Global trade and supply chain pressures have been front of mind at many points in the pandemic. These issues have come in numerous guises: from securing vaccine supplies and hoping Christmas packages clear customs, to reading about global chip shortages and waiting for the Ever Given to be freed from the Suez Canal.
As 2022 gets going, it is useful to look back at the Government’s recent trade agenda, see what’s coming down the line and consider what’s driving it all.
The Morrison government’s crowning trade achievement in 2021 was the signing of the highly anticipated free trade agreement with the United Kingdom. Trade Minister Dan Tehan overcame some uncomfortable seating provisions and other undiplomatic tactics to deliver Boris Johnson a much needed and highly symbolic win: the UK’s first end-to-end trade pact since Brexit.
The ambitious deal, which was struck in record time, is set to eliminate tariffs on over 99% of Australian exports to the UK and opens up more opportunities for workers and young people. It will enter into force later in the year.
Beyond bilateral trade efforts, 2021 was also notably the year the world’s largest free trade deal— the Regional Comprehensive Economic Partnership Agreement, or RCEP — made its way through our Parliament. After 9 years of negotiations, the final agreement brings ASEAN states together with Australia, China, Japan, South Korea and New Zealand in a multilateral pact covering 30% of both the global population and global GDP. RCEP entered into force on New Year’s Day and speaks to Australia’s further enmeshment in the Indo-Pacific trading order.
With RCEP done and dusted and the UK deal (almost) in the bag, attention this year will turn to other trade priorities — some of which are closer to conversion than others.
Trade talks with the European Union are high on the list. Negotiations were paused in October after becoming mired in the awkward argy-bargy around AUKUS and a cancelled contract for $90 billion worth of French submarines. With President Emmanuel Macron set to face voters in April, Canberra will be hoping there’s an opportunity to restart talks in the second half of the year — expending much effort during France’s six-month stint as president of the European Council likely won’t amount to much.
This year will also see a redoubling of efforts to finally secure some sort of trade pact with India. Canberra and New Delhi began talks about a Comprehensive Economic Cooperation Agreement way back in 2011, before they were suspended in 2015 over Australia’s agricultural asks. The Morrison government appointed Tony Abbott as Special Envoy to get negotiations moving again, but an ‘early harvest’ agreement covering wine and mobility never materialised in 2021. With India on track to become the world’s third largest economy by 2030, Australia will be looking to sign on the dotted line by the end of 2022 — a goal shared with New Delhi.
There’s also ambition this year to build out the digital side of the Australia-United States trading relationship. With the pandemic underscoring the centrality of all things digital to how many live and work, diplomatic muscle is now being applied. The aim is to ensure cross-border data flows and digital trade can continue unimpeded, with a common approach to issues like digital payments and data privacy. The Australia-Singapore Digital Economy Agreement, signed in 2020 is set to serve a foundation.
Finally, expect some movement around the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) — even if it’s only more jostling and campaigning!
The CPTPP was signed by 11 nations back in 2018, after a near-death experience when Donald Trump withdrew the US in his first official act as President. The deal was salvaged by Japan’s Shinzo Abe — ably assisted by Malcolm Turnbull — and today the CPTPP Commission is considering accession applications from the UK, Taiwan and China (which applied just hours after AUKUS was announced). South Korea also recently pledged to begin the formal application process, so there is every chance the CPTPP will end the year stronger than at the start — despite remaining utterly untouchable in Washington DC.
Australia’s track record on trade is driven by an abiding commitment to a free and open international order. Protectionism is rejected, and interactions between countries are governed by agreed rules, laws and standards. These principles have always been important, but never more so than today in our Indo-Pacific region. Increasingly, economic agendas are intertwined with the strategic. Economic upside and market liberalisation are still at the heart of our trade agenda, but geopolitics and a values-led pursuit of the national interest have come to the fore.
On 21 December 2022, Australia will mark 50 years since Whitlam established diplomatic relations with China. There’s a good chance that we will still be subject to Beijing’s targeted campaign of economic coercion — even though the material impact on GDP is thought to be limited. With the Biden Administration consumed by domestic priorities, it will be important for the regional strategic balance that Canberra continues to promote free trade and pursue an open market strategy — particularly while the CCP continues to order off their menu of punitive sanctions. Watch for signs that DFAT’s new trade tsar is having an impact.
Federal election campaigns are inherently domestic affairs, but should our foreign standing come up on the trail, expect the Government to speak to their success in trade: 75% of Australia’s trading markets are now covered by free trade agreements, up from 26% at the end of the second Rudd government.
With so much on the trade agenda in 2022, international-facing Australian businesses will need to remain across developments, seek foreign-market intelligence, and engage closely with decision-makers. It will be important to understand commercial impacts early on, along with any strategic opportunities that may arise. Above all, there will be chances to influence the agenda, so seeking objective political insights and putting in place a robust engagement strategy will both be key to ensuring businesses can promote their story and shore up their commercial equities.
If you’d like to learn more, please contact David Lang on [email protected]