Address to Tradeworks: Board of the New Zealand International Business Forum
“Australia, Trade and the World:
Navigating the tightrope of international trade”
H E Harinder Sidhu, Australian High Commissioner to New Zealand
28 November 2023, Wellington
E ngā mana, e ngā reo, e ngā iwi, e rau rangatira ma
Tēnā koutou, tēnā koutou, tēnā koutou katoa
It’s a genuine pleasure to join you all today.
I want to thank Steven Jacobi and Philip Gregen for the invitation to speak to the International Business Forum Board.
I also want to thank the board for inviting me to speak on the Australia-New Zealand Closer Economic Relations Agreement (ANZCERTA) or the CER it is most often referred to.
This has been a year of celebration as we acknowledge the 40th anniversary since the agreement was signed in March 1983.
While I intend to speak on the CER, I have also been asked touch on current trade policy issues and Australia’s current trade negotiations. And also to share a bit of my experience of Australia’s relations with India, in which I played a role as Australia’s High Commissioner to India from 2016-2020.
That’s a lot to cover in a short space of time, so it will necessarily be high-level. But I’m sure our discussion will allow us to cover these issues in more detail.
The Challenge of Trade Liberalisation
To kick things off, I am going to start with a proposition I have no doubt you all know well – the task of trade liberalisation is challenging. In my view, it is becoming even more so today than it has been in the past.
I don’t have to explain to this audience the multiple benefits in economic competitiveness, productivity, job creation and innovation that flow from free and open trade.
It can be hard to quantify these benefits, but a few years ago, we had a stab at it.
Modelling undertaken by the Australian Government in 2017 was able to show that the trade liberalisation in the Australian economy between 1986 to 2016 had resulted in real GDP being 5.4% higher than it would have been with no trade liberalisation. By 2017, trade-related activity accounted for one in 5 jobs in the Australian economy.
This story in Australia (and in New Zealand) is replicated in many countries around the world.
Anyone who has participated in trade negotiations knows that gains are hard won. Yet – because of the great benefits that flow – the case for liberalisation has, for the most part, prevailed.
But now we find ourselves in more challenging territory. It is getting increasingly hard to make progress on trade liberalisation in the WTO. This means the WTO is only able to make small, incremental - but still important - improvements.
Even so, key outcomes that Australia and New Zealand see as necessary, such as all countries agreeing to reduce tariffs, quotas and subsidies, are unlikely to be achieved.
We can speculate on the many drivers for this, but at their heart there are two key dynamics. First, the proposition that open trade is in and of itself a good thing is becoming increasingly contested. The second is a growing interplay between trade objectives and geostrategic considerations.
The upshot is that the rules and norms that have kept the peace and governed international economic relationships, and which have served Australia and New Zealand so well, are now under significant strain.
We are seeing rising protectionism, increased use of coercive trade measures, and the negative impact of the pandemic and conflict on global supply chains.
In short, trade, investment, and industrial policy are increasingly being used as tools of statecraft, rather than as ends in themselves.
Australia’s national interest and trade
Australia has not been immune to these trends. We remain firm on advocating for trade liberalisation and against economic coercion and protectionism.
These aims are part of a wider goal to seek a region that is peaceful, stable and prosperous, that operates by rules, standards and norms – where each country can pursue its own aspirations; where no country dominates, and no country is dominated.
Navigating our way in the world today and securing our national interest will require unprecedented coordination and ambition in our statecraft.
Economic security is a critical element of our trade policy goals.
For a trade reliant economy like Australia – where trade represents almost half of Australia’s GDP – more trade, not less, is a key part of how we build the secure and stable economic future we want.
Forty years ago, we had the foresight to encapsulate our economic ambition in the CER.
What we did in 1983 was ground-breaking. We brought to life an audacious idea – that two countries as close as Australia and New Zealand should remove as many barriers as possible to our economic integration.
We built on this ambition with the creation of a Single Economic Market and again this year with the announcement of the Sustainable and Inclusive Trade Protocol which allows us, some 40 years later, to still hold up the CER as a ‘gold standard’ agreement.
And what we see today is the result of that ambition.
Two countries that have a uniquely close relationship.
Today, diversification remains central to Australia’s trade policy, and New Zealand remains a critical partner for Australia in this effort.
We’ve upgraded the ASEAN-Australia-New Zealand Free Trade Agreement, which includes a range of new and upgraded provisions, as well as ASEAN’s first dedicated trade and sustainable development chapter.
Having signed an accession protocol in July 2023, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) parties and the United Kingdom are in the process of undertaking the domestic treaty processes needed for the UK to join the CPTPP.
The recent developments through the Indo Pacific Economic Framework (IPEF) resulted in the substantial conclusion of three new regional agreements which will lift and align trading standards, and protect supply chains so that trade flows more freely in the Indo-Pacific region.
While IPEF doesn’t include direct market access, it does build a foundation of cooperation and trust. And its important for countries like Australia and New Zealand to be at the table shaping these sorts of agreements.
WTO rules underpin the global trading system, a system that is absolutely fundamental to Australia’s prosperity and security. We will continue to advocate for strengthening and reforming the WTO – an organisation we need to help tackle global trade challenges into the future, and we will do this in close partnership with New Zealand.
We have also worked through the WTO to deal with a number of trade impediments placed on Australia by China – our largest trading partner.
Sustained engagement with China, aimed at stabilising our relationship, has led to several positive trade developments this year, including:
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the resumption of trade in coal, cotton, copper ores and concentrates (although at low volumes).
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the re-registration of oaten hay exporters
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removal of the duties applying to Australian barley exports
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an agreement with China on a pathway towards resolution of the WTO wine dispute and
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the lifting of quarantine restrictions on timber logs
Australia secured these outcomes while continuing to uphold our values and pursue our national interest.
Lastly, last year we signed a world first Green Economy Agreement with Singapore, a key bilateral and regional partner, to ensure we work together to transition our economies to net zero.
It is a new type of agreement, which combines trade, economic and climate objectives. Our joint efforts focus on promoting economic cooperation, boosting trade, creating business opportunities, and decarbonising key industrial sectors.
Of course, it’s not always smooth sailing. We don’t always secure the outcomes we want in the timeframes we expect.
As you would be aware, Australia wasn’t able to come to an agreement on our free trade agreement with the European Union. Our Trade Minister’s assessment was that the EU was asking too much, and offering too little, to conclude a fair deal which benefitted both sides.
This isn’t the end of the road – the EU is still an important partner for Australia, and it will continue to be a significant market and a significant investor for Australian businesses.
India
Finally, a few words about India.
I’m aware that the incoming New Zealand Government has said that advancing trade with India – and, possibly, concluding a Free Trade Agreement with India – will be a high priority.
This makes sense. India is one of the world’s fastest growing economies, with GDP growth averaging 6 per cent between 2006 and 2021, reaching a high of 9.1 per cent in 2022.
India’s demographics also suggest a very long growth trend into the future. Having surpassed China this year as the world’s largest country, with a population of 1.4 billion, it is also one of the youngest, with a median age is 28 years.
A young, dynamic and aspirational population bodes well for trade prospects long into the future.
So of course it should be a priority for any country seeking to diversify its trade to engage with India.
As you can tell, I am an India optimist.
However, especially during the early part of my tenure in India, I found few among Australia’s business or trade policy communities who shared my optimism.
Rather, they tended to focus on India as a difficult place to do business, as protectionist and as an unreliable investment destination.
Indeed, there is plenty of lived experience out there which bears out these views.
But if trade policy and gains are getting harder, then it pays to work harder to achieve them. So it is with India.
It is worth remembering that Australia began our negotiations with India on a Comprehensive Economic Cooperation Agreement (or CECA) in 2005. Negotiations were slow and protracted. They were put into abeyance in 2016 when we were unable to overcome some key concerns particularly with respect to movement of natural persons.
Over this period, however, we continued to invest in the bilateral relationship. Our strategic alignment grew stronger, and accelerated once India joined the Quad in November 2017.
We worked to invest in the relationship at the political level, through frequent Prime Minister-level and Ministerial engagement. We also supported engagement at various other levels – in government, among CEOs and business groups, universities and think tanks and even among youth.
We also began to see the economic relationship in broader than simply trade or FTA terms. In 2018 we published an India Economic Strategy to 2035 – a 500-page document setting out how Australia and India could build a deep and robust economic relationship in 10 priority sectors.
All these efforts served to demonstrate Australia’s genuine intent in prioritising the India relationship, and the value that Australia could bring to India.
We were also helped by other factors in the relationship – notably the tremendous growth in Australia’s Indian diaspora, which has served as an important connector between the two countries.
It was from this basis that we were able to conclude a landmark early harvest agreement with India in 2022 – the Australia-India Economic Cooperation and Trade Agreement.
And from this, we are now progressing the negotiation of a full Comprehensive Economic Cooperation Agreement.