Devonport, in North Western Tasmania, is a long way from the tumult that seems to characterise today’s global trade policy debates.
At this time of year, the chill in the air heralds the onset of the winter planting season in North Western Tasmania.
In Devonport, and many other regions of Australia, there is an instinctive understanding that Australia must trade to survive and prosper.
Our market is too small, and our human capital, resource endowment, and our ambitions are too large to be limited by our borders.
The prosperity of our regions depends on trade, rather than being threatened by it, as is the case in large swathes of Europe and the United States.
It should come as no surprise to anyone, you don’t get rich by selling to yourself.
And you don’t drive economic prosperity selling to yourself.
The Ertler family, founders of Premium Fresh Tasmania, understand this better than most.
Premium Fresh Tasmania has grown from a small family company to a large vegetable growing and processing operation.
I visited their farm almost two years ago today with Brett Whiteley, our then hard working Member, and now hard working candidate, for the seat of Braddon, and was impressed by their story.
Vegetables grown in northern Tasmania are exported by Premium Fresh to France, the UK, Belgium, the United Arab Emirates, Saudi Arabia, Kuwait, Japan, South Korea, Taiwan, Malaysia, Indonesia and Fiji.
Where their vegetables end up is impressive, but it doesn’t matter much to the local hairdressers, mechanics or cafe managers of Devonport.
What matters to them are the knock-on effects of Premium Fresh’s success.
Employing 60 people - up to 240 in the peak season - Premium Fresh boosts the local economy and drives local employment.
It is a story repeated in every state and territory across the country. This is the real impact of free trade and liberalised investment.
Jobs, growth, and better living standards made possible by the opportunity to sell to the world.
This golden thread has bound together policy settings from the floating currency exchange through to consumer product standards; from the western tip of Europe, across the Indian and Pacific Oceans, to New York.
The seeds of this policy orthodoxy germinated in the tumult of the decades from 1910 to the mid-1940s.
The first World War, followed by hard-learned lessons from misguided pro-nationalist policy approaches during and following the Great Depression, magnified by World War Two were fertile soil.
This period gave rise to a consensus immediately thereafter to cement a commitment to the flow of goods between countries for the mutual benefit of all.
It was the Menzies Government that perhaps best exemplifies this policy approach when it decided to pursue a Commerce Agreement with Japan in 1957, just over a decade post Japan bombing the Australian mainland in Darwin.
Courageous and pragmatic trade policy indeed.
Especially when you consider it was opposed by the then Opposition.
The argument promulgated at the time, echoes of which continue to this day in one form or another, was that the Australian people had a choice.
They could choose to either open to the world, subject to the pressures of competition and potentially finding new markets; or they could turn away from global engagement - adopt a policy of shunning so-called unfair international competition.
In the decades that followed, time and again Australians were told they must choose between a vibrant local industry, shielded from global forces, or subject ourselves to the self-harm of opening to the world.
This debate surrounding Australia’s trade policy raged for many decades. The commitment to global engagement waxed and waned between protectionists and free traders.
By the late 1970s and early 1980s there was a clearer realisation that protectionism was the wrong choice.
Australia’s stewardship leading to the formation of the Cairns group is, in retrospect, a clear line in the sand. A national maturation where the weight of policy direction and public opinion firmed behind free trade and liberalised investment.
The floating of the dollar, the slashing of tariffs, labour market reform, National Competition policy, the switch from direct to indirect taxation — the big reforms of the 1980s, 1990s and 2000s set the scene for a sustained rise in the productivity of Australian businesses.
Years of economic reform exposed us to more and more competition.
Ultimately, the removal of protectionism has made the Australian economy more flexible, more resilient and much better at creating jobs.
A more open economy helped us manage the Asian Financial Crisis in the late 1990s and the Global Financial Crisis a decade later.
So by 2015, even after the waning of the mining investment boom, we had lifted our GDP per capita up into the top ten, from the doldrums of the 1980s, when we were 19th in the world.
Today, one in five Australian workers have international trade to thank for their job.
Australians working in export industries receive more than ten per cent more in average wages than those working in the non-traded sector. There is no mystery here. We know why trade boosts incomes and protection dampens spending. By putting a tariff on imports, protectionists force domestic consumers to pay more for the same product.
Tariffs and other protectionist measures impose higher costs on those least able to bear them.
Free trade, on the other hand, makes Australians’ money go further – more than eight thousand dollars further for the average Australian family, according to the Centre for International Economics.
Australian consumers have been free trade winners. General goods are cheaper.
It is not only consumers who benefit from reduced costs, however, with Australian business also beneficiaries. Lower businesses input costs allow them to grow and create more jobs.
Today, Australian businesses enjoy inputs with among the lowest tariffs anywhere in the world. A better price for farm equipment from the United States, for example, can boost an Australian farmer’s productivity for years to come.
We are also more likely to have the capital we need to grow thanks to our open investment settings, which allow overseas businesses to supplement Australian capital.
The other side to free trade of course is that our exporters can access overseas markets.
The Coalition has made sure that Australian businesses have among the best access into China, the United States, Japan, rising South East Asia, Korea, and increasingly Latin America.
As a result, receipts from not only our resources, but also education, tourism, agribusiness, financial services and the like continue to rise year on year, far outpacing domestic sources of growth.
Free trade works because it means Australian businesspeople make their decisions in the real world.
In a protected economy, businesses and workers alike make decisions with one eye on the Government, chasing special deals.
This matters, because our future prosperity will depend to a large extent on how responsive we are to changes happening around the world.
Both in Australia and abroad we have seen political forces attempt to exploit the concern of those who are unconvinced of the benefits of free trade.
The refrain against is straightforward and plain - ‘only the rich are getting richer’.
The sceptics argue the middle and working classes see their manufacturing jobs vanish as plants are mothballed. Claims are made there are no dividends for the lower socio-economic groups, just employment insecurity and no real wages growth.
Unions quickly point their finger at ‘hordes’ of foreign workers ‘stealing’ locals’ jobs, our companies, buying our land and feasting on a hollowed out Australian economy while the global elites drone about free trade and prosperity.
“So out of touch” is the poisoned charge.
However, this is not the reality. Far from being mutually exclusive, free trade and a higher standard of living, go hand in hand.
Ladies and gentlemen, there is no doubt the dynamics of the international trading system are more complex today than in recent decades.
That is a function of many things.
We cannot dispute there has been growth in protectionism and economic nationalism since the Global Financial Crisis. It is an empirical fact.
According to the research group, Global Trade Alert, G20 countries have implemented more than 7,400 protectionist measures since November 2008.
The worst global downturn since the Depression shook the confidence of many countries and their peoples.
The rapidity of technological change is also unsettling communities in every nation. So much so, anxiety about the impacts of automation are often conflated with concern about globalisation.
As technology advances rapidly and automation encroaches in so many aspects of life, the fear of many is that their livelihoods face existential risk.
We need look no further than the very live debate today around vehicle automation and the progressive roll-out of electric engines. The potential impact on those employed as drivers and mechanics is apparent.
But this threat isn’t a result of free trade. To believe trade settings are capable of holding back the tide of automation is to pine for a Cuban solution to the advance of automobiles.
The real discussion to be had is how those employed in industries most likely to succumb to the relentless advance of technology will be retrained into new fields.
That is the choice. A genuine up-front discussion of how the world is changing and why we must remain competitive, versus the balm of false promises to protect and prop-up sectors until the inevitable.
No clearer recent example exists than the stark difference in approach between the Coalition and Labor surrounding automobile manufacturing.
Labor wanted to cling to the past. We gave people the tools to tackle the future, with a strong safety net.
The identical discussion is taking place now in other theatres.
There are other challenges that have come to the fore.
Unlike the Cold War period, our two major powers are operating in the same economic geography.
In 1960, two-way trade accounted for just nine per cent of United States’ GDP and four per cent of the then Soviet Union.
The two major powers did not interact economically.
Today trade accounts for 38 per cent of China’s GDP, and 27 per cent of the United States national output.
To use a technical economic term, they bump up against each other more often.
The global economic space is more congested, more contested but also more interdependent. And that’s a good thing.
The people of the United States are better off because their economy is more integrated with the global economy. It is not by accident the United States is the world’s largest economy, largest importer and exporter of goods and services, and largest destination for foreign investment.
Few countries have benefited more from post war trade liberalisation than the US.
The same is true for China.
In 1980, China’s trade with the outside world amounted to less than $40 billion; by 2015, it had increased one hundredfold, to $4 trillion.
During the first decade after entry into the WTO, China’s GDP nearly tripled in real terms, while exports quintupled.
In sum, these three phenomena – the post GFC hangover, anxiety about technological change and great power economic competition – have shaken confidence in the system of rules that have guided international trade in the post war system.
This is not the case in just one country but in many.
This is no easy challenge to overcome.
The stakes could hardly be higher.
But what are the alternatives? I hear calls for reform of free trade, for the rules of trade to change. The world has been there before. The alternative to a system based on rules is one based on might and power.
Edward Alden, senior fellow at the Council on Foreign Relations warned recently that if the global rules-based trading system is allowed to wither,
“the world will revert to the historical norm in which the strong do what they can and the weak suffer what they must.”
What is Australia doing to turn back this tide?
We are pursuing the most ambitious trade agenda in our nation’s history.
While others are building barriers, we are knocking them down – creating new opportunities for Australian businesses so they can sell their goods and services to the world.
Since 2013 the Coalition Government has concluded or upgraded seven trade agreements. The most recent being the TPP-11.
The TPP-11 will eliminate more than 98 per cent of tariffs in a trade zone with a combined GDP of $13.7 trillion.
The US withdrawal from the TPP on 27 January 2017 presented Australia and its regional partners with a major challenge.
It was a test of resolve and a test of judgment.
It was also a test of the confidence we have in ourselves and in our partners.
One option was retreat.
That was the favoured option of Bill Shorten and the Labor Opposition.
Labor said the Prime Minister, was ‘deluded’ for continuing to pursue the TPP.
Mr Shorten’s understanding of the Asia Pacific region was so acute, so sharp and so incisive that he decided the pursuit of a TPP without the US was a lost cause. Giving up on the TPP would save money, he said.
There is hardly a better example of the risk to jobs and living standards posed by the timid judgment of the Leader of the Opposition. If Mr Shorten had got his way, if Labor had been in Government at this moment, there would have been no TPP-11.
If Labor had their way, there would have been no new and historic access to the Canadian market for our grains, refined sugar, beef and wine exporters.
No new access to the Mexican market for our pork, wheat, sugar, barley and horticulture producers and education services providers.
There would have been no improved access to the Japanese market for our beef, wheat, barley and dairy exporters.
No improved access to the Vietnamese and Malaysian markets.
A major lost opportunity. No new export jobs, no new growth in regional Australia, no lift in living standards.
The global trading system is stronger today because we pushed on, in close co-operation with Japan and others, on the TPP-11.
Let’s just put this in context. It is the most significant advance in global trade architecture in the 21st century. The biggest trade deal since the birth of the WTO.
We have lit a beacon of liberalisation for nations who want to work within a rule- based framework, complementary to the global architecture provided by the WTO.
We want the TPP to grow in membership. It’s not an exclusive, inward-looking bloc. It’s confident, engaged and growth-oriented.
We welcome the interest in TPP-11 shown already by nations both inside and outside Asia Pacific.
There is a strong constituency in the US for it to ultimately re-join the agreement, a prospect we support when the US is ready to do so.
Australia’s TPP-11 achievement is a feature of an ambitious and confident trade policy.
One that did not falter at the first hurdle. An audacious but pragmatic approach. That, in my view, has been the hallmark of the Coalition trade and investment policy.
Since 2013, the Abbott and Turnbull Governments have had a very clear plan to restore the competitive edge of the Australian economy.
Lower the regulatory burden on Australia’s export and import competing sectors.
Narrow a widening gap in business tax rates with our key trading partners.
And build a competitive edge for Australian exporters through the most ambitious trade agenda in Australia’s economic history.
In less than five years, the Coalition has concluded trade agreements which provide Australian business with duty-free and/or preferential access to billions of new consumers in the fastest growing economies of the world.
This trade agenda has translated into a $67 billion boost to export earnings in the last five years.
In the first two years of our trade deal with China, our exports grew by 33.7 per cent.
In the five years to the end of 2017, trade contributed fully a third of Australia’s economic growth.
Over that period, a more competitive Australian economy has delivered more than a million new jobs.
With one in five Australian jobs trade-related, that is a jobs dividend of about 200,000 extra jobs.
Think about what that means in terms of the dignity, the joy and the well-being of Australian families securing the high-skill, high-wage jobs supported by Australian exports. It’s a deeply virtuous thing, on a moral level.
And more openness delivers the material benefits to consumers and businesses that I outlined earlier.
It’s an international economic agenda that not so long ago would have been a bipartisan endeavour.
In his 2009 book, The March of Patriots, Paul Kelly noted that:
“beyond their compulsion to win elections, [Paul] Keating and [John] Howard had a patriotic mission: to reshape Australia’s political tradition for the transformed world they confronted.”
Kelly said that their common mission was the ‘renovation of Australia for a more exacting chapter of global history.”
Ladies and gentlemen, the chapter of history we now face is no less exacting.
But under Bill Shorten, Labor has renounced the common mission of a more competitive, enterprising Australia.
Labor is indifferent to the need to be internationally responsive and instead, hostile to entrepreneurship.
Labor is opposed to a competitive tax rate.
And Labor is either hostile or ambivalent to market-opening export agreements.
Mr Shorten’s only enthusiasm is for a higher tax burden on business and savers. A $200 billion extra burden.
It is an approach that is redolent of neo-isolationism.
One that is frightened or cowed by international competition.
One that lacks confidence in our ability to succeed.
One that is cynically complacent about the impact on jobs and living standards of a high tax, low ambition international economic policy agenda.
Labor is walking away from the central and once bipartisan objective of a competitive, internationalised Australian economy.
It is the subject of an existential battle within Labor, and the wrong people are winning.
The bottom line is that Shorten Labor is nothing like Hawke Labor or Keating Labor.
Ladies and Gentlemen, despite the achievements of the last five years, there is more to be done.
I have just added the European Union – currently 28 economies with 500 million consumers – to our trade negotiating dance card.
This underlines the global extent of our ambitions and the value in diversification. I look forward to formally launching the negotiations with my European colleague, Cecilia Malmström in coming weeks.
And when the United Kingdom completes its exit from the EU we will be ready to commence negotiations with them.
We are working closely with Indonesia on a Comprehensive Economic Partnership Agreement (IA-CEPA) and have made valuable progress in recent months. I would even say I can see the finish line.
The benefits of a strong deal with one of our closest neighbours – and South East Asia’s biggest economy can hardly be exaggerated.
I am also hopeful of concluding a free trade agreement with Hong Kong later this year. Although Hong Kong’s product markets are already open, a deal with one of Asia’s largest commercial and financial markets makes a lot of sense.
We are active across the globe, and have commenced negotiations with the Pacific Alliance countries including Mexico, Peru, Chile and Colombia.
It’s a policy that combines ambition and, importantly, diversity. There is, of course, wisdom in diversification and Latin America represents real untapped potential for Australia.
That strategy lay behind the decision to conclude the Peru-Australia free trade agreement, building on the FTA with Chile, as well as the current FTA negotiations with the Pacific Alliance countries.
We are also hopeful that the Regional Comprehensive Economic Partnership can generate new momentum when I meet my ministerial colleagues in Tokyo next month. Those negotiations bring together the 10 ASEAN economies as well as China, India, Korea, Japan and New Zealand.
While the bilateral free trade negotiations with India have been more difficult, I am determined to continue pursuing all opportunities with India.
I recently commissioned the former DFAT secretary, Peter Varghese, to compose a comprehensive new report, an economic engagement strategy, for India. This will be released in the near future and will focus on ways to strengthen the economic relationship.
I stress that our focus on regional and bilateral deals does not mean there is no role for the World Trade Organization. In fact, the World Trade Organization is more important than ever.
The WTO can move slowly at times. The former head of the WTO Mike Moore once likened the decision-making progress amongst the WTO membership to a motor vehicle, “we have 144 handbrakes and one accelerator.”
But it is an indispensable part of the global rules based system which we must continue to nurture and strengthen.
As a consensus rules-based system with an effective dispute settlement mechanism, the WTO has many strengths but some key vulnerabilities.
To operate best, all three pillars of the WTO need to function. The negotiating pillar to set and update rules. The WTO regular bodies to implement those rules effectively. And the dispute settlement mechanism to resolve disputes.
With any one of those pillars misfiring the system is weakened.
The Government believes a strong multilateral trading system is essential for economic stability and global prosperity.
A key element to ensuring the resilience of the system is to make sure it stays relevant, both in the sense that it continues to create rules that are timely and relevant to business, and that it encourages inclusive globalisation and growth.
That is why in December I led an effort among 70 WTO members to launch a digital trade initiative. This group of countries represents more than 75 per cent of global trade.
The group – along with a dozen more observer countries – has met three times this year, with an ongoing work plan and a number of concrete proposals on the table.
I just returned from hosting a WTO ministerial meeting in Paris and made the case for getting to negotiations on digital trade as soon as possible.
I am delighted that Australia enjoyed the support of countries such as the United States, Japan, Canada, Singapore, Norway, and the European Union in pursuit of this ambition.
Another concrete example of pragmatic trade policy delivering.
It is a critical time for the WTO to demonstrate its value-add, especially when we need to keep pace with rapid technological change.
That’s especially the case when the movement of data is already surpassing traditional physical trade as the connective tissue in the global economy.
According to Cisco Systems, the amount of cross-border bandwidth used grew 90-fold from 2005 to 2016, and it will grow an additional 13-fold by 2023.
The last thing we want to see is the emergence of new barriers to international commerce, especially our services providers.
Ladies and gentlemen, our trade and investment policy has delivered jobs, growth and better living standards.
I believe this is what the Australian people want.
A government that will match the skills and innovation of its people with confident and ambitious policies.
We must continue to stare down those who claim Australians must choose between a protected domestic economy or the relentless buffering of opening to the world.
We must reject those who claim it is a choice between our trade interests and our security interests.
Instead, it is our vision to reap the dividend of being among the richest, the most creative, the most agile people by delivering policy that reinforces our competitive strengths through better market access, a more competitive tax environment, and an innovative culture that will back Australians to take on the world.
Government must get the big calls right.
The most ambitious and pragmatic trade agenda that benefits all Australians through a stronger economy and better job prospects remains my objective, and the Turnbull Government will continue delivering on this vision.
- Trade Minister's Office: (02) 6277 7420
- DFAT Media Liaison: (02) 6261 1555