The tensions in Tony’s trade targets
28 Oct 2013|

Her Majesty Queen Elizabeth II opens the Menzies Building at the ANU, March 1963No executive in charge of a major construction project should announce the scheduled date for the Queen to open the building until after it’s up and finished. This bit of British building lore drew its force from the experience of those optimistic executives who’d announced the date of the royal ceremony while the building was still being erected. The moment the royal deadline was announced, every supplier, sub-contractor and supervisor had been handed a wonderful extortion weapon. For workers and unions the trend was to bloody-mindedness and blackmail. Who knew a modest monarch could cost a builder so much money?

The Queen Opening Gambit is a version of the bureaucratic law that you can announce a target or set a timeline, but never do both; the date always arrives on time, projects often don’t. That suggests that Tony Abbott has been bold in announcing that, within 12 months, Australia wants to conclude bilateral free trade agreements with China, Japan and South Korea. In setting both target and timeline, Abbot has been ‘courageous’—in the ‘Yes, Minister’ sense.

Trade is an area where voters seldom punish governments for failing to reach targets on time (the Doha Round is a wonderful and woeful example of trade’s ability to trek towards a target for years without any sign of a finishing time). Given the opaque and arcane nature of trade, it has taken some effort by the new Abbott government to make trade an early stress point or test case for its international policy approach. One of the early cracks on display was the not-so-subterranean struggle between the coalition parties, the Liberals and the Nationals, over trade philosophy. As my previous column discussed, that struggle led to the Nationals losing the iron grip they’ve had on the Trade portfolio for seven decades.

In politics, of course, there is philosophy and then there is personality—it’s the people that give it the pep. And the personality as well as the philosophy of the National’s deputy leader, Barnaby Joyce, was part of the calculation that led to the Liberals hanging on to Trade. In the Joyce view of the world—and that of many National Party voters—free trade is all about selling Australian farm products to the world. It is most definitely not about other parts of the world coming to buy Australian farms. For the wombat tribe, holding on to ownership of the farms is about sovereignty, not the free flow of investment.

Another version of the philosophy struggle within the Coalition got a public run in 2011 when Abbott commented that he preferred to give priority to free trade with Japan rather than China because Japan was a pluralist democracy, and a ‘vastly more’ market economy. Abbott argued China was ‘one of the more problematic’ deals, because there were questions as ‘to what extent China is a market economy’.

The irony in Abbott’s ‘market economy’ comment is that ‘market economy’ status is precisely the prize that Canberra gave China to launch the bilateral free trade negotiations.

In April, 2005, Australia formally acknowledged China ‘as an equal WTO trading partner by recognising China’s full market economy status’. That recognition mattered greatly to China in the World Trade Organisation. And having won the market trophy at the very start, China has shown little sense of urgency about the negotiations which have dragged through 19 rounds over nine years.

Abbott talks of the need to ‘conclude a significant free trade agreement with China within 12 months’. Such an agreement would indeed be ‘significant’. But it would be achieved by abandoning the standard Australia position that for the deal to be worthwhile, it would have to be ‘high quality’. To get that important agreement within a year, Australia would need to make important concessions and settle for something that looked a little on the low quality side to the trade experts. Success is going to be redefined.

The comparison is with the free trade agreement that the Howard government clinched with the United States. To get the deal, Howard was willing to abandon deeply entrenched Australian principles and give the US agricultural carve-outs in areas such as sugar. The symbolism of a trade treaty with the US meant a bit of the substance could be lost. The deadline Abbott has set his government with China (and with Japan and South Korea) suggests that the symbolism-substance equation is again to be squeezed. The tough review regime imposed on investments by China and by Chinese state owned enterprises, for instance, is one of several areas where Beijing will be probing for a bit of deadline-induced softness in Canberra’s position.

Cabinet has approved a negotiating mandate for the Minister for Trade and Investment, Andrew Robb, and he has headed off to become the first Abbot minister to visit China, seeking what he calls ‘China’s biggest Free Trade Agreement’ (that might be news to ASEAN, but no matter). Robb says the Abbott government has decided ‘to put a stronger focus on economic diplomacy’. If the measure of that diplomacy is to be the conclusion of bilateral free trade treaties, then Australia is going to have to rethink what it has been grappling over with China since 2005, with Japan since 2007 and with South Korea since 2009.

In Shanghai, Robb waved aside the 12 month deadline as the driver, saying he had a fresh Cabinet mandate to redefine what a deal might look like:

It’s not the timing that’s an issue, it’s trying to meet one another half-way. The fact of the matter is that all three of those negotiations had stalled, and had been on hold. Hence, we have to find a way through the blockages.

Meeting the other side half way is not always how the Queen Opening Gambit plays out.

Graeme Dobell is the ASPI journalist fellow. Image courtesy of the Australian National University.