Overview and analysis

The department’s objective is to open new markets for Australian exports of goods and services, maximise flows of productive investment, address trade and investment barriers, and support Australian business in its overseas commercial endeavours.

Open markets have never been more important

In 2017–18 complex, long-term challenges defined the global economic environment. This included shifts in economic power, technological change, an anti-globalisation backlash, increased protectionism and weaker support in some countries for global rules and institutions. As a nation with strong trade and investment links to the global economy, some of these challenges pose a serious threat to Australia’s prosperity.

Australia’s open economy has made a major contribution to 27 years of uninterrupted annual economic growth, strong employment conditions and improved living standards for Australians. A recent Centre for International Economics study found trade liberalisation between 1986 and 2016 boosted Australia’s real GDP by 5.4 per cent and lifted the real income of an average Australian family by over $8,400. Around one in five Australian workers or 2.2 million people are employed in trade-related activity, while one in 10 Australians are employed in industries benefitting from foreign investment.

Access to global markets supports Australian companies by helping them secure economies of scale, participate in global value chains and access inputs for their goods and services—including advanced technologies—at lower prices. This supports the competitiveness and flexibility our economy needs to thrive in an interdependent, fast-changing world.

Benefits of imports to Australian households and business since 2000

Access to global markets also provides Australian consumers with greater choice and helps keep prices of household consumables more affordable.

Australian Consumer Price Index: seasonally adjustedAs figure 8 shows, prices of the goods and services we trade have increased by just seven per cent over the past decade compared to the 24 per cent increase in overall consumer prices for the same period.

Benefits of trade for Australians 2017Given our relatively small population and level of domestic savings, Australia has always relied on foreign investment to help drive economic growth. Foreign direct investment often introduces new technology and ways of doing business, and contributes to upgrades of equipment and machinery, enhancing the productivity of Australia’s factories, farms and mines, and creating more jobs for Australian workers.

Our performance in 2017-18

To support Australia’s prosperity, the government pursued an ambitious international trade agenda. It focused on resisting protectionism, bolstering support for an open, rules-based trading system, improving access and opportunities for Australian business and enhancing our competitiveness.

These efforts are paying dividends. In 2017 Australia’s total exports reached a record $387 billion. In the three years to 2017 the volume of our exports increased, on average, by 5.6 per cent, surpassing the growth rate of world trade over the same period of 3.4 per cent. Australia’s ambitious trade agenda has opened new markets and provided greater opportunities for Australian businesses and consumers.

Assistant Minister for Trade, Tourism and Investment, Mark Coulton, meets Thailand’s Vice Minister for Commerce, Sakon Varanyuwatana, to discuss trade opportunities [Senior Adviser to the Hon Mark Coulton MP, Cathy Heidrich]

Multilateral and regional engagement

The World Trade Organization (WTO) provides the framework of rules governing international trade and is the world’s primary trade-negotiating forum. It is under challenge from a rise in anti-trade sentiment, growing trade tensions, unilateral actions and an inability to agree on how to take negotiations forward. These factors limit outcomes and risk weakening respect for global trade rules and the WTO as an institution, and have practical and direct implications for Australian business. In response, we have worked to build the WTO’s resilience and secure new liberalising outcomes. At the 11^th WTO Ministerial Conference in December there was a risk consensus would not be achieved on a future negotiating agenda beyond fisheries subsidies.

Australia responded pragmatically by promoting new and innovative approaches, including plurilateral negotiations that did not require consensus. We built a coalition of 70 WTO members to support an e-commerce initiative that would cover over 70 per cent of global trade. This helped drive negotiations forward in an area important to Australian business.

The WTO Dispute Settlement System is the most active international legal system. In 2017–18 we defended Australia's right to regulate to protect public health through our comprehensive victory in four disputes against Australia’s tobacco plain packaging measure. We launched consultations with Canada on its measures that discriminate against Australian wine imports, currently valued at $199 million. We also defended Australia’s anti-dumping measures on A4 copy paper in a dispute brought by Indonesia. To protect our interests in the application of WTO rules, we participated as a third party in disputes covering agricultural subsidies and tariff quota administration in China, and the proper interpretation of anti-dumping rules relevant to our business.

WTO members agreed in June to support Australia’s accession to the WTO Government Procurement Agreement, opening the door to markets worth over USD1.4 trillion.

Complementing these efforts, we played a significant role in driving negotiations on a global export credits agreement. When concluded, this agreement should cover both OECD and non-OECD countries and ensure our exporters compete on a level playing field.

We responded to global trade tensions by strengthening Australia’s advocacy for free trade, open markets, economic integration and pro-growth structural reforms including in APEC, the G20 and the OECD. Our efforts helped galvanise defence of the global, rules-based international system, including bolstering key countries’ commitment to fighting protectionism.

Our efforts on aid for trade were recognised in the OECD Development Assistance Committee Review of Australia’s aid program as encouraging a more development-friendly outlook on trade. This included support for developing countries to participate in trade, strengthen inclusive economic growth, reduce poverty and engage in the multilateral trading system.

Our ambitious regional and bilateral free trade agreements agenda

The White Paper endorsed Australia’s approach of negotiating and implementing regional and bilateral FTAs to help ensure Australia’s future prosperity. It set a goal of having over 80 per cent of Australia’s total trade with FTA partner countries by 2020. Currently Australia’s 10 FTAs cover about two thirds of our total trade. Nine of the 10 have entered into force since 2003, and the benefits to Australia will continue to grow as we build on existing agreements and negotiate and implement new agreements in the future.

We negotiated the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11), which Mr Ciobo signed with his counterparts on 8 March (see case study).

We made significant progress on the Indonesia–Australia Comprehensive Economic Partnership Agreement negotiations. The agreement will help strengthen our trade and investment relationship with Indonesia, create opportunities for business and build closer links with a close neighbour and major Indo-Pacific democracy.

The Peru–Australia Free Trade Agreement (PAFTA) was signed on 12 February. Treaty-making processes are underway to bring TPP-11 and PAFTA into force.

To build on the benefits of these agreements, diversify our export markets and strengthen engagement with Latin America, Australia is pursuing an FTA with the Pacific Alliance bloc of Chile, Colombia, Mexico and Peru. High tariffs in some of these markets have disadvantaged Australian exporters. Australia is one of the first countries to pursue a trade agreement with the Pacific Alliance, which has a combined GDP of USD1.95 trillion.

During the year Australia also pursued new opportunities through the Regional Comprehensive Economic Partnership (RCEP) negotiations—another key element of the emerging regional economic architecture. With ASEAN at its core, RCEP will include the major economies of China, India, Japan and the Republic of Korea in an agreement that accounts for almost 60 per cent of our trade and half of the world’s population.

In June FTA negotiations were launched with the European Union. Australia is seeking an ambitious and comprehensive agreement that will create new access for our goods and services to a market of half a billion people and a GDP of USD17.3 trillion. With our shared commitment to the rule of law, global norms and free and open markets, this agreement could set the benchmark for what can be achieved between like-minded partners.

We continued to explore the parameters of a future FTA with the United Kingdom, our seventh-largest two-way trading partner and second-largest source of foreign investment in 2017. We are committed to commencing negotiations quickly once the United Kingdom leaves the European Union.

Support for business

We are working with Austrade and other government agencies to strengthen the government’s support for business, including by revamping the government’s Economic and Commercial Diplomacy Program (see review).

Australia’s High Commissioner to Kenya, Alison Chartres, learns the finer details of the mineral sands operation at the Australian-owned Base Titanium mine in Kwale, Kenya. With her is Base Titanium's External Affairs Manager Simon Wall and Graduate Geologist Flora Nasila [DFAT/Rob Sirotka]

Given the importance of services to the Australian economy, the department continued to give a high priority to services trade liberalisation and reform. We worked with APEC member economies and the private sector to build capacity on investment policy, the digital economy and professional services, and to promote good regulatory practices, productivity and competitiveness. We also sought to advance efforts in the WTO and through our FTAs to open services markets. We collaborated with the OECD Secretariat on how to increase the competitiveness of Australia’s services sector.

In 2017–18 we helped professional services bodies negotiate regional and bilateral Mutual Recognition Agreements (MRA). These allow Australian professionals to deliver services overseas, increase the value of Australian qualifications for international students and raise the international profile of our professionals. Agreements for engineers and architects recognise qualifications and licensing for skilled professionals across the APEC region. The department also facilitated discussions on bilateral MRAs between professional bodies on accounting, veterinary science and law in Asia and Europe.

We delivered our 100^th FTA information seminar with Austrade in April. These seminars have played an important role in building awareness and helping businesses to use our FTAs. The FTA portal—which provides information for Australian exporters and covers all in-force agreements—was expanded to include services.

We also supported business with information and market intelligence through our trade and investment publications, and facilitated more than 2,200 requests for information from ministerial offices and the public.

Supporting domestic policy development

We worked closely with partner agencies to bring our global economic experience and geopolitical insights to inform government decision-making on a range of complex issues—helping to ensure that Australia’s interests were considered, and international competitiveness enhanced, in domestic policy development.

With Austrade, we promoted policies that supported our attractiveness as a competitive destination for productive foreign investment. This included providing input to government reviews of foreign investment applications.

We supported legislative changes to enable Export Finance and Insurance Corporation (Efic) loans to more Australian exporters, including tourism operators, online businesses, intellectual property holders and businesses engaged in overseas direct investment. We also worked closely with Efic and the Department of Defence to establish the $3.8 billion Defence Export Facility, which will help Australia’s defence industry pursue export opportunities.

The department also worked with Austrade and Treasury to build understanding across the community of the value of foreign investment, and supported the Minister for Trade, Tourism and Investment’s Statement to the Parliament on Investment. We were active in the Department of Home Affairs’ Critical Infrastructure Centre, including by seconding an officer.

We assisted the Department of Environment and Energy with the oil ticketing procurement program.

Results

Our delivery of trade and investment outcomes for Australian business

Case study: The Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Last year’s annual report foreshadowed challenges in implementing the Trans-Pacific Partnership (TPP) following the United States’ withdrawal. At a time of considerable stress on the rules-based international trading system, Australia worked with Japan and others to help conclude the agreement, which was signed on 8 March in Santiago, Chile. This was an extraordinary success for Australian trade policy and regional trade reform.

The TPP-11 is an FTA between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. It is the most significant trade and investment agreement in more than two decades and will eliminate 98 per cent of tariffs. It will also improve transparency and predictability for Australian services exporters in a free trade area that represents 13.3 per cent of the global economy.

To reach this landmark agreement, we led Australia’s engagement with remaining TPP countries to capture the ambitious outcomes contained in the original agreement. Maintaining the high standards of the original deal was not easy. We worked hard to build consensus to retain the original TPP’s market access commitments, ensuring that Australia could fully benefit from the significant commercial gains the agreement offers.

Extensive stakeholder consultations were undertaken throughout the negotiations, and Australian businesses argued strongly in favour of the agreement. The result of these efforts is an agreement that will remove significant barriers to trade, deliver opportunities for Australian businesses and deliver modern rules on a range of issues, such as transparency, state-owned enterprises and digital trade.

‘Open and inclusive regional leadership is needed right now more than ever,’ said Rio Tinto Chief Executive Officer Jean-Sébastien Jacques. ‘The signing of TPP-11 is a great outcome for Australia and for the region. All countries need to work together to keep markets open and to support trade and growth.’

The Red Meat Advisory Council’s CEO Anna Campbell said, ‘the TPP-11 opens up some fantastic market advantages for Aussie red meat in countries like Japan, Peru, Mexico and Canada. We commend the Australian Government for these historic achievements and look forward to prompt ratification so Australia’s 75,000 red meat businesses can realise the gains.’

Other economies in the region have already expressed interest in joining the TPP-11. This reflects its appeal as a pathway to reducing trade and investment barriers and is consistent with our objective of creating more opportunities for Australian businesses in overseas markets.

Minister for Trade, Tourism and Investment, Steven Ciobo, signing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11) in Santiago, Chile on 8 March [DFAT]

Our promotion and protection of Australia’s economic interests in bilateral, regional, multilateral and plurilateral outcomes

Case study: World Trade Organization: Australia wins the historic tobacco plain packaging dispute

Australia's membership of the WTO gives us access to an open, predictable and enforceable system of trade rules, and an orderly path to settling trade disputes. Since 2012 we have been defending our world-leading tobacco plain packaging measure in the WTO. Ukraine (which later withdrew its case), Honduras, the Dominican Republic, Cuba and Indonesia initiated disputes against Australia, claiming our measure breached numerous WTO obligations. These included obligations to protect intellectual property and to refrain from introducing unnecessary trade obstacles. A record 41 WTO members joined the disputes as third parties, reflecting the global significance of the public policy issues being litigated and scrutiny of how these issues would be resolved.

We led the whole-of-government litigation team that represented Australia in the fiercely contested dispute proceedings. Our close collaboration with the Department of Health and the Attorney-General's Department was instrumental to ensuring a robust defence of Australia's measure. Our advocacy included over 1,300 pages of submissions and more than 600 exhibits, including nearly 30 expert reports that spanned public health, marketing and economic disciplines. We drew on our global network to support our defence, working closely with posts as well as other governments and non-government organisations that shared our interest in preserving the critical right of states to pursue legitimate public policy measures.

The department's leadership, and the valuable contribution of our domestic and international partners, resulted in a comprehensive victory in the WTO dispute proceedings. In a report circulated on 28 June the WTO panel rejected all 33 of the complainants' claims that Australia's measure breached WTO rules. The panel confirmed Australia's right to implement the tobacco plain packaging measure, which is making a meaningful contribution to improving public health. This landmark decision is not only a resounding win for Australia's pioneering efforts to protect against the harmful effects of tobacco, but also for upholding the right of WTO members to regulate in the public interest within the international trade rules.

Case study: Enabling the WTO e-commerce initiative—promoting and protecting Australian interests

Australia is leading an initiative in the WTO to develop international rules on digital trade. This initiative aims to reinforce the multilateral trading system and ensure it stays relevant to changing patterns of trade, resists protectionism and helps make globalisation work better for Australians.

Our objective is to negotiate rules that deliver commercially meaningful outcomes and trust in the online environment for the increasing number of people and businesses (both big and small) engaging in e-commerce. This initiative reflects Australia’s proactive approach to creating an enabling environment for digital trade, as set out in our International Cyber Engagement Strategy and the 2017 Foreign Policy White Paper.

We are working closely with like-minded partners including Singapore and Japan on e-commerce. Australia is chairing the discussions aimed at launching negotiations on e-commerce in the WTO. These discussions will set the foundations for WTO e-commerce negotiations.

Australian stakeholders—both businesses and consumers—need digital trade rules that balance the flow of data, facilitate online purchasing, build trust in the online environment, protect consumers and ensure governments continue to regulate in the public interest. Around half of Australian businesses are already engaged in the digital economy and this number will grow.

Together with our leadership on digital trade in FTAs and in other multilateral forums, the WTO e-commerce initiative should help promote and protect Australia’s economic and commercial interests as global trade continues to evolve.

Satisfaction of Australian business with our support

Case study: Helping business to take advantage of Australia’s FTAs

The FTA Portal provides detailed information on Australia’s FTAs and helps prospective and existing exporters and importers explore the benefits of these agreements. Developed in collaboration with business, the portal (ftaportal.dfat.gov.au) features a sophisticated tariff finder that shows the reduction in tariffs over time, a step-by-step guide to determining whether exports or imports meet a given FTA’s rules of origin and provides data on individual markets. The portal also helps business navigate overlapping FTAs with a tool that allows them to compare and choose the one offering the greatest benefits.

Business feedback has been positive. Heath Baker, Head of Trade Policy with the Export Council of Australia, said the portal made it far easier for businesses to use Australia’s FTAs. ‘I always encourage exporters to make sure they check the portal. It’s extremely easy to use—you just put in your product description and the market you’re exporting to, and it tells you everything you need to know.’

The portal was expanded in 2018 to include most services commitments made by Australia’s FTA partners. Full coverage of these commitments is expected in the coming year. New and more detailed information will help businesses export their services across borders or establish a presence overseas to supply services. The interface was designed to be easy to use for small and medium-sized enterprises.

In 2017–18 the portal attracted an average of 2,600 users a week—almost three times more than in 2015–16 when it was first launched.

Alexander Lederer works with Real Dairy, which has facilities in New South Wales, Victoria and Queensland, and is looking to expand exports of dairy products to new markets. He says the portal is very useful for sourcing up-to-date details on tariffs and safeguards.

The portal’s programming interface is available online and allows third parties to display data in innovative ways. In May the Australian Industry Group became the first organisation to develop tailored services for its members based on the interface.

New FTAs, such as the Peru–Australia Free Trade Agreement and TPP-11, will be added to the portal as they enter into force.

Review: Effective implementation of Australia’s FTAs, including meaningful outcomes from the general review of the ASEAN–Australia–New Zealand FTA and reviews of our north Asian FTAs

Results over the year have highlighted the effective implementation of our FTAs and the value Australian businesses place on them.

An independent study by PricewaterhouseCoopers found that awareness of Australia’s FTAs is strong and they are widely used. The three North Asia FTAs were a particular focus. See pwc.com.au/trade.

The study, which was launched by the Minister for Trade, Tourism and Investment in March, found more than 80 per cent (by value) of eligible merchandise exports were taking advantage of tariff preferences under these agreements. In the case of Japan, this figure was as high as 95 per cent. The study noted that awareness and use of the FTA by small and medium-sized enterprises was relatively low, underlining the importance of ongoing advocacy and outreach efforts, including the FTA roadshow seminars and portal.

The number of export shipments from Australia issued with ASEAN–Australia–New Zealand Free Trade Agreement (AANZFTA) certificates of origin increased by seven per cent from 2016 to 2017, following a 38 per cent increase the year before. This underlines the continued relevance to business of Australia's largest multi-country FTA in force. By 2020 over 96 per cent of imports from Australia could enter ASEAN tariff free (based on average composition of imports in 2012–13), up from 67 per cent prior to AANZFTA's entry into force.

AANZFTA officials presented a report on the first stage of a general review of the AANZFTA to ministers in September. The report recommended further action on trade facilitation, non-tariff measures, services, investment, e-commerce and engagement with business. Officials will provide recommendations to ministers in September 2018 on how to upgrade the agreement.

Tariff eliminations or reductions under the China–Australia Free Trade Agreement (ChAFTA) helped deliver significant increases in exports for a range of goods with our largest trading partner.

For example, wine exports to China grew 119 per cent to $746 million in 2017, compared to 2015 when ChAFTA entered into force. ‘Wine exports to China had grown as wine tariffs had dropped again in January 2018, in line with the China–Australia Free Trade Agreement,’ according to Wine Australia Chief Executive Officer Andreas Clark. The tariff will be removed completely in January 2019, providing Australian wine exporters with a competitive advantage over key producers such as France, Italy and Spain. Andreas Clark also said, ‘Mainland China has now overtaken the United States to become Australia’s second-largest export market by volume. Pleasingly there was very strong growth at all price points as imported wine becomes more approachable and is increasingly consumed by middle-class drinkers and seen as suitable for consumption at informal gatherings and while relaxing at home.’

A review of ChAFTA’s services and investment provisions commenced in October with the aim of further negotiations to expand opportunities for Australian businesses.

Review: effectiveness of posts, and state and territory offices in supporting Australian businesses to take advantage of global trade and investment opportunities

Our overseas posts and our state and territory offices play a major role in supporting Australian business to take advantage of global trade and investment opportunities.

Under the economic and commercial diplomacy banner, we have leveraged the access, insights and creativity of our diplomatic network to promote prosperity at home and seize opportunities overseas. We put the pursuit of economic outcomes at the centre of our work.

Our officers have built networks in host countries with ministers, government officials, business, media, think tanks, universities and community groups. These networks give us valuable and practical insights to share with other Australian Government agencies and businesses on key political, economic, commercial, regulatory and strategic developments.

Feedback from White Paper consultations pointed to the need to strengthen our economic diplomacy agenda and sharpen our focus on business engagement. Consequently we have revamped our economic and commercial diplomacy agenda across the overseas network and are creating stronger links with business on Australia’s economic and commercial interests.

In 2017–18 we worked closely with all portfolio agencies to prepare market insights and economic diplomacy strategies, to identify specific goals and report on whole-of-government activities. These actions complemented our broader public advocacy on the benefits of trade and investment.

The following examples demonstrate the value of our economic diplomacy agenda, at post in Beijing and in Western Australia at our state office.

Beijing: China–Australia Year of Tourism

In 2017 the department led the inaugural China–Australia Year of Tourism in partnership with Austrade, Tourism Australia and the Chinese National Tourism Administration. The initiative showcased Australia as a destination for tourism and investment opportunities. Key events included a visit by the Chairman of the China National Tourism Administration, an AFL match in Shanghai and trade missions to China.

The initiative’s broad range of activities helped support steady growth in two-way visitor flows throughout the year. China is Australia’s most valuable tourism market—1.4 million Chinese visitors travelled to Australia in 2017–18, up 12.9 per cent. In February China overtook New Zealand to become our largest source of overseas visitors. Chinese visitors to Australia spent $10.49 billion in the year ending March 2018, up 12.9 per cent, with visitor spend forecast to reach $26.2 billion in 2026–27.

The China–Australia Year of Tourism also laid the groundwork for strengthened business links between tourism providers in both countries and created opportunities for further investment and collaboration. For example, the Greater China Travel Mission held in Guangzhou from 11 to 14 December 2017 enabled Australian tourism businesses to engage and establish business links with about 70 key Chinese buyers.

The initiative also leveraged the December 2016 bilateral open skies-style air services agreement and helped expand the flight network between Australia and China—from about 130 direct flights a week in 2016 to about 200 a week in 2018.

Australia’s Ambassador to the People’s Republic of China, Jan Adams, and Tourism Australia’s China-Australia Year of Tourism (CAYOT) Ambassador, Wu Xiubo, at the Beijing CAYOT launch event, February [DFAT]

Western Australia: help the Perth Mint realise the benefits of KAFTA

The department works with Australian business to maximise the value of export opportunities created by our FTAs. In 2017 our Western Australia office helped Perth Mint make the most of tariff reductions under the Korea–Australia Free Trade Agreement (KAFTA) by supporting increased exports to the Republic of Korea.

Perth Mint is one of the world’s largest gold refineries. Each year it exports around $18 billion worth of pure gold, silver and platinum bullion bars and coins to investors in more than 100 countries, including the Republic of Korea.

To access significant KAFTA tariff reductions, Perth Mint needed to prove its gold exports met the KAFTA rules. We worked with trade negotiators, our embassy in the Republic of Korea and the Australian Border Force to support the mint’s efforts. Thanks to our proactive and consultative approach, Perth Mint’s Korean customers now benefit from tariff reductions and the mint’s exports to the Republic of Korea have increased.

Australia's trade and investment with the world, 2017Australia's trade and investment with the world, 2017