FTA win-win for both sides

First published by The Australian on 12 July 2018


Hon Steven Ciobo MP   By Steven Ciobo, Minister for Trade, Tourism and Investment

Free trade appears to be losing friends and is coming under political fire.

The intensity of debate surrounding trade and investment policy questions the global rules-based order. An order that has delivered wealth and prosperity since the end of the Second World War.

As we witnessed the implementation of tit-for-tat tariffs between Australia’s major trading partners last week, with more to come into effect later this month and the US compiling a potential list on a further $200 billion worth of Chinese goods, it is important to remember no-one wins from a trade war.

Every time we see tariffs imposed, that means new barriers to trade, which ultimately results in less trade and economic growth.

Australia, however, is running against the populism of being anti-free trade. We’re doing this by standing up for open trade and investment, most recently evidenced by launching negotiations for an ambitious and comprehensive trade agreement with the European Union. The first round of negotiations have just concluded in Brussels.

In the face of creeping protectionism, there remains a number of countries — particularly in the Indo-Pacific, but also in Europe — getting on with delivering the opportunities we need to support growth and create new jobs.

The Australia-EU FTA stands to be the next element in that trend; building on the significant progress the Coalition has made over the past several years with our slew of North Asian FTAs, the TPP-11, and the other FTA negotiations we have under way.

As protectionism appears to become more popular again, it is worthwhile pausing to reflect on free trade and investment and why it is essential to Australia’s prosperity.

Trade is a major component of Australia’s 26 years of uninterrupted economic growth. In the five years to the end of 2017, it contributed fully a third of Australia’s growth.

Over that period, a more competitive Australian economy delivered more than a million new jobs. With one in five Australian jobs trade-related, that’s around 200,000 jobs thanks to trade.

To create new jobs, we need to create new opportunities for our exporters to sell more of their goods and services to the world.

That’s why the government is pursuing Australia’s most ambitious trade agenda.

Consider the benefits a high-quality, comprehensive Australia-EU FTA would offer.

For Australia, access to one of the world’s largest markets — a population of more than half a billion people, with GDP of $US17 trillion ($22.9 trillion).

We already enjoy a $101 billion two-way trading relationship with Europe, but our exporters are at a significant disadvantage to their competitors who have already won preferential access to the EU.

Exports from Canada, Korea and other major economies already have duty-free access or greatly improved access to the EU.

Currently, Australian trade on a range of agricultural commodities — such as beef, sheepmeat, sugar, cheese and rice — is significantly constrained by EU tariff quotas.

Beyond agriculture, the potential for Australian advanced manufacturing and services exports to the EU is significant. This negotiation will give us an opportunity to open up new doors for Australians with great ideas and innovative approaches.

Australia cannot afford to miss an opportunity with a market of this size.

We need a trade agreement to make Australian exports more competitive so our farmers can sell more produce, our professionals can provide more services and our manufacturers can make and sell more goods. For Europe, the benefits are also significant.

Better, cheaper access to Australia’s world-class products, from agriculture through to advanced manufacturing and services.

From Ferrari parts to fine dining produce, preferential access to the Australian market offers great things to European producers and consumers.

Australia already exports carbon fibre wheel rims to the EU for high performance vehicles like the new Ferrari 488 Pista.

When they get to the EU, though, they are burdened with tariffs of 4.5 per cent — which means this trade agreement could enhance the competitiveness of our carbon fibre rim exports, and reduce input costs for the EU’s high end sports cars — which are exported all over the world, including to Australia.

In the same vein, Australia exports silicon to the EU worth more than $49 million.

Our silicon is used in a broad range of products in the EU, but is lumbered with a tariff of up to 5.5 per cent.

Canadian exporters don’t face this same burden, so removing that tariff could boost our exports and reduce input costs for EU metal alloy and semiconductor manufacturers making Australian silicon more competitive.

Likewise, Australia manufactures highly specialised cables used in EU aerospace, transportation, telecommunications and electronics industries, including in Airbus aeroplanes. Removing the tariffs that apply to these exports will enhance the competitiveness of Australia’s exporters and reduce input costs for the EU.

It’s the same story for Australian almonds and macadamias that find their way into European confectionary.

Trade is not a zero sum game with winners and losers. Trade agreements like this deliver win-win outcomes for both sides.

While some countries are building barriers, we will continue knocking them down to create new opportunities for Australian businesses.

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