NEW REPORT OUT NOW
21/06/2015
Trade between nations is one of the most ancient forms of diplomacy. It is also that part of diplomacy which has been the most transformed in the 21 century, maintaining its centrality to economic growth but raising a range of concerns about transparency, efficacy, national interest, development pathways and human rights. As Nancy Pelosi recently told USA Today in the context of a bruising battle between Democrats in the US Congress over the Trans Pacific Partnership fast track Bill:
“In order to succeed in the global economy, it is necessary to move beyond stale arguments of protectionism versus free trade…
Today, driven by a new technological revolution, national markets are being transformed into global networks of finance, production and distribution. Markets — for goods, money and even labor — are integrating across borders beyond the reach of national legislative bodies.”
John Ravenhill has found that international trade increasingly represents trade in components as part of the production of a product. With global manufacturing, goods are now ‘made in the world’ rather than in a single country.
Ravenhill points out that one implication of the rise in global value chains is that traditional trade statistics, which are measured on a gross basis rather than value-added, are obsolete, and so “concern over bilateral trade imbalances is clearly misplaced”.
Traditional trade policy is no longer an effective tool to assist domestic industries either, according to Mark Thirwell.
This means that as economic diplomacy has achieved a certain primacy for Australia in 2014-2015, it has become an increasingly sophisticated and difficult negotiating area. Trade as a secret, elite and technocratic activity of behalf of nations is colliding with transnational social movements, globalised democracies and the internet, where Wikileaks can leak the health and IP chapters of the TPP.
Key outcomes from last November’s G20 meeting on trade
In the G20 Leaders Summit in Brisbane, the trade session was by far the most animated. Thankfully, there was a last-minute deal between the US and India which saw India remove its veto to advancing the World Trade Organization (WTO) agreement on trade facilitation.
Mike Callaghan argues that one of the main roles of the G20 is to “provide a circuit-breaker to intractable international economic issues”, and he identifies the ‘collapse in 2008 and continuing impasse in the WTO Doha Development Round of multilateral trade negotiations’ as a front-runner in that category. In Brisbane there were some modest outcomes:
Our growth strategies include reforms to facilitate trade by lowering costs, streamlining customs procedures, reducing regulatory burdens and strengthening trade-enabling services. We are promoting competition, entrepreneurship and innovation, including by lowering barriers to new business entrants and investment. We reaffirm our longstanding standstill and rollback commitments to resist protectionism.
The Leaders agreed to define a work program to complete Doha, and find ways to make the WTO work better. But to be fair, they have been saying this since 2008 with little joy so far.
Another issue that emerged at the Brisbane Summit was that the Australian political attitude to climate change may be impacting our international reputation, such as the Asia-Pacific Economic Cooperation negotiations around trade in environmental goods. The link between political insecurity and economic governance was very clear at the G20 Summit with issues raised such as Ebola, the annexation of the Ukraine and the conflict in Syria.
International relationships we should be nurturing.
The Coalition has prioritised economic diplomacy, as exemplified by the repeated refrain from Finance Treasurer Joe Hockey (2014) that Australia is “open for business”. The four pillars of economic diplomacy are trade, growth, investment and business – “opening up the Australian economy, to empowering private sector growth, to encouraging investment and creating conditions for business partnerships to flourish and trade to flow,” said Andrew Robb.
This approach has led to a preference for diplomatic venues and processes that focused on continuing investments in regional architecture, new emphasis on minilateral dialogues such as Indian Ocean Rim Association (IORA) and Mexico, Indonesia, Korea, Turkey, Australia (MIKTA), and more effort directed to plurilateral processes such as the TPP trade negotiations, as well as the hot pursuit of bilateral free trade agreements.
In terms of regional architecture, during its G20 Presidency, Australia focused on dialogue with countries in the immediate region and with Asia-Pacific groupings, including Asia-Pacific Economic Cooperation (APEC), Association of Southeast Asian Nations (ASEAN), East Asia Summit (EAS) and the Pacific Islands Forum (PIF). Foreign Minister Julie Bishop announced Mr Simon Merrifield's confirmation as Australia's first resident Ambassador to the Association of South East Asian Nations (ASEAN) in late 2013.
Australia is working with Mexico, Indonesia, South Korea and Turkey to form MIKTA, a group led by foreign ministers with a wider remit than the G20, but with obvious advantages for G20 caucusing.
An oncoming storm is brewing over the idea that TPP rules will be presented to the WTO for approval, something which I doubt the Brazil Russia India China South Africa (BRICS) will stand for. MIKTA will be very important as a grouping in keeping the avenues for communication open.
The emerging economies have arrived - the combined gross domestic product of top seven emerging nations is now bigger than that of the conventional G7 group of industrialised nations, when measured in terms of purchasing power parity, according to data from the International Monetary Fund (IMF).
Australia was a very active chair of the Indian Ocean Rim Association in 2014, and did some important work in encouraging women to engage in trade in textiles across the region. The area of increasing women’s participation in trade is one where there could be significant macroeconomic benefit and Australia could play a clear leadership role in the region.
Australia is pursuing the TPP with vigour and in the case of bilateral FTAs some considerable success. These deals do not always have the social support required due to concerns they will be Trojan Horse deals that will allow international corporations to limit the measures that can be taken by national parliaments to promote public health, user-based intellectual property regimes and technology transfer.
Robert Putman reminds us that diplomacy is always a two-level game, the domestic coordination and public support can be as hard as or harder than the global negotiations, as President Obama is finding over the TPP. Australia should pay more attention to civil society concerns about our participation in trade deals, and be clear on who the winners and losers of such deals may be.
Beeson and Higgott argue that middle powers like Australia do have the potential to succssfully implement games of skill, especially at moments of international transition. It requires a certain level of diplomatic infrastructure and investment as well as integrated strategy.
The questions are: how skilful have Australia’s efforts been in these minilateral dialogues, enhanced regionalism and plurilateral processes, what are the challenges and what more can be achieved in these fora?
Geopolitical drivers behind the TPP, AIIB and recently-signed FTAs
Australia should reject any geopolitical drivers behind the TPP, Asian Infrastructure Investment Bank (AIIB) and recently-signed FTAs that are based on Chinese containment. When Abbott reportedly told Angela Merkel that Australian foreign policy towards China is driven by fear and greed, that is not an adequate response.
In fact the opposite path of a more strategic vision is what Australia should consider. World Bank economists Aaditya Mattoo and Arvind Subramanian urge a comprehensive China round, “a China-inspired agenda – whose aim would in fact be to anchor China, to the maximum extent possible, in the multilateral trading system”.
As the upcoming host of the G20 after Turkey, China will be paying close attention to the blockages in the multilateral trade framework. We should be putting our case for better global governance.
Dr Susan Harris Rimmer participated in CEDA's State of the Nation conference, click here to watch videos.