Coalition launches sale of the century

INVESTMENT Minister Andrew Robb's task is to sell Australia to the world.

Andrew Robb

TONY Abbott sounded, in his victory speech a fortnight ago, like a retailer who has just acquired a failing store and is determined to do what it takes to bring the customers back in.

"From today," he pronounced, "I declare Australia is under new management and is once more open for business."

What kind of business, though? With whom?

His store manager is to be Andrew Robb, economist, company director and farming expert, the first Liberal to take the trade portfolio since 1956.

This century, trade is increasingly enmeshed with investment. Exporters, especially, learn about their markets by putting "boots on the ground" to use the military metaphor - by running businesses in their key markets.

In Australia's case - a big globally focused economy generated by a medium-sized population rattling around in a whole continent - foreign investment has always been a crucial component of national success. There simply aren't sufficient local savings to drive an economy of the size we need.

Thus it makes sense for Robb to have been handed responsibility for investment, as well as trade. This also serves to quarantine this key area from the National Party's agrarian socialist-cum-protectionist instincts.

But it still requires intimate understanding between Robb and Treasurer Joe Hockey, who retains the responsibility for ticking off rulings of the Foreign Investment Review Board.

At the top of the FIRB's in-tray is American firm Archer Daniels Midland's bid to buy Australia's biggest listed agribusiness GrainCorp. Hockey backed Wayne Swan's veto, as treasurer, against Singapore's move on the Australian Securities Exchange, which may indicate that the drawbridge will again be raised against foreign incursions. In which case, Robb will be struggling from the start.

But putting that big question to one side for now, what are the many other challenges and opportunities driving Robb's agenda?

Here are some. And it's a daunting list. First, the extension of the areas covered by the World Trade Organisation. The Doha round of negotiations that aims to bring services and agriculture, in particular, more comprehensively within the WTO's umbrella, began 12 years ago.

No one wants to be the first to call the round over, but all the would-be silver bullets seem to have been used up. Even without Doha, though, the WTO's rules and its rulings over trade disputes remain essential for orderly global trade.

Second, the bilateral free trade agreements or their equivalents, that Australia has been negotiating. The most important, because it is with our biggest trading partner, is with China. But these talks are now well into their ninth frustrating year.

Others are with Japan and South Korea - Australia's second and third biggest trading partners - and with India and Indonesia.

Australia is also in talks on trade deals with the Gulf Cooperation Council, the Pacific island states, towards the Trans Pacific Partnership with a group of North American, Asian and Latin American countries and New Zealand - in which the US is playing a prominent role - and towards the Regional Comprehensive Economic Partnership, an extension of ASEAN and its north Asian partners in which China is particularly active.

The north Asian FTAs, and Australia's engagement with the TPP, were complicated in the past couple of years by the Labor government's policy decision not to negotiate on any agreement that includes any form of investor-state dispute settlement via international arbitration.

This followed Philip Morris taking Canberra to arbitration via an investment treaty with Hong Kong signed in 1993, over one of the government's proudest achievements: plain packaging for cigarettes.

This move outraged the government so much that the Department of Foreign Affairs and Trade's website entry on Hong Kong, under Trade and Investment Strategies and Opportunities, does not now even mention the existence of the trade treaty.

The Labor government also declined to take up Hong Kong requests to negotiate an economic partnership and a double tax treaty.

New Zealand has meanwhile concluded both, not only with Hong Kong and Taiwan, but also in 2008, an FTA with China, since when trade has trebled.

An FTA with South Korea was on the verge of conclusion almost two years ago, but the ISDS issue prevented it. Since then, Seoul has sealed deals with the US and Europe and, as a result, tariffs with Australia's competitors - including most significantly beef and wine - have started to tumble, eroding Australia's market share.

During the past few years, state governments have begun to move into this space more energetically, as progress has faltered on the national front with visits to key economic neighbours by all the premiers and other economic ministers, usually accompanied by large business delegations.

Now it's the turn of the new Trade and Investment Minister, who despite not holding the portfolio in opposition is hitting the ground running, having previously been engaged heavily in the trade negotiations area as executive director of the National Farmers' Federation and the Cattle Council.

Robb is travelling with Abbott to Indonesia next week with a business delegation, and then to the Asia-Pacific Economic Co-operation summit in Bali from October 4-5, during which he has already scheduled 18 meetings, covering all Australia's principal trade negotiations still under way.

He is pursuing a pragmatic approach to such deals, in the hope that new momentum from the incoming government - once the cabinet has signed off on his rules of engagement, providing the negotiating mandates he needs - can achieve results even before Christmas.

He may seek approval for less than perfect deals but in the understanding that business tends to operate in a less than perfect world, and that dividends can still be delivered for Australia even following compromise.

The challenge was underlined by the recent announcement that Australia's exports to the APEC markets, the world's biggest, fell by 3 per cent in 2012, in part due to sliding commodity prices.

Robb will also be playing a leading role in cutting the red tape that is often cited by investors as a major constraint on productivity in Australia.

Alan Oxley, the managing director of consultancy ITS Global, who was Australian ambassador to the World Trade Organisation's predecessor, says Robb's newly created portfolio "raises the interesting possibilities of using Austrade, with its marketing and investment functions, to activate broader trade goals and creating an environment where we foster more investment".

Partnerships and cross-linking between companies, and between trade and investment, can be important ways, he says, to overcome the challenge of entering what can be highly competitive markets in the Asia-Pacific region.

He says Peter Costello, when treasurer, spoke of "keeping our powder dry" in terms of restraining investment relaxation until broader negotiations are under way. "But I think we could send a more positive signal to potential investors by extending the concessions we give the US and New Zealand - a $1.078 billion threshold for consideration by FIRB - to all of them, except in landed property and from state owned enterprises."

Luke Nottage, professor of comparative and transnational business law at Sydney University, says: "It is high time for the new government to review" the ISDS barrier to negotiating deals, introduced in 2011.

"This is delaying FTA negotiations with Japan, Korea, China and Trans-Pacific Partnership nations, and will also complicate negotiations for the Regional Comprehensive Economic Partnership, as those nations generally accept and expect this dispute resolution mechanism.

"Australia's outbound investors will no longer be able to compete on a level playing field in developing countries, compared to investors from other countries that can invoke ISDS to enforce investment treaty rights securing a minimum level of protection under international law.

"And eschewing ISDS completely, exacerbates a sense recently felt that Australia does not really welcome foreign investors."

Nottage says the answer is to revert to a case-by-case assessment during treaty negotiations, as the Coalition has foreshadowed, "and to draft ISDS provisions carefully in future treaties to balance the interests of private investors and host states."

Peter Gallagher, the managing director of trade consultancy Inquit, says: "There's little that matters more to the future prosperity of a small, open, still somewhat remote economy than building its long-distance links to growth and technology through trade and foreign investment."

His radical suggestions, which indicate to Robb how far Australia has retreated from its former days as a trade reform trailblazer, include: cut all customs duties to zero within three years; set "unacceptable risk to national security" as the only basis for review of foreign investment proposals; repeal the expensive, inefficient statutory preferences for Australian shipping; adopt an economy-wide impact test before imposing any anti-dumping taxes or restrictions on imports.

Trading  places

Andrew Robb's in-tray, including estimated capacity to achieve in first term of government from zero to 5:

Completing the World Trade Organisation's Doha Round. Capacity: 1

China free trade agreement: 2

Japan FTA: 4

South Korea FTA: 5

Indonesia FTA: 3

India FTA: 2

Trans Pacific Partnership: 4

Regional Comprehensive Economic Partnership: 3

Investment: 51 per cent of investment in Australia comes from just two countries, the US and Britain.

Exports: 55 per cent of Australia's exports come from resources. Fifty-eight per cent of Australia's industrial output comes from companies with fewer than 200 staff, but only 10 per cent of them export.