- Future priorities and focus areas
Overview
6.1Throughout the inquiry the Committee received evidence broadly outlining a range of priorities, focus areas and considerations for Australia’s approach to trade into the future. In relation to new and existing trade agreements, some submitters emphasised the need for continued focus on market access, particularly for agricultural products, through the removal of both tariffs and non-tariff barriers. Others identified the need to build awareness and capacity to assist business to utilise opportunities under existing agreements, particularly for small and medium sized enterprises (SMEs). The complexity and costs of using agreements was also discussed, particularly those that arise from rules of origin.
6.2Submitters also reflected on the preference for certain types of trade agreements and reform. Many observed that the multilateral framework and rules-based trading system is in Australia’s best interests, and that it should remain the priority for Australia. In relation to bilateral and plurilateral agreements, several noted their inferiority to multilateral agreements and the potential limited value in further such agreements, while others emphasised their significant benefit in the absence of progress on multilateral outcomes. Some submitters also discussed the issue of dumping and whether Australia’s anti-dumping framework is fit for purpose.
Establishing new and utilising existing agreements
Market access, tariffs, and non-tariff barriers
6.3The Committee received evidence emphasising that Australia should continue to prioritise maintaining, gaining, and improving export market access for agricultural products by seeking to reduce distortions in global markets. The significance of open market access for Australia’s agricultural industries is discussed in Chapter 2.
6.4Several submitters suggested that Australia should focus on concluding bilateral agreements currently under negotiation, upgrading existing agreements and seeking opportunities for new agreements. For example, Australian Pork Limited (APL) stated that it encourages the Australian Government to conclude agreements currently under negotiation, improve existing agreements, and initiate new agreements with important trading partners. Similarly, the National Farmers’ Federation (NFF) suggested that there are opportunities to secure market access by ratifying signed trade agreements and working with partner nations to ensure that they come into effect quickly as well as negotiating remaining commercially advantageous bilateral agreements.
6.5The NFF, CropLife Australia, GrainGrowers Limited and APL all specified the need for ‘commercially meaningful’ export market access to be placed at the centre of Australia’s trade negotiations. The NFF elaborated that in some cases improved market access outcomes achieved by agreements are not logistically feasible or financially viable to be utilised by the agriculture sector. Similarly, CropLife Australia stated that: ‘…the negotiation of an FTA [free trade agreement] must result in commercially meaningful outcomes... there is little benefit in entering into Free Trade Agreements [FTAs] if they do not provide farmers with genuine, unfettered access to the trading partner’s market.’
6.6Submitters emphasised that improved market access must be achieved through addressing both tariff and non-tariff barriers to trade. For example, GrainGrowers Limited explained that: ‘Capturing the ongoing benefits of liberalising trade will require Australia’s trade negotiations to continue to focus on traditional barriers, such as tariffs and tariff-rate quotas, along with broader technical market access and multilateral engagement.’
6.7Mr Kade Denton, General Manager, Trade and Economics at the NFF told the Committee that there are opportunities to improve access under existing agreements:
I think too much of a focus on what's next often means that we miss the question around are we fulfilling the existing opportunities as much as we can. I think that there are a lot of non-tariff measures and non-tariff barriers that are hindering the uptake of that existing market access…
6.8To improve market access, including through addressing non-tariff barriers, the NFF recommended that the Australian Government:
- Ensure trade agreements have review and cooperation mechanisms, encompass a systemic approach on resolving non-tariff barriers and include the ’most favoured nation’ principle.
- Review, and where necessary, renegotiate existing bilateral agreements to ensure that Australian agricultural products have the most favourable and, at a minimum, competitive access rights.
- Beyond tariff reductions, actively work with trading partners and domestic industry to resolve non-tariff barriers that have a tangible impact on market access.
- The NFF also emphasised the importance of promoting and protecting Australia’s global trading reputation as a leading exporter of high-quality, safe, and sustainable food and fibre. It noted that doing so is critical to secure new market opportunities and the resilience and longevity of the agricultural sector.
Awareness and facilitation of opportunities under existing agreements
6.10Some submitters indicated that there are barriers in place preventing the uptake of opportunities under existing trade agreements and that Australia should focus on assisting businesses to better utilise the opportunities available. For example, the Australian Industry Group (Ai Group) advised that many businesses have limited awareness of the potential benefits of Australia’s trade agreements or find it difficult to navigate the complexities. Likewise, the Business Council of Australia (BCA) stated that: ‘Australian business has not always been able to make the best use of FTAs, either due to a lack of understanding of an agreement’s provisions or because of the complexity of rules that make the agreement less workable.’
6.11The Productivity Commission observed that the substantial increase in the number of bilateral trade agreements has resulted in ‘ad hoc and piecemeal’ arrangements that impose large compliance costs on businesses that seek to utilise Australia’s trade agreements.
6.12Mr Kade Denton, General Manager, Trade and Economics at the NFF told the Committee about the importance of providing information to facilitate opportunities under existing agreements:
That should be a strong focus for the government to make sure… that there is enough information out there for businesses and farmers to make informed decisions about what market opportunities they take up when there is that question around risk in the market—that is an opportunity for farmers to make business decisions, and it's making sure they have the information available to do that in an informed way.
6.13Ai Group outlined that increased use of agreements could be supported by an comprehensive outreach and training strategy led by the Department of Foreign Affairs and Trade (DFAT) and the Australian Trade and Investment Commission (Austrade) in collaboration with industry bodies that could include engagement with stakeholders on their needs and concerns, consultation on agreements to design simpler to use provisions, customised sector-specific training programs, in person workshops and seminars, digital learning platforms, and communications campaigns outlining opportunities and showcasing success stories.
6.14The BCA noted that consultation and engagement during the negotiation process assists to socialise the benefits of trade agreements and ensure stronger uptake once in force.
6.15Austrade outlined its responsibility to facilitate trade and investment and stated that it: ‘… focusses its trade facilitation efforts on: marketing and promotion activities that highlight Australia’s expertise and credentials; assisting Australian businesses reach markets through trade information services; connecting individual businesses to potential buyers; and undertaking economic and data analysis to support trade and investment market insights.’ It also explained that it regularly engages with businesses to provide education on how to benefit from an agreement and routinely supports business delegations to maximise the uptake and benefit from agreements.
6.16DFAT outlined some of the online methods it uses to support business to understand the benefits and requirements of Australia’s trade agreements including the FTA Portal website providing easy to access information; a suite of materials on objectives, updates and outcomes of trade negotiations; and specific user guides for each agreement. It further explained that it enhances business awareness and use of agreements by participating in industry stakeholder events; maintaining an active social media presence; fielding queries from businesses; direct engagement with the business sector; and producing the regular ‘Business Envoy’ magazine to provide updates, insights, opportunities and showcase success.
Small and medium sized enterprises
6.17Several submitters noted that small and medium enterprises (SMEs) face significant challenges in entering international markets and deriving benefits from Australia’s trade and investment agreements.
6.18The Australian Small Business and Family Enterprise Ombudsman advised that Australian SMEs contribute a significantly smaller proportion of goods exports in comparison to countries in both Group of Seven (G7) and European Union (EU). It recommended that to maximise opportunities Australia should ensure a dedicated SME chapter in its trade and investment agreements, as well as integration of relevant provisions throughout agreements to reflect the commercial and operational realities of SMEs.
6.19Mrs Sarah Whelan, Chief Executive Officer of the Karratha and Districts Chamber of Commerce and Industry, noted some of the barriers facing SMEs in remote areas:
Definitely it would be the knowledge. A lot of people are unsure of how to go about it and how to enter those markets. They do have products and services that are available, but making those connections with the international market is challenging because of where to start … The other one would be the logistics. We have a lot of ports up here, but a lot of them are privately owned, so it is understanding the logistics because we are quite remote. How to go about it would be another one. And also access to financial resources, because, obviously, if you are going out to that global scale, how do you access funding?
6.20Austrade advised that the majority of clients for its outreach and engagement activities, both direct one-on-one and broad engagement, are SMEs, with activities targeted on first identifying their priorities for what is included in agreements and then understanding how agreements can be utilised.
6.21Dr Robert Harrison, Board Member at the German Australian Business Council (GABC), told the Committee that in Germany local chambers of commerce and industry are successfully utilised to support uptake of opportunities under the EUs trade agreements, including many SME’s. Dr Harrison added that: ‘… that's one of the ways that the Australian government could help and the state governments could really help engage small and medium businesses within it… it's this hand-holding experience that I think has been extremely successful and that, in my experience, is somewhat lacking in Australia.’
6.22Voices of Korean-Australian Businesses noted the potential for diaspora communities to contribute to identifying business opportunities in their communities to take advantage of trade agreements.
Complexity and costs of agreements
6.23The Productivity Commission noted the increased complexity arising from the proliferation of bilateral trade agreements, many of which have inconsistencies, making them difficult to understand and to administer as well as imposing significant compliance costs. It stated that as a result: ‘The detrimental effects of compliance and administration costs can easily outweigh the expected gain to businesses and consumers from the lower tariff rates that flow from these agreements, such that they may not produce a net overall benefit.’
6.24The Productivity Commission noted that administration costs will be lower when agreements are as simple as possible and broad rather than product or sector specific. It advised that the primary source of complexity is associated with rules of origin that are required by bilateral and plurilateral agreements to determine which goods have access to provisions under an agreement. It added that trade agreements will not deliver their potential benefits unless future agreements reduce rules of origin stringency and work toward removing them altogether. This could be most effectively achieved by unilateral (most favoured nation) tariff liberalisation that would make importing simpler and less costly and assist Australian exporters through lower input costs.
6.25The Department of Home Affairs also commented on changes to rules of origin to support increased trade:
… to support use of FTAs by Australian exporters, the implementation of FTAs needs to include a focus on ensuring they remain current by either transposing [rules of origin] to the current tariff nomenclature or amending FTAs to include new [rules of origin] that reflect modern production processes. Where [rules of origin] have been transposed, these should be implemented expeditiously in order to benefit Australian traders.
Types of trade agreements and reform
6.26Submitters provided evidence in relation to the types of trade agreements and trade reform that Australia should pursue in the future, particularly focussing on the preference for multilateral agreements and the rules-based trading system over bilateral and plurilateral agreements, whilst also recognising a role for bilateral and plurilateral agreements in the absence of progress on multilateral outcomes.
6.27As noted in Chapter 2, the multilateral trade framework and global rules-based trading system has broken down in recent years, subsequently leading to a rise in bilateral and plurilateral agreements.
Multilateral agreements and the rules-based trading system
6.28Submitters highlighted that Australia has benefitted from and strongly supported a multilateral approach to trade and the global rules-based trading system. DFAT explained the benefits of the global rules-based trading system for Australia:
Australia’s economy relies on the predictability and stability provided by a strong, open and rules based global trading system, centred on the World Trade Organization (WTO). The WTO’s framework of rules enhances transparency and market access for our exporters and investors, and provides a mechanism for all WTO members, regardless of size or economic weight, to enforce those rules. …[Australia’s] bilateral and regional agreements rest on the foundation of global trade rules established under the WTO.
6.29Ms Philippa King, Deputy Chief Executive Officer, Policy and Programs at Austrade also explained that the multilateral framework underpins Australia’s approach to trade and that Australia has always supported the multilateral system:
The multilateral framework is the overall underpinning of the way we trade and invest as a country… We're known as an open economy; as an economy that wants to do business with others and has continued over many years to pursue outcomes that liberalise markets globally; and as a strong backer of those efforts in the multilateral system and a strong supporter of that system.
6.30The Productivity Commission also noted Australia’s history of support for the international rules-based global trading system as well as of efforts to reform and modernise these rules. It added that in recognition of the distortionary effects that selective trade barriers, Australia has advocated for a non-discriminatory multilateral approach to trade whereby developed countries are treated equally with concessions for developing countries.
6.31Several submitters broadly identified that Australia’s best interests are held in multilateral agreements and the global rules-based trading system. For example, Australian Fair Trade and Investment Network (AFTINET) stated that: ‘… non-discriminatory multilateral rules-based trade negotiations are preferable to preferential bilateral and regional negotiations that discriminate against other trading partners.’
6.32The Media, Entertainment and Arts Alliance (MEAA) noted that it considers that Australia’s trade objectives are best achieved through multilateral agreements and specified that multilateralism delivers greater benefits to Australia than those achieved in bilateral trade agreements.
6.33The Red Meat Advisory Council (RMAC) explained how the multilateral, rules-based trading system has benefitted the red meat industry:
The multilateral process, despite its shortcomings, has preserved and enhanced Australia’s economic interests. In so doing, WTO negotiations concluded to date have produced direct benefits for the red meat sector by reducing a number of border protection measures – primarily through tariff reductions as well as transparency of trading partners’ technical barriers to trade. The WTO has also proved invaluable via the rules that govern trade and in settling trade disputes, which has directly assisted in keeping some of our key markets open or via reinstating lost access.
6.34Dr Hazel Moir outlined that multilateral agreements are favourable in comparison to bilateral agreements: ‘… the reason why multi-lateral agreements are strongly preferred to bilateral agreements is that they set a global level playing field, fostering improved competition for all parties. In contrast, bilateral treaties can be trade diverting rather than trade enhancing, reducing the chances that they promote welfare and, in some cases, even leading to a reduction in welfare.’
6.35RMAC stated that the WTO remains the best opportunity to fix many of the structural problems associated with market access, such as domestic support measures and export subsidies, and that many distortions to trade in agriculture can only be addressed multilaterally. The NFF recommended that Australia should: ‘Advocate for a re-invigorated World Trade Organization (WTO) capable of playing a functional role in upholding the rules-based trading system, and vigorously pursue Australia’s interests in the multilateral space.’
6.36Ai Group suggested that as future benefits from agreements focussed on market access objectives reach a plateau, Australia must redirect its focus toward building an open global trade system and establishing rules for emerging trade issues.
6.37Mr Tim Yeend, Associate Secretary, Trade and Investment Group at DFAT told the Committee that while bilateral and regional agreements have increased in recent years, a multilateral approach remains the fundamental goal and that Australia remains committed to supporting and reforming the multilateral system so that it delivers for Australia, the region and globally.
Bilateral and plurilateral agreements
6.38Some submitters provided evidence challenging the merits the bilateral and plurilateral agreements, while others acknowledged that a multilateral approach is preferred but identified a role for bilateral and plurilateral agreements.
6.39Both the Productivity Commission and Dr Moir contended that bilateral and plurilateral trade agreements are more accurately described as ‘preferential trade agreements’ [PTAs] which make preferential arrangements for trade between countries signatory to the agreement. Such agreements may primarily divert existing trade from one country to another rather than create new trade and may provide little if any net benefit. They also result in fragmented rules governing international trade which impose substantial compliance costs on business seeking to utilise the agreements.
6.40The Productivity Commission indicated that while multilateral agreements are strongly preferable, bilateral and plurilateral agreements can be beneficial in the absence of progress on multilateral negotiations:
Preferential trade agreements are practical workarounds to the impasse on multilateral reform. Given their fragmented and piecemeal nature, they are inferior to multilateral reform and involve compliance costs. They are generally viewed as being better than no reform, but it is important to avoid preferential agreements from being barriers to multilateral agreements.
6.41Several submitters that argued in favour of a multilateral approach explained the important role for bilateral agreements given the lack of multilateral outcomes. Mr Pat O'Shannassy, Chief Executive Officer at Grain Trade Australia (GTA) told the Committee that: ‘In terms of the free trade agreements [FTAs], we believe very strongly in free trade and a rules-based trading system. In free trade agreements [FTAs], where the more multilateral system has probably not succeeded as we would like, they at least allow us to trade on a bilateral basis.’
6.42Similarly, RMAC argued in favour of a multilateral approach to international trade whilst stating that the multilateral process should be supplemented by closer bilateral ties with strategically important trading partners. The NFF also reflected that as multilateral forums have stalled, bilateral agreements are the primary tool for trade liberalisation and expanding market access.
6.43Both the Productivity Commission and DFAT suggested that bilateral and plurilateral agreements can provide the basis for progress toward multilateral outcomes. Mr Tim Yeend, Associate Secretary, Trade and Investment Group at DFAT told the Committee that: ‘… it's not always easy to advance the multilateral agenda, but what we've seen is that quite often the agreements you strike at the bilateral or the regional level can be building blocks to multilateral outcomes.’ The Productivity Commission proposed that Australia should continue to invest in the development of plurilateral and sector specific agreements, adding that: ‘A plurilateral approach to trade negotiation can bring many of the benefits of multilateral negotiation and may be a stepping stone to multilateral liberalisation.
6.44Some submitters made the point that bilateral and plurilateral agreements should be consistent with the multilateral rules-based trading system and not act as a barrier to future multilateral agreements.
6.45DFAT and Austrade noted that Australia’s national interest is best served by having a complimentary set of bilateral, plurilateral and multilateral agreements.
Marginal benefits of future agreements and unilateral reform
6.46Some submitters contended that the scope for gains from additional trade agreements may be marginal, particularly as FTAs already cover most of Australia’s major trading partners outside the EU. Professor Alexander Robson, Acting Chair at the Productivity Commission, explained the potential limited scope for further gains:
While moving towards greater liberalisation of trade arrangements is still likely to be beneficial, there is a good chance that the specific benefits of PTAs, both for exports and imports, may have plateaued.[67]
6.47Similarly, Ai Group indicated that: ‘With FTAs established with its major trading partners… the returns from the market access objectives are approaching a plateau.’
6.48The Productivity Commission noted the gains from reductions in tariff barriers and the removal of other restrictions on imported goods as a result of trade agreements, while stating that: ‘… the potential for similar gains from future agreements will decline as the number of agreements to which Australia is a signatory increase and as more of Australia’s trade is covered by such agreements.’ Consequently, Australia may have already realised most of the advantages of increased competition and cheaper goods and services arising from bilateral trade agreements.[70]
6.49The Productivity Commission outlined the case for Australia to take unilateral action, that is introducing reform to reduce trade barriers without trading partners taking similar actions, noting that doing so could bring substantial benefits in the national interest. As an example, it drew attention to previous research suggesting that revenue from remaining tariffs in Australia is effectively negated by the administration and compliance costs of those tariffs. It added that the case for retaining tariffs as a negotiating tool is weak given that they are already low, impose significant costs on importers, and that it forgoes benefits that could increase wellbeing.
6.50Dr Moir argued that as Australia now has very low tariffs, the major source of benefit is in domestic reform rather than market access for exporters. ‘When Australia reduces tariffs, many consumers benefit and many firms find their input costs reduced. This economy wide improvement in competitiveness contrasts sharply with the small set of beneficiaries from improved access to a particular segment of an overseas market…’
Anti-dumping framework
6.51Both the Australian Workers’ Union (AWU) and Australian Council of Trade Unions (ACTU) submitted that a robust anti-dumping policy is critical to ensuring Australian industry remains competitive.
6.52Dumping occurs when products from one country are introduced into another country at less than the normal value of those products. The AWU explained that Australia has the capacity to introduce tariffs to reflect the significant government subsidies that allow overseas manufacturers to charge less than cost for their outputs. It advised that a range of anti-dumping measures are in place to protect products such as aluminium extrusions, ammonium nitrate, steel, wind towers and railway wheels (among others), which would otherwise be forced to compete against subsidised products.
6.53The AWU suggested that Australia should make better use of its rights to enact anti-dumping measures: ‘… to defend Australian jobs and interests from unfair trade.’ It also noted that: ‘… while China and other countries have sought to fully exploit anti-dumping measures against world-standard Australian exports like barley and wine, the Australian Anti-Dumping Commission is showing increasing reluctance to intervene to protect the competitiveness of our industries.’ As an example, it highlighted the removal of tariffs on steel grinding balls on their expiry in September 2021.
6.54The AWU suggested that a review of existing anti-dumping laws should be established to ensure that they are fit for purpose and that Australia is taking a strong and robust approach to respond to dumping. Both the AWU and the ACTU recommended that the Australian Government ensure that the Anti-Dumping Commission, Anti-Dumping Review Panel, International Trade Remedies Forum, and the Department of Industry are adequately resourced to investigate and enforce anti-dumping measures as well as that relevant agencies have broad industry and union representation to support them in delivering their functions.
6.55The Maritime Union of Australia (MUA) proposed that the Australian anti-dumping system requires reform to clarify that shipping services are within scope for investigation by the Anti-Dumping Commissioner and or by the Minister. It further explained that:
… the ‘price’ of foreign registered ships engaged in trade with Australia i.e. the freight rate (the proxy for the price of the ship or shipping service) for Australian importers that involves a sea transportation component is lower than the price (the freight rate) that a domestic user of ships is required to pay in the domestic market of many exporting countries, particularly developed exporting nations, and as such falls within the definition of dumping as specified by the World Trade Organisation (WTO).
Committee comment
6.56The Committee agrees that market access objectives, including through the removal of tariff and non-tariff barriers should continue to be a priority for Australia. Further, it recognises that these objectives are vital to the continued success of many Australian industries, including agriculture.
6.57The Committee acknowledges the significant effort of both DFAT and Austrade to building awareness and capacity to enable business to utilise opportunities under Australia’s existing agreements. There are always improvements that can be made, particularly in regard to the engagement of SMEs with trade.
6.58The Committee is of the view that Australia best interests have been and will continue to be achieved through commitment to a multilateral approach to trade and the rules-based trading system. While multilateral outcomes should be the priority for Australia, plurilateral and bilateral agreements can continue to bring additional benefits and further Australia’s trade interests. However, the Committee notes the evidence that bilateral agreements have the potential to divert existing trade and that the benefits of additional bilateral agreements may be marginal. As such, it is vital to determine that further bilateral agreements have a net benefit and are in the national interest.