Australia is one of the most open and successful economies in the world. Our openness to trade and investment and the competitiveness of our businesses overseas have made a major contribution to Australia’s 28 years of uninterrupted annual economic growth.
We are increasingly connected to global markets. In 2018 Australia’s total trade in goods and services increased by 11.6 per cent to $853 billion. The level of foreign investment in Australia increased 5.6 per cent to $3.5 trillion and the level of outward investment from Australia increased 7.6 per cent to $2.5 trillion.
This is good for our economy—one in every seven Australian jobs is with one of the more than 53,000 businesses that export goods and services. Compared with non-exporters, these businesses employ more staff, are more productive and pay more in average wages.
One in 10 Australian jobs is supported by foreign direct investment. This provides Australia with the capital needed to finance new productive capacity and to boost infrastructure.
Openness to global markets means household goods are cheaper and Australian consumers have greater choice. Over the past decade, the price of goods and services exposed to international trade rose by only 6.8 per cent, compared to a 23.6 per cent increase in prices overall.
In 2018–19 Australia’s trade agenda was as ambitious as it has ever been, but our operating context grew increasingly difficult. Escalating trade tensions between the United States and China increased uncertainty and the risk of unintended consequences for third parties. There is growing pressure on the global trading system to modernise and respond to the rise of large emerging economies, changing patterns of trade and new technologies.
In this dynamic global environment, the department’s efforts to advance Australia’s prosperity are more important—and more challenging—than ever.
Promoting open markets and global trading rules
The department’s efforts to increase Australia’s prosperity, create new opportunities for our businesses and deliver benefits to Australian consumers are underpinned by international rules, particularly those of the World Trade Organization (WTO).
However the WTO faces a number of serious challenges. The past year saw growing anti-trade sentiment in some countries, more unilateral trade measures and intensified trade tensions—which risk damaging the multilateral trading system. Despite increased engagement on WTO reform and progress on negotiations on e-commerce and other issues, agreement on significant outcomes remained out of reach. The WTO dispute settlement system—vital to enforcing our trade law rights and protecting Australian businesses—faces significant challenges and needs reform.
International economic forums such as the Asia-Pacific Economic Cooperation (APEC), the Group of Twenty (G20) and the Organisation for Economic Co-operation and Development (OECD) support an open global economy. Australia continued to use those forums to pursue our interests.
|Performance measure||How we rate our performance*|
|Effectiveness in supporting the global rules-based trading system and opening markets. Influential advocacy in favour of open markets, resisting protectionism and the rules-based trading system internationally and domestically.||On track but progress towards promoting open markets and global trading rules is under strain|
Source: Corporate Plan 2018–19 p. 12, PBS 2018–19 program 1.1 p. 29 | Funding: PBS 2018–19 program 1.1
We assess that we are ‘on track’ against this performance measure. Despite significant challenges to the open global trading system in 2018–19, Australia continued to be a key supporter of the WTO and an influential advocate for reform and open markets. We played a major role in leading the negotiations among WTO members on e-commerce and behind the border barriers to trade in services. We arranged for Australia to join the WTO Government Procurement Agreement and we completed negotiations on a number of free trade agreements (FTAs) that will open markets.
We continued to be a leading voice in the WTO on agricultural trade reform, both through our leadership of the Cairns Group (a coalition of 19 agricultural exporting countries) and our active defence of Australia’s agricultural interests. We raised concerns in the WTO about the agricultural policies of China, the European Union, India, the United States and other countries, with a focus on India’s subsidies for sugar and trade-restricting measures on pulses.
Australia’s participation in the WTO dispute settlement system advanced Australian interests and reinforced the system during a period of crisis. In 2018–19 we strongly defended ongoing disputes brought against Australia on tobacco plain packaging and on anti-dumping measures on A4 copy paper. We initiated two cases to enhance opportunities for Australian exporters of wine and sugar.
The department contributed to efforts to reform the WTO dispute settlement system, tabling proposals to resolve the impasse on appointments of new Appellate Body members. Without new members, the Appellate Body will not be able to hear appeals after December 2019. Despite our best efforts, WTO members failed to reach agreement in 2018–19, and work continues. Failure to resolve the issue will make it more difficult to enforce global trade law to the detriment of the multilateral rules-based trading system.
Over 2018–19 we helped bolster support for the global rules-based trading system in APEC, the G20 and the OECD, including at eight ministerial or leader-level meetings. Progress was difficult, as protectionist pressures and tensions among major economies continued to rise. In November APEC leaders were unable to agree to a leaders’ declaration, however agreement was reached in other forums, including by G20 leaders in June.
The department provided strong policy support for Papua New Guinea’s successful hosting of APEC in 2018. We worked closely with Papua New Guinea’s APEC team throughout the year to support its agenda. This included providing a digital economy expert to help Papua New Guinea develop its key theme as host: harnessing inclusive opportunities, embracing the digital future. We helped Papua New Guinea secure agreement from APEC economies to focus more strategically on building the region’s digital infrastructure and to develop better rules governing digital trade. This will help Australian companies doing business online with these fast-growing economies. We also launched an APEC fund on digital innovation with the Republic of Korea to help APEC economies implement policies that expand e-commerce and digital trade in the Asia-Pacific.
We delivered a series of APEC workshops on services and investment to accelerate recognition of professional qualifications. Improving recognition of qualifications will make it easier for Australians to work across the region and help encourage APEC economies to liberalise investment policy settings.
We participated in multilateral reform efforts to strengthen transparency and improve safeguards in investor-state dispute settlement (ISDS) arrangements. We also pursued ISDS reform, signing an updated investment treaty with Uruguay in April, which contains modern safeguards and reaffirms governments’ right to regulate.
Supporting Australian businesses to secure opportunities globally
Australia is at the forefront of negotiating comprehensive FTAs and new WTO rules. These provide our firms with new market openings, reduce the cost of doing business overseas, and deliver greater choice and more affordable products to Australians.
The 2017 Foreign Policy White Paper set an ambitious target to expand Australia’s network of FTAs to account for 80 per cent of our two-way trade by 2020. Completing FTA negotiations with the European Union and Regional Comprehensive Economic Partnership countries will see over 86 per cent of two-way trade covered by our FTAs. The government’s goal now is for FTAs to cover around 90 per cent of Australia’s two-way trade by 2022.
Trade agreements that link multiple economies help Australian businesses reduce transaction costs and better access global supply chains. We are working to increase the degree to which the major Indo-Pacific economies work together under common trade and investment rules.
|Performance measures||How we rate our performance*|
|Concluded free trade agreements with countries that account for over 80 per cent of Australia’s trade by 2020.||On track|
|Increased opportunities for Australian businesses.||On track|
Source: Corporate Plan 2018–19 p. 12 PBS program 1.1, p. 29 | Funding: PBS 2018–19 program 1.1
It is challenging to negotiate, conclude and implement comprehensive trade agreements with multiple countries that have varying trade and economic interests and different priorities for economic development. We would have liked to conclude some agreements more quickly than we did. On balance, we rate our performance against these measures as ‘on track’ given the progress we made and the opportunities created for Australian businesses, despite the challenges.
On 31 October Australia ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which entered into force on 30 December. The agreement has already delivered two sets of tariff cuts for Australian goods exporters. This includes reductions on Japan’s import tariffs on beef and numerous dairy products, and preferential access into Canada and Mexico.
Australia and Indonesia signed the Indonesia–Australia Comprehensive Economic Partnership (IA-CEPA) on 4 March 2019, launching a new chapter in our economic relations. Once ratified, this agreement will provide significant new market access and greater certainty for Australian exporters and investors in one of the fastest growing economies in the Indo-Pacific.
‘IA-CEPA will cement the existing relationship between Australian and Indonesian milling wheat industries, whilst allowing new trade, investment and relationships to flourish between Australia’s grain industry and Indonesia’s food manufacturing, stockfeed and livestock sectors.’
On 26 March Australia and Hong Kong signed the Australia–Hong Kong FTA and associated investment agreement. These agreements will guarantee duty-free access for Australian goods into Hong Kong, open services and investment settings, and help attract vital capital into new and existing industries in Australia.
The Peru–Australia FTA, signed in 2018, will give Australian industry immediate duty-free access to the Peru market for a range of goods, helping to diversify markets for Australian exporters.
We are working to ratify the FTAs with Indonesia, Hong Kong and Peru in the near future, and will bring these agreements into force.
We are negotiating a comprehensive and ambitious trade agreement with the European Union to give Australian exporters a competitive edge. An Australia–European Union FTA will open new opportunities for Australian companies in the very large European Union market, with its USD18.7 trillion GDP (2019) and population of 510 million (2018). It will also underline our shared commitment to supporting the global rules-based trading system.
We initiated a review to upgrade the ASEAN–Australia–New Zealand FTA, and deepened bilateral dialogue with Japan and the Republic of Korea on regional economic issues. We continued to pursue conclusion of Regional Comprehensive Economic Partnership (RCEP)—an FTA between the ten ASEAN member states, Australia, China, India, Japan, the Republic of Korea and New Zealand. Leaders of RCEP countries, including Prime Minister Morrison, have set 2019 as the deadline for concluding this agreement. We are negotiating with China on the RCEP and continuing to work towards the general review of the China–Australia FTA.
We were unable to reach the anticipated conclusion of the Pacific Alliance FTA (Chile, Colombia, Mexico and Peru) in 2018 due to changes of government in some Pacific Alliance countries that year; negotiations are ongoing.
We secured Australia’s accession to the WTO Agreement on Government Procurement, giving our businesses better access and certainty in bidding for government contracts in 47 new markets, including the European Union. The agreement covers around $2.3 trillion of government procurement annually, which will grow as other countries join.
We led efforts to launch WTO e-commerce negotiations on new rules for trading goods and services online. These negotiations help address barriers to digital trade and provide appropriate consumer protection on issues such as privacy and security.
We secured the support of 60 WTO members (representing over 70 per cent of world trade) to negotiate new rules to eliminate behind the border barriers to trade in services. When concluded, these will give Australian service providers greater regulatory certainty and transparency in overseas markets, including those delivering services online.
We led work on legislative changes to provide Export Finance Australia (formerly Efic) with an additional $1 billion in capital and an expanded mandate to finance overseas infrastructure development. Export Finance Australia can now help more Australian businesses, including small and medium enterprises, to take advantage of commercial opportunities from Indo-Pacific infrastructure projects, and help drive stronger commercial links between Australia and our region.
We also helped Australia’s defence industry secure export opportunities through the first two transactions under the Defence Export Facility. A $90 million loan to Canberra-based CEA Technologies will finance a new manufacturing facility to help grow the company’s exports. A loan of US$80 million to the Government of Trinidad and Tobago will support its purchase of two Austal Cape Class Patrol Boats—the first overseas sale of this class of vessel by Austal.
Ensuring domestic policies support trade and investment
Australia’s international competitiveness and economic resilience depend on our domestic policy settings, with significant implications for Australian firms doing business overseas and for our attractiveness as an investment destination. Decisions made as a result of our increasingly challenging national security environment can also have implications for our economic competitiveness. We worked to ensure that all relevant factors were considered by the government.
Public surveys, including the Lowy Institute’s 2019 poll—as well as the department’s own consultations—found most Australians support free trade, but also showed some increased community anxiety about globalisation. These concerns are closely linked to changing patterns of production, technology and its impact on wages growth and employment, and immigration and tax issues. In 2018–19 we worked to explain how openness to trade and investment improves the welfare of Australia’s economy and local communities.
‘Three-quarters of Australians (75%) say free trade is ‘good for [their] own standard of living’, up eight points since 2017, and 71% agree free trade is good for the Australian economy. A majority say free trade is good for Australian companies (65%) and creating jobs in Australia (61%, up six points from 2017). While 72% of Australians say globalisation is ‘mostly good’ for Australia, this has fallen six points from 2017 in a return to 2008 levels.’
|Performance measure||How we rate our performance*|
|Extent to which international competitiveness on trade and investment is factored into Australian economic policy settings.||On track|
Source: Corporate Plan 2018–19 p. 13 | Funding: PBS 2018–19 program 1.1
Over 2018–19 the department contributed to whole-of-government consultations and decisions relating to Australia’s competitiveness. This included policies on foreign investment, visas and migration, and energy and resources. We engaged in domestic policy formulation processes to ensure issues affecting our economy were considered and to explain the benefits to Australia of open economic settings. We assess that we are ‘on track’ against this performance measure based on the outcomes detailed below.
We helped enable strong inward foreign investment flows by contributing to 664 Foreign Investment Review Board application assessments. This was a 45 per cent increase in applications compared to 2017–18 and represented hundreds of millions of dollars in potential investment to support more jobs for Australians, including in agriculture, mining and critical infrastructure.
We also worked with Austrade to lift Australia’s profile as a destination for foreign investment, including through an annual investment statement to the parliament by the Trade Minister. Overseas investors continued to see Australia as an attractive destination, despite intense global competition for investment.
Supporting business to unlock new opportunities
The department is helping Australian businesses navigate a contested world while keeping in touch with their views and experiences. We held three strategic dialogues during the year with leaders in business and education on foreign policy and security issues.
The dialogues enabled frank exchanges between leaders and our Secretary. Business leaders shared their ideas about trade and investment, new and emerging technologies and threats to business, all of which affect strategic commercial decision-making. Discussions ranged across critical infrastructure, defence industry, emerging technology and natural resources. Ninety per cent of the participants who provided feedback felt the dialogues had informed their thinking on foreign policy and security issues.
Our analysis helped inform the government’s understanding of international economic developments and contributed to domestic policy settings designed to enhance Australia’s competitiveness. For example, we helped build understanding of the factors that make Australia an attractive destination for skilled migrants, including by contributing to the population and migration policy reforms announced by the Prime Minister in March.
We helped build understanding of the benefits of trade and investment, and the value of an open economy for Australia, including through our new cross-agency dialogue on Talking to the Australian Public about Globalisation. We refreshed our physical and online advocacy products to ensure we were communicating effectively with Australian businesses and consumers.
Young Australians learn about trade
Young Australians are learning more about the benefits of free trade through the department’s outreach activities. In March Year 10 students from South Australia and Queensland took part in an Australia–ASEAN Youth Forum.
Through role-play, participants learned more about ASEAN member countries and Australia’s relationship with the region. They shared what they had learnt about trade issues with the Trade Minister. A new interactive website—Australia’s Trade through Time—was launched at the forum, allowing users to trace the history of our trade and its contribution to making Australia one of the world’s most open and successful economies.
Over 2018–19 we responded to more than 2,400 requests for trade and investment data from the public, ministers and government departments. Government, business and community organisations use our data to make informed, evidence-based decisions.
Together with Austrade, the department improved the Australian community’s understanding of the important role of foreign investment. We released the Economic Activity of Foreign-owened Businesses in Australia report in August, helping inform public debate on foreign investment in Australia and explaining its economic effects. We also worked with the Australian Bureau of Statistics to publish more than 60 fact sheets about investment flows.
Supporting Australian trade and investment outcomes
We are working hard to strengthen the department’s economic and commercial diplomacy in response to feedback from Australian companies about how we can better help them find global opportunities.
The 2018–19 Budget provided $15 million over four years to increase support for Australian business. This includes whole-of-government efforts to address non-tariff barriers more effectively and a partnership with business to strengthen the competitiveness of our services sector. It also involves using our posts more effectively to support business, and greater efforts to help businesses understand how to use our free trade agreements.
|Performance measure||How we rate our performance*|
|Positive trade and investment outcomes supported by the department’s economic and commercial diplomacy, and domestic advocacy efforts.||On track|
Source: Corporate Plan 2018–19 p. 13 | Funding: PBS 2018–19 program 1.1
A key priority for our diplomatic missions around the world is helping Australian businesses achieve commercial outcomes. With Austrade, the department helped Australian companies address challenges overseas, briefed them on local business conditions to pre-empt issues and inform decision-making, and helped them find commercial opportunities and make new partnerships. We also engaged with partner countries to address systemic issues impacting Australian businesses, improve trade and investment outcomes, and remove regulatory burdens for Australian businesses overseas. In doing so, we highlighted the benefits of open markets to other governments and the value Australian businesses add to their economies. We assess that we are ‘on track’ against this performance measure.
Australia’s Non-Tariff Barrier Action Plan, launched in December, is a whole-of-government strategy to reduce or remove unjustified trade restrictions hampering Australian exports. We developed systems to enhance whole-of-government efforts to respond to non-tariff barriers—including a dedicated non-tariff barrier gateway (tradebarriers.dfat.gov.au)—and established a multi-agency trade barrier coordination team. Since its launch, we have identified more than 200 potential non-tariff barriers and, working with partner agencies, have made progress toward addressing a number of them.
Million-dollar opportunity for Tasmanian seafood exporter
A Tasmanian seafood producer is preparing to sell up to $4 million of seafood to China each season, after the department’s efforts increased access to the Chinese market.
The first query lodged through the Trade Barriers Gateway was from Huon Valley Seafood—a Tasmania-based seafood processing and packing business that employs 16 staff. Despite expanding export market access opportunities provided by the China–Australia Free Trade Agreement, one of Huon Valley Seafood’s products—Gould Squid—was not on China’s list of approved exports from Australia. In January—following long-term efforts by the department and other agencies—new seafood species, including Gould Squid, were granted market access.
‘We are anticipating sales between three and four million dollars next season, which will substantially increase our turnover and direct employment. The flow-on effect to the fishing industry and transport sector is also very positive. All these factors are important to the continued viability of our company and the industry.’
‘Improved market access for Australian seafood products into a diversity of markets is a great win, as suppliers will be able to grow their business to fill increased international orders.’
In 2018–19 we helped Australian professional bodies establish 13 new mutual recognition agreements. These set the framework for two-way recognition of qualifications and registration, including with Canada, France, Hong Kong, Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka and the United States. The agreements open new commercial opportunities for Australian accountants, engineers and quantity surveyors by allowing them to practice overseas without having to meet additional local registration or qualification requirements.
We initiated a partnership between Australia’s services sector and government to develop an industry-led Services Export Action Plan. We are working with business leaders to identify and address barriers faced by Australians offering services overseas. This will boost the competitiveness of Australia’s services providers and grow our services exports.
We worked closely with the Australian beef industry to secure continued access for Australian beef exports into the European Union. A deal struck between the United States and the European Union jeopardised Australia’s access to the valuable grain-fed high-quality beef quota. Although access will be reduced, our efforts—underpinned by WTO rules—secured a number of concessions, including an extended seven-year transition period for changes to the quota. We are working to improve access for our beef producers through the Australia–European Union FTA negotiations.
Our strong partnership with business in Europe
The department is fostering greater trade and investment links with Europe. During the 2019 European Australian Business Council mission to the region, we worked with Austrade to connect council members with trade and investment and public-private sector collaboration opportunities in France, Germany, Belgium, Denmark, Sweden and the United Kingdom.
We held the inaugural Australia–Germany Joint Economic Committee Meeting in Berlin. Participation from Australian and German ministers, senior officials and business leaders from Europe and Australia underscored the strong partnership and identified opportunities to enhance economic cooperation. This will build on the more than 700 German companies in Australia employing around 98,000 people in a range of sectors including advanced manufacturing, chemicals, financial services, infrastructure, and information and communication technologies. In 2018 Germany’s total foreign investment stock in Australia was valued at $49 billion, of which $24.3 billion was foreign direct investment—the 10th largest source of foreign direct investment in Australia.
We helped Australian business understand the potential economic implications of United States–China trade tensions for the Australian economy. We communicated this and other insights to inform business decision-making through briefings to Australian companies, and the Strategic Dialogue with Business on Foreign Policy and Security Issues.
We provided Australian businesses overseas with information on economic trends and commercial opportunities in foreign markets. In 2018–19 we released 50 new Market Insights reports to provide business with commercial intelligence—including political and economic analysis, and information about the business environment in key markets—to help them make informed decisions about their international operations. This information has been viewed online more than 4,000 times since November 2018.
To boost awareness and use of Australia’s FTAs, the department and Austrade delivered 23 information seminars during the year. Seventeen of these were in regional areas enabling us to reach small to medium-sized enterprises, and help them take advantage of our FTAs. Feedback from participants indicated a greater understanding about Australia’s trade agenda and the benefits that may be derived from the agreements.
We expanded the FTA portal (ftaportal.dfat.gov.au) which provides valuable information for Australian exporters. It now includes commitments made under the CPTPP, as well as on services in all our in-force FTAs. In 2018–19 the portal attracted an average of 2,600 users each week.
Our advocacy and support helped business take advantage of tariff preferences under our FTAs with China, Japan and the Republic of Korea. Use of our bilateral FTAs with these important North Asian markets has continued to be strong since entry into force. On average, the use of these agreements to gain preferential access for Australian exports to China, Japan and the Republic of Korea increased from 87 per cent in 2016 to 93 per cent in 2017.