In Praise of Openness

In today’s Drum, I have an op-ed with Senator Lisa Singh.

Malaysia Trade Deal: In Praise of Openness, The Drum, 29 May 2012

The rise of Asia is often seen as the rise of Asia’s big nations, like India and China. But even taking these two giants out of the equation, Asia’s share of middle class consumption is expected to outstrip that of the United States and the European Union combined by the middle of this century. A growing Asian middle class means a massive increase in consumption and spending on imported goods and services. Those goods and services include the kind of things that Australians produce and expect: a wide range of yummy food; high-quality education; and elaborately transformed manufactures.

As well as providing a market for our exports, the rise of Asia has also benefited Australian consumers. The past 20 years have seen real prices for imported furniture, handbags, clothes, shoes and medical products roughly halved. Real prices of computers, telephones and other electrical goods have fallen by about two-thirds.

A generation ago, Australians missed out on this because of high tariff walls. As primary school children growing up in the 1970s, we both recall our parents having to pay large sums for our school shoes. Back then, tariffs had the effect of doubling the price of imported shoes. Today, thanks to technology and trade, Aldi sells school shoes starting at $6.49. Indeed, market-opening has helped keep prices low across the board. From 1950-85, inflation averaged 6.7 percent. Since then, it has averaged just 3.7 percent.

Australia is perfectly positioned to be part of Asia’s growth. Working with our neighbours to the north, Australia can both sow the seeds of economic and social progress in Asia, and reap the benefits of new markets and better relations. Last year, the Prime Minister asked Ken Henry to head a review of Australia’s place in the Asian Century. While that White Paper isn’t due until July, the Australian Government continues to improve our engagement with the region.

On May 22, Trade Minister Craig Emerson signed the Malaysia-Australian Free Trade Agreement (MAFTA). Malaysia is already Australia’s tenth largest trading partner. MAFTA is about deepening that engagement, and removing the barriers to doing business and building relationships between the two countries.

More and more, Australians and Malaysians are working together. Australian companies operate in Malaysia, and Malaysians seek the skills of our business leaders and professionals. MAFTA increases the number of Australians allowed to live and work in a range of sectors, like finance to architecture, in Malaysia and allows them to stay for longer periods.

This is especially important for Australian higher education institutions who have facilities in Malaysia, like Monash University and Curtin University. Australian service providers will now be able to increase their ownership in education services to 70 percent by 2015, moving to 100 per cent by 2015. Malaysia has also raised the limit on Australian lecturers at a single institution from 20 to 30 percent, meaning that it’s easier and more profitable to take the expertise of our higher education sector to Malaysia. MAFTA will strengthen ecotourism accreditation used by Australian tourists, while Malaysia will work with our scientists to the carbon emissions of the region. While economists have sometimes criticised bilateral free trade agreements for diverting rather than boosting trade, this one has been crafted with an eye to our long-term goal of free trade in the Asia-Pacific.

Opening international markets has long been an Australian aspiration. In the 1980s, we established the Cairns Group of agricultural free-trading nations, and in the 1990s, we set up the APEC Leaders’ Meetings. Under Labor Governments, Australia has had a strong preference for multilateral free trade agreements. But with the Doha negotiations at the World Trade Organisation having stalled, Australia has championed regional trade freedom.

MAFTA is one part of that. The other is the negotiation of the Trans-Pacific Partnership. A stepping stone to the APEC goal of a free trade area across the Asia Pacific, the Trans-Pacific Partnership allows other countries to ‘bolt on’ at a later date.

As an island nation, Australia depends on trade for our prosperity. By reducing our tariffs, we help our consumers. By improving market access into Asia, we boost wages and create jobs. The Malaysian-Australian agreement is a downpayment on the opportunities that will flow to Australia in the Asian Century.