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28 Oct 2015

Free Trade Agreements

Adjourned debate on motion of the Hon. J.S. Lee:

That this council—

1. Recognises the benefits of free trade agreements to South Australian businesses and the economy; and

2. Acknowledges the work of the commonwealth government to establish recent free trade agreements with Korea, Japan, and China.

(Continued from 13 May 2015.)

The Hon. A.L. McLACHLAN ( 17:50 ): I rise to speak in support of the motion that this council recognises the benefits of free trade agreements to South Australian businesses and the economy, and acknowledges the work of the commonwealth government to establish free trade agreements with Korea, Japan and China.

The federal government first began to scale back its economic protection of Australian industries in the 1980s. At this time Asia was undergoing a phenomenal surge of growth and, in Australia, we began to realise that we were increasingly becoming reliant on our trade with Asia and sensibly commenced trade liberalisation. This resulted in a remarkable shift in Australia’s pattern of trade as products from Asia that were previously excluded by tariffs were now able to enter our economy.

The result of the economic growth in Asia was that Australia, for the first time, was placed within the fastest-growing region of the world. Today, Australia is somewhat unusual compared to other wealthy nations because its trade profile is still dominated by commodity exports, mainly minerals, oil and gas. Australia’s heavy reliance on the export of primary resources has been responsible for driving Australia’s economic growth over the past decade. Going forward, an ongoing reliance on certain sectors threatens to leave the Australian economy vulnerable.

Australia’s most important trading partners in order of importance are: China, Japan, the US, the Republic of Korea, Singapore and the United Kingdom. This trade profile reflects Australia’s close proximity to Asia and its ability to provide a reliable goods trade. The federal government’s recently‑established FTAs will provide better Australian access to Chinese, Korean and Japanese markets and improve the competitive position for Australian exports, greater prospects for increased two‑way investment and reduced import costs for Australian businesses and consumers alike.

Recent research undertaken by the Department of Foreign Affairs and Trade suggests that the trade of Australia’s natural resources is slowing and Australia will need to develop new markets in the region if it is to remain competitive. The Department of Foreign Affairs and Trade reports that:

Mining accounts for about two-thirds of Australia’s exports to Asia, and even more to China. But this boom will pass, and Australia must become better at selling other things to affluent Asia.

In South Australia the state government has reported that manufacturing remains an industry of great promise for small and medium enterprises that are able to produce high-quality innovative products for a niche global market; however, their ongoing success will be determined by the ability of the companies to operate under a business model which delivers value by differentiation through innovation.

This changing approach means that despite the forfeiture of more than 100,000 manufacturing jobs across the country over the last seven years, South Australia has opportunities to develop its manufacturing sector. The key to making the most of this opportunity will lie in the ability of business and government to work together to ensure that manufacturing in Australia encourages innovation.

To succeed, global manufacturing relies on a strategic approach to innovation with an emphasis on quality and design, high-calibre management and workforce skills which can only be effectively cultivated in a supportive policy and investment environment.

The Global Innovation Index is a global comparative study of 142 countries undertaken each year by Cornell University, INSEAD and the World Intellectual Property Organisation, and provides a useful overview of the strengths and weaknesses of areas of the economy which are seen to foster innovation. According to this dataset, Australia ranks 17th overall on the global scale, behind Switzerland at the top, the United Kingdom, the United States, Singapore, Ireland, Canada and Norway, amongst others.

It is interesting to note that, according to this guide, that Australia outstrips Switzerland in some areas, including ease of starting a business, levels of university enrolment, access to non-agricultural products, and amounts of human capital and research, but performs well below Switzerland on areas such as knowledge creation, scientific and technical publications, and high-tech exports. These areas represent capacity for improvement in Australia and should be developed and encouraged accordingly.

The federal government’s recent FTAs established with China, Japan and Korea are representative of the importance and focus of Australia’s trade relations; however, in order to build Australian competiveness we cannot become complacent. Australia cannot just rely on its reserves of raw resources. They will not last.

As a state in the federation, we need to harness the potential of industries, such as high-tech manufacturing, by allocating adequate community resources to encourage creativity and design integration. In this way, we will create the conditions ripe for investment in innovation. I commend the motion to the chamber.

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