SENATOR THE HON SIMON BIRMINGHAM
Minister for Trade, Tourism and Investment
SPEECH
Center for China and Globalization, Beijing
2 August 2019
Australia and China:
Mutual benefits through trade liberalisation and multilateral trade reform
I am delighted to be here, at this think tank for our times, when issues of global governance are front of mind. As participants observed at the 4th Annual China Global Think Tank Forum here in Beijing in May, think tanks can strengthen ties between nations, and this role is especially important at times of strain and contest.
I am here in Beijing for a Ministerial meeting on the Regional Comprehensive Economic Partnership, or “RCEP”, an agreement that will include 16 Indo-Pacific economies, and accounts for about one third of global GDP.
As Prime Minister Morrison has said, Australia is committed to concluding the RCEP negotiations this year. I am optimistic that during our meetings here in Beijing over coming days we will make real progress. A quality RCEP agreement is important to Australia – as it is to China. We want to make sure that RCEP, with the 10 ASEAN nations at its core, with India, China, Australia, Korea, Japan, New Zealand all as members, can actually provide the type of economic advancement. The conclusion this year would strengthen trade and investment links across RCEP markets, and increase opportunities for businesses to operate regionally.
But more to our theme today, RCEP is not only significant to China, Australia and our region, RCEP is globally significant, both for its economic benefits and because of its symbolic weight. The conclusion of RCEP would demonstrate that all of these countries – with their vibrant economic activity, and the massive potential they have for future growth – all are committed to further openness, and are rejecting the lure of greater protectionism. RCEP will be a powerful statement that our region is moving forward, into a future of open trade.
But I am also here with the very much wider global situation in mind. I know that this Center has been studying closely the situation at the World Trade Organization (WTO), the concerns of the United States and others, and how China should respond.
Friends, the opportunities and challenges that confront us are finely balanced. Despite pessimistic commentary or perspectives that progress solely relies upon agreement between two economic giants, I firmly believe that countries working together and forging innovative partnerships can tip that balance towards reform and further continued economic growth.
The nations of the world share compelling mutual interests in the prosperity that flows from open and fair trade and investment. Yet we face serious disagreements as to what comprises fair trade policy. Meanwhile, trade tensions continue to escalate with trade-distorting measures and related uncertainty diminishing global economic growth. We are all paying a price.
While China and the United States must carry much of the responsibility that comes with their power and economic might, other nations can and should play a part. Today I will explain why I believe conversations between Australia and China can help to make a contribution.
Our starting point must be the well-understood fact that post-war global governance has delivered enormous gains, for both our countries, and for the world. Prime Minister Morrison recently characterised the foundations of this international order as “a respect for the individual sovereign state, no matter how large or small, and the ambition that each may be able to engage and participate with the security afforded by a common set of rules that means they can get a fair go, free of coercion”. In the economic domain, we have benefitted from open markets, in which trade relationships are based on rules, underpinned by global agreements.
While a great majority of economists all over the world agree that rules-based, open international trade is the best system for all, it has never been easy to achieve and sustain. As President Xi has said, swimming in the open ocean is hard, but those who never learn to swim are most at risk of drowning. Our two nations have learned to swim, and we are stronger as a result. China’s reform and opening since 1978 is rightly celebrated around the world. Australia’s opening up during these decades is less well known, but highly instructive.
Since the 1970s, Australia has transformed from a protected economy with strong ties to Britain, to today an open economy deeply integrated into the Asia-Pacific and increasingly, now, the Indo-Pacific. Domestic reforms – such as tariff reductions, competition policy, reforms of banking and superannuation – were accompanied by increasing influence in regional and global trade policy.
In 1989, Australia was a founding member of the Asia Pacific Economic Community. We continue to pioneer trade liberalisation in our region, and to incubate reforms that can have wider application, including in the WTO. We were a founding member of the Cairns Group, which in the 1980s and 1990s helped to deliver the WTO’s Uruguay Round of negotiations by bringing agriculture fully under international trading rules for the first time.
Australia has also added to the momentum and reach of the international trading system by achieving bilateral and regional trade agreements which go further than WTO commitments. No two nations outside Europe have closer economic arrangements than Australia and New Zealand, a proud and enduring achievement. We also have gold-standard trade agreements with the United States, Japan, Korea, Indonesia, and, as I will discuss in more detail soon, China – in addition to several other Indo-Pacific nations.
At the same time, we have helped to write the world’s most liberalising plurilateral trade rules. Australia was a leading proponent of the 11-nation Trans Pacific Partnership. The TPP-11 provides for other countries, including China, to join if they are willing to meet its high standards. Australia champions the open-ended nature of this agreement, as a step towards a free trade area that can increasingly encompass the whole Asia Pacific region. This remains our long-term goal, even in the face of current challenges. RCEP we trust will be another important building block.
I mention these achievements to encourage you to consider what Australia may have to offer as the international community searches for new olutions to trade policy problems. Australia has shown in the past that we can provide creative ways forward with a wide range of partners, and we are very keen to do so again.
While Australia is capable of making a significant contribution, China, with its impressive economic achievements, will necessarily have a very large impact on the international economy and trade arrangements in particular. China’s participation in the international trade system has been enormously consequential.
Last year, my counterpart, China’s Minister for Commerce Mr Zhong Shan, put it like this, and I quote: Over the past 17 years since it became a member of the WTO, China has opened its door wider and wider, promoted reform and growth through opening-up and contributed greatly and continuously to the world. China has added impetus to the world economy. Acceding to the WTO has markedly widened the room of opening-up in the country.[1]
China’s economic reform and rise has not been a zero sum game. It never is. That’s why open markets and lower trade barriers are good economic policy, because they maximise growth for all. As China has grown Australia has benefitted, as has the United States, our region, and as Minister Zhong rightly says, the world economy. That is why Australia stands firm in continuing to welcome China’s economic growth.
Australia welcomes the contribution that China’s Belt and Road Initiative can make to trade and infrastructure connectivity across our region. Australia supports regional investment initiatives that are transparent, uphold international standards, meet genuine need and avoid unsustainable debt burdens for recipient countries.
Australia wants our good economic relations with China to provide even more mutual benefits. The complementarities of our economies make us natural trading partners. The China-Australia Free Trade Agreement has significantly increased and enhanced economic cooperation. Both our countries have implemented our tariff commitments on schedule. The vast majority of Australian products now enter China tariff-free, and all Chinese products now come into Australia with zero tariffs.
Over the 10 years to 2018, the stock of Chinese direct investment in Australia has grown from $3.6 billion to more than $40 billion. The Australian Government continues to welcome and encourage Chinese investment, while reviewing individual proposals on a non-discriminatory, case-by-case basis against the national interest.
Two-way goods and services trade has risen some 42 per cent since ChAFTA came into force at the end of 2015, to reach a record high of $215 billion in 2018. Australia is China’s 7th largest source of imports. Many of these goods contribute to China’s manufacturing base and economic growth.
The Australian Government and Australian businesses are working hard together to make the most of our trade relations, which still have a lot of room to grow. Last November, when I led a delegation to Shanghai for the first China International Import Expo, I witnessed the signing of a dozen memoranda of understanding worth $15 billion. Australia’s innovators – in agtech, fintech, medtech – are increasingly delivering valuable services into China and through investment partnerships, valuable business and growth opportunities for Chinese investors.
But it is not only government and business that are embracing China – everyday Australians are travelling and studying here in increasing numbers. In expenditure terms, China is the 2nd most popular destination for Australians who choose to study abroad. On a per capita basis, Australians travelling to China far outweigh the number of Chinese tourists travelling to Australia. Taken together with the more than 1.2 million people of Chinese ancestry living in Australia, this surge of Australians into China can only bode well for the future relations between our countries.
Australia wants a good and growing relationship with China. We will have our disagreements from time to time, but throughout, we should cooperate for our mutual benefit. In March, Foreign Minister Marise Payne announced Australia’s new National Foundation for Australia-China Relations. It illustrates the big aspirations we have for the relationship. The Foundation will harness the private sector, peak bodies, NGOs, cultural organisations, state and federal agencies and the Chinese-Australian community to promote greater understanding of China among Australians.
In all, Australia is determined to work constructively with China, as our peoples draw closer and our economic complementarities yield ever greater mutual benefits. Bilaterally, China and Australia have shown, through ChAFTA, that we can work productively together. Regionally, we are demonstrating shared leadership in seeking to conclude an ambitious and comprehensive RCEP agreement by the end of the year.
Globally we have good reason, then, to ask what more Australia and China can do together to take our mutual interests in a stable, strong and modern international trading system forward, especially to restore confidence and certainty in the operation of the WTO.
Australia is a creative and progressive player in international trade policy. We have helped to write the rules of the WTO and have benefited from those rules, as trade growth as helped to underpin our 27 years of consecutive economic growth. China has benefited too, as it has grown under those rules from accounting for around 5 per cent of international trade when it joined the WTO in 2001 to more than 12 per cent in 2018.
I see three areas where, along with other willing partners, we can and should seek to work together, to ensure the trade rules that we have relied upon and benefited from are fit for the future.
First, to reinforce the authority of world trade rules, we should collaborate to achieve a healthy and effective dispute settlement system. Delays and uncertainties have eroded confidence in the dispute settlement system but it must be restored and fixed, not allowed to slide into a state of permanent disrepair.
Australia is an active participant in efforts to address concerns in the dispute settlement system. We want to work with China, as well as other WTO members, to improve the Appellate Body’s functionality and responsiveness. We want to have a dispute settlement system in which all Members have confidence.
Second, we should update the WTO rulebook. China’s participation in the fisheries subsidies negotiations and the e-commerce negotiations at the WTO is a welcome signal of its role in helping to write new rules that meet the needs of the modern economy.
Cooperating to conclude negotiations on fisheries subsidies this year, and make real progress on e-commerce ahead of the 12th Ministerial Council in Kazakhstan next year, can prove to the world that the WTO is far from defunct.
Third, we want to work with China to boost the participation of all developing and least developed economies in the global trading system. As China’s own experience has demonstrated so vividly, trade is an essential engine of development.
In June, Prime Minister Morrison acknowledged perceptions that WTO arrangements for developing countries have not kept pace with economic growth and China’s weight in the world economy. There is an opportunity for us to work together to help the WTO better reflect the changing role that emerging economies play, while still accommodating the absolute necessity for continued growth in those economies. China’s leadership can be essential to restoring confidence in these processes.
To ensure we can continue to integrate developing countries into the global trading system, we need to secure greater confidence that the way in which the WTO provides support for developing countries, including flexibilities, fairly reflects their differing stages of development. We stand ready, willing and able to work with China, as well as any other nations, to find practical solutions that provide confidence without undermining future growth imperatives.
Conclusion
The 4th Annual China Global Think Tank Forum held here in Beijing in May was a great example of China’s willingness to collaborate to find mutually beneficial ways forward. As you consider how to build consensus between China and the United States, we ask everyone to remember the contribution that third countries can make.
Australia is deeply committed to our partnership with China. We want to see China continue to flourish, and to continue to deepen our ties, not just in the economic realm but personal and cultural connections too. That is the commitment we bring to our work together on RCEP and the potential for greater collaboration in the WTO. That commitment, along with the record of accomplishment of our two countries, indicate good things to come from our further collaboration. By your attendance here today, you demonstrate your commitment to collaborative engagement and we stand ready to continue to pursue that in the future. Thank you very much for the opportunity to address you, and I look forward to the engagement that is to come.
[1] Zhong Shan, China and the WTO, 3 July 2018, http://zhongshan2.mofcom.gov.cn/article/speeches/201808/20180802780321.shtml