- Despite the rise of nationalism in the US, Australia’s economic and trade future with Asia remains fluid.
- Trade Minister Steve Ciobo is optimistic that Australia's partnership with Asia will boost economic opportunities.
- Australia is fortunate to be shaking hands with Asia, as trade deals open up to the West.
By Steve Lewis.
Image above: Indonesian President Joko Widodo and Australian Prime Minister Malcolm Turnbull meeting in Sydney in February. Image credit: Peter Parks/Getty Images.
When Indonesian President Joko Widodo flew into Sydney in late February he delivered an upbeat message on the future of bilateral relations with Australia.
Amid the continued fallout of US President Donald Trump’s withdrawal from the Trans-Pacific Partnership – and the threat of further protectionism sweeping across Europe – the Indonesian leader assured Australian Prime Minister Malcolm Turnbull that he was committed to closer and more productive trade ties.
Critically the nation of 250 million people stood ready to finalise a bilateral trade pact. It was confirmation that Australia’s economic and trade future is inexorably gravitating towards Asia with its rising middle class population and bountiful opportunities.
In an interview with Acuity, the Australian Minister for Trade, Tourism and Investment Steve Ciobo reaffirmed this push to capitalise on the so-called Asian Century. China, Japan, South Korea, Indonesia and other Asian economies represent the future, an optimistic future.
Servicing the engine
At the same time, the Australian trade envoy sees a positive outlook for professional services – including accountancy – as Asian economies gradually open their borders to the West.
“If you look globally Asia is the growth engine of the world,” the minister says.
“Europe has got significant economic headwinds and there continues to be uncertainty with respect to North America. The real driver with high levels of rapidly-developing economic growth is Asia.”
As part of this gravitation, Australia recently concluded bilateral trade pacts with three Asian powerhouses: China, Japan and South Korea. The minister claims these bilateral deals will “help to propel Australia’s economic growth if we are in a position to make the most of the opportunity”.
While coal and other resources have traditionally led Australia’s export performance, Ciobo believes the services sector will emerge as the area of biggest potential growth.
“The fact is that services account for about 75% of the Australian economy, yet make up only around 22% of our exports,” he says.
“As we have liberalised access to these markets, there is more opportunity than ever for Australian service providers. So that is an area that I am genuinely very excited about.”
While education and tourism have traditionally been the “powerhouse” when it comes to services exports, the minister wants to broaden the areas of opportunity.
"There is a full arsenal of services exports that Australia can tap into."
He nominates a range of areas – including legal, accountancy, architectural and mining-related services – as potentially contributing to this export boom.
“There is a full arsenal of services exports that Australia can tap into,” the minister says.
Caption: Australian Minister for Trade, Tourism and Investment Steve Ciobo. Image credit: Fairfax.
And the opportunities to Australia’s north are substantial, as the statistics show. For instance, China – Australia’s largest trading partner – represents two-way trade of around A$150b per annum. By way of contrast, two-way trade with Indonesia and India is much smaller – around A$15b each per annum.
For Australia, the number one priority is a trade deal with Indonesia. Negotiations commenced in March 2016 and Ciobo hopes he’ll be able to ink a deal by the end of this year.
He concedes that Australia’s trade and investment relationship with Indonesia is “very underweight”. Major exports include wheat at around A$1.1b per annum and live animals, which have recovered from Australia’s temporary ban to Indonesia and were valued at A$586m in 2015-16.
In the services arena, exports of education-related travel were valued at A$619m in 2015-16, but the numbers are modest compared to China and Japan and Ciobo is keen to talk up the prospect of substantial growth.
“Indonesia is one of our nearest neighbours and a country of 250 million people. There are around 50 million middle class Indonesians, so there is tremendous potential to boost that relationship substantially,” he says.
“We are both working towards a comprehensive economic partnership between Australia and Indonesia and if we secure that it will be a very good outcome.”
Signalling that both sides want this Indonesia-Australia Comprehensive Economic Partnership Agreement to be wide ranging, negotiators have identified the following areas for possible inclusion: red meat and cattle, skills, financial services, professional services, food processing, food and drug standards, agriculture, design, infrastructure and education.
India, the world’s largest democracy with a population of more than one billion and a turbocharged economy forecast to grow at 7.6% in 2017, represents another target for Australia’s trade negotiators. However, expectations that a deal with India could be concluded by the end of 2016 proved optimistic and the Minister now adopts a more cautious tone.
“One of the actions that I took in coming to the role as trade, tourism and investment minister was to agree with my Indian counterpart to undertake a stocktake on where negotiations were. Obviously it is a complex negotiation with India and it is important every now and then to pause, to assess where we both are, and then to subsequently re-engage to try and secure a deal,” he says.
Does that mean a pause in negotiations?
“No, they are not on hold. We will be re-engaging constructively again very shortly.”
But he won’t nominate a date by which they could be concluded.
“I won’t put a timeframe on it. It is not a case of just trying to secure a deal as quickly as possible – it is more important to secure a good quality deal.”Steve Lewis is an author, journalist and senior adviser with Newgate Communications.
This article first appeared in the April/May 2017 issue of Acuity magazine.