The failure of the latest Trans-Pacific Partnership (TPP) talks in Hawaii has put the spotlight back on Australia’s recent Asian free trade deals.
Fortunately, there are still plenty of opportunities for Australian exporters in the world’s fastest-growing region, analysts say.
The latest export figures released by the Australian Bureau of Statistics (ABS) showed strong growth in Australia’s services, manufacturing and rural exports, “cushioning the impact of lower resource export earnings,” according to Trade Minister Andrew Robb.
Total exports amounted to $319 billion for fiscal 2015, with services exports rising by 9 per cent to $63 billion, rural exports up 7 per cent to $43 billion and manufacturing exports increasing by 4 per cent to $44 billion. However, resource exports dropped by 14 per cent to $143 billion, resulting in total exports dropping 4 per cent on the previous year.
“With the end of the resources boom, Australia’s economy will need to transition to a broader growth base – increases in rural, manufacturing and services exports in 2014-15 indicate that this transition is already underway,” Mr Robb said.
“The conclusion of trade agreements with Japan, Korea and China will enhance opportunities for broadening our export base, and underscores the importance of the Government’s trade negotiation agenda,” he added.
Confidence on the rise
The latest DHL Export Barometer has also found exporter confidence is on the rise, with the highest level of confidence since the global financial crisis. According to DHL, two-thirds of the nearly 600 Australian exporters polled expect orders to increase next year, with more than half seeing increased orders in the past year.
Exporters also showed strong backing for the recent Asian FTAs, with the latest agreement with Australia’s biggest trading partner, China (known as ChAFTA) gaining positive expectations from 49 per cent of those polled.
The earlier deal with Japan, known as the Japan-Australia Economic Partnership Agreement (JAEPA) was found to be more beneficial than initially expected, with positive impacts cited at 41 per cent compared to the anticipated 35 per cent in 2014.
Concerning future FTAs, more than half (51 per cent) expected a positive impact from a deal with the European Union, with confidence in the TPP also growing, up from 37 per cent last year to 46 per cent forecasting a beneficial outcome.
Comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam, the TPP encompasses 40 percent of world gross domestic product (GDP) and a quarter of global exports, with a successful accord likely to become the world’s biggest multilateral trade deal in a decade.
According to the Peterson Institute for International Economics, a successful deal could boost world gross domestic product (GDP) by nearly US$300 billion a year, with exports of member nations forecast to grow by US$440 billion.
Yet while the future of the TPP is uncertain following the breakdown of the latest talks, ANZ says Australian exporters still have enormous opportunities to benefit from the growth of the world’s fastest-growing region, Asia.
“Many of the final hurdles to the TPP are bilateral in nature and the negotiations will continue on that basis around specific issues such as dairy, sugar and automobiles. Despite the various trade representatives appearing to be confident of an agreement being reached, multilateral agreements are notoriously difficult to bring to a conclusion,” ANZ’s chief economist Warren Hogan said.
The economist warned against attempts to renegotiate the China trade deal, which he said could risk the nation’s Most Favoured Trading nation status. However, should ChAFTA be ratified as expected, Australian exporters can expect major benefits from the growth of the world’s second-biggest economy.
“The Chinese market represents one of the most important opportunities for Australian businesses over the decade ahead. As China’s economy transitions from the investment-led industrialisation of the past two decades to a mature services-orientated consumer economy, the Chinese domestic market for a broad range of intermediate and consumer goods is expected to grow strongly,” Hogan said.
‘Nearly all industries will benefit’
“By 2030, our projections indicate that China’s urban disposable income (per capita) will almost quadruple, over 300 (million) new middle class members will emerge in China’s urban areas, and this new class of consumers will spend three times as much in 2030 as they do now. We expect the automobile, telecommunications, housing, education, recreation and medical service industries to benefit most from the rise of the Chinese consumer, but nearly all industries will benefit in some way.”
With non-mining exports now crucial following the end of the mining boom, trade with Asia’s fast-growing markets could represent the best opportunity to ensure the Lucky Country’s dream run of economic good fortune continues.
Anthony Fensom is an experienced business writer and communication consultant with more than a decade’s experience in the financial and media industries of Australia and Asia. Having spent four years with Australia’s stock exchange, together with six years in Tokyo, Japan as a full-time writer, he has a keen awareness of the Asia-Pacific’s economic and financial issues.