Defending the rules based trading system: the role of business

Trans-Tasman Business Circle

Speech

Speaker: Secretary of the Department of Foreign Affairs and Trade, Frances Adamson

Canberra

18 September 2018

Thank you Allen[Koehn, Associate VP and GM, Public Sector, Infosys], it is my great pleasure to be here.

I acknowledge the traditional custodians of the land on which we meet — the Ngunnawal people — and pay my respects to elders past and present.

The Trans-Tasman Business Circle, extending since 2015 to Singapore, helps bring the economic potential of our countries to life.

The Circle’s involvement in organising the 2018 Australia‑New Zealand Leadership Forum, held in Sydney in March, is a case in point.

We heard Australian and New Zealand prime ministers emphasise the importance of resisting protectionism and the benefits of the ‘Single Economic Market’.

Government and business together in the Forum’s sectoral working groups are identifying practical ways, such as electronic invoicing, to make trade across the Tasman more efficient.

And the Australian and New Zealand productivity commissions will shortly undertake a joint study on promoting opportunities for small to medium enterprises in digital trade.

Business helps government make the Single Economic Market better for business. We welcome your ideas. And we would like — indeed we need — more of them.

Close personal relations define the partnerships between Australia, New Zealand and Singapore.

Personal links become more important, not less, when there are wider differences to bridge, and many countries with interests at stake.

This is hardly an original idea, but it is an important one at this time, as the United States changes tack in international affairs, and international institutions take the strain.

We may disagree with the approach of the current administration, but our response is to step up our engagement with them — we are certainly not pulling back.

On several fronts, the US is unsettling the international trading system that has underpinned global economic growth for 70 years.

Perhaps most concerning for Australia, the United States has withdrawn some of its support for the World Trade Organization, while raising unilateral tariffs and quotas against some of its trading partners.

Whether or not it is true, as President Trump has said, that it is easy for the United States to win trade wars, smaller open economies have much to lose if trade barriers rise around the world.

Credible economic modelling suggests Australia would be significantly worse off in the event of a regional or global trade war, with the extent of the damage depending on the extent and duration of higher trade barriers.

The Australian Government has encouraged the United States to pursue their trade grievances through the WTO, and in ways that strengthen the liberal character of the trading system.

The US position on trade is part of a wider pattern — withdrawal from the multilateral agreement to monitor Iran’s nuclear program; vacating a seat on the Human Rights Council; signalling withdrawal from the Paris Climate Agreement.

None of this changes the fact that the United States and Australia are close partners.

We share values and pursue common interests energetically and in line with shared long-term strategic interests.

Yet it is still the case that Australia, like New Zealand and Singapore, has distinct national interests in the health of international institutions.

As my New Zealand counterpart, Secretary of New Zealand’s Ministry of Foreign Affairs and Trade, Brook Barrington, has said, the rules‑based order matters because it gives a voice to all countries and is very important for smaller countries.

We must resist the idea that recent US policy is an example for us to follow.

Instead, we must renew and re-energise our engagement in multilateral diplomacy.

Multilateralism in action: APEC, 1999

Let me give you an example of why multilateral diplomacy matters, through the eyes of the Chair of the Auckland chapter of the Trans-Tasman Business Circle, Don McKinnon.

It’s Thursday September the 9th, 1999, and Mr McKinnon is New Zealand’s Foreign Minister.

The hottest issue in world politics has landed in his lap.

Mr McKinnon is chairing the APEC Foreign Minister’s Meeting in Auckland as violence spirals out of control in East Timor.

The foreign ministers of Singapore, Thailand and the Philippines are present.

Senior officials are attending from Indonesia and the rest of ASEAN, along with China.

That evening, journalist Graeme Dobell tells Mark Colvin on ABC radio, “for the first time at an APEC meeting a regional security issue was on the table and all of Asia was ready to talk”.1

The reporter goes on: “Mr McKinnon says that as chairman he'd be able to convey a strong message of concern to Jakarta and of support to the UN, but it's up to the UN to carry the issue”.

Over the following three days, APEC leaders gather in Auckland.2

On Sunday the 12th, Indonesia’s Co-ordinating Minister for Economics and Finance, Ginandjar Kartasasmita, talks to John Howard, and separately to Bill Clinton, and to his South East Asian colleagues.

That evening, Indonesia’s President Habibie informs the UN Secretary General, Kofi Annan, that he would invite a peacekeeping force of friendly nations to East Timor.

Thus President Habibie set in motion a successful and ground-breaking international mission — it was the first time a group of ASEAN members had demonstrated a readiness to play a significant political and military role in regional conflict management.

From this time of intense pressure, controversy and tragedy, President Habibie will be remembered for his part in ensuring that international collaboration and dispute settlement prevailed — a fine legacy to add to his achievement that year of Indonesia’s first democratic national elections since 1955.

Amongst the various strands that led to this outcome was the fact that senior people from all over the region booked their flights to attend to the ordinary business of multilateral diplomacy — in this case, economic cooperation.

As it turned out, they had a hand in writing our region’s history.

And they also had a hand in identifying a growing need for leaders to gather to discuss regional, political and security issues — in what has become the East Asia Summit.

Multilateral settings, while delivering on their immediate objectives, also help shape an international environment that suits countries like Australia, the world’s 13th largest economy, New Zealand, the 52nd and Singapore, 37th.

The great powers will sometimes act unilaterally — that is in the nature of things.

Yet our nations can and do make a difference.

We can shape our international environment through persuasion and collaboration, and multilateral diplomacy provides important opportunities for this.

In certain circumstances we can lead.

We conceived and helped build APEC.

With Japan, we got the Trans Pacific Partnership across the line.

Australia was a founding member of the UN, and we are an effective contributor to international collaboration, our chairing of the Australia Group to prevent the proliferation of chemical and biological weapons being one example.

So it’s a concern when countries not only begin to question the value of multilateralism, but actively resist and oppose it.

This is the context within which we must do all we can to sustain the multilateral trading system:

Not only to keep trade flowing and ensure disputes are settled according to trade law, but as a component in the order that flows from agreed rules, rather than power, and which sustains peace and prosperity in the broad.

My message to you today is that across the Tasman, it is very much in our national interests for governments and business to work together on three related fronts:

  • to reinvest in international institutions and multilateral diplomacy
  • to defend and advance an inclusive, rules-based trading system
  • and to continue the fight against protectionism at home.

The benefits of a liberal and inclusive international trading system

Let’s turn, first though, to the more immediate interests that business has in the international trading system.

The Australian Government’s comprehensive agenda of trade negotiations is locking in access for businesses to international markets.

In the WTO, we are writing rules on e-commerce, with as many willing partners as we can, including the US and the EU.

Our free trade agreements rely on, build on, and fill gaps in WTO rules, and take our partners further along the path of liberalisation.

We saw with our three North Asian FTAs, with China, Japan and Korea, that business can boom when tariffs are lowered.

The Trans-Pacific Partnership, or “TPP”, will strengthen access for Australian businesses into markets comprising almost half a billion people, and set a new standard in pro-growth trade rules.

For Australia, the TPP delivers, in effect, two new free trade agreements, with Canada and Mexico.

The potential is evident in the story of the Juguette range of Australian wines.

In 2010, an Australian and a Mexican walked into the bar at the University of Adelaide where they were studying winemaking.

Four years later, Mr Mauricio Ruiz Cantu returned to Mexico with a small shipment of Barossa Shiraz he had made, and named “Juguette”, the Spanish word for toy.

The response was encouraging.

Mr Ruiz and his Australian friend Mr Ben Caldwell have since generated about $1 million in revenue, 80 per cent of it sold in Mexico, through 100 outlets.

Mr Ruiz and Mr Caldwell have forged a path for mid-range boutique Australian wines in a major market.

The TPP means it will be easier to capitalise on these kinds of openings, with Mexican tariffs on high quality wine dropping from 20 per cent to zero within three years of the agreement entering into force.

Trade law — these rules, agreements and arrangements to settle disputes — is the backbone of the international trading system.

Yet the trading system is also a community of governments and businesses that get together to work out better ways to trade, invest, grow economies and generate jobs.

APEC, which Papua New Guinea is hosting this year, is important in this regard.

Former Prime Minister John Howard described the value-add of APEC well.

As APEC host in 2007 he said “APEC works best when it sets a broad shared objective without seeking to be overly prescriptive about how member economies should pursue it”.

It’s a flexibility that renders APEC more useful, at times, than other international institutions — as a platform on which we find it easier to reach common ground, and which engages the major players in the region in a constructive way.

And APEC is a platform in which business, including through the APEC Business Advisory Council, has a valuable role to play.

The role of business

Ladies and gentlemen, the Government is committed to keeping the Australian economy strong, keeping Australians safe, and keeping Australians together.

To achieve this objective we must act internationally in a strategic and coordinated way.

It’s important that business and government understand one another’s perspective on the economic and security concerns of our day.

As part of the 2018 Budget statement on Foreign Affairs, Trade, Tourism and Investment, the Government announced an initiative for a strategic dialogue with business on foreign policy and security.

The inaugural dialogue meeting will take place in November — led by DFAT in close partnership with the Business Council of Australia. Jennifer Westacott and I will co-chair. More will follow as we partner with range of business groups.

We are interested in your ideas about how we can best bring together the insights of business and government to the prosecution of Australia’s interests internationally.

This includes better understanding the opportunities and constraints we face in shaping our international environment.

Multilateral institutions deserve our close attention both for their own stated agendas, the way they serve their members and because of the broader function they perform simply by bringing people together in constructive ways.

Business has an important part to play in setting the general tone of public debate concerning international affairs.

It is easy to play the cynic and scoff at international meetings where little seems to get done.

It is more constructive to identify how each of our organisations can contribute to international negotiations and processes, to make them as productive as possible, and so keep the life blood of the international system oxygenated and flowing.

Business can help by bringing to international forums and negotiations your objectives and your focus on outcomes.

APEC remains in good repute in part because business, through the APEC Business Advisory Council, has helped to deliver tangible outcomes: the business passports, the effective processes encouraging domestic reform.

Business must also provide the momentum, the constituency for further trade liberalisation. When diplomats negotiate, we bring your interests to the table.

Meanwhile, as protectionist sentiment rises around the world, government and business need to be partners in making the case for trade and investment to the public.

Business has the practical experience as participants in trade and investment, and can provide persuasive examples of how trade delivers real benefits across the Australian community.

We in government need your support.

The stakes are high, and small steps, taken in the right spirit, can make a big difference.

1 PM Archive, http://www.abc.net.au/pm/stories/s50683.htm, downloaded 30 August 2018

2 Peter Edwards and David Goldsworthy, eds, Facing North: A Century of Australian Engagement with Asia, Vol. 2: 1970s to 2000, DFAT with Melbourne University Press, 2003, pp. 249-252.

Last Updated: 19 September 2018