The government’s conclusion of a free trade agreement with Korea is the first down-payment on an ambitious but achievable trade agenda that is clearly in Australia's national interest.
The agreement is good news for our farmers and miners as it eliminates tariffs on 98 per cent of Australian agricultural exports to Korea, and cuts tariffs on many key resources exports.
It will also provide businesses in our services sector with better market access in areas like legal services, financial services, accounting services and telecommunications.
The agreement to increase the screening threshold by the Foreign Investment Review Board for Korean private sector investment from $248 million to $1.1 billion is a big win-win outcome from this FTA.
As a medium-sized, open economy, Australia has long relied on trade and investment to support our economic growth and prosperity. The figures are well-known: one in five jobs in Australia is related to trade, and numerous international studies have shown that trade liberalisation is a strong engine for job creation and higher wages.
A combination of the government's commitment and pragmatism in advancing trade negotiations, alongside relatively favourable political and economic tailwinds from a number of key trading partners, offers a rare window for Australia to conclude several important agreements that will give us a loosely formed free trade network with our key north Asian partners.
But as the Business Council of Australia’s Action Plan for Enduring Prosperity outlines, it is now up to us to maximise the opportunities from our engagement with the global economy by lifting the competitiveness of our domestic firms and markets, and by fostering openness and reciprocity on the part of our regional and global partners.
The size of the prize is worth pursuing. By this time next year, we could have concluded preferential agreements with our two largest export markets – China and Japan – as well as the Trans-Pacific Partnership Agreement (which alone brings together 12 countries, accounting for 40 per cent of global GDP, and includes five of our top 10 trading partners).
Developments in Japan are lining up favourably. Prime Minister Shinzo Abe is keen to reach agreement on the seven-year negotiations on an Australia-Japan FTA, using the agreement as a plank in his domestic economic reform narrative.
He would follow in the footsteps of his grandfather, Nobusuke Kishi, who presided over the passage of the ground-breaking Australia-Japan Agreement on Commerce in 1957, which underwrote the huge expansion of trade relations between Australia and Japan.
China, likewise, sees the value of concluding the nine-year-long negotiations on an Australia-China FTA. It is hard to find two countries whose economies are more complementary than Australia and China, and who would benefit more from signing a preferential trade agreement.
The previous Australian government was right to hold out on a deal until China was prepared to offer sufficient market access gains to make an agreement balanced, but that threshold looks like it is getting close.
China is keenly conscious of the network of other trade agreements under discussion in the region – not least the TPP – and would rather be an internal participant than an external observer. Should China be prepared to offer sufficiently favourable market access conditions, Australia should take a pragmatic approach to handling some of China’s requests, for example on the threshold for Foreign Investment Review Board reviews of foreign investment applications.
A consistent feature of Australian trade policy has been the importance of bipartisanship in achieving success in free trade agreements. The agreement with Korea is no exception, having been launched by the previous government in 2009, and considerable progress made in the years since.
Ongoing bipartisanship will be equally important in ensuring the smooth conclusion of more free trade agreements, and a seamless implementation of the benefits that will flow through to the Australian economy.
The quicker we can conclude free trade agreements with our largest trading partners, the sooner all Australians will benefit from increased access to Australian goods, services and investment from some of the world's biggest markets.
Jennifer Westacott is chief executive of the Business Council of Australia.