When the COVID- 19 pandemic eventually eases and the ban on most international travel comes to an end, Australians will jump at the chance to finally re-connect with the world.
Many will joyfully reunite with their friends and loved ones. Holidaymakers will again jet off to exotic foreign lands, and business people will be able to re-engage with their clients and customers in the world’s major cities.
That will be the fun part.
The more challenging post-pandemic task facing Australian policymakers will be to restore Australia’s integration with the global economy after its slide into relative isolationism during the pandemic.
The world will emerge from Covid-19 a different place. The pandemic has shut borders, damaged global supply chains, curbed migration, weakened the world's multilateral institutions and led to the erection of fresh trade barriers between nations.
This is bad news for an open-facing multicultural nation such as Australia, where more than 2 million Australians are employed in a trade-related activity.
It will be crucial for our future prosperity that we lead efforts to reboot the world’s multilateral trading system that has served us so well, and to restore our place in it.
Here’s what we need to do to achieve this:
Diversify our export markets
Twenty years ago, China bought about 5 per cent of Australia’s goods exports. By 2020 that had skyrocketed to around 40 per cent, making Australia the most dependent country on trade with China in the world.
Our exports to China are equal to the exports of our next five biggest trading partners combined.
Recent analysis by the Perth USAsia Centre showed that half of Australia’s top-30 export industries rely on a single dominant customer – usually China.
This means Australian exports and jobs are particularly vulnerable to trade shocks – including the well-publicised sanctions imposed by China over the past 12 months.
The benefits of our trading relationship with China over many decades should be celebrated, but governments should also have been doing much more to avoid an over-reliance on any single market.
It’s time Australia finally got serious about building better relationships with India and Indonesia, both of which are predicted to be among the world’s top four economies within 30 years.
Vietnam is another regional market with massive potential. And we must continue to expand our already strong trading relationship with South Korea and Japan.
Trade diversification is hard and will take decades to realise, but nothing will happen unless the Commonwealth government makes it a priority. After World War II, no export market compared to Britain, but our leaders worked tirelessly to build up our resources industry to allow exports to Japan and South Korea, and later to China.
Our exporters need a Government that does more than simply point to free trade agreements and hope that this leads to an increase in trade. Australia needs leadership that will adopt a whole-of-government approach to diversifying what we sell and who we sell to.
Every Ministerial portfolio should take on the task to consider how it can contribute to “Project Diversification”. For instance, the Australian healthcare system has the opportunity to export its world-leading capacity in healthcare education and training, medical technology as well as digital health and systems to enable to rural and remote healthcare.
All of these Australian capabilities can help our neighbour, Indonesia, increase its health-care capacity and improve the health of millions across the vast Indonesian archipelago.
The advent of Australia’s superannuation system has by necessity created an advanced, successful and domestically owned fund management sector. This is a capacity in financial services that could be a significant export industry if Australia develops the right products for the right markets.
Some have suggested Japan is an ideal target, as it is a market that tends to seek longer-term investment products with reliable returns. This is a speciality of Australian superannuation fund managers!
There is nothing but a lack of initiative and imagination stopping Australia’s Federal Government Ministers from helping their respective sectors think more broadly and support them in developing new export industries.
It doesn’t take long to think about which Ministerial portfolios could commit to Project Diversification and seek out new export products for different markets.
As well as the two I’ve mentioned, health and financial services, there are defence industries, industry and innovation, education, training childcare, communication and infrastructure. And the existing mainstays of Australian exports – resources and agriculture – could equally participate in this national priority of genuine diversification.
True diversification takes years and it needs real commitment. But this Government has failed to do the hard work to open up new markets.
The most glaring example is its decision to implement just one of the 20 priority recommendations contained in a 500-page report released in 2018 that contained a blueprint for closer economic engagement with India.
The report’s author, former Department of Foreign Affairs and Trade secretary Peter Varghese, found that no single market over the next 20 years offered Australia more growth opportunities than India. And he suggested the Government adopt a target of lifting Australian investment in India almost tenfold – to reach $100 billion by 2035.
As that report has gathered dust, India's share of Australian merchandise exports has dropped below 2 per cent, the lowest level in almost two decades.
And the Morrison government’s singling out of India – in the midst of its worst COVID crisis – by abandoning Australians and criminalising their re-entry into Australia directly undermines our relationship with this vital economic and strategic partner.
We have to take the relationship with India seriously – but the Morrison government has neglected it.
Diversification will enable Australian exporters to manage geopolitical risks, expand their consumer base and support Australian jobs.
It will make the Australian economy more resilient to future external shocks and supply chain disruptions.
Diversify what we export
Australia’s reliance on four key exports – resources, agriculture, tourism and education – has served us well for decades, but the growth prospects of these sectors are uncertain.
A recent Harvard Growth Lab Atlas of Economic Complexity ranked Australia 93rd in the world for the “complexity” of goods and services exported, lagging Kazakhstan, Uganda and Senegal.
Resources account for about half of all exports, led by iron ore, coal and natural gas. Services come second at 22 per cent, largely made up of international education and tourism – but these two sectors have been almost wiped out by the pandemic and will take years to recover.
The Government must foster new export industries and encourage more businesses to export their goods and services. More government investment in research and development will boost advanced manufacturing capabilities, which will move the economy up the ladder of complexity.
The power of small business must be harnessed. Of the more than 2.3 million businesses operating in Australia, only 53,000 sell their goods to the world.
Many small to medium enterprises (SMEs) say they do not have the confidence to consider trade opportunities and lack the capabilities to be able to expand into overseas markets. Many are hampered by a lack of information about Australia’s network of free trade agreements, the relatively high cost of complying with regulation and inadequate access to trade finance.
SMEs account for only 14 per cent of Australia’s exports, whereas in G7 countries they account for 25 per cent and the European Union average is 35 per cent. Lifting SME exports to 25 per cent of Australia’s exports would increase our GDP by an estimated $36 billion, according to the Export Council of Australia.
More strategy and less politics on China
Diversifying our exports while continuing to reap the benefits of trade with China are not mutually exclusive ambitions. China will continue to be a massive market for Australian exports; those who call for economic decoupling or trade retaliation by Australia are being unrealistic or deliberately inflammatory.
Trade Minister Dan Tehan said recently he plans to oversee “another golden age of trade diplomacy” with China. How he plans to achieve such a bold aim remains unclear. At the time of writing, Mr Tehan had yet to even receive a reply to a letter he sent in January to his Chinese counterpart, Wang Wentao, seeking to reopen dialogue.
When Mr Tehan became Trade Minister in December last year, exporters hoped the appointment would prove to be a circuit-breaker in Australia’s trade disputes with China.
I understand the relationship with China is increasingly complex and that it must always be managed in the national interest. While the wealth generated by exports is hugely important, national security and sovereignty are paramount.
But if the Government wants to help our exporters, it could start by drawing on the expertise of Australian companies that have enjoyed long-term trade links with China.
With the Prime Minister and his ministers unable to even speak to anyone in Beijing, these companies are the ballast in the relationship. Business leaders have a legitimate place in this important national discussion. Yet some of those who do speak up about the need for strong relations with China often have their motives questioned, labelled as "China sympathisers" or somehow disloyal to Australia.
It’s a complex relationship but disengagement is not an option, and the Prime Minister must lead the national discussion.
But Mr Morrison has never admonished the regular inflammatory and irresponsible comments on China by some of his Coalition MPs. This has made a bad situation worse.
Backbencher George Christensen has led the xenophopbic charge, calling for a boycott of Chinese products, comparing China to Nazi Germany and recently posting to Facebook that “WAR IS COMING”. Mr Christensen is the Chair of Parliament’s Joint Standing Committee on Trade and Investment Growth, which has recently conducted an inquiry into the future of Australia’s trade relationships with China and other nations.
China, of course, will take note of his comments. Mr Christensen should be removed from this role and replaced with someone who would work to improve Australia’s trading relationships, rather than engaging in immature chest-beating to grab a headline or a Facebook like.
Improve our Asia capabilities
Australian business knowledge of Asia remains limited. Research by AsiaLink has found that more than 90 per cent of board members and senior executives at ASX 200 companies would not qualify as ‘Asia-capable.’ It also found only 4 per cent of directors and 5 per cent of senior executives had worked in Asia for more than five years.
The Morrison government has been trumpeting a new bilateral trade agreement with Indonesia, but little has been done to arrest a worrying decline in our understanding of Indonesia, its people and language.
It’s a national embarrassment that more students in Australia were learning the Indonesian language in Australian the 1990s than they are today. Last year, I found it difficult to enrol in a post-graduate Indonesian studies course in, of all places, Western Australia, a state with close business ties to Asia.
With demand for Australian goods and services expected to rise across Asia’s growing consumer class in coming decades, the value of Asia-capabilities for Australian exporters will be critical to successful export diversification.
Lift our trade diplomacy
Australia must become a vocal global leader in defending free trade and working with like-minded nations to restore faith in the enfeebled World Trade Organization.
The government’s commitment to such cooperation remains under a cloud. In 2019, Scott Morrison railed against the threat of “negative globalism” and ordered an audit of Australia’s role in international organisations. This at a time when Australia’s stake in strong global rules-based architecture is more important than ever.
Australian diplomats must be at the forefront of supporting and strengthening the rules-based order and working with allied and aligned nations to speak out against unilateralism and protectionism.
In the WTO, we must encourage a long-term solution to the collapse of the Appellate Body. The Appellate Body was rendered functionless after the Trump Administration consistently blocked the appointment of new members.
It is a key component of the multilateral global trading system that has helped to underpin economic growth and lifted more than one billion people out of poverty around the world.
This opinion piece was first published in June 2021 edition of Tocsin magazine.
