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Australian Government - Department of Foreign Affairs and Trade

Advancing the interests of Australia and Australians internationally

Australian Government - Department of Foreign Affairs and Trade

Advancing the interests of Australia and Australians internationally

Department of Foreign Affairs and Trade :: 2001-2002 Annual Report
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Output 1.1:

Protection and advocacy of Australia's international interests through the provision of policy advice to ministers and overseas diplomatic activity

1.1.1 North Asia

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Overview Click to view related information - opens in new window

North Asia is an area of great strategic significance for Australia. Developments there crucially affect the security of the whole of East and South-East Asia. North Asia is also home to three of Australia's top five trading partners, and four of the top ten. The department's goal of closer engagement with North Asian countries, through strengthening the levels of cooperation and dialogue, remains vital to ensuring Australia's interests are taken into account.

The visit to China in May 2002 of the Prime Minister, Mr Howard, advanced Australia's political and economic interests. It was important in successfully promoting Australia's goal of a strategic energy relationship with China. It also enabled the department to pursue negotiations for a new framework agreement on trade and economic relations. Separately, the department conducted the fifth round of the bilateral human rights dialogue with China.

The visit to Australia in May 2002 of Japan's Prime Minister, Junichiro Koizumi, helped further to strengthen Australia's relations with Japan. The department worked successfully in the lead up to and after this visit to develop the timing and modalities for discussing a bilateral trade and economic agreement. Our support for earlier visits by Mr Howard and Mr Vaile to Japan also helped to advance this key political and economic goal.

Despite the global economic downturn, Australia's trade with North Asian economies either remained stable or continued to grow, with exports reaching a total of $49.3 billion in 2001-02. The department was closely engaged in work leading up to accession to the WTO by China and by Taiwan (as Chinese Taipei) in late 2001, with its promise of significant new commercial opportunities.

We organised the ministerial launch of a study on Australia's economic relations with the Republic of Korea (ROK). We also worked to further Australia's security interests on the Korean Peninsula through broadening contact with the Democratic People's Republic of Korea (DPRK), leading to re-establishment of the DPRK embassy in Canberra.

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Japan Click to view related information - opens in new window

The department continued efforts to update and invigorate Australia's relationship with Japan-our largest merchandise export market and a close security partner in East Asia. A key focus of our efforts was to update the trade and economic relationship. Building on strong and diverse ties, we also worked to strengthen dialogue and cooperation on security and defence.

We were active in advancing prospects for negotiation of a new bilateral trade and economic agreement with Japan. Our extensive efforts contributed to the commitment by Mr Howard and his Japanese counterpart, during the latter's visit to Australia in May 2002, to launch high-level consultations to explore all options for deeper economic links. The Secretary visited Japan in June 2002 and secured Japanese commitment to a work program that will culminate in a report to government leaders in mid-2003 on the way forward. Throughout this process, the department undertook extensive consultations with key parties, including business groups and state governments, as well as other Australian government agencies, to ensure their interests were reflected appropriately.

The department provided strong support for Mr Vaile's visit to Japan in April 2002. This visit advanced Australia's economic and commercial interests through discussions with counterpart ministers on trade liberalisation issues and market access barriers. We also provided substantial policy and logistical support for the visit to Japan by Mr Howard in August 2001. The exchange of high-level visits between Australia and Japan helped strengthen the profile of the bilateral relationship in both countries. Disappointingly, however, the Australia-Japan Ministerial Committee meeting was not held, due to Japanese scheduling difficulties.

The strong common security interests of Australia and Japan were underlined in the aftermath of the 11 September 2001 terrorist attacks in the United States. We welcomed Japan's decision in late 2001 to commit 680 personnel to peacekeeping operations in East Timor. We worked closely with Japan on regional and international security issues such as terrorism and weapons of mass destruction, including in the context of the ASEAN Regional Forum. We also played a lead role in facilitating the establishment of inaugural '1.5 track' security talks. These are talks involving officials in their private capacities and experts from other sectors (to be staged in the second half of 2002).

The department and the post made a crucial contribution to protecting the interests of Australian beef exporters following the discovery of BSE in Japan in September 2001. After an initial plummet in sales of all imported beef to Japan, we took a proactive role in advocating the safety of Australian beef to Japanese consumers and the media. By June 2002 sales of beef in Japan had returned to 80 per cent of pre-BSE levels, recovering from falls of around 40 per cent.

Following our efforts over the previous year to help resolve a long-running dispute over southern bluefin tuna, we maintained a close dialogue with Japan to ensure that principles of sustainable fisheries management were maintained, and that the issue did not again become a bilateral irritant. This issue will continue to require very close monitoring.

As part of the Government's efforts to update Australia's image in Japan as a modern, sophisticated economy, we played an important role in facilitating the visit of a trade mission comprising information and communications technology (ICT) industry representatives to Japan in October 2001. The visit proved positive in highlighting the world-class capability of Australian ICT.

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China Click to view related information - opens in new window

The department focused on deepening the strategic relationship with China, both at the political and economic levels. The thirtieth anniversary of diplomatic relations, China's hosting of APEC and its accession to the WTO provided key landmarks to achieve this end. China became Australia's fourth-largest merchandise export market in 2001-02.

The department gave high priority to the visit to China by the Prime Minister, Mr Howard, in May 2002-his third to China as Prime Minister. The visit advanced important Australian interests in trade and political relations, including by providing critical support for Australia LNG's bid to supply gas to Guangdong province. The Prime Minister also secured Premier Zhu Rongji's agreement to negotiate a framework agreement on trade and economic relations. The framework will provide a sounder foundation for each side to take advantage of new commercial opportunities.

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Minister for Foreign Affairs Alexander Downer with Chinese Foreign Minister Tang Jiaxuan during Mr Tang's visit to Australia in March 2002. Photo by AUSPIC.

The Prime Minister's visit also produced agreement to resume bilateral talks on regional security and disarmament issues. We played a central role in supporting and developing initiatives for the visit, including Mr Howard's address to China's important Central Party School, the first by a foreign leader.

Sustained effort was devoted throughout the year to securing Australia LNG's bid for a major energy supply contract (China announced in August 2002 that the bid had succeeded). In view of the Government's key goal of establishing a long-term strategic energy relationship with China, the department and posts in China pursued a closely coordinated whole-of-government strategy with business to close the deal.

Departmental and post support for a large number of visits by federal ministers and leaders of states and territories helped advance economic opportunities. Major visits supported included participation by the Prime Minister, Mr Howard, in the APEC Leaders Meeting in Shanghai in October 2001. Mr Vaile's meeting with Premier Zhu Rongji at the high-level Boao Forum in April 2002 further advanced the Australia LNG bid and the economic framework agreement ahead of the Prime Minister's visit.

Although visits to Australia by Chinese ministers remain relatively few, the department was successful in securing a visit to Australia by Tang Jiaxuan in March 2002, the first visit by a Chinese foreign minister since 1992. The visit enabled exchanges on specific trade issues, China's treatment of Falun Gong adherents and Tibet. The department also worked in its dialogue with China for an improvement in US-China relations and a steady calming of cross-straits relations, to enhance regional security. Progress on both has been welcome.

Our work to achieve progress on humanitarian issues took a further step forward at the fifth round of the bilateral human rights dialogue in November 2001, with the Chinese side for the first time providing considered responses on individual human rights cases. China also announced a review of its criminal law to remove the scope and incentive for the use of torture. Human rights in China remain a concern in Australia.

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Republic of Korea Click to view related information - opens in new window

The department continued to focus on enhancing Australia's wide-ranging strategic, economic and people-to-people relationship with the ROK.

We continued Australia's active support for greater inter-Korean cooperation and reconciliation (see below, under Democratic People's Republic of Korea, for further detail). The department, including through our post in Seoul, worked with the ROK to develop responses to regional and international security issues such as terrorism and weapons of mass destruction. In the annual bilateral senior officials' talks in Canberra in April 2002, we encouraged the ROK to support Australia in enhancing regional security, including in organisations such as the ASEAN Regional Forum and on issues such as arms control and counter-terrorism.

In the sixth round of bilateral political-military talks with ROK officials in July 2001 the department focused on enhancing security on the Korean Peninsula and encouraging cooperation between Australia and the ROK in the region, for example in peacekeeping in East Timor. We subsequently assisted with arrangements for a visit by Korean defence personnel to participate in the fifth Australia-ROK military talks in July 2001. These talks strengthened defence cooperation, including through the conclusion of a new memorandum of understanding on defence industry cooperation.

The department worked actively to strengthen the bilateral trade and economic relationship with the ROK. When visiting Seoul in September 2001, Mr Vaile proposed that the two sides discuss the possibility of a bilateral trade and economic agreement to capture new comparative advantages arising from globalisation. This was a central recommendation of an Australia-Korea Strengthened Economic Partnership study, commissioned by the Australia-Korea Foundation and launched by Mr Vaile during his visit. The ROK has this proposal under consideration.

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Democratic People's Republic of Korea Click to view related information - opens in new window

Australia and the DPRK re-established diplomatic relations in May 2000 following a 25-year break. During the year, the department's main priority was to continue efforts to persuade the DPRK to engage more fully with the international community, and especially to resume bilateral dialogue with the ROK, and separately with the United States. To this end, we facilitated the re-establishment of a DPRK embassy in Canberra, which occurred in May 2002.

This process, and the increased access to DPRK diplomats which it brings, also enabled us to hold regular dialogue with the DPRK in support of regional and international efforts to encourage it to work more closely with the international community on preventing the proliferation of weapons of mass destruction, ballistic missiles and chemical and biological weapons; and to address the humanitarian situation in the DPRK.

We reiterated Australia's strong support for the 1994 United States-DPRK Agreed Framework and the work of the Korean Peninsula Energy Development Organization (KEDO) as central elements for nuclear disarmament on the Korean Peninsula and for reducing tensions in the region. Australia has provided $22 million to KEDO to date, the largest contribution from a non-Executive KEDO Board member. We also provided training in Australia for six DPRK officials in nuclear safeguards accounting, under the auspices of the International Atomic Energy Agency (IAEA).

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Table 5. Australia's regional trade with North Asian economies

Exports Imports
2000-01 $m 2001-02 $m Trend growth 1996-97 to 2001-02 % 2000-01 $m 2001-02 $m Trend growth 1996-97 to 2001-02 %
Japan 23 495 22 769 8.8 15 370 15 471 8.0
ROK 9 206 9 856 8.6 4 709 4 721 11.6
Taiwan 5 894 4 843 7.7 3 326 3 133 4.9
Hong Kong 3 909 4 004 3.3 1 362 1 410 9.3
China 6 841 7 781 18.1 9 881 11 278 22.2
Other 36 46 33.8 12 11 4.8
Total North Asia 49 380 49 299 9.3 34 660 36 023 11.6

Source: Compiled by DFAT from ABS data.

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Economic relationships in North Asia

Market access for Australian companies in Japan Click to view related information - opens in new window continued to feature prominently on the department's bilateral agenda. In 2001-02, bilateral merchandise trade was worth $38.2 billion, making Japan Australia's largest merchandise trading partner. Japan was also Australia's largest merchandise export market, with merchandise exports worth $22.8 billion.

In cooperation with other agencies, the department worked to secure equal and fair access to the Japanese market, particularly for agricultural commodities. During the year we registered our concerns over Japan's application of food standard regulations, particularly its distance from internationally accepted CODEX definitions.

We again argued for greater participation in Japanese races by Australian thoroughbred racehorses. We pursued market access for bovine semen and loosening of restrictions on the import of certain milk powders and other dairy products.

Our achievements in Japan included contributing to:

  • recognition of Australian organic food-certifying organisations as equivalent to Japanese certifying bodies, thereby streamlining certification processes and saving costs
  • completion of further long-term sales contracts of LNG to Japan (which have also facilitated Japanese investment in petroleum exploration in Australia)
  • lifting of a temporary ban on imports of Australian rice bags
  • agreement to begin in-transit disinfestation of citrus products that will result in fresher produce arriving in the Japanese market
  • obtaining 'equivalency status' on a number of Australian construction products including plywood, laminated veneer lumber, cypress pine and selected steel types expected to generate export revenue of over $60 million per annum in the next few years.

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Figure 5. Australia's merchandise trade with Japan

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Exports to China Click to view related information - opens in new window, our fourth largest merchandise export market, grew to $7.78 billion in 2001-02, up almost 14 per cent from 2000-01. Total merchandise trade with China was worth $19 billion, making it our third largest merchandise trading partner.

Following the agreement between the Prime Minister, Mr Howard, and Premier Zhu Rongji to negotiate a framework agreement on trade and economic relations, the department and Chinese counterparts have begun work to boost the economic relationship. This work is focused on developing sectoral strategies to promote trade and investment, and identifying new areas of mutual economic opportunity through a joint scoping study. Prospective areas include agriculture; energy and mineral resources; financial, legal, education and social welfare services; and the 2008 Beijing Olympics.

Other major achievements in China included:

  • assisting a leading Australian air traffic control system developer to secure a landmark $200 million contract with the Civil Aviation Administration of China in September 2001
  • improving market access for Australian wool and wool-tops to China by encouraging a more transparent and predictable wool quota allocation in 2002
  • taking forward a proposed memorandum of understanding to set out the quarantine requirements for Australian meat exports to gain better access to the Chinese market.

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Figure 6. Australia's merchandise trade with China

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The department continued to support the growing trade and economic relationship with the ROK Click to view related information - opens in new window. In 2001-02, bilateral trade was worth $14.6 billion, making the ROK Australia's fourth largest merchandise trade partner and third largest merchandise export market ($9.9 billion).

The department coordinated Australia's preparations and briefing for the second Ministerial Joint Trade and Economic Commission (MJTEC) meeting in Seoul in April 2002. Mr Vaile led the Australian delegation at the MJTEC meeting, the first held in the ROK, and raised a number of issues. These included Australia's credentials as a reliable energy and resources supplier, particularly of LNG and thermal/coking coal; Australia's strong interest in re-opening the live cattle trade; sales of Australian automotive parts to the ROK; and access for Australian financial and business consultancy services.

Market access gains for Australia in the ROK included:

  • the ROK's decision to allow freezing of chilled Australian beef exports, thus broadening sales possibilities
  • abolition of the ROK's dual retail system for beef, in accordance with a WTO decision, with improved prospects for sales of Australian beef.

The Australia-Korea Strengthened Economic Partnership study pointed to several sectors where government and private sector cooperation might achieve better commercial outcomes: ICT, biotechnology, environment technology, education and training, and other services (for example, banking, finance and business services). It concluded that Australian service and venture capital entities experienced in infrastructure privatisation and restructuring should be able to acquire a competitive edge in the ROK. The department is exploring follow-up action to the study.

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Figure 7. Australia's merchandise trade with the Republic of Korea

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The department advanced Australia's substantial economic interests in Taiwan Click to view related information - opens in new window, our ninth largest merchandise trading partner (with total trade worth just under $8 billion in 2001-02). Merchandise exports were worth $4.8 billion, making Taiwan our eighth largest merchandise export market. We strongly supported Taiwan's entry to the WTO (as Chinese Taipei) in January 2002. This has created significant trade and investment opportunities in the high technology, agribusiness, LNG and resources sectors.

We continued to support Australian companies in their bids to gain access to the Taiwan market. In particular, we made effective representations on outstanding quarantine and agricultural issues. We organised the fourth round of annual economic consultations, which consolidated our continuing efforts to diversify the composition of trade and strengthen investment links. The two sides agreed to undertake a joint study to address the disproportionately low levels of two-way investment.

The department contributed to the following outcomes during the year:

  • signing of a memorandum of understanding on agricultural and agribusiness cooperation between the Department of Agriculture, Fisheries and Forestry-Australia and the Taipei Economic and Cultural Office in July 2001
  • further progress towards concluding a working holiday-maker arrangement to enhance people-to-people links
  • aiding consideration by Parliament's Joint Standing Committee on Treaties of a bilateral nuclear cooperation agreement with the United States to cover export of Australian uranium to Taiwan.

Advancing Australia's profile as a competitive candidate for long-term LNG supply to Taiwan remained a priority.

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Figure 8. Australia's merchandise trade with Taiwan

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In 2001-02 Australia consolidated its strong trading relationship with Hong Kong Click to view related information - opens in new window as our ninth largest merchandise export market, worth over $4 billion. Total merchandise trade reached $5.4 billion, making Hong Kong our thirteenth largest merchandise trading partner. The department played a significant role in assisting a number of export successes, such as the sale of three fast ferries. Many smaller Australian companies secured lucrative commercial opportunities, particularly in consumer goods and food.

We worked to ensure that education remained a boom export, with student visas up 26 per cent and Australia retaining its place for the second successive year as the leading destination abroad for Hong Kong students. Hong Kong remained a leading export market for Australian services, and a major investment partner.

The department contributed to the following notable outcomes during the year:

  • conclusion of a memorandum of understanding establishing arrangements for a working holiday-maker scheme between Australia and Hong Kong in September 2001, further strengthening people-to-people links
  • an improved climate for negotiations to liberalise Australian access to Hong Kong's air services market, with bilateral talks recommencing in May 2002, following an eighteen-month hiatus.

Reporting against quality and quantity indicators and administered items begins on page 96.

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