The growing economies of South-East Asia provide significant opportunities for Australian businesses, and bilateral trade agreements in the region are a necessary step in moving towards a global free trade environment.
The growing economies of South-East Asia provide significant opportunities for Australian businesses, and bilateral trade agreements in the region are a necessary step in moving towards a global free trade environment, Foreign Minister Alexander Downer told a WA Business News Meet the Ambassadors event last week.
Mr Downer said Australia’s policy of pursuing bilateral trade agreements, while lobbying for global free trade, would deliver net benefits for the country, despite any trade diversionary effects of bilateral arrangements.
“There are costs, but in net terms, I believe we’re better off,” he told the breakfast forum.
But while acknowledging that global free trade may never be achieved, referring to the World Trade Organisation’s stalled Doha round of negotiations, Mr Downer said smaller milestones, such as the elimination of export subsidies, were occurring.
The role of government was to create appropriate environments for business by campaigning for comprehensive trade agreements, he said, although the EU and Japan were continuing to restrict access to their agriculture markets and were keen to preserve heavy government subsidies.
Mr Downer said although it was difficult to conclude FTAs with China and Japan, due to sensitivities in the agriculture sector and Japan’s strong agricultural lobby, Australia was at the threshold of an agreement with Japan and was the only developed country in the process of negotiating an FTA with China.
“Japan is the world’s second largest economy and our largest export market, but China is one of the world’s fastest growing economies and with 1.3 billion people…there are staggering opportunities,” he said.
Mr Downer said Australia’s FTA with the US, which came into effect in 2005, was expected to provide significant benefit in the long-term.
“I believe that, for the rest of my lifetime, the US will not only continue to be the world’s largest economy, but I think without doubt, and very importantly, it’s going to continue to be the world’s most innovative economy,” Mr Downer said.
Drawing an analogy between Australia’s free trade agreement with New Zealand, which was established in 1983, and its free trade agreement with the US, Mr Downer said Australia stood to benefit as the smaller player in the relationship.
While both Australia and New Zealand have benefited from their FTA, the latter has received proportionately more advantages through dealing with an economy six times its size, Mr Downer said.
“The American economy is 15 times the size of the Australian economy and so I think the same argument follows,” he said.
Globalisation and new technology would favour innovative and dynamic economies, Mr Downer said, making a free and liberal link with the US of significant benefit.
He said South-East Asia remained a vitally important trade zone for Australia, with its growing economies and investment opportunities.
He cited Australia’s FTA with Singapore, which had granted important access to financial and education markets, and the country’s FTA with Thailand, which had delivered significant growth in exports.