Australia Welcomes Closer ASEAN Ties, but Trade needs to Catch Up

21 March 2018 Jarryd de Haan, Research Analyst, Indian Ocean Research Programme

Background

Prime Minister Malcom Turnbull recently welcomed a number of his counterparts from member states of the Association of South-East Asian Nations (ASEAN). The ASEAN leaders came to Australia to attend the second ASEAN-Australia Biennial Summit, which was held on 17-18 March. It was the first ASEAN summit to be held in Australia. Prior to the summit, Foreign Minister Julie Bishop and Defence Minister Marise Payne met with their Indonesian counterparts Retno Marsudi and Ryamizard Ryacudu to sign a maritime deal.

Comment

At the conclusion of the summit, a joint statement titled the Sydney Declaration was released. While the declaration does not contain any surprises, some key points include: condemnation of North Korea’s nuclear and ballistic missile programme; and emphasis on the importance of non-militarisation in the South China Sea. The latter emphasising the need for self-restraint (alluding to China’s ambitions in the area). Indonesia’s maritime deal with Australia, which was signed before the summit, also indirectly dealt with some of the concerns surrounding the South China Sea.

The topic of trade was also heavily discussed during the summit, with Turnbull encouraging a push towards free trade among ASEAN members. That was the general consensus of the attending ASEAN leaders, with the Sydney Declaration stating that the members are committed to enhance trade through resisting protectionism and promoting open and free markets. The ASEAN members and Australia also expressed commitment to the effective implementation of existing agreements, such as the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA). Implemented in 2010, AANZFTA remains the largest FTA Australia has concluded and the most comprehensive FTA that ASEAN has concluded.

While there is little doubt about the noble intent behind the AANZFTA, efforts to increase trade under its framework have so far proven to be ineffective and not beneficial from Australia’s standpoint. Looking at the annual growth rate of trade over the seven-year periods before and after the AANZFTA was implemented reveals that the growth rate in Australia’s trade value with ASEAN has fallen by eight per cent, while imports have fallen by 10.4%  and exports by 3.6%.[1] So, although trade between Australia and ASEAN is, for the most part, still increasing year-by-year, it has done so at a slower rate since the AANZFTA was implemented. While there are numerous outside factors involved that may be impeding trade, it appears that current efforts to boost economic co-operation have failed to surmount these challenges and trade has consequently failed to reach the desired targets.

That said, trade is not the only aspect of Canberra’s broad economic relations with ASEAN members. The AANZFTA covers a variety of economic sectors, including investment, intellectual property, e-commerce, temporary movement of business people, competition and economic co-operation. In relation to trade, however, Australia needs take a closer look at how to either revamp exports to its ASEAN neighbours under the existing framework, or look into other possible methods.

[1] According to trade statistics from the Australian Bureau of Statistics (Cat. № 5368.0).

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