Saturday, January 31, 2015

Australia To Link To Pacific Alliance As Part Of Larger Push On Free Trade Area Of Asia-Pacific

Posted: November 5, 2012

Australian Trade Minister Craig Emerson last month made clear that his government's efforts to deepen links to the Asia-Pacific region is not limited to the Trans Pacific Partnership (TPP) by announcing it would seek observer status in the Pacific Alliance, which includes Mexico, Colombia, Peru and Chile.

In an Oct. 28 announcement, Emerson said this observer status would position Australia as a link between the Pacific-facing nations of Latin America and Asia. He made that announcement the same day the government released a White Paper titled "Australia in the Asian Century," which recommends that Australia increase the value of its trade links with Asia from one-quarter of GDP in 2011 to one-third of GDP by 2025.

Australia is becoming an observer in the Pacific Alliance after an informal invitation from Chile during a September visit of the Chilean president, according to an informed source. Australia had previously attended the June summit as an informal observer along with Panama, Costa Rica, Canada and Japan.

"These nations [in the Pacific Alliance] are like-minded with Australia as open traders and are interested in Australia connecting them to dynamic Asian economies through our familiarity with countries of the region," Emerson said in the statement.

The alliance would also give Australia more market access to Colombia, with which it has mineral and energy interests, sources said. Trade between Colombia and Australia has been growing, but investment is growing much faster, according to sources, who noted that Australia opened a trade office in Bogota in July.

The Alliance has a broader scope than TPP and has involved negotiations on the free movement of business people, as well as integrating stock markets in the different countries, Francisco Rosenzweig, Mexican undersecretary of foreign trade, told Inside U.S. Trade in a May interview. He added that TPP and the Pacific Alliance could be complementary agreements.

Observer status will help Australia better understand the issues being negotiated in the Alliance and ultimately decide if it wants to join as a member, one source said. "We will make an assessment of the merits of seeking to join the Pacific Alliance, which is likely to expand to include other countries such as Costa Rica and Canada," according to the White Paper.

The paper deals with the steps that Australia has to take domestically and internationally to benefit from the rise of Asia in this century by diversifying trade beyond supplying the energy and minerals that have so far dominated its trade with Asia. This trade pattern has led to a substantial increase in Australian domestic income, but has yielded little in terms of overall productivity, which is critical to lifting living standards, according to the paper.

On the domestic policy front, the White Paper recommends investment in education, innovation, infrastructure, tax reform and regulatory reforms.

Internationally, the White Paper calls for integrating the Australian economy more with Asian countries and make it part of comprehensive region-wide agreements as well as the World Trade Organization. This will reduce the cost of doing business by lowering trade and investment barriers, better aligning economic regulations and corporate governance arrangements, as well as improving connectivity of infrastructure.

The paper says Australia should work in existing forums, such as the Asia-Pacific Economic Cooperation (APEC) forum, the Association of Southeast Asian Nations (ASEAN) and through other free trade arrangements.

This includes participating in the Regional Comprehensive Economic Partnership (RCEP), for which negotiations will be launched this month. The RCEP is otherwise referred to as ASEAN plus six, which is comprised of China, Japan, South Korea, India, New Zealand and Australia.

Australia is participating in that effort even though it already has what Emerson said was a high-quality free trade agreement with ASEAN and New Zealand. It is doing so in the hope that each of these agreements can add momentum to others by leading to "competitive liberalization," in which countries increasingly open their markets as they see the benefits of doing so from other agreements.

The Australian government sees these various negotiations as a pathway to the APEC vision of the Free Trade Area of the Pacific, according to the Oct. 28 statement.

Australia is also pursuing bilateral negotiations with China, Japan, South Korea, Indonesia and India, and just completed an FTA with Malaysia. It is also having FTA talks with the Gulf Cooperation Council and is working on expanding the Pacific Island Countries Trade Agreement.

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