engage actively with all of our close partners in Asia and beyond. Australia will continue to invest its efforts in the WTO, in the TPP expansion, in the successful conclusion of the RCEP, the EU-Australia FTA, as well as an FTA with the UK when they're able.
We will pursue partnerships elsewhere with the Pacific Alliance and other like-minded nations. This is a path to a region in which agreed rules underwrite opportunity and prosperity for Australia and for all other nations.
We have in place the arrangements to ensure that we grow stronger, and richer together as a region and a global community.
It's vital that we don't diminish or undermine these efforts and certainly I can assure you that far from retreating in the face of some of these headwinds, Scott Morrison and I are committed to redoubling our efforts in support of open, rules based trade into the future.
I thank you so much for the opportunity to be with you today, the chance to spell out the comprehensive case for trade and investment and I look forward to engaging exchange with Lisa and the Q and A to come. Thank you all very much.