Trade in an Asian Century and the Age of Trump
Australian Chamber of Commerce and Industry — Sydney
Monday, 30 October 2017
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A couple of months before I was born a Labor Leader travelled to the Middle Kingdom.
The audacity of Whitlam’s trip to China is today, I think, under appreciated.
Trips to China by Australian political leaders are now common place. They weren’t in 1971.
A trip like that back then could have been political suicide. The Cold War was in full swing and no other western leader had visited the then largely unrecognised and isolated communist regime.
Whitlam’s great speech writer Graham Freudenberg recounts:
“If a fortune teller had told me at the beginning of 1971 that I would go either to China or the moon that year, I would have opted for the moon as the more probable destination.”
Whitlam went because he saw opportunity — for himself and for Australia.
It turned out he was right.
Timing is everything in politics. Three days after he was pilloried for going by the then Australian Prime Minister Billy McMahon, the US President Richard Nixon announced he too was heading to China.
Things were changing. The world was reaching out to China and Whitlam was at the head of the pack.
At his meeting in the Great Hall of the People with the Chinese Premier Zhou Enlai the wise old revolutionary told Whitlam “all things develop from small beginnings”.
How prescient that proved to be.
China is now our biggest trading partner.
All from a standing start just over 40 years ago.
But this isn’t just a China story. It’s an Asian story.
73 percent of all the goods and services we export now go to Asia.
In other words almost three in every four dollars we make from trade comes from our northern neighbours.
A lot of the credit for this belongs to three other Labor leaders — the triumvirate of Bob Hawke, Paul Keating and Bill Kelty.
What they did together — ripping down the tariff walls we had been hiding behind and remaking our economy — set us up to compete and win in these new and emerging markets.
Markets that get bigger every day.
The world’s economic centre of gravity continues to shift east.
Seven of the 10 fastest growing economies in the world are in our region.
Half the world’s middle class already lives here.
Two thirds of the world’s middle class will live on our door step by the end of the next decade. Three billion people, all potential customers.
When you hear these sorts of numbers it’s easy to assume our lucky country is just going to keep getting luckier.
If you think that you are wrong. There are no guarantees. Nothing is certain.
Asia, for one reason or another, might not reach its full potential.
But even if it does, it doesn’t mean we will.
That’s up to us. This generation, and how brave and determined we are prepared to be.
Here’s the challenge.
For all our hard earned success to date we also have a pretty soft underbelly.
We are not making the most of what Asia is today, let alone what it will be tomorrow.
18,536 Australian companies currently export to New Zealand — a country of 4.7 million people. How many do you think export to China a country of 1.3 billion people?
The answer is only seven thousand.
We invest more in New Zealand than we do in China, Japan, India and the 10 nations of ASEAN combined.
More than 4 million Australians can claim Asian heritage. That is an enormous potential asset, but you will find very few of them on the boards or in the senior ranks of our top 200 ASX companies.
A lot of Australians speak an Asian language but that’s more a product of immigration than education.
Fewer Australians study Indonesian today than did when Whitlam got on that plane to Beijing almost 50 years ago.
We are good at putting resources and agricultural products on ships and attracting students and tourists and foreign capital, but we have got to get a lot better at what Bob Hawke called our “enmeshment” with Asia.
This is what my friend and Canberra flat mate the Shadow Treasurer Chris Bowen was talking about when he launched our ‘FutureAsia’ plan a few weeks ago.
In that speech Chris said we need a whole of government, in fact a whole of nation, effort to broaden and deepen our engagement with Asia and he announced the first of a number of things a Shorten Labor Government will do to meet this challenge.
The Shadow Foreign Minister Penny Wong added to this in a speech she made to the Australian Institute of International Affairs two weeks ago.
Today I will add to that.
But this isn’t the only challenge we face.
We live in an Asian Century, but we also live in the age of Trump.
You can’t have a conversation about trade today without talking about President Trump.
His election has been a game changer.
It’s meant big trade deals like TPP and TTIP have hit the fence. He has also threatened to rip up NAFTA and the US — Korea Free Trade Agreement and whack a 45 percent tariff on all Chinese goods coming into the US.
None of this happened in a vacuum. Trump tapped into something palpable.
There are a lot of people in the US and right around the world who are angry, frustrated and resentful, they feel like life is getting tougher and they are raging against the machine.
They are worried about immigration, they are worried about losing their job to a robot or someone overseas and they are very sceptical that the trade deals we talk about are going to do anything to help them.
There’s a feeling that while big companies might have benefited from free trade, they haven’t.
I have talked about this at a number of Chamber events this year.
Today I will outline some of the things a Shorten Labor Government will do to respond to this.
There is a good reason why a lot of people around the world feel like life is getting harder. Because it is.
In the decade before the Global Financial Crisis living standards went up in most developed countries. In the decade since they have flat lined or fallen. They are only now just starting to recover.
In America a lot of people are still earning less today than they did when Lehmann Brothers collapsed.
A lot depends on the sort of job you do and where you live. In places like Michigan and Ohio and Wisconsin a lot of jobs have been lost and wages are down — and these are the places that made Trump President.
A lot of people voted for him. And a lot of people chose not to vote at all.
These are places where the mortality rate of middle aged working class white Americans has gone up over the last decade or so. Being called deplorable didn’t go down well.
Things aren’t that bad here. But the gap between rich and poor is growing. Wage growth is the lowest it’s been in 20 years.
Add in the chronic unemployment in places like northern Queensland and the dream crushing increase house prices in places like Sydney, and you get a pretty toxic mix.
There is a reason Malcolm Turnbull doesn’t talk how it’s the most exciting time to be alive any more. Most people don’t believe it.
Think about this. In Townsville where earlier this year unemployment hit its highest level since the Great Depression, and where youth unemployment is at its highest level in twenty years, three in ten young people say they are going to vote for Pauline Hanson’s One Nation in the upcoming State election. 
If that doesn’t tell us something we are not listening.
If people don’t have floors under them they will reach for walls.
There is a real link between support for free trade and open markets and increases in real incomes.
In places like the Philippines and Vietnam where a lot of people have seen their real income rise in the last few decades support for free trade is over 85 percent. Here in Australia and in the US it’s about half that.
Unlike the US, the views that people like Bernie Sanders and Donald Trump have about trade are on the fringe of political debate here. They are espoused by the Greens on the left and One Nation on the right. The two major political parties both support free trade. With good reason, we rise and fall on what we sell to the rest of the world.
But that doesn’t mean we can forget all of this. If we want to avoid the sort of anti-trade and anti-globalisation backlash that we have seen in the US and elsewhere we have got to do something about the growing gap between wealthier and poorer Australians.
That means shaking up our education and training system to make sure more Australians have got the skills to get the jobs that open markets create in a developed economy like ours.
It also means making our tax system fairer and more progressive, increasing the minimum wage and not cutting things that working people on low incomes rely upon, like penalty rates.
We also shouldn’t waive things like Labour Market Testing in trade agreements.
This is the sort of thing that really upsets people.
It’s not protectionism to say that before a company brings in an electrician or a carpenter or a mechanic from overseas it should first have to check if there is an Australian who can do the job. It’s common sense.
Independent Economic Modelling of all new Free Trade Agreements
If we want more people to support open markets we also have to be more open, and more honest.
At the last election we committed to do a number of things to make the trade negotiation process more open and transparent.
We promised for example to:
- provide public updates on each round of trade negotiations;
- release draft texts during negotiations where this is feasible; and
- table the text of proposed agreements in Parliament before they are signed.
In addition to that today I announce that a Shorten Labor Government will ask the Productivity Commission to conduct an independent economic analysis of each new free trade agreement before it’s signed.
This is a practical, common sense way to address some of the scepticism that often surrounds these agreements.
It will be an honest assessment of the deal, done at arm’s length from government.
It will identify the benefits and the costs. What it means for jobs, household income and different sectors of the economy as well as the strategic and other non-economic benefits.
That’s not what happens at the moment. Once a free trade agreement is signed a report is prepared by the Department of Foreign Affairs and Trade outlining why the agreement is in Australia’s national interest. That’s it.
I don’t think that’s good enough. Given all the scepticism that exists I don’t think it’s good enough to rely on a report from the same people who negotiated the deal that says it’s a good deal.
It should be independently assessed.
I know this Chamber has called for this to happen. So has the ACTU, the Harper Review, a number of Parliamentary Committees and the Productivity Commission itself.
And if we are elected it will happen.
Ten year independent review of free trade agreements
There is also a lot we can learn from the trade deals we have already done — where they have worked and where they haven’t.
At the moment there is no independent economic analysis of the existing free trade deals we have signed to see if the benefits we were promised have been delivered.
These are big deals. We should know what the impact of them has been.
Again this sort of information has been called for from a number of organisations including the Australian Chamber of Commerce and Industry.
If we win the next election a Shorten Labor Government will do this. We will instruct the Productivity Commission to conduct 10 year reviews of free trade agreements.
I see a lot of value in this. It will identify the sorts of things we should do differently in future agreements — and what we should seek to change in these ones.
Good companies do this. It’s the best way to learn and improve. Governments should do the same thing.
It will also put the heat on governments and the bureaucracy to try to get as much out of these agreements as we can. That’s not happening at the moment.
Compared to other countries we massively under-utilise the trade deals we sign. Part of that is because a lot of exporters don’t even know if an FTA applies to their business. Part of it is the complex, technical nature of these deals. And part of it is problems with market access. I’ll talk more about how we can tackle that in a moment.
Increased role of business in trade negotiations
There is also more we can do right at the start of trade negotiations to make sure we are heading in the right direction and get the right outcomes.
As part of any trade deal DFAT does a lot of consultation with business and other organisations.
But in the Indonesia — Australia Comprehensive Economic Partnership Agreement negotiations something different has happened. Business leaders in Indonesia and Australia came together and told both governments what they want in the trade deal.
They set up a body called the Indonesia-Australia Business Partnership Group. Its current members are:
- Australian Chamber of Commerce and Industry;
- Kadin Indonesia (Indonesian Chamber of Commerce);
- APINDO (Asosiasi Pengusaha Indonesia, the Employers’ Association of Indonesia);
- Ai Group;
- Indonesia Australia Business Council; and the
- Australia Indonesia Business Council.
This group has done a lot of important work in identifying opportunities to increase trade and investment and it’s also identified some of the impediments and provided advice on how they can be overcome.
This doesn’t happen with all the free trade negotiations we undertake.
It’s pretty unusual to have business leaders from both countries collaborate like this and provide this sort of advice. But I think it is extremely valuable.
I think the Indonesian Free Trade Agreement will be the better for it — and if we win the next election we will adopt this model for all future bilateral free trade negotiations.
It’s also a model that could potentially work for other organisations like unions.
Up ahead and over the horizon
On the weekend Chris Bowen and I are heading to Surabaya to take part in the Indonesia Australia Business Conference.
It’s a busy time in trade.
The Indonesian Free Trade Agreement is expected to be finalised next month.
I hope it’s a good agreement. It’s got the potential to be a very important agreement — not just in economic terms but also in bringing our two countries closer together.
Indonesia is an economic and regional juggernaut in the making. It’s already the fourth biggest country in the world in population terms, by the middle of this century it’s predicted it will become the fourth biggest economy in the world.
You wouldn’t know it though by the way we act.
We are next door neighbours and yet we barely look over the fence. Trade is massively underdone. So is investment and people to people relations.
We don’t know each other, speak to each other or work with each other anywhere near as much as we should. If this agreement can help change that we will reap the dividends of it in the years to come.
If we are elected we have also proposed that Australia and Indonesia’s finance and trade ministers meet annually in a 2+2 format to increase our economic engagement and focus on problem issues.
There are a number of other important potential deals in the making with everyone from the UK to Europe to Hong Kong to India.
There is also the possibility of a new version of the TPP without America. Given the US made up about 60 percent of the combined GDP of the original TPP this would be a very different agreement.
And there is also RCEP (the Regional Comprehensive Economic Partnership) under development. It’s made up of 16 countries including China, Japan, South Korea, India, Australia, New Zealand and all of ASEAN. That’s about 30 percent of the world’s GDP.
But I think we need to be even more ambitious.
In 12 days’ time APEC leaders will meet in Vietnam. It will be President Trump’s first trip as President to the region.
It’s an important organisation. Forged with the help of Hawke and Keating, over the last 30 years it’s helped cut tariffs in half across the Asia Pacific.
In the next 30 years it could play an even more important role.
It has set the objective of a free trade agreement for the entire Asia-Pacific (FTAAP). It seems a long way off at the moment and maybe it is, but it is something we should be striving for.
One of the problems with the TPP was it included America but not China. One of the problems with RCEP is it includes China and not America.
What happens in our region this century will be largely driven by the relationship between these two great powers.
Unlocking the full potential of the rise of Asia requires peace and stability. That requires more than just US engagement in Asia, it requires the United States and China at the same table, working together. Neither feeling excluded, contained or disadvantaged.
A trade agreement like that, that knits these two great powers closer together and includes all the countries of the Asia Pacific, has got to be our driving ambition.
The more countries in a trade deal the harder they are to close, and so global agreements are by their nature the hardest. But they are also the best. They deliver the biggest dividends and avoid lots of conflicting and confusing rates and rules.
23 years ago Australia played a critical role in getting the Uruguay Round across the line. Wrapping up the Doha Round has proved elusive, but there is another way — chopping it up into bite sized chunks. That’s what the WTO is doing.
Craig Emerson proposed this approach when he was Australia’s Trade Minister and it looks like it’s working.
The Trade Facilitation Agreement that entered into force this year, and more than 110 countries have now signed, is a great example of how this can work. It makes changes to customs procedures that could increase exports worldwide by up to one trillion dollars each year.
Hopefully the same sort of deal can be done next on things like e-commerce and foreign investment.
Tackling Non-Tariff Barriers
I talked earlier about the under-utilization of our trade agreements and the problem of market access. It’s a particular problem for a lot of Australian businesses in Asia.
Signing a deal like the ones the Abbott Government negotiated with Japan, South Korea and China is just the start.
When it’s signed the clock starts ticking. Other countries will try to get the same deal, and if they do our competitive advantage is lost. So we have to move quick.
Often the big obstacles in the way are non-tariff barriers. They can be anything from product standards to labelling and certification requirements. As tariffs have fallen around the world over the last few decades non-tariff barriers have gone up.
Helping business overcome these different sorts of barriers might not make as many headlines as signing a new deal but they can be just as important.
Let me give you an example. We have signed a free trade agreement with China, but we still can’t export everything from beans to broccoli to blueberries, avocadoes, carrots, celery, cucumbers and a lot more.
The reason is because Australia and China have not negotiated the necessary technical market access protocols.
The red meat industry currently has challenges in a number of markets including China and Malaysia. And the wine industry has had to meet a number of regulatory and chemical analysis requirements in India and Japan.
In the conversations I have had with Australian companies they have made it pretty clear to me that some government agencies are better at responding to these sorts of problems than others.
Our free trade agreements and the WTO have processes to address non-tariff barriers but its obvious more needs to be done.
In New Zealand the former government recently announced the establishment of a cross agency team to better coordinate the work they do on non-tariff barriers in key export sectors.
They have to respond to inquiries from business within 48 hours and if a company makes an inquiry they have to develop a plan with the company within six weeks on how to address the non-tariff barrier. The cross agency team also reports to a Committee of Cabinet.
Not every barrier is going to be fixed. They are not miracle workers. But it makes sure that the work government agencies do is better coordinated, that they work closely with business and that they are accountable for what they do or don’t do.
I think it is a good idea — a single point of accountability that makes different government agencies work together — and we will implement something like this if we are elected.
Annual Australia Week in China
Every year we run a big roadshow in the United States called G’day USA.
It is an important annual program which promotes Austrade, Australian companies and Australian tourism to our second largest trading partner and third largest export market.
We currently conduct Australia Week in China every two years.
China is our biggest market and it’s expected to just keep getting bigger.
It’s GDP is expected to triple by the middle of this century — from $15 trillion to $45 trillion.
According to the Government, Australia Week in China 2014 generated $1 billion in export sales.
If only a fraction of that is true it makes sense to make Australia Week in China an annual event.
And so that’s what we’ll do.
Building the skills we need in Asia
We need to do more though than sign deals, knock down barriers and open doors. We also need Australian businesses to walk through them.
There are about two and half million companies in Australia. Only about 53,000 are exporters. A lot of others are reticent to give it a go. Particularly in Asia.
Some have tried and lost their shirt. Some are just comfortable doing what they are doing. They don’t have the appetite for the risk involved, the capital or the patience needed to succeed in a market that can be difficult to crack.
That’s part of it. But a lot don’t make that big leap because they don’t have the people they need to do it.
According to a joint Asialink / PwC report released a few months ago only 10 percent of directors and senior executives in our top 200 listed companies have a high level of Asian skills and experience.
No wonder the appetite to get into Asia isn’t always there. You have got to know your market and how it works — the business culture — before you are going to put shareholders money and your job on the line.
None of this is easy. Asia is not homogenous.
I don’t think it is a coincidence that one in two Australian exporters are born overseas.
In his FutureAsia speech Chris Bowen announced that we would allocate $3 million to work with the Australian Institute of Company Directors on a pilot program mentoring Asia capable potential board directors to help get more Australians with Asian business experience on our boards.
That’s the first step.
There are companies in the towers around us that have bucket loads of young graduates who have an Asian heritage, but not many with the same heritage are in the top jobs.
Only five percent of our ASX 200 companies have CEOs from a non-European background.
I mentioned earlier more than four million Australians have an Asian background. It has got to be one of our most valuable and under-utilised assets.
If we want to make the most of Asia, businesses have got to look more closely at the assets in their own companies — hiding in plain sight.
To build our Asia business capability it’s also important that more young professionals get experience working in Asia.
That’s why if we are elected we will pursue an agreement with the Chinese Government to allow young professionals to gain commercial experience in the Chinese market by undertaking an internship with a company in China for up to six months.
It’s been recommended to us by the Australia Australian Chamber of Commerce in Shanghai.
The French Government negotiated a deal like this two years ago. It’s a reciprocal deal for young professionals in each country.
There is nothing like working in a country to understand how it works, especially a market like China. A program like this will help us build the skills and experience we so desperately need.
And if it works we will look at doing the same thing with other countries in Asia.
I have talked about two challenges today:
- How we respond to rising public scepticism about trade, and
- How we make the most of the rise of Asia.
And I have outlined a number of things we will do to meet these challenges.
There is more to come.
And we will be developing these policies (like the ones I have just announced) with you and other organisations.
We have got to get this right. We can’t be complacent.
We are a trading nation.
Following the lead of what we have seen overseas would be a mistake. But so would opening doors and not walking through them.
We can meet these challenges if we work together. And I am keen to do that with everyone here as the Trade Minister in a Shorten Labor Government.
MEDIA CONTACT: 02 9790 2466
 Whitlam Institute — https://www.whitlam.org/gough_whitlam/china/A_Moment_of_Opportunity
2 “The Coup that laid the fear of China” — Dr Stephen Fitzgerald
4 H Kharas, The emerging middle class in developing countries, OECD Development Centre, Working Paper no. 285, January 2010, OECD Publishing, Paris, p. 28.
5 Australian Bureau of Statistics, email///www.abs.gov.au/AUSSTATS/abs)(.nsf/DetailsPage/5368.0.55.0062015-16?OpenDocument">Characteristics of Australian Exporters, Cat. no. 5368.0.55.006, table 9
6 Australian Bureau of Statistics, email///www.abs.gov.au/AUSSTATS/abs)(.nsf/DetailsPage/5368.0.55.0062015-16?OpenDocument">Characteristics of Australian Exporters, Cat. no. 5368.0.55.006, table 9
8 Australian Council of Learned Academics, Australia’s Diaspora Advantage: Realising the potential for building transnational business networks with Asia, Final Report, May 2016, p. 3.
10Based on data by The World Bank, GDP per capita (current US$), World Bank website, 2017.
11Parliamentary Library estimates based on United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index Archived News Releases, September 2008, table 1, p. 9; United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index Archived News Releases, August 2017, p. 4.
12‘The Collapse of the White Working Class’ — The Atlantic, March 2017.
13Australian Bureau of Statistics, email///www.abs.gov.au/AUSSTATS/abs)(.nsf/DetailsPage/6345.0Jun%202017?OpenDocument">Wage price index, June 2017, Cat. no. 6345.0.
14Reachtel Polling 3 May 2017
15Friedman. T., 2016, Thank you for being late — an optimist’s guide to thriving in the age of accelerations, Penguin Books, London. pg. 121.
16The Economist, November 2016, What the world thinks about globalisation.
17This document is called the National Interest Analysis
18The Economist. (2014). FTAs: fantastic, fine or futile? London: The Economist Intelligence Unit Limited.
19Access Asia: Leveraging Free Trade Agreements for Australian Trade Growth, KPMG, October 2016.
20Subsequently referred to as the Indonesia Free Trade Agreement
24“Charting a Course for Trade and Economic Integration in the Asia-Pacific”,March 2017, A report of the Asia Society Policy Institute Independent Commission on Trade Policy.
25Organisation for Economic Co-operation and Development (OECD), GDP long-term forecast, OECD website, 2016.
27Australian Bureau of Statistics Jun 2016, www.abs.gov.au/ausstats/abs)(.nsf/mf/5368.0.55.006">Characteristics of Australian Exporters 2014–15, Cat. №5368.0.55.006, Australian Bureau of Statistics, Canberra.
29Leading for Change; A blueprint for cultural diversity and inclusive leadership, July 2016.
 Whitlam Institute — https://www.whitlam.org/gough_whitlam/china/A_Moment_of_Opportunity
 Australian Bureau of Statistics, email///www.abs.gov.au/AUSSTATS/abs)(.nsf/DetailsPage/5368.0.55.0062015-16?OpenDocument">Characteristics of Australian Exporters, Cat. no. 5368.0.55.006, table 9
 Australian Bureau of Statistics, email///www.abs.gov.au/AUSSTATS/abs)(.nsf/DetailsPage/5368.0.55.0062015-16?OpenDocument">Characteristics of Australian Exporters, Cat. no. 5368.0.55.006, table 9
 Australian Council of Learned Academics, Australia’s Diaspora Advantage: Realising the potential for building transnational business networks with Asia, Final Report, May 2016, p. 3.
 Parliamentary Library estimates based on United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index Archived News Releases, September 2008, table 1, p. 9; United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index Archived News Releases, August 2017, p. 4.
 ‘The Collapse of the White Working Class’ — The Atlantic, March 2017.
Australian Bureau of Statistics, email///www.abs.gov.au/AUSSTATS/abs)(.nsf/DetailsPage/6345.0Jun%202017?OpenDocument">Wage price index, June 2017, Cat. no. 6345.0.
 Reachtel Polling 3 May 2017
 Friedman. T., 2016, Thank you for being late — an optimist’s guide to thriving in the age of accelerations, Penguin Books, London. pg. 121.
 The Economist, November 2016, What the world thinks about globalisation.
 This document is called the National Interest Analysis
 The Economist. (2014). FTAs: fantastic, fine or futile? London: The Economist Intelligence Unit Limited.
 Access Asia: Leveraging Free Trade Agreements for Australian Trade Growth, KPMG, October 2016.
 Subsequently referred to as the Indonesia Free Trade Agreement
 “Charting a Course for Trade and Economic Integration in the Asia-Pacific”,March 2017, A report of the Asia Society Policy Institute Independent Commission on Trade Policy.
 Australian Bureau of Statistics Jun 2016, www.abs.gov.au/ausstats/abs)(.nsf/mf/5368.0.55.006">Characteristics of Australian Exporters 2014–15, Cat. №5368.0.55.006, Australian Bureau of Statistics, Canberra.
 Leading for Change; A blueprint for cultural diversity and inclusive leadership, July 2016.