It may only be Wednesday but this has already proven to be a busy week for the Abbott Government. The Prime Minister and his 600-strong entourage of ministers, state premiers and big names in business travelled to North-Asia to sign free trade agreements with Japan and Korea as well as to move along negotiations with the missing ‘trade trifecta’, China.
The Japan-Australia Economic Partnership Agreement (JAEPA), was confirmed by Trade Minister Andrew Robb in the Japanese capital on Monday afternoon. Japan is Australia’s second largest partner in two-way trade behind China. With 127 million people and extremely limited natural resources, Japan is regarded as the great prize by trade liberalisers because its economy has been so protected.
South Korea meanwhile, was offered a $1 billion investment threshold in its recently concluded free trade agreement with Australia. This privilege had previously only been extended to the US and New Zealand, two of Australia’s closest diplomatic allies. It would be hard to justify withholding a similar deal to Chinese investors.
In the background will also be talks on progressing the Trans-Pacific Partnership and, in parallel, the Regional Comprehensive Economic Partnership, two “pathways to the same destination” of freer trade. RCEP has the potential to create a new political and economic dynamic intended to push North East Asian countries and India to agree on outcomes that cannot be secured bilaterally. Furthermore, given the strategic policy differences between China, Japan, and Korea, RCEP could become the de facto forum for their trilateral FTA negotiations and regional disputes.
The correlation between economic prosperity and peace was highlighted in an Asia Society speech in Canberra last month where Prime Minister Abbott highlighted the importance of maintaining regional stability. Indeed, as Professor Peter Drysdale notes: “Getting Northeast Asian partners to lift their sights beyond backward-looking political troubles and focus on the regional economic cooperation opportunity and their role as stakeholders in the global system would be a real achievement of the Abbott mission.” The Prime Minister’s trip is designed to show that he is doing everything possible to advance relations with China, but also that Australia is not solely reliant on it.
As former DFAT economists, Mike Adams, Nicolas Brown and Ron Wickes suggest “Multilateralising regionalism is the central trade policy dilemma of our time.” FTAs will continue to proliferate, however with the mining boom more or less over, Australia must look beyond influencing the regional economic agenda and begin expanding its economic diplomacy further afield. The case for an Australia- EU FTA, as articulated by Donald Kenyon and Pierre van der Eng, is that it could stimulate demand for Australia’s non-resource sector exports. Currently this two-way trade is based on manufacturing and services whereas Australia-Asia trade is reliant on exchanging commodities for manufactures.
There is indeed a scramble for influence in our region and, though it remains uncertain where this competitive tension between different regional and prospective groupings may lead, the Government’s focus on economic diplomacy will remain key for Australia.
Katrina Senchuk is an intern at the Australian Institute of International Affairs National Office and post-graduate student at the Australian National University. She can be reached at firstname.lastname@example.org