Australian Embassy
The Philippines

SP100430 AANZFTA Advocacy Seminars

AANZFTA Advocacy Seminars
Remarks by Ambassador Rod Smith
27 and 30 April, Davao and Cebu 

AANZFTA Lead Negotiator Ramon Kabigting; New Zealand Ambassador Andrew Matheson; Ambassador Donald Dee of the Philippines Chamber of Commerce and Industry and Chairman of U-ACT; my Bureau of Customs colleagues; distinguished businesspeople; ladies and gentlemen; good morning.

It is a pleasure to be here with you today to discuss the opportunities presented by the ASEAN-Australia-New Zealand Free Trade Agreement. This is an event that the Australian Government sees as a milestone for both the region, and the Philippines-Australia relationship.

The AANZFTA is Australia’s largest free trade agreement. It will eliminate tariffs and other barriers to trade in goods, services and investment across a region that is home to more than 600 million people and has an annual GDP of 2.7 trillion US dollars – almost 130 trillion pesos.

As a group, ASEAN and New Zealand constitutes a larger trading partner for Australia than any single country, with trade valued at over 86 billion US dollars - or 4 trillion pesos – which amounts to over a fifth of Australia’s total trade with the world. So this agreement reflects and reinforces the enduring value Australia places on its relationship with ASEAN.

The Philippines-Australia commercial relationship is a significant one. Two-way trade is around $3 billion – merchandise trade $2 billion and services trade around $1 billion – and investment worth around $1.7 billion, with Australia having significant interests in the mining sector in particular.

So the relationship is significant. But put in perspective, the Philippine market is underperforming relative to its competitors in ASEAN. Australia’s two-way trade (goods and services) with ASEAN is close to $90 billion – which means that the Philippines share of this trade is only around three percent. By comparison, Australia’s trade with Singapore is worth $31b, Thailand $18b, Malaysia $15b, Indonesia $12b and Vietnam $8b.

So I want to underline that there are very significant opportunities for Philippine exporters and investors in Australia, as indeed there are for Australian exporters and investors in the Philippines, and very considerable potential for growth in two-way trade and investment.

Australia is sometimes referred to as a small market. In fact it’s not. Australia’s is the world’s fourteenth largest economy with a GDP of around $1 trillion; it is a dynamic, export-driven economy with strong financial and regulatory systems and an affluent consumer market.

It is certainly true that with a population of 22 million we are not as big a market as China, Japan, Europe or the US, but in some respects this is an advantage. Our market size is more complementary to the Philippine export sector, which doesn’t have the export volumes of larger countries. What this means is that Philippine exporters can make an impact in the market without the large volumes needed to do so in these larger economies.

So, again, there is considerable potential to grow the commercial relationship between our two countries. This is what makes AANZFTA a milestone; it’s a significant new opportunity to boost trade between the Philippines and Australia.

Our key priority now is to ensure Philippine and Australian businesses are aware of AANZFTA and in a position to take early advantage of the opportunities that the agreement opens up.

One of the most important benefits to come from the agreement is that it will provide businesses with greater certainty and more transparency in doing business, in the Philippines and indeed all countries across the region. AANZFTA locks in existing market access and regulatory protections, speeds up administrative processes, improves access to information, and locks in investment protection disciplines. These will have an important confidence-building effect.

For exporters, the tariff outcome is substantial and the benefits immediate. On 1 January 2010, Australia reduced to zero tariffs on over 96 per cent of Philippine exports, based on current trade. Australia will eliminate all tariffs on imports from the Philippines by 2020, and most within a few years. Major Philippine exports to Australia, including industrial products, transport vessels, automotive parts, furniture and processed agricultural products will face zero tariffs. Regional rules of origin will also facilitate doing business across the region.

Philippine exporters are particular beneficiaries of these market access improvements. Zero tariffs level the playing field for Philippine exporters by removing the margin of preference that your competitors from Thailand, Singapore and other countries have enjoyed into the Australian market under existing bilateral free trade agreements. Thailand’s experience here is particularly relevant: since the Thailand-Australia FTA was concluded, two-way trade has almost doubled. Most of that growth has been in Thai exports to Australia.

The AANZFTA also creates opportunities for exporters to link themselves better into global supply chains – for example in the automotive sector where Philippine auto part makers could supply Australia’s car industry, serving both the Australian and third-country export markets.

On the import side, businesses can benefit from lower input costs. Australian exports are high-quality, highly competitive and supply reliable. And consumers across the AANZFTA region also stand to gain through lower retail prices.

Other key outcomes include improved commitments on entry and stay for business people, professionals and skilled workers. Importantly also, the FTA is not static, and it provides a platform for further liberalisation in the future, including a work program to improve investment market access.

An aspect of the FTA which cannot be overlooked is the important signal the AANZFTA sends to the entire world that the Philippines – ASEAN – Australia and New Zealand are committed to keeping markets open. We share a determination to support trade liberalisation, working together in the WTO, in APEC and elsewhere to press for a conclusion of the Doha Round and resist protectionism.

As our region emerges from the global economic crisis, it is vital that we keep in mind the value of trade liberalisation. As any number of recent studies have shown, raising trade barriers now would make a difficult situation much worse. Australia’s experience has been that lowering trade barriers has helped our economy grow, and made our businesses more resilient and competitive.

Developing countries such as the Philippines face challenges in realising the benefits of increased trade. But sustained economic growth remains the most powerful long-term solution to poverty. No country has achieved strong and sustained economic growth – and thus rapid poverty reduction – without participating in international trade.

To translate increased trade activity into development outcomes requires support. That’s why AANZFTA includes a built in Economic Cooperation Work Program for ASEAN nations worth up to 1 billion pesos over the next five years. This will provide capacity building and technical assistance, and help the Philippines implement its FTA commitments, as well as support further economic integration across the region.

On that note I congratulate U-ACT and the Department of Trade and Industry for organising this seminar and this business briefing session, which will be important in informing business about how to make the most of the opportunities AANZFTA presents Philippine business. We look forward to continuing to work with DTI and U-ACT in ensuring exporters are well-positioned to take advantage of the benefits AANZFTA has to offer and we encourage interested businesspeople to find out more about how the agreement could boost their business.

Thank you to the U-ACT and PCCI for hosting this briefing, and thank you all for your attention.