Trade pact should be only for those who play by rules

Former Japanese prime minister Shinzo Abe. Picture: AFP

A heartening message reached my inbox last week. Governor-General David Hurley announced the late Shinzo Abe was awarded Australia’s Honorary Companion of the Order of Australia, the country’s highest honour. This is the latest gesture of warmth we have received from across Australia since the former Japanese prime minister’s tragic passing. Abe’s state funeral will be attended by Anthony Albanese, and three former prime ministers.

Hurley thanked Abe for his “true friendship” to Australia, and commended him for having elevated our bilateral partnership “to new heights”. Indeed, we owe Abe’s leadership many landmark milestones in the development of our special strategic partnership, such as the Japan-Australia Economic Partnership Agreement and the Reciprocal Access Agreement.

His visit in 2018 to Darwin where, together with Scott Morrison, he laid wreaths for those killed in the bombing of Darwin symbolised the reconciliation between our two countries.

Hurley mentioned Abe’s foresight in championing the vision of a free and open Indo-Pacific. He is credited as “a force behind the formation of the Quad” and “a key advocate for the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership”.

The relevance of this aspect of Abe’s legacy is keenly felt in the Indo-Pacific, where the rules-based international order is facing serious challenges. Unilateral attempts to change the status quo by force, as seen in the brutal aggression by Russia against Ukraine, are also increasingly blatant and prevalent in the East and South China seas, including in the waters around the Senkaku Islands. Beijing’s military activities, including unprecedented exercises around Taiwan, have intensified dramatically.

What I intend to highlight here is the seriousness of the challenge presented to international trade architecture in the face of economic coercion. There can be no clearer or more blatant opposition to the foundational principles of the World Trade Organisation than the weaponisation of economic clout. The irony is economic coercion has become a signature modus operandi of a certain major WTO member. Economic coercion, along with disruptions to global logistics caused by Covid-19, has also laid bare the potential vulnerabilities of global supply chains.

In response, like-minded partners are joining forces to reinforce the rules-based international trade architecture and to develop resilient supply chains. At the global level, WTO reforms remain a key challenge. While much remains to be done, the achievements at the 12th WTO ministerial conference in June should form a basis to build on.

In discussing economic coercion, it is worth noting the export of rare earth from China to Japan was temporarily suspended in 2010. China’s non-transparent de facto import restrictions on Australian products (including barley and wine) are being scrutinised in Geneva. At the regional level, Japan and Australia, together with key partners including Association of Southeast Asian Nations members, are taking a multilayered approach and working on initiatives such as the CPTPP, the Regional Comprehensive Economic Partnership and the newly launched Indo-Pacific Economic Framework.

Inclusiveness is essential for rules-based trade architecture to function. Diversity in membership of the RCEP is therefore important but should not detract from the need to aim for higher standards in rule-making and trade liberalisation. Nor should inclusiveness justify a race to the bottom, thereby compromising the integrity of a rules-based order. That is why developing the CPTPP as a framework for members willing and capable to maintain the highest of standards is a strategic imperative.

CPTPP members are working on the entry application of Britain. Even for an advanced economy such as Britain with a respectable track record, close scrutiny has been going on since June last year. Such is the level of requirements to ensure the standard is kept high. This process will set a precedent for subsequent consideration of entry applications. There is a consensus among members the bar should be set high, not lowered arbitrarily.

Let me emphasise the strategic importance of ensuring full engagement of the US. It is encouraging the US led the launch of the IPEF, an emerging regional platform for inclusive and sustainable growth. But the eventual return of the US to the Trans-Pacific Partnership, in a way that provides the region with the merit of the largest market in the world, remains among the region’s top priorities.

I am therefore perplexed when confronted with suggestions the history of compliance with established trade rules of an economy does not matter in considering new membership to the CPTPP.

We should learn from the history of having let economies in the WTO, only to see them infringing rules and undermining the integrity of the framework. The mission of the CPTPP is to serve as a beacon for the region and to embody the highest standards in trade and investment rules. Is the applicant economy genuinely committed to the pursuit of this mission? Is there any risk of sabotage from within? These are the questions we should ask.

Shingo Yamagami is Japanese ambassador to Australia.