Simon Birmingham (SA, Liberal Party, Minister for Trade) Share this | Hansard source

I table a document responding to the order for the production of documents concerning the China-Australia Free Trade Agreement. In tabling this document, I'm explaining the government's assessment, in accordance with Senate's order of 3 December, of China's compliance with the letter and spirit of the China-Australia Free Trade Agreement, known as ChAFTA; the extent and consequences of Australian economic dependence on the Chinese market; and the wider economic, strategic and diplomatic context of Australia's trade relations with China. I'll touch on each of those three points in response.

Firstly, I turn to China's compliance with the letter and spirit of ChAFTA. After 10 years of negotiations, Australia and China signed ChAFTA in June 2015 and, after both ratified it, the agreement entered into force in December 2015. It was the third bilateral FTA Australia concluded with a North Asian trading partner. Since 2015, ChAFTA has delivered six rounds of tariff cuts, which have provided expanded opportunities for Australian businesses and consumers. Australia's goods exports to China were valued at $149.2 billion in 2019, up 97 per cent since ChAFTA's entry into force, and total two-way goods and services trade with China was valued at $251 billion in 2015, up 66 per cent since ChAFTA's entry into force. ChAFTA has been used extensively by businesses, with around 95 per cent of eligible imports from China to Australia benefitting from ChAFTA tariff preferences, helping Australian businesses and consumers. This was up in 2019 from around 85 per cent in 2016.

Preliminary trade data for the calendar year 2019 shows growth compared to 2018 in a number of products where tariffs have been cut under ChAFTA. Some examples: exports of whole and skim milk powders grew by 22 per cent to $256 million, with 10 per cent tariffs progressively reduced; exports of fresh, chilled and frozen beef grew by 106 per cent to $2.67 billion, with tariffs of up to 25 per cent that were previously in place progressively reduced; exports of sheepmeat grew 79 per cent to $1.2 billion, with tariffs that were up to 23 per cent being progressively reduced; exports of frozen fish grew some 53 per cent to $26.5 million, as tariffs that were up to 12 per cent have now been eliminated; exports of fresh lobster and crayfish grew 17 per cent to $711 million, with 15 per cent tariffs that were in place now eliminated; exports of shelled almonds more than doubled to $171 million, with 10 per cent tariffs now eliminated; and exports of cosmetic skincare products grew by 39 per cent to $101 million, with 6.5 per cent tariffs that were in place now eliminated. ChAFTA has also improved access to the Chinese market for Australia's services exports, including education, health, legal and financial services. The latest available data from China, in 2017, indicates that Australian businesses utilising the preference rate for Chinese imports from Australia was over 90 per cent.

However, the Australian government has become increasingly concerned about a series of trade disruptive and restrictive measures implemented by the Chinese government on a wide range of goods imported from China, and that these disruptions have increased significantly in recent months. The Chinese government has publicly stated that these disruptions are due to legitimate trade remedies, biosecurity measures as well as noncompliance with other technical standards. They have included measures implemented through the operation of Chinese regulations on quality, labelling, safety, and pest and disease inspections.

In the view of the Australian government the targeted nature of Chinese government measures on Australian goods raises concerns about China's adherence to the letter and spirit of both its ChAFTA and its WTO obligations. Australia has raised these concerns with Chinese officials on multiple occasions, both in Canberra and in Beijing, and has asked the Chinese government to engage on these matters at officials and ministerial levels. The Chinese government has consistently spoken about its commitment to open trade and the multilateral trading system, as well as to its free trade agreements, including ChAFTA. All WTO members are expected to conduct their trading relationships in a manner consistent with their international obligations.

We have raised our concerns about the Chinese government's measures in the WTO, including most recently at the 25 November 2020 meeting of the WTO committee on trade in goods. We raised at that committee our concerns with respect to barley, wine, meat and dairy establishments, live seafood exports, logs, timber, coal and cotton. Only yesterday the Chinese government, through its customs agency, the General Administration of Customs of the PRC, notified Australian agricultural officials of a further suspension of a meat-processing facility, Meramist in Caboolture. The Australian government has raised its concerns with the Chinese government's antidumping and countervailing duties investigations in the imports of Australian barley, and has expressed our view that the Chinese government's processes, analysis and findings were inconsistent with WTO rules.

ChAFTA includes a structure of regular meetings intended to create an ongoing dialogue between Australia and China and a built-in agenda of reviews which provide avenues to address issues and increase two-way trade opportunities. After a reasonable start in bilateral engagement, in recent years the Chinese government's lack of engagement has prevented the use of these structures. Australia remains committed to building on the gains already achieved under ChAFTA, and we will continue to advocate for its timely and effective implementation, including those consultation mechanisms for the benefit of businesses and consumers in both Australia and China. Our government continues to work closely with our exporters in an effort to retain preferential market access into China, which has delivered such widespread gains to date, and we continue to raise issues of apparent or potential discriminatory actions targeted against Australia. The Australian government is considering all dispute settlement options in order to support our exporters and to ensure they can compete on fair terms.

I turn to the second point of the motion: the extent and consequences of Australian economic dependence on the Chinese market. It is a fact that China is Australia's largest trading partner, accounting for around 29 per cent of our total two-way trade in 2019-20. Over the same period, China accounted for around 35 per cent of Australia's total goods and services exports. Australia's exports to China reflect the complementarity of our economies and meet many of China's needs, including for resources, energy, food, tourism and education services. This trade has helped to lift hundreds of millions of people in China and, indeed, across our region out of poverty. The economic growth of China and the elimination of poverty for many millions of people is something that we warmly welcome and we wish to see continue, and it underlines the mutual benefit that comes from trade. Australian businesses have capitalised on these opportunities and, in doing so, they have made their own choices about markets, reliance and risk.

Australia is not unique in having China as its largest trading partner. At least 60 countries in 2018 counted China as their No. 1 merchandise trading partner. Australia's success in growing markets in China has not only been driven by Australian businesses but also by factors such as the size of China's population, its favourable demographics and its rapid economic development, as well as, of course, our geographical proximity. In turn, China's economic growth, we acknowledge, has been supported by our reliable and high-quality supply of exports, including iron ore, energy and agricultural commodities. The trade disruptions occurring at present are not only detrimental to some Australian businesses but also potentially to Chinese businesses and consumers as well.

As China opened up and its citizens started increasingly to travel and study abroad, it has grown to be Australia's largest inbound visitor market for both students and tourists. In the past five years, visitor numbers have increased by 69 per cent and total spending by 117 per cent. This, again, is a function very much of China's size, its economic development, its demographics and its proximity. It is not unusual for countries across our region to find a circumstance where their largest visitor market is, of course, the largest country in our region.

On investment, many do not realise that China is an important but, compared to others, comparatively small partner for Australia. The stock of total two-way investment was $163 billion in 2019, making China Australia's eighth largest investment partner behind countries such as the United States, the United Kingdom and Japan. The total stock of Australian investment in China in 2019 was, for the third year in a row, greater than Chinese investment in Australia.

The Australian government is committed, of course, to expanding opportunities in other markets. Australian businesses will continue to export to markets where Australian products and services are in demand, and where profits are highest relative to risks. Concluding ongoing FTA negotiations, implementing and upgrading existing FTAs and expanding their membership, and increasing Australia's two-way trade coverage by negotiating new FTAs will underpin trade growth and diversification in a post-COVID environment and will support the creation of Australian jobs. Our government has had considerable success in expanding Australia's FTA network including by expanding FTA coverage of Australia's two-way trade from around 26 per cent in 2013 to around 70 per cent covered today. Apart from ChAFTA, over the last five years our government has concluded and implemented FTAs with Japan, Korea and, most recently, with Indonesia, Hong Kong and Peru, as well as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, known as the CPTPP, which has opened up additional opportunities for Australian businesses in key markets, including across the Indo-Pacific region where some of the fastest growing economies are concentrated. A groundbreaking agreement on digital trade signed with Singapore on 6 August 2020 sets new global benchmarks for digital trade rules, offers an opportunity and a pathway for Australia to be leading in this space and enhances opportunities for Australian exporters. Progress is being made in trade negotiations with the European Union and the United Kingdom.

Signature of the Regional Comprehensive Economic Partnership agreement, known as RCEP, in November, means that Australia will become a party to a regional agreement that will provide a single set of rules for trade and investment across 15 regional economies—the largest ever such agreement. Although it is disappointing that India chose not to join RCEP in 2020, the door remains open to India. In the meantime we are exploring opportunities with India to recommence bilateral trade negotiations, particularly following the 4 June virtual summit meeting between Prime Ministers Morrison and Modi, where both countries agreed to elevate the relationship to a Comprehensive Strategic Partnership.

Throughout COVID-19 our government's actions have helped to keep supply chains operating, including through collaboration with trading partners via the WTO, APEC, the OECD and the G20.

I turn now to the last of the points in the Senate order: the wider economic, strategic and diplomatic context of Australia's trade relations with China. Growth and prosperity in the Indo-Pacific region has been underpinned by open trade both with China and with other regional partners. Australia's trading relationship with China has supported Australia's growth over time, as it has China's growth. It has helped through the global financial crisis and contributed to Australia's 28 years of uninterrupted economic growth. By providing some of the key inputs to China's modernisation and more recently to its development of a consumption based economy, Australia has in turn played a crucial part in China's development—as I noted before, a development that has seen China lift more people out of poverty than any country in history.

At the same time, the relationship is taking place in the context of increasing geopolitical competition, including China's growing economic and strategic weight in the global context. We make no secret that this competition is creating new dilemmas for us and for the rest of the global community. Australia has been consistent in our approach to our values, our principles and protecting our national interest. It is not we who have changed. It is in our mutual interest, though, and that of the region, to co-exist peacefully, promoting economic development and open trade to aid recovery from the COVID-19 pandemic. As a supporter and an adherent to rules based trade globally, Australia's continued economic engagement with China will remain important, as will expanding opportunities for Australian exporters to make the choices necessary to access other markets.

Multilateral institutions and organisations are key to sustaining Australia's trade relationship, guided by international rules and norms. Organisations, including APEC, the G20, and in a trade context, most importantly, the World Trade Organization, provide a platform for Australia to manage the challenges that arise from our evolving economic and strategic landscape. As the Prime Minister has said, international institutions play an important role as circuit-breakers to provide the space and frameworks for meaningful and positive interaction to be maintained as a bulwark against any emerging divide. This is not to say that these organisations and institutions are perfect. We must continue to improve their effectiveness, including by encouraging all members to play their part in terms of participation and enhancement as well as honouring the commitments they make through such organisations.

In relation to the WTO, Australia acknowledges the importance of reforming it so it can better serve the needs of its members. This includes resolving the impasse on appointments to the Appellate Body. The WTO's dispute settlement system provides an independent umpire for members to consider and resolve their disputes. That independent umpire must be used in ways that uphold the rules and must be able to be relied upon to deliver and uphold those rules effectively. Our government is currently considering our options regarding a WTO challenge on antidumping and countervailing duties on barley, where we feel this sector, like wine, has been so egregiously impacted.

Australia remains a nation that supports the free flow of trade and goods according to the international rules and norms that not only that we have committed to but that China has committed to as well. It is important that we remain open to working together and to finding a way forward. Our door remains open for ministerial dialogue. We continue to make that clear, including just last week. For all the economic and strategic reasons I have just outlined, Australia remains committed to constructive and workable relations with China. I hope that, fundamentally, this is something that the Chinese government wants too. We, of course, equally remain committed to opening up more avenues and more opportunities as we have done consistently over the last six years for Australian exporters and businesses to access even more markets around the world. I thank the Senate for the opportunity to address these issues this morning. I encourage all senators to read the government statement which I have tabled, and I understand the Senate will now take note of this explanation.