Opening Remarks by Ambassador Rod Smith
Media Launch of the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA)
10 February 2010
Bureau of Customs Commissioner Napoleon Morales, Department of Trade and Industry Assistant Secretary and AANZFTA Lead Negotiator Ramon Kabigting; New Zealand Ambassador Andrew Matheson; Ambassador Donald Dee of the Philippines Chamber of Commerce and Industry; distinguished businesspeople; ladies and gentlemen of the press; good morning.
It is a pleasure to be here with you today to recognise in an official setting the entry-into-force of 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.
It was in the early 1990s that the Australian Government initiated efforts to develop links between the ASEAN Free Trade Area and the Australia-New Zealand Closer Economic Relations agreement. It was not until March 2005, that AANZFTA negotiations began with the first round held right here in Manila.
So it is appropriate that, having been a birthplace of sorts for AANZFTA, the Philippines was also one of the first countries to ratify and implement the new agreement, giving Philippine businesses an early opportunity to benefit from the agreement.
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 – over a fifth of Australia’s total trade with the world. This agreement reflects and reinforces the enduring value Australia places on its relationship with ASEAN.
The Philippines-Australia commercial relationship is a significant one. But it could be much more so – currently the Philippines accounts for just 2.8 per cent of our trade with the countries of ASEAN. Two-way merchandise trade is worth around 1.4 billion US dollars and total investment 1.7 billion US dollars. We think there is room for both countries to build on our trade relationship. 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. On 1 January 2010, Australia reduced to zero tariffs on over 96 per cent of Philippine exports, based on current trade, to our country. Australia will eliminate all tariffs on imports from the Philippines by 2020, and most within a few years. 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. It 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. 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.
Let me conclude by mentioning a recent report by the Asian Development Bank, which found that Philippine firms want to use FTAs because of the new export opportunities they represent. Significantly, the researchers behind the report found that information and education about FTAs is crucial to successful use of an FTA by business.
On that note I congratulate the Department of Trade and Industry for organising this media launch and this afternoon’s 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 working with DTI 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 Bureau of Customs for hosting this morning’s briefing, and thank you all for your attention.