To Senior Members of Australian Business Community in Singapore
Executive Director – Austrade
10 July 2009, Singapore
• Welcome – thank you for being here and your continued and generous support to Austrade in the business of trade and investment promotion here in Singapore. Also thank you Kirsten (Sayers) for opening your residence once again to the business community.
• With POB in town this seemed like and excellent opportunity to provide a briefing not only on the global economic downturn and trading conditions generally, but a brief overview and update on the ASEAN FTA, its benefits and Austrade’s planned approach to promoting it.
• David Twine Austrade know some of you have heard some or all of these thoughts from me in other contexts here in Singapore or when you may have been with me in other ASEAN cities – so thank you for your patience if you are hearing it again.
Signing of the FTA
• After extensive discussions with the Minister and the negotiating team in the lead-up to finalisation of the agreement, it was a particular pleasure to be with our Trade Minister Crean in Hua Hin when he signed AANZFTA in Thailand for Australia in February this year.
• Given lead-up ‘posturing’ of the various signatories, unclear until almost the last minute as to how many countries would sign (needed 4 in addition to Australia and NZ for the process to move forward – though there was some natural sensitivity over what ramifications might ensue in the event of , say, only Brunei, Laos Cambodia and Myanmar signing!). Pleasingly, all 10 signed and we now have an FTA which links the 10 nations of ASEAN with NZ and Australia in a regional free trade agreement – ASEAN is Australia’s largest trading partner.
Timing is Excellent – ASEAN is already vitally important as a market – now it gets better.
• At any time this would be regarded as a “good agreement” between Australia and these partners, but at this delicate juncture in the global economic and trading environment, its signing now, during GED, is particularly good news and excellent timing.
• ASEAN is already vitally important as a market – now it gets better.
• Our trade with ASEAN has grown by an average of 10% each year over the past decade – this is even more significant – if not surprising – given that until the last few years of the last 10, the economies of ASEAN have still been crawling back out of the Asian crisis. We have only really seen pre-crisis dynamism and vibrancy return to the key markets in the last few years.
• ASEAN as a whole is already Australia’s No. 1 trading partner (2-way basis – A$110 billion – or 21% of total trade) and our 3rd largest export market (a smidge behind China) so this agreement sets the scene to take Australia’s commercial engagement with ASEAN to a profoundly higher level.
• When the ASEAN FTA comes into effect, which is expected to be not later than 1 January 2010, it will give Australian exporters and investors greater access to a market of 600 million consumers, with a combined GDP of A$3.2 trillion.
• To come into force, the ASEAN FTA now requires that it be approved by the Parliaments of Australia, New Zealand and at least 4 of the 10 ASEANS. In Australia, the legislation to implement the ASEAN FTA is currently before the Parliament.
What does it gives us?
• In short, the FTA will i) bind existing low tariffs now and ii) schedule further reductions in the years ahead.
• We expect that in time it will eliminate tariffs on between 90 to 100 per cent of tariff lines, covering 96 per cent of Australian exports to ASEAN.
• These agreements always involve trade-offs by all countries. Accordingly, always some sensitivities for example about the time that some gains (tariff reductions) come into effect (15-20 years in some cases). These need to be looked at in context and are not to be belittled. We have a line in the sand and a baseline to build upon with further negotiation – this is to be applauded
Direct and Indirect Benefits
• All agreements have Direct and Indirect benefits. The mix varies from market to market.
• < eg: talk about SAFTA experience to highlight the point about improved, transparent, consistent predictable, IP-protected trading and investment conditions etc and the outcomes >
• The ASEAN FTA will also give investors more certainty about the safety of their investments from expropriation which is vitally important to Australian companies penetrating regional and global supply chains as well as providing a more risk controlled alternative (investment) to getting behind those tariff barriers that remain higher for some time.
• About 18,500 Australian exporters, or 42 per cent of our total exporter base, trade with ASEAN. This is a higher proportion of exporters than those exporting to the New Zealand (at 17,000) the US (9000) or China and Hong Kong.
• A rough analysis of ASEAN needs/potential demand compared with Australian capability suggests that it is not beyond realms of imagination to see 30,000 Australian companies doing business in and with ASEAN in medium-longer term to take advantage of the increased (and increasing) access. While not a “KPI”, we will work towards increase the breadth and depth of Australian companies across ASEAN.
• I don’t intend to get into the trenches now with details re specific tariffs, but while the benefits are a really mixed bunch, agriculture, services and industrial goods are expected to be the major areas to benefit from the FTA.
Apart from specific advantages and gains, the ASEAN FTA is important in a broader sense:
• At a time of global recession, and with the Doha Round of the WTO still in play, the ASEAN FTA is a major vote of confidence in an open and liberalised global trading system.
• I mentioned before that this is excellent timing for such an agreement to come into effect. In the context of GED, trade is a stimulus to growth. It is a critical means by which the world can lift itself out of the recession. FTAs like AANZFTA are a good way to counter growing protectionist forces and lock-in existing tariff levels.
• It is also a sign of Australia’s commitment to trading with the Asia Pacific region, which is where Australia’s economic future largely lies.
• The FTA will also be a platform for further FTAs between Australia and other regional nations, and will be a catalyst for greater regional integration.
• It is worth recalling that the 10 nations of ASEAN have agreed in principle to the creation of a single economic bloc by 2015 (with regulatory, standards, protocols convergence) – just 6 years away and 5 years ahead of original schedule (which in itself is a further reflection of the strengthening political will and collective maturity of ASEAN). The ASEAN FTA should be understood as contributing to this aim, which is in our national interest.
Austrade’s Strategic Approach to Promoting the ASEAN FTA:
• <“one ASEAN”>
• Similarly, Austrade’s approach to the ASEAN FTA is now to view the ASEAN region as a single economic entity, structured around 10 industry teams.
• Each team focuses on a particular sector of the economy, such as infrastructure, construction, clean energy, information technology, financial services, and food and beverages etc.
• An underlying Austrade mantra is “One Touch ASEAN” or “Touch One, Touch All”. This approach has been to provide exporters with the opportunity of entering a market anywhere in the ASEAN region and getting market intelligence and advice for all to help determine optimum advice and solutions by a holistic perspective of ASEAN.
• Over a three year period Austrade seeks to make more and more Australian businesses and customers across ASEAN aware of the ASEAN FTA and what it now offers in terms of trade and investment. The importance of a promotion and education program cannot be over-estimated; FTAs are highly complicated and not like flicking a switch to implement.
• A detailed list of export and investment opportunities has been developed to help Australian businesses take advantage of the new FTA.
• Between September this year and June 2010, Austrade will also conduct a series of major business promotion activities throughout Australia and the ASEAN region. Some will promote the FTA generically and others will be industry sector specific.
• Austrade is also actively monitoring and reporting what are known as “behind the border” rules, such as non-tariff barriers, which could affect Australian exports and investment. We have a self-described activist / interventionist minister – he will act and depends on Austrade for discerning intel with recommendations on how he can best apply / act on it.
• The ASEAN FTA, the largest of Australia’s six FTAs, is a bold and historic agreement at a time of turmoil in the global economy. I am confident that it will prove to deliver significant value in quantitative and qualitative terms.
• We expect that within three years, Indonesia will have tariff-free treatment of 73 per cent of its tariff lines; Malaysia will have 84 per cent free; and the Philippines will have 80 per cent free.
• I am also confident that it will provide a sound basis / reference point for the future integration of the Asia Pacific region in the years ahead.
• The ASEAN FTA is therefore a welcome development in an uncertain global environment, and I urge you to take advantage of this historic trading and investment opportunity.
• A lot of work has gone into this agreement to get it to this point (by DFAT and Austrade in providing intel, perspectives and recommendations on negotiating positions) but the real work is ahead of us to promote both the Direct and Indirect benefits.
• In short it is a highly significant agreement, but really this is the end of the beginning. The hard work of promoting it and delivering outcomes for Australia is now ahead of us.