AUSTRALIA’S TRADE AGENDA – INCLUDING TRADE WITH CHINA

Since coming to government, Australia’s Trade Minister Senator The Hon Don Farrell has worked hard to re-establish Australia’s good trading relations with China. Acknowledging that, in the case of China, “we started with $20 billion worth of trade impediments by 2019 figures,” adding that this number has now been reduced to less than a billion dollars. For all that, it is a diversification of Australia’s trade that Don Farrell seeks saying, “We see ASEAN not only as an enormous growth opportunity for Australian businesses, but also as a key destination to diversify our trade, both for imports and exports, looking further afield.” To discuss all this and Australia’s future trade growth, Don Farrell addressed The Sydney Institute on Monday 8 April 2024. The paper which follows is an edited transcript of the talk as given.

 AUSTRALIA’S TRADE AGENDA – INCLUDING TRADE WITH CHINA

DON FARRELL

Thank you, Gerard and thank you Anne as well. And thank you all for coming along this evening. This is in fact the second time I’ve addressed this organisation. And it’s the only time I’ve ever been invited back by any similar organisation to talk to them again. So, I do feel very privileged. Congratulations to the Institute for reaching a milestone of 35 years in public affairs.

I would also like to acknowledge the traditional custodians of the land on which we meet and pay respects to the elders past and present.

Gerard, I’m an avid reader of your column, and not that I agree with everything you say, but what I do love is two things: Your forensic approach to journalism – I only wish some of your colleagues, in that newspaper that you write for, did the same. And your iconoclastic approach to journalism, I actually think, we need more of this in this country.

I do see my good friend here. I’ll call you out if it doesn’t embarrass you, former NSW Premier Barry O’Farrell, who was sitting on a polling booth in Glenbrook when I first met him. He wasn’t Premier then. And our names are very similar – O’Farrell, Farrell. After some discussion, we discovered that when our great grandparents left Ireland, they were both called O’Farrell. When mine got to Australia, and of course, Adelaide, a city being not all that friendly to the Irish, he dropped his O, and became Farrell. The Premier’s great grandfather also dropped the O. But his grandfather understood that the name was in fact O’Farrell and he changed it back. Can you believe it? So that’s a great testament to Barry.

I’ll let you in on a little secret. The opposition was a bit critical of some comments I made about the interrelationship between Australia and the United States, and New Zealand, which attracted some comment for a few days. But I was, in fact, at the Irish embassy that night and said, “Look, our closest allies really aren’t the United States or New Zealand, it’s the Irish”.

When I first came to talk to The Sydney Institute it was the very early days of the new government. Of course, we did have great ambitions in the trade space, and I’m pleased to say that I can report to you that we’ve made very significant progress on trade in the almost two years since we came to government. My mum used to say self-praise is no recommendation, but I think we have made significant progress in the trade space. So, I want to talk to you about some of the things we’ve done and some of the things we still have to do, because the job is far from finished.

It was very different place back in 1989 when the Institute was established. I had just lost my first attempt at Parliament. It was the 1988 Adelaide by-election where Bob Hawke helpfully announced timed telephone calls a few days before the election. Well, that was the end of what I thought was my political career. But politics is strange. I’m still here.

In 1989, Bob Hawke was prime minister and the Australian economy was just starting to open to the world. Our exports back then totalled $35 billion. And our imports were around $40 billion. Of course, that left us with negative terms of trade.

Something that is helpful to observe, over the last couple of years, is that our terms of trade have been very much in our favour. In fact, our terms of trade have never been as good in my lifetime as they have been over the last couple of years. And we can thank Tanya Constable’s organisation the Minerals Council of Australia very much for the wonderful contribution that they have made to getting us to that to that position. So, both in terms of volume and value, our trade has never ever been better in my lifetime. Today, Australia’s two-way trade has expanded to around $1 trillion. So, starting at $75 billion 35 years ago, our two-way trade is now $1 trillion.

It’s fair to say that the opening of our economy sets us on a path to greater prosperity. The economic reforms from the Keating Labor government in the 1980s and 1990s was then and still are the right path to take. It positioned Australia well to take full advantage of the global opportunities created by the outcomes of the Uruguay Round of trade negotiations, and the establishment of the World Trade Organisation back in 1995. Fast forward to 2024 and trade continues to be a force for good in addressing Australia’s current and future economic challenges. One in four Australian jobs are related to trade. Jobs in the export industries pay at least 5 per cent more on average than non-trade related jobs. And 27 per cent of Australia’s economic output is supported by trade.

This evening, I want to talk about the Albanese Labor government’s approach to trade policy, and how we are delivering outcomes for businesses, for workers and everyday Australians in this space. In particular, I’ll cover the economic engagement with China, India, South East Asia and, very soon, the United Arab Emirates.

On China, when we came to government, our bilateral relationship was in a very different place. China’s trade impediments – that’s the word we use – were affecting a range of Australian exports worth over $20 billion. If you think about that, total two-way trade with China last year was $299 billion dollars. Far and away ahead of any other country. Yet, even at that level, we had $20 billion worth of trade, trade impediments.

The political level dialogue had broken down and it was the objective of the incoming government to reverse that. Partly, the job that the Prime Minister gave me was to reverse that breakdown in the relationship. The relationship needed stabilising in the interests of both countries. And over the past two years, that stabilisation is exactly what the Albanese government has done. We’ve acknowledged our differences. But we seek to manage those differences wisely, and always act in Australia’s national interest.

I’ve now met my Chinese counterpart, Wang Wentao, six times and pressed for all trade impediments to be removed. The first of those meetings was a Teams meeting. It’s funny how things give you the wrong appearance. I thought he was about the same height as me, just based on the Teams photos. When I met him, of course, he’s about a foot taller than me. So, as we were going up some stairs in Beijing, I had to always be one or two steps ahead of him. Otherwise, he would tower over me and I didn’t want to create that impression.

Since the day I took the job as the trade minister, I’ve sought to resolve trade issues by dialogue, rather than disputation. That hasn’t always been a popular view in this country. Today you will read reports that it is not the right direction. But, in 45 years in public office, I believe discussion is a better way to go than disputation. And we can see now the benefits of that constructive engagement. Only 10 days ago, China announced that all imports on Australian bottled wine would be lifted. Just remember that those tariffs were 220 per cent on Australian wine. A huge tariff.

I did say to Gerard and Anne that I wasn’t going to come back and address this group until such time that I had the tariffs lifted. And very pleasingly, the timing worked out just nicely.

Since 2020, China’s duties on Australian wine had effectively made it unviable for Australian producers to export bottled wine to that market. This outcome paves the way for Australian producers and exporters to again supply our world class wine to Chinese consumers. There’s already wine on its way back into to China anticipating the lifting of the bans. A lot of Australian companies re-established their links with their Chinese counterparts. It’s true that wine consumption has dropped in China. One of the reasons it’s dropped is that they haven’t had access to Australian wine. And Australian producers know that they’ve got a great market there and they’re about to start supplying once again. I know first-hand that Chinese consumers are eager to buy our wines – the Chinese Trade Minister told me that, and who can blame them.

In the case of China, we started with $20 billion worth of trade impediments by 2019 figures. That’s now been reduced to less than a billion dollars, so the job’s not finished. We want the figure to be reduced to zero.

In that same two-year period, we’ve managed to get $20 billion dollars worth of trade back into China. If you have a look at some of the figures, particularly things like barley, coal, we’re actually selling more of those products into the China market than we were pre the impediments. So, the government continues to press for the removal of the remaining trading impediments on lobster. There’s about eight Australian abattoirs who have not managed to get their product back into China. But we’re now selling more meat into China than we were pre the bans. Meat is, by and large, a positive story.

The fact is, China is our largest trading partner and will remain so for the foreseeable future. That’s not to say we can’t continue to grow opportunities for Australian businesses reopening these markets in China, as well as expanding other markets. We now have a diversification policy. That doesn’t mean selling less into China, because of course, my objective over the last couple of years has been to sell more. But what it does mean is expanding into other markets so that we’re never again reliant on a single market the way we have been in the past.

As a government, we’ve been encouraging businesses and exporters to diversify their trade into new markets. We’ve concluded two new agreements, one with India. And can I say, what a terrific role former NSW premier O’Farrell (as Australia’s Ambassador to India) played in that exercise, along with the more recent visit of the Prime Minister and myself to India. The Indian market is one of the fastest growing in the world and home to 1.4 billion people. They’re now the largest national population of the world. When you think about India, they’re now also our largest source of migrants, our largest source of tourists and our largest source of students. It’s a really important market for us.

The Albanese Government fast tracked legislation to bring the Australia-India trade agreement into force by the end of 2022, which gave us one extra reduction in tariffs. The agreement itself eliminates tariffs or more than 85 per cent of Australian exports to India and gives Australian exporters a competitive advantage in the Indian market. Trade figures for the first 12 months of this trade agreement show that Australia’s industrial exports rose by 35 per cent. And agricultural exports by almost 60 per cent. When I was in India recently, the Indian trade minister Piyush Goyal committed to getting our trade to $100 billion by the end of the decade. And I’m confident that two-way trade will continue to grow well into the future.

Deeper engagement with South East Asia is also a key priority of the Albanese Government. Too often, we’ve flown over South East Asia to East Asia. We can’t do that anymore. We’ve got to engage with South East Asia. Last month we hosted in Melbourne, a terrific ASEAN Australia special Summit. Every single leader in South East Asia attended, except Myanmar. That’s an expression of just how successful that meeting was. There were some incredible announcements to come out of the summit, which will supercharge our trade and investment in South East Asia. We’re establishing a $2 billion South East Asia investment financing facility to accelerate Australian investment in key sectors such as infrastructure and clean energy. We’ve got regional landing pads and investment deal teams in Jakarta, Ho Chi Minh City and Singapore to support our tech sector launch, and to facilitate more Australian trade and investment in this fast growing region.

I’ll just give you one example. When I was married in the Philippines 40 years ago, two things, Ferdinand Marcos was president. Today, Bongbong Marcos is president. More significantly, 40 years ago, the population was 60 million. It’s now 120 million. It has an economy that’s growing as fast if not faster than then China. And we now have the new South East Asia business exchange program to get more Australian boots on the ground, and learn what it takes to export into these dynamic markets.

There are a few things we’re doing to deepen our ties with South East Asia. ASEAN, as a block, is going to be the world’s fourth biggest economy by 2040. As I said before, we’re underdone in South East Asia. Now we see ASEAN not only as an enormous growth opportunity for Australian businesses, but also as a key destination to diversify our trade, both for imports and exports, looking further afield.

Last year, the Albanese Government made the decision to negotiate a trade agreement with the United Arab Emirates. They’re our largest trade and investment partner in the Middle East, and have huge sovereign wealth funds. When I visited Abu Dhabi in February to attend the World Trade Organisation’s 13th Ministerial Conference, I met the senior ministers and business representatives of the UAE to progress negotiations, and promote stronger investment ties. The UAE is the gateway to the Middle East. A trade agreement would open up new, commercially meaningful opportunities for our businesses and our exporters seeking to diversify trade. It would also unlock massive opportunities to deepen our cooperation in our shared ambition, to transition to net zero emissions through greater investment.

Both sides are committed to progressing the negotiations as swiftly as possible. I’m reluctant to make predictions, because whatever predictions I make generally don’t come to pass. What I’ve discovered about being in government is that things do take a lot longer than you expect them to. And very often are harder. But I would like to see a free trade agreement up and running with the United Arab Emirates by the end of this year. I think we can do that before the next election.

In summary, the government’s message to business is that you should continue to diversify your markets. We’ll help you to do that through our Austrade representatives. These new people that we’re sending into South East Asia will take advantage of some of the great opportunities provided by the trade agreements. I’ve always believed that Australia is a great trading nation, and the future of our country, our economy and our prosperity depends on trade.