Contemporary trade challenges require robust rules of the road

Thanks to the Peterson Institute for International Economics and the National University’s Lee Kuan Yew School of Public Policy for the invitation.

Introduction

It’s a hackneyed phrase to say we are at an inflection point – but we really are.

The global trading system has been facing many stresses in recent years.

Russia’s invasion of Ukraine has been a reminder that vigilance is the price of lasting peace.

Supply shortages and disruptions caused by Covid-19 showed us that even sophisticated global supply chains are not immune from global shocks.

We have all had a re-think about economic security and resilience, particularly the risks of concentrated supply chains.

Sometimes economic interdependence is misused, with stronger players flouting rules which undermines economic security and prosperity for big and small nations.

And economic coercion weakens trust between countries, which has a knock-on effect regionally and globally.

The intensification of geostrategic competition risks fracturing global cohesion, including in the sphere of global trade and investment.

After decades of building a multilateral trading system underpinned by common rules of the road, a turn away from free and fair trade has emerged in some parts of the world in recent years.

But all of us in this room know the benefits of an open, rules-based trade and investment system.

A system that has underpinned historic gains in global security and prosperity.

Most notably, for the past thirty-five years, across the Indo-Pacific.

The fact is: our clear collective interest in a stable, predictable, and transparent global order, including trade rules, hasn’t gone away.

The point I want to make today is that – in the context of intense pressure on the global trading system – our region has agency.

In 2025, it will be incumbent on those of us who understand the benefits of global trade rules to actively engage in support of the multilateral trading system with the World Trade Organization (WTO) at its core.

Of course, if the system is going to remain relevant, it must adapt to new realities – realities that were not present several decades ago.

We have to shape and protect our own economic prosperity by ensuring that the global system meets the needs of all.

This means being prepared to revise existing rules, or develop new ones, that effectively meet the needs of our world as it is today and for tomorrow.

And it means considering innovative approaches with our international partners where multilateral agreement might not immediately be achievable.

So, today I want to talk to you about how the Indo-Pacific can step up its collective efforts and exercise its agency in three clear ways.

Reinvigorating the WTO

The first is sharpening our efforts on reinvigorating the WTO.

The WTO remains the preeminent forum for creating, monitoring and enforcing global trade rules.

But the WTO must continue to evolve to be fit for purpose.

It’s encouraging that the WTO and its predecessor, GATT, has demonstrated over the decades an ability to adapt by creating frameworks to help govern new developments in trade.

We need to keep the pressure on to reform the WTO.

A key priority is fixing the dispute resolution system.

To overcome the non-functioning of the WTO Appellate Body, Australia and others established the multi-party interim appeal arbitration arrangement (MPIA).

It’s a temporary arrangement but nevertheless demonstrates that exercising agency can result in practical solutions.

Ultimately, we need high-level political buy-in to reshape the WTO including the dispute settlement system.

We need to lift WTO reform out of the trenches of Geneva negotiations and drive it with senior level political support.

On the subject of leadership, I was delighted that WTO Director-General Dr. Ngozi Okonjo-Iweala was reappointed to the role last week.  She is an impressive leader who will continue to have Australia’s unwavering support.

Make no mistake, the economies of Southeast Asia have the agency to shape the direction of global trading architecture.

We can make a big difference in this effort.

If we cannot address concerns on key areas like dispute settlement and national security, then we risk the system being abandoned.

Countries in our region can play a role in advocating for reshaping, as a better outcome than abandonment.

Updating the rulebook

Secondly, we need to advance our rulemaking efforts.

Trade rules support fair competition by creating a level playing field for all – large and small alike.

Rules underwrite national security, including economic security.

They offer stability and certainty for businesses.

However, with 166 WTO members, it’s a challenge to advance WTO trade negotiations on pressing trade issues in a timely way.

Plurilateral agreements have proven to be an effective approach to swiftly establish rules with an initial critical mass of members.

The recent Agreement on Electronic Commerce shows the WTO is capable of developing new and modern trade rules, including to make global digital trade faster, cheaper and more secure.

Together, we have generated four major global agreements at the WTO in the past two years.

These are on fisheries subsidies, where we have a full multilateral agreement, and on services domestic regulation, investment facilitation and ecommerce, which each have between 70 and 126 members. 

Singapore and Australia have worked closely on this agenda over the past two years, coordinating closely with Pacific partners like Fiji.

We should celebrate these successes and bring these new agreements into the WTO rulebook.

We should also drive rulemaking in the regional context, widening and deepening platforms like RCEP and CPTPP.

Southeast Asia as a bloc is projected to become the world's fourth-largest economy by 2040, after the United States, China and India.

Regional economic integration – the development of transparent and consensual rules for the region – has been something we’ve been supporting for decades.

All of which is to say – this part of the world matters as we reshape the rules-based trading system.

Southeast Asia is not to be underestimated.

Obey the road rules

And the third way we can exercise agency on trade is by complying with trade rules.

The resurgence of industrial policy on the global stage is being driven in part by the need to reach net zero.

That’s ok – Governments around the world need to play a leading role in promoting an orderly and positive economic transformation to renewable energy.

But it is also a response to the challenge thrown up by heightened geostrategic competition.

There is rising concern around high-tech advantages and imbalances, data security and civil-military fusion.

These challenges have increased uncertainty for business and put supply chains under pressure.

Concerns around the reliability and security of critical supply chains are legitimate.

Countries around the world are looking to enhance their economic resilience and to minimise security vulnerabilities.

For example, critical minerals are vulnerable to supply chain disruption, and with increasing geostrategic competition, managing supply chain risks needs to be a priority for governments seeking to build their economic resilience and bolster their national security.

That is why Australia is working with partners to diversify and strengthen supply chains, by creating more opportunities and markets for these strategic commodities.

The rules have to provide some flexibility to allow governments to regulate for legitimate public policy purposes and introduce measures that deal with genuine national vulnerabilities.

That includes addressing the challenges posed by critical and emerging technologies.

If we don’t, as a global community, accommodate the need for greater flexibility to take account of security vulnerabilities as nations perceive them, of course the system will struggle.

So there’s an important balance to be struck.

We see an uptick in nations considering and developing policies to respond to these challenges.

Our own ‘Future Made in Australia’ agenda is a case in point.

This agenda responds to twin priorities of building our own economic resilience and giving momentum to the transition to net zero.

Importantly, when designing policy initiatives, we seek to do so within the guardrails of our trade treaty obligations.

Prime Minister Albanese has said that as we invest in our industrial base, manufacturing capability and our economic sovereignty…

… we are not withdrawing from global trade or walking away from world markets or international rules.

We will make sure our measures are targeted, and do not lead to negative international spillover effects.

Conclusion

Colleagues, the environment for global trade is changing fast and as a result there is increased uncertainty for our businesses.

More than ever, global trade rules matter.

It’s therefore incumbent on all in the region to exercise agency to level the playing field to allow our businesses to compete fairly in global markets.

Remember, we are all economically stronger when trade flows freely and fairly.

Thank you.