1.1.8 Trade development and policy coordination
Australia faces a highly challenging international trading environment. While there were some encouraging signs in 2010-11, a number of significant risks remain.
Global merchandise trade rebounded in 2010 with growth of 22 per cent and international efforts to avoid a back-slide into protectionism have proven largely successful so far. Australian exports increased overall due to ongoing demand for raw materials in developing regional economies.
Despite overall growth, exporters in other sectors faced continuing challenges caused by the high Australian dollar and remaining uncertainty over economic recoveries in the United States and Europe.
In this environment, Australia remained active in multilateral economic institutions, including the G20, the Asia-Pacific Economic Cooperation (APEC) forum and the Organisation for Economic Co-operation and Development (OECD). The department supported the Prime Minister and other ministerial participation in these multilateral forums.
(a) Goods data on a recorded trade basis, services data on a balance of payments basis.
Based on DFAT STARS database and ABS catalogue 5368.0.55.004.
Prime Minister Gillard, at the G20 Leaders’ Summit in Seoul in November 2010.
Photo: Copyright Auspic
The department’s work on the G20 focused on cementing the G20 as the key forum for global economic cooperation, as well as on its trade and development activities. Australia advocated and won support for an ongoing G20 commitment to fight trade protectionism. The joint OECD, WTO, UNCTAD Report on G20 Trade and Investment Measures, which assesses adherence to this commitment, noted that members had largely refrained from implementing trade and investment-restricting policies since the global financial crisis. While this was a significant achievement, more recently there were signs that protectionist pressures
Our embassy in Seoul worked closely with the ROK as host to bring about a fruitful G20 Leaders’ meeting in November 2010, including adoption of the ‘Seoul Development Consensus for Shared Growth’. This development agenda commits G20 members to help developing countries ‘build the capacity to achieve and maintain their maximum economic growth potential’, particularly in the areas of food and income security, financial inclusion, domestic resource mobilisation, infrastructure, trade, human resources development, private investment and job creation, and knowledge sharing.
In March 2011, the Secretary hosted a two-day meeting of Australia’s G20 Ambassadors, and Australia’s senior G20 officials from the Department of Prime Minister and Cabinet and the Treasury. The meeting brought relevant posts together to plan G20 policy and advocacy strategies and highlighted the role of our posts overseas in advancing G20 work. The Prime Minister gave the keynote speech, presenting her vision for Australia’s priorities and role in the G20. Mr Rudd and Dr Emerson and foreign government officials and non-government commentators participated.
Using our network of missions in G20 partner countries, we supported Mr Rudd, Dr Emerson and other ministers in advocating Australia’s interests with senior policy makers. Our diplomatic missions in non-G20 countries undertook extensive G20 outreach, particularly in the Asia-Pacific region, and contributed to Australia being viewed internationally as a key interlocutor on G20-related issues.
The Minister for Trade, Dr Emerson (front row, seventh from left), with delegates to the APEC Ministers Responsible for Trade Meeting in Big Sky, Montana on 19 May 2011. Photo courtesy of the APEC Secretariat
APEC is the premier forum for Australia’s economic engagement with the Asia-Pacific, the world’s fastest growing and most dynamic region. Two-way trade between Australia and APEC economies has risen from $82 billion when APEC was formed in 1989, to $391 billion in 2010. Investment into Australia by APEC economies reached $859 billion in 2010, and outward Australian investment into the APEC region peaked at $662 billion.
As the lead agency for Australia’s participation in APEC, the department coordinated the input of over 20 government agencies and business groups across more than 30 APEC working groups. A critical year for APEC was 2010, when APEC industrialised economies, including Australia, were due to achieve the ‘Bogor Goals’ of free and open trade and investment. A report commissioned by the department and launched by Dr Emerson at the APEC Ministerial Meeting in Yokohama in November, found that Australia sits among the most open and liberalised economies in the Asia-Pacific region (see box on page 94).
We achieved significant progress by lobbying for Australian priorities in APEC, including the further integration of regional economies through improved logistics and transport networks to facilitate the movement of goods and people around the region. In 2010, all APEC economies committed to achieve a 10 per cent improvement in the cost, timeliness and certainty of these regional supply chains by 2015, estimated to lift APEC’s real GDP by $21 billion.
Departmental officials worked with APEC counterparts to gather support and funding for two new Australian initiatives to enhance trade in services. The APEC Accountancy Initiative aims to boost regional trade in accountancy services. The APEC Services Trade Access Requirements Database will increase the transparency of rules affecting regional services exporters. This work will be extended in 2011.
APEC Bogor Goals
In their 1994 Bogor Declaration, APEC leaders agreed to common goals of free and open trade and investment by 2010 for industrialised economies and 2020 for developing economies. The ‘Bogor Goals’ provided a clear focus for the APEC vision of economic cooperation and open regionalism.
Australia has made exceptional progress in liberalising trade and investment. With the average applied tariff rate halving from 7 per cent in 1996 to 3.5 per cent in 2008, Australia’s applied tariffs are now among the lowest in APEC.
Data source: 1996 figures from APEC Secretariat (1999), Open Economies Delivering to People: APEC's decade of Progress;
2008 figures sourced from World Trade Organization (WTO), Tariff Download Facility online database; United Nations
Conference on Trade and Development (UNCTAD), Trade Analysis and Information System (TRAINS) online database; World
simple average data from World Tariff Profiles 2009.
Note: Simple average of all tariffs applied on a 'Most Favoured Nation' (MFN) basis, referring to the tariff rate WTO members
apply to imports from all other members, unless they are eligible for more preferential treatment under another agreement.
But not all economies have done as well as Australia in reducing barriers to trade and investment. More work is needed in the area of agriculture, where average applied tariffs are 3.5 times higher than for non-agricultural products, and in services and investment.
A full report on progress by Australia and the region in achieving the Bogor Goals is available at http://www.dfat.gov.au/publications/trade/APEC-2010-Bogor-Goals.html.
The United States, APEC host for 2011, has made the promotion of the APEC region as one ‘seamless regional economy’, a concept proposed by Australia, the theme for its host year. The department promoted this concept, which recognises that as a result of globalisation, the economic performance of individual APEC economies increasingly depends on the prosperity and economic management of their trading and investment partners. This means economies have a shared interest in each other’s domestic policies. The department has actively and successfully promoted an evolution in APEC’s work towards the related work of addressing ‘behind-the-border’ measures such as regulatory reform. At the Ministers Responsible for Trade meeting in Montana in May 2011, Dr Emerson and other APEC Ministers renewed their commitment to APEC’s core mission to strengthen and deepen regional economic integration and expand trade.
The department supported the government’s efforts to promote structural reform across APEC’s agenda, recognising that it is the key to lifting growth in the region. As a result, structural reform has become a central pillar of APEC’s activities, spearheaded by Australia’s $3 million APEC Structural Reform Initiative, which was announced by the Prime Minister at the 2010 APEC Leaders’ Summit in Yokohama. As a first step under this initiative, the department organised a workshop in May 2011 in Montana, which brought together experts from Australia’s Productivity Commission, the World Bank, OECD and Asian Development Bank to work with policy makers and regulators from developing members on planning, prioritising and implementing reforms to their economies.
In the area of human security, the department worked with several Australian agencies to help businesses and societies in APEC economies cope with major disruptions and natural disasters, such as terrorism, earthquakes and tsunamis. Our efforts led to the strengthening of programs and regional collaboration in counter-terrorism, food and energy security, as well as in disaster and emergency management.
The department supported Dr Emerson’s participation in the OECD Ministerial Council Meeting (MCM) in May 2011 in his advocacy of further trade liberalisation and in working to ensure that OECD ministers maintained the political will to resist protectionism. Dr Emerson called for vigilance against new trade restrictive measures and for bold action to find a path forward for the Doha Round. The department worked in the MCM to achieve adoption of two priority agreements for Australia, the updated OECD Guidelines for Multinational Enterprises, which provides voluntary principles and standards for responsible business conduct; and the Recommendation on Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, which helps countries respect human rights and avoid contributing to conflict through mineral-sourcing activities.
We encouraged Russia to make progress in its accession to the OECD and it formally accepted members’ invitation to join the OECD Working Group on Bribery and the Anti-Bribery Convention, a prerequisite for OECD membership.
The department supported efforts to enhance the OECD’s outreach to non-member countries and actively engaged in the organisation’s expanded work program in response to the Global Financial Crisis. Australia relinquished the role of chair of the OECD’s External Relations Committee in January 2011, but continued to promote strengthened engagement and increased cooperation with the non-member emerging economies of Brazil, China, India, Indonesia and South Africa.
The challenge to improve global food security is a cross-cutting issue that attracts growing international attention and debate in a wide range of forums. The department has worked closely and consistently with other federal agencies to develop and advocate to the world a comprehensive approach to improving food security which comprises:
- emergency assistance and social protection for the most vulnerable
- increased overseas development assistance for agriculture and rural development
- increased investment in agricultural research and development
- appropriate economic and trade policies at the global, regional and national levels, together with good governance.
The department is responsible for outlining Australia’s position on key elements that many other countries and stakeholders overlook: the need to reduce global agricultural and food market distortions, and the importance of open and efficient markets as an essential part of improving food security. There are numerous international forums debating the issue—the G20, OECD, World Bank, the UN General Assembly and several of its key agencies (such as the Food and Agriculture Organization), the WTO, APEC, East Asia Summit, and many others. Within these, Australia consistently argues that global market reform would stimulate increased output by developing country farmers and boost global food flows, and that conclusion of the Doha Round would be a crucial step in the right direction.
The department has also taken the position in FTA negotiations that bilateral food security interests can be optimised by liberalising bilateral agricultural and food trade. In the Trans-Pacific Partnership (TPP) negotiations, for example, the department is seeking outcomes that enhance food security, such as the liberalisation of staple food products and improved disciplines on the use of export restrictions.
Despite the difficulties of the debate, and continuing divergence of international views, the department considers it imperative to continue to advocate this comprehensive approach to improving global food security.
Prime Minister Gillard, and Deputy Prime Minister and Australian Treasurer, Mr Swan, with Australian Heads of Mission to G20 countries in Canberra on 20 March 2011.
The department worked closely with the Export Finance and Insurance Corporation (EFIC), a statutory corporation that provides trade finance and insurance services in support of Australian exporters and overseas investors. EFIC operates in the segment of the market where private sector financiers or insurers lack the capacity or willingness to assist Australian companies.
The department managed, in accordance with the national interest provisions of the Export Finance and Insurance Corporation Act 1991, whole-of-government coordination of National Interest Account transactions to assess the risks and benefits of proposed transactions. The department oversaw EFIC’s reporting under the Commonwealth Authorities and Companies Act 1997. The department managed, in liaison with the Department of Finance and Deregulation, national interest payments and receipts involving the corporation and the Commonwealth. See EFIC’s annual report for more information.
In 2010–11 EFIC signed 101 new trade finance facilities that supported 63 clients. These transactions in 2010–11 had an aggregate value of $593.1 million and supported exports and overseas investments with an aggregate value of $3.5 billion.
The department worked to advance Australia’s interests in disciplines on export credit agencies in the OECD and continued to represent Australia in the Paris Club group of creditor nations, which coordinates the response of official creditors to requests from countries seeking debt relief. In late June 2011, the department took part in the G20 Trade Finance Workshop which focused on the availability of trade finance in Low Income Countries, the potential impacts of the Basel III banking regulation and supervision reforms on availability of trade finance and the environmental dimension of trade finance.
Australia, Indonesia and the Global Fund to Fight AIDS, Tuberculosis and Malaria signed a Debt-to-Health Swap agreement in July 2010. The department worked with AusAID and EFIC on the agreement, which will cancel up to $75 million worth of debt repayments owed by Indonesia in exchange for the Indonesian Government investing $37.5 million in Global Fund programs in Indonesia. The first swap took place in December 2010.
The department contributed to a range of government policy development processes that aim to enhance Australia’s economic performance. These included carbon pricing, taxation, international education and the assessment of foreign investment proposals. These contributions highlighted potential policy impacts on the international competitiveness of exporters.
We also worked closely with the Department of Resources, Energy and Tourism to promote Australia’s interests in the Energy Charter Treaty.
With Kimberley Process members, we worked to bring Zimbabwe’s Marange alluvial diamond mining activities into compliance with Kimberley Process requirements. The department participated in a Kimberley Process Review Mission to Zimbabwe to assess measures by the country to curb smuggling and illicit diamond mining in Marange. We remain concerned that some Zimbabwean rough diamond exports do not comply with Kimberley Process certification standards and are working towards an export model that upholds the integrity of the Kimberley Process.
Global economic growth is forecast to be about 4 per cent in 2011, but this growth remains uneven and financial volatility has increased. The department will work to address the worrying signs that advanced economies’ commitment to resist protectionism is under pressure. The department will maintain its role in multilateral economic institutions to encourage policies that oppose any protectionist trend. We will promote a positive understanding of the benefits of trade and its contribution to economic recovery and development and highlight the risks of protectionism.