Vital Malaysian trade partnership needs to benefit grass roots economies

International trade is the lifeblood of the Australian economy, and nobody knows this as much as a Western Australian like myself.

We have an economy of around $217 billion, of which exports of goods and products make up $121 billion, or 55 per cent. With only 10 per cent of the nation’s population, Western Australia generates 16 per cent of Australia’s economy and 46 per cent of Australia’s merchandise exports.

Malaysia is a vital part of the WA trade scene. After all, we are closer geographically than the eastern states and we see Malaysia as a key market.

Many of Australia’s key exports into Malaysia, including petroleum, copper, coal and wheat, come from Western Australia.

These four products account for nearly half of our exports to Malaysia. With a population of over 28 million, Malaysia represents a significant opportunity for Australian produce and, I hope, particularly for Western Australian produce and those producers in my electorate in the south-west.

It is an opportunity that should be developed. Currently, our merchandise exports to Malaysia are valued at $5 billion and we import product worth $9 billion from Malaysia. So the trade balance is currently weighted in favour of our partners, which really should give us significant scope to move in this new agreement.

We also remain slightly behind in services trade between the two nations, which includes bilateral trade in the education and travel markets. There is also a significant level of investment by each nation in each other.

Malaysia’s investment in Australia stood at nearly $14 billion in 2011 and Australia held nearly $6 billion worth of Malaysian investments.

From all of this we can see the importance of Malaysia to Australia in general and Western Australia in particular.

In this process, however, it is important to take a moment to consider the wider impact of trade agreements on the Australian economy.

Australia has been a long-term proponent of loosening the restrictive trade practices we see throughout the world, and we were a driving force in the Doha round of trade talks and remain active in UN trade negotiations.

Naturally we do this with an acknowledgement of vested interest. We are an exporting nation, after all. Unfortunately, we have not always been able to bring the world with us in what we are trying to achieve.

Many countries remain protective, particularly of their primary industries—and, from someone in the agricultural sector, it is something that has certainly been an issue for agriculture and primary production in this nation—and they do restrict attempts at trade liberalisation for primary production.

This is a significant problem for Australia given that primary production comprises such a large part of our exports. Minerals and petroleum account for nearly half of the exports, but we should note that, according to the Western Australian Department of Mines and Energy, Western Australia produces 68 per cent of the country’s mineral and energy exports.

We should also be aware that agricultural product exports are worth nearly $30 billion, or 10 per cent of total Australian exports. And we know that it was our agricultural exports that kept Australia out of technical recession during the period of the global financial crisis—something that was underestimated and undervalued.

Therefore, fair and equitable access to food markets around the world is of paramount importance to Australian trade. It is also of critical importance to the incomes of food producers and manufacturers in this country, despite the resistance of countries that seek to protect their own agricultural producers.

It was this need that drove Australia to Doha in an attempt to continue to push market deregulation.

There is, however, no greater acknowledgement of the lack of equity in trade than the failure of the world to deliver on the Doha round of world trade talks.

This process has now been acknowledged as having produced nothing concrete in a decade of discussions and a lot of talk that has cost a lot of money—millions of dollars. Even World Trade Organisation Director General Pascal Lamy is on record as saying that the process of trade liberalisation and equalisation is failing. Last year he stated that the political gap between member states is ‘not bridgeable’.

In addition, EU trade commissioner Karel De Gucht told European lawmakers that there was no reason to be optimistic that the negotiations could be concluded successfully.

Put simply, this process is failing because the market is currently neither free nor fair in a lot of instances and too many nations have an obvious self-interest in protectionism to allow for an outcome that provides trade liberalisation across a larger number of countries.

No foreign developed nation has been or is likely to be willing to sacrifice their own industries or their own farmers in the name of free trade because, in most nations, that probably would be political suicide.

And no developing nation has been or is likely to be willing to slow the growth of wealth accumulation for their citizens in order to raise the standard of living in other countries—because this is what it means in practical terms to them.

So, while international trade is a free market by definition, it requires national self-sacrifice, and that is what we have seen in Australia—a lot of sacrifice. This price is too high for many nations of the world.

That is why there has been a shift in world trade policy from broad encompassing trade agreements—the so-called multilateral agreements—to the current focus on bilateral agreements between individual nations, such as the one that we are considering today.

This shift was probably inevitable, if we recognise and acknowledge national interest as a major influence, and this could well continue.

It is probably pertinent at this point to consider the impact on global economic trends on the likely future of international trade agreements.

There is little doubt that a number of developed nations around the world are facing impending financial crisis, and this will impact on the process.

Sovereign nations with massive debt levels and no short- to medium-term capacity to reach budget surplus positions stand at the edge of a fiscal abyss, and the current trend of increasing debt and printing more money—the so-called quantitative easing—will not hide forever the insolvent position some countries may well find themselves in.

Unlike Labor, the coalition does not follow the economic strategy of ignoring debt now and allowing future generations to pay it off.

Delaying the pain, as we know, may be just a short-term political fix but it is long-term economic suicide and structural debt and deficit. The short-term politics, however, continue to be a paramount driving force and there are more uncertain times ahead in the world.

It means that easy markets will be hard to find in the near future and countries are likely to tighten rather than loosen their trade restrictions. As I said earlier, agriculture has been and probably will continue to be a sticking point in many free trade agreements.

I know that historically primary producers in this country have often felt as though they were essentially traded away in that process. This international marketplace in Australia produces, without question—and I am very proud of what we produce in this country, as one of those producers—some of the world’s best-quality and most efficiently produced agricultural and food products and high-quality manufactured goods, and we will always struggle to compete on price alone in that environment.

There is an opportunity in this free trade agreement with Malaysia for many products that come out of my electorate: orange juice, wine, beef, lamb, horticulture, high-value products and a range of niche products.

Many countries, as we know, provide advantages for their industries that include low-input labour costs and low levels of compliance with government regulations. These in turn provide cost advantages to their products, and we know about the additional cost of the carbon tax.

I see the member for Wannon sitting here. He and I both share a great concern about the dairy industry and its capacity to compete with the increased cost of a carbon tax on every litre of milk you will cool on your farm—and there are nine billion litres of those on farms having to be cooled—let alone your other inputs.

Local producers are inundated with compliance on costing issues, like the carbon tax.

In such a world marketplace, bilateral trade agreements are going to be essential. It is also going to be essential, however, to monitor and manage free trade agreements to ensure that the outcomes are delivered and that both parties receive the benefits that were planned.

There remains in Australia perhaps a lack of follow-up after the signing of trade covenants. Trade agreements need to be held accountable for the outcomes that they deliver.

The current proposal comes at a cost to the Australian budget of $80 million, which to some may not sound like a lot of money in the entire $370 billion annual budget, but essentially every dollar really does need to be properly accounted for. We do know about the current level of debt and deficit and we do need to make sure that every single dollar is accounted for.

This agreement, like all our trade agreements, does need to be analysed and real intangible benefits need to be demonstrated as having returned to the Australian economy.

On that basis I am desperately hoping that this Malaysia free trade agreement brings real benefits not just to the broader economy but also that flow through to the grassroots level to those who are producing—particularly in the primary production areas—so that they actually achieve some tangible benefit from this particular agreement.