Australia encouraged to focus on trade with China, India: report


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Australia needs to focus on trade opportunities with China and India rather than being derailed by nerves about the rise of protectionism in the United States and Britain, according to a report released today.

The Committee for Economic Development of Australia (CEDA) cites the protectionist policies of US President Donald Trump and the UK vote to leave the European Union, as two key factors clouding potential deals with key emerging markets.

But in its Outward Investment report, CEDA’s policy committee chairman, Professor Rodney Maddock said Australia was over-emphasising traditional trade with the US, UK and New Zealand at the expense of deals China and India.

“The amount that flows to China and India only accounts for 2.9 per cent of Australia’s total outbound investment,” Professor Maddock said.

“With concern about trade barriers stemming from Brexit and the Trump presidency, Australia should focus on engagement with its immediate region where growth opportunities are substantial.”

CEDA estimates that Australian investment in traditional partners like the US and UK is valued at more than $540 billion a year.

But the report said there was a major opportunity for Australia to be a premium food provider to Asia and recommended setting up “food processing clusters” to speed integration into Asia markets.

“There is a significant opportunity for Australian outbound investment in distribution systems for chilled and fresh foods in Asia, which remain poor,” Professor Maddock said.

The report also urged the Federal Government to “better articulate” the benefits of outward investment, especially with the emerging economies of China and India.

“There are significant emerging markets with an exploding middle-class, demanding higher quality products and services. This represents a huge opportunity for Australia,” Professor Maddock said.

Protectionism not encouraged

The report cautioned against moves to adopt protectionist policies in Australia and that rather than protecting local jobs, isolationism posed a risk to living standards.

Professor Maddock said that outbound investment was often viewed negatively — as local companies off-shoring jobs to cut costs in a high-wage economy.

“In reality, [offshore investment] can deliver significant economic benefits to the Australian economy and in fact create jobs both here in Australia and abroad,” Professor Maddock said.

“The lifting of trade barriers and integration of Australia into the global market-place has resulted in the biggest increase in our living standards in our history.”

CEDA also saw Australia’s taxation system as a potential barrier to investment and urged the Productivity Commission to find solutions.

“There have been conflicting views on whether the Australian taxation system is biased against outbound investment,” Professor Maddock said.

The CEDA report comes as the Federal Government works to strike bilateral free trade agreements, after President Trump torpedoed the Trans-Pacific Partnership shortly after his inauguration.

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