Author: The Hon. Andrew Robb AO
Event: China-Australia Economic Cooperation Forum
Location: Park Hyatt, Melbourne.
Forty years of global efforts to remove tariffs, and open up economies to trade and investment has delivered extraordinary growth and dramatically increased the living standards of literally billions of people across the world.
The phenomena confirms what we have witnessed at various times throughout history that periods where countries have opened up to trade and investment, incomes have risen appreciably because it leads to nations specialising and producing effectively what they do best.
Open economies not only benefit the wealthier countries but lift the world’s poor out of seemingly intractable poverty. This has been evidenced most dramatically in both China and India over recent decades; together they have removed well over a billion people from abject poverty following the opening up of their economies.
Yet today freer and open trade is increasingly out of fashion, abandoned by many policy makers, particularly among rich countries. Political wisdom, judgement and courage is needed.
Much of this reflects the impact of the digital revolution, and the associated extraordinary innovation and pace of change.
As a consequence, the nature of the workplace is constantly transforming, people are needing to retrain, and often retrain again, in order to keep their jobs, or secure new jobs as their old jobs become redundant.
Yet, it is human nature to prefer the status quo. As a consequence, this need for re-skilling and lifelong learning has created powerful political resistance. Open economies are being blamed for the loss of traditional jobs, notwithstanding the potential for many more 21st century jobs that freer open trade would deliver.
In wealthy Western nations, political and business leaders need to lead in restoring public confidence in the post-World War II rule-based and market-oriented globalisation, because these rules have been remarkably successful over 70 years in regulating economic activities in the market, and avoiding the law of the jungle prevailing.
Even the United States appears to have begun to abandon the rules of the multilateral system it has led successfully for 70 years, leaving international organisations such as the World Trade Organisation (WTO) completely compromised.
Furthermore, the recent so-called US Inflation Reduction Act effectively neutralises 30 years of global tariff reductions by providing millions of US companies with nearly half a trillion dollars in subsidies, and in the process sucking billions of further investment dollars into the US from around the globe. This protectionist approach is not a free and fair approach to trade in investment, and it is forcing other countries to follow suit.
The move to a series of hegemonic values-based systems, propped up by subsidies, is not viable, not practical and fuels great business and political uncertainties, all of which foster political misinterpretations and misunderstandings.
We are many countries but one world, and we need to strive to keep it that way. It requires strong political leadership to restore global commitment to a rules-based, market-orientated trade and investment system.
Fortunately, Australia has resisted much of this political resistance by successfully pursuing a wide range of free trade agreements, including with China, over the last decade, and importantly with strong bipartisan support. For its part, China’s continued successful opening up to the outside world critically requires continuing market-based and rule-based international laws. China must not undermine the existing order – it must preserve it, and promote globalisation based on existing rules.
This requires China to also abide by the World Trade Organisation’s rule book for a free, fair and transparent global trading system.
In our Asia Pacific region, one very practical way to begin to restore confidence would be for the United States and China to both join the current 11-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
This agreement is the most advanced 21st century trade agreement, covering goods and services, and regulations on foreign investments, and for the first time establishes rules for e-commerce and trade in the digital age, labour, the environment and anti-corruption. Of course, the US-led those negotiations over many years, signed the final agreement, but never ratified their participation in the agreement because of local politics.
Entry to the CPTPP, requires the unanimous agreement of all the member countries. Given the blacklisting of commodities contravenes the rules of the CPTPP, China’s entry would require removal of their current black-listing of a range of key Australian commodities, and the sooner the better.
Following the face-to-face meeting of both the US and Chinese Presidents last November, President Biden reaffirmed that: “a stable and developing China is in the interest of the United States and the world, and the United States respects China’s system, is not seeking a new Cold War, not seeking to oppose China by strengthening alliances, not supporting Taiwan independence, not supporting two Chinas, nor one China, one Taiwan and has no intention of engaging in conflict with China”.
In response, President Xi stated that: “China does not seek to change the existing international order or interfere in the internal affairs of the United States, and has no intention to challenge or displace the United States”.
In April this year President Xi further committed China’s policy when he stated: “Reform and opening up will remain unchanged over the long term. China is ready to collaborate with any nations that are interested in engaging in mutually beneficial cooperation to advance shared prosperity and development of a global economy”.
Both the US and China must not forget recent history and recognise the role played by the United States in China’s reform and opening up, particularly in ensuring China’s entry to the WTO.
Some suggest that China and the United States, could not and would not work together in an agreement, such as the CPTPP.
This is nonsense. Both the US and China are members of the UN, the World Bank and many international bodies, including the WTO; both the US and China are effective members of APEC.
A very public commitment from both countries to join the CPTPP would help confirm the sincerity of these recent trade commitments by both President Biden and President Xi. Importantly, such leadership would help restore global compliance with a proven rules-based, market-orientated system.
Recent global uncertainty has also been fuelled by China’s strong military growth. As China reemerges to where it was for 18 of the last 20 centuries as a major power, it inevitably leads to China establishing a military comparable to its size. It is China’s critical responsibility to demonstrate that this military build-up is defensive in nature, not aggressive.
In this regard, China should also see as inevitable the development of security alliances and military capabilities of other countries to ensure continuing peace in our region, because the best strategy to ensure peace and harmony for the future, is the presence of an appropriate deterrent.
China and Australia have proven the potential for peace and harmony by the establishment of diplomatic relations 50 years ago. This created the context in which the peoples of our two nations could slowly, but surely, grow in their knowledge of, and respect for, one another.
It created the growing awareness that what China was good at, Australia needed, and what Australia was good at, China needed – it gave effect to the highly complementary nature of our two economies.
The subsequent 2015 major free trade agreement, CHAFTA, gave impetus and substance to the fact that Chinese and Australian business people are very comfortable doing business with one another.
Despite subsequent significant political differences that unfortunately arose between Australia and China, and the prevailing uncertainty, the 50-year development of people-to-people linkages, especially at a commercial level and at the Australian diaspora level, has seen a strong, respectful and prosperous working relationship being maintained between China and Australia.
Long may it last.