There is little doubt that the conduct of Australian trade policy will become more complex and more difficult in the foreseeable future.
Two trends emerge. First, with the deterioration of the global geopolitical situation, trade policy and foreign and strategic policy increasingly overlap. Second, the Covid-19 pandemic has seen a growing tendency for governments to opt for measures that favor domestic production in the name of resilience and sovereignty.
There are risks in viewing trade rules and instruments entirely through the prism of foreign policy, but given the depth of the US-China rivalry and Russia’s decision to militarize its hostility to the West, the Foreign trade and national security policy will become more rather than less interconnected in the future.
Two recent manifestations of this trend occurred this month. A number of World Trade Organization (WTO) member countries, including Australia, issued a joint statement condemning the Russian invasion of Ukraine. And the G7 released a statement announcing action by a coalition of WTO members to revoke Russia’s most favored nation (MFN) treatment.
As a country with broad global trading interests, Australia depends on the preservation and expansion of a positive global trading environment.
The direction of travel is clear – trade measures are now part of the arsenal that governments could openly use to advance their foreign policy goals.
Covid-induced economic nationalism presents itself as a more familiar challenge. Measures that restrict trade – such as relocation/reshoring incentives and local content requirements – are now seen by many as justifiable, given the disruption and competition for vaccines and personal protective equipment. during the pandemic. Recent calls by several EU states to restrict imports of agri-food products to ensure food security are of concern.
Trade has been at the heart of Australia‘s economic growth. Today, as a country with broad global trading interests, Australia depends on the preservation and expansion of a positive global trading environment.
Our future trade policy settings must balance the objective of boosting competitiveness and productivity gains through trade in a world where support for open markets is waning. At the same time, Australia must also preserve political space for legitimate national security measures without setting a precedent for protectionism or generating major trade and investment tensions.
First, the negotiation of free trade agreements (FTAs) and trade facilitation agreements must remain a priority to promote export diversification. Full FTAs with India and the EU will be difficult to achieve in the short term; the government’s efforts to quickly conclude a progress agreement with India is a pragmatic path.
It would be useful to consider bilateral trade facilitation agreements in sectors that are critical to our economic resilience, such as critical minerals and green economy/manufacturing.
Plurilateral agreements – between coalitions of like-minded WTO members – have both economic value and strategic importance as springboards for the wider system; the ongoing e-commerce negotiations co-chaired by Australia are an example of a plurilateral negotiation with great potential for growth.
Second, Australia should strive to extract more value from its existing FTAs by applying the rules/commitments and pursuing the negotiating agendas built into the agreements, in particular to address non-tariff and other barriers” behind the borders”.
Third, Australia’s trade remedy systems need to be reviewed to ensure that they remain fit for purpose. Anti-dumping, countervailing and safeguard measures are important trade instruments and their deployment must take into account the broader context. Mechanisms of change of government – in which public service entities are created, abolished or restructured – should not be excluded.
Fourth, Australia should continue its efforts to reform the WTO to meet the challenges posed by the Chinese market model and the loss of US confidence in the organization.
Initiatives to promote connectivity and develop regional infrastructure should be intensified with a focus on building concrete results with partners such as the United States, Japan and the European Union.
The WTO is the right forum to craft new rules to address some of the characteristic distortions of the Chinese model, such as industrial subsidies and forced technology transfer, and to identify collective action to tackle illegal economic coercion.
Some have called for the creation of a distinct group of like-minded countries to fight coercion, modeled on defense/military alliances. While the case for greater coordination is clear, Australia must avoid any action that would fragment the WTO system. A preferable model might be a plurilateral arrangement under the auspices of the WTO focused on expanding cooperation beyond the Five Eyes intelligence alliance and the quadrilateral security dialogue.
Finally, Australia should continue its efforts to shape the Indo-Pacific trade architecture. Expanding the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to countries that meet the agreement’s high standards, both in letter and spirit, would be in Australia’s interest. It would be inconceivable for Australia to allow a non-member country to seek to dictate enlargement decisions.
Although there appears to be no prospect of a shift in US policy towards the CPTPP, Australia should continue to develop the CPTPP, the Regional Comprehensive Economic Partnership (RCEP) and the Asia-Pacific Economic Cooperation (APEC) in as building blocks of a regional strategy. economic integration and cooperation. Initiatives to promote connectivity and develop regional infrastructure should be intensified with a focus on building concrete results with partners such as the United States, Japan and the European Union.
It is a large program with a substantial degree of continuity but some changes in focus. Execution will require sustained political investment and some bureaucratic innovation.