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Economy

Australian Trade Minister Ciobo sets sights on FTAs

Australian Trade, Tourism and Investment Minister Steven Ciobo speaks to the Nikkei Asian Review at his parliamentary office in Canberra.

The Trans-Pacific Partnership is in danger of having its ratification tripped up by divided domestic politics, led by the turbulent U.S. elections. The Nikkei Asian Review spoke with Australia's Trade, Tourism and Investment Minister Steven Ciobo about Australia's firm support for the TPP deal, and Australia's intention to introduce legislation after its committee inquiry reports by early 2017. Indonesia is the next free trade agreement for Australia to tie up, Ciobo said, building on recent "powerhouse" FTAs with China, Japan and South Korea.

Q: Over the past few years, Australia has signed its "trade trifecta" of FTAs with Japan, China and South Korea. What does that mean for your role now as trade minister?

A: We fundamentally believe that opening markets to Australian exporters and reducing business input costs for importers are crucial in powering economic growth for the country. What we've been able to secure with the three Northeast Asian powerhouse economies of Japan, China and South Korea, really, we see underpinning Australia's economic growth for years to come. The early results have been very encouraging; we've seen big increases in both export values and volumes with a number of different exports. And this comes at a time, of course, when we've seen weaker resource prices, but an uptick in prices achieved in volumes in a number of other goods.

[Now] we have an opportunity by reducing non-tariff measures. So I continue to have a strong focus on, for example, mutual recognition of professionals. There's also scope to reduce the compliance burden that financial services and [other] businesses face.

I'm relaxed about where the market opportunities are. What we try to do is reduce barriers, facilitate trade as much as possible, and leave it up to the private sector to make decisions about where they want to invest.

Q: The Australian government is pursuing several bilateral FTAs. Is Indonesia the top priority for you now?

A: Yes, it is. So I'm very focused on advancing the current negotiations between Australia and Indonesia. Our relationship is very underweight, given the proximity and respective market sizes. It's a relationship that has a lot of potential. There is a lot of goodwill on both sides. And we're working diligently in accordance with our resumption of negotiations in March this year. I remain hopeful that we'll work toward achieving an agreement by the second half of next year.

India [also] remains a focus for us. I had a bilateral meeting recently with my counterpart from India and we agreed to undertake a stock-take, and then we'll have a further bilateral in the near future to form an assessment about the best way forward from there.

Q: Does this indicate that Australia is somewhat walking away from multilateral agreements?

A: Not at all. Of course, our top priority always remains multilateral agreements. Below multilaterals is plurilaterals, and below that bilaterals. That is the priority ranked order.

But the fact is that in terms of Uruguay and Doha we have seen limited success on the multilateral front, and we continue to pursue with vigor plurilateral agreements, including the Trade in Services Agreement; likewise, the Environmental Goods Agreement.

Q: Japan's Diet is prioritizing TPP legislation, aiming to pass the bills within the month. Is Australia's position "wait-and-see," or can the country add to the TPP momentum?

A: The first thing I would do is congratulate Japan on its strong, forward-leaning initiative. It's appreciated and it's acknowledged.

Australia has commenced our domestic ratification process. Unfortunately, that was interrupted by the election [on July 2]; and that process doesn't pause and restart; it actually has to start from the very beginning again.

So, our Joint Standing Committee on Treaties is currently undertaking its inquiry into the TPP. I suspect that process will conclude by late this year or perhaps early next year, and that will be the precursor to moving the legislation into the parliament.

Q: If TPP should fail, what would Australia's next move be?

A: I haven't entertained what happens in that scenario. Our encouragement is for the U.S. to ratify the agreement. And, of course, without U.S. domestic ratification, TPP doesn't come into effect. But the Australian government's position is that this is an agreement that should be supported, and we're moving in that direction.

Q: Is there any possibility of opposition in the Australian parliament, or room for negotiation?

A: [The opposition] haven't disclosed their position, so we'll wait and see. If Labor does the right thing on a bipartisan basis there should be no problems at all with the rest of the ratification.

From the government's perspective, we are not prepared to entertain any further discussion or negotiation. The agreement is as the agreement is.

Q: TPP ratification across the board has been delayed beyond initial expectations; the Regional Comprehensive Economic Partnership (RCEP) is also behind schedule. Has the TPP lag affected the RCEP's prospects?

A: No, [TPP and RCEP] are two separate processes. We have a good agreement on TPP; it warrants support. We have very high ambition in relation to RCEP. Australia's view is that we should try to secure as commercially meaningful and high-ambition an agreement as possible.

With RCEP, because of the 16 parties involved there will be, from time to time, different positions which come to the table, which affect the timing. If it can happen this year, fantastic; if it spills into next year, well, I think, better it spills into next year and we attain a high-quality agreement than rush to conclude an agreement that perhaps isn't as ambitious as it ought to be.

We know there are decades of policy orthodoxy which make very clear that engagement of free and liberalized trade promotes higher standards of living, stronger economic growth, creates employment opportunities. Australia is very focused on being a leading global advocate for free trade. This means we're mindful of the impacts of globalization, but recognize that these forces are also important drivers of prosperity, job creation and economic growth.

Q: There are some perceptions of protectionism, if we may call it that, in some Australian industries such as defense manufacturing. Is there any setback in terms of a free trade focus?

A: Not at all. Australia has always maintained exemptions in relation to defense industries and capability, and that is a position consistent with pretty much every other country on the planet.

The fact is that we continue to work with friends and partners in relation to manufacturing, and we took, recently, the decision to discontinue the subsidy to car manufacturing in this country. Clearly, one of the biggest beneficiaries, as a result, will be Japan's car industry. But we had to ultimately take the policy decision.

The flip side of that coin is that there are many other industries where we do have a comparative advantage, where we can gain better access to markets, including Japan. This is really underscores the great win-win outcomes that can be achieved through free and liberalized trade.

Q: We've seen some high-profile rejections from the Foreign Investment Review Board on recent company acquisitions. What is your position on that?

A: What I made clear was that our position has been consistent. We apply a non-discriminatory policy. We continue to make sure that any investment that isn't contrary to Australia's national interest is approved.

But if you look at the track record of FIRB, they receive, on average, around a thousand applications a year. Since 2001, I think we've had five or six rejections. It really does speak volumes about Australia's open approach.

Q: Japanese steel mills are troubled by rising coking coal prices, and by Western Australia's state-level government's proposal for an iron ore tax.

A: [The tax] is a policy announcement from the Western Australian Nationals [junior coalition partner]. The federal Nationals and federal coalition aren't supportive of that proposal. We live in a federation; it's not something that we control centrally.

Australia has a strong and proud history of being a very reliable partner when it comes to the supply of commodities, and it's an area that we take very seriously. We recognize our low sovereign risk profile in this regard, and we're very committed to it as a matter of policy as well.

Q: What are your thoughts on the recent signs of recovery in commodity prices for Australia?

A: As a government, we're very focused on rebalancing the Australian economy away from the capex focus we've had around resources and energy. As we shift towards the construction phase, that's going to have an impact on prices.

I'm not a big believer in wishing and hoping for particular outcomes. I'm a realist, and we deal with the price as it is. Obviously, if we can achieve better terms of trade, then that's a great outcome. But the market does as the market does.

Q: Is there any specific field where you'd like to attract Japanese investment?

A: One of the key areas I'd specifically mention is, of course, the focus that we've put on Northern Australia. We have our Northern Australian Infrastructure Facility of $A5 billion that we've set aside to provide a catalyst for investment. It's an area with some 18 million hectares of arable land; fewer than 1 million people; it achieves 60% of Australia's annual rainfall and yet we capture only 2% of that. We want to make sure we drive infrastructure investment -- road, rail, port, telecommunications, water, electrification -- all key assets which will prove a solid return, a multi-decade return, for long-term, patient capital, recognizing this incredible opportunity in Northern Australia, especially given its proximity to Asia.

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