Introduction
4.1
In 2019, the CPTPP Commission made a decision to establish the accession process for interested economies to join the CPTPP. The process is described in Chapter One.
4.2
This chapter examines Australian perspectives on the four economies that have formally applied, or announced their intention to formally apply, to accede to the CPTPP. In chronological order of application, these four aspirant economies are the United Kingdom, the People’s Republic of China (China), the Republic of China (Taiwan, also known as the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu), and the Republic of Korea (South Korea).
4.3
The UK was the first economy to formally request accession to the CPTPP on 1 February 2021. The UK has abided by the accession process outlined in 2019 by the CPTPP Commission in performing the following steps:
informal engagement with all CPTPP parties prior to submitting a formal request; and
formal notification to New Zealand, as the CPTPP Depository, of the UK’s intent to begin the accession process.
4.4
On 2 June 2021, the CPTPP Commission agreed to formally commence accession negotiations with the UK. The CPTPP Commission accession process is described in further detail in Chapter One.
4.5
China notified New Zealand of its formal request to commence negotiations on acceding to the CPTPP on 16 September 2021. To date, the CPTPP Commission has not yet made a decision on whether to commence negotiations.
4.6
Taiwan notified New Zealand of its formal request to commence negotiations on acceding to the CPTPP on 22 September 2021. To date, the CPTPP Commission has not yet made a decision on whether to commence negotiations.
4.7
South Korea announced its intentions to commence the application process to accede the CPTPP on 13 December 2021. To date, it has not yet undertaken formal steps to accession.
The United Kingdom
4.8
The United Kingdom was the first economy to bid for accession to the CPTPP after the agreement’s entry into force, with the UK formalising its application in February 2021.
Lessons learnt from the UK as the first applicant to join the CPTPP
4.9
As the first aspiring economy to to formally request accession to the CPTPP and to undergo the accession process, there are lessons to be learnt from the UK-experience including the benefit of negotiating a bilateral FTA, the importance of government-to-government engagement, the relevance of geography and the importance of guidance about the deal making process.
4.10
Australia and UK began negotiations on a bilateral FTA in June 2020. Upon the UK formalising its request to accede to the CPTPP in February 2021, both agreements were being progressed concurrently.
4.11
In welcoming the UK’s formal request for accession to the CPTPP, the Department of Foreign Affairs and Trade (DFAT) made it clear that both agreements would be progressed but the bilateral FTA was the priority:
While Australia’s current negotiation of a bilateral FTA with the UK remains our priority, the UK’s accession to the CPTPP would further promote economic integration and contribute to more resilient global value chains.
4.12
Her Excellency Ms Vicki Treadell CMG MVO, British High Commissioner to Australia remarked that ‘the bilateral UK-Australia FTA—which, as your own trade minister has recently said, is only millimetres away from being signed off.’ She further stated:
For both the UK and Australian businesses, CPTPP will provide additional benefits that complement our UK-Australia Free Trade Agreement. The regional rules of origin could make it easier for businesses with CPTPP parties to take advantage of the preferential tariffs when exporting to the UK.
4.13
Elaborating on the topic of meeting the high standards of the CPTPP, Mr Peter Harrington, Head of Economic Diplomacy at British High Commission in Canberra remarked that ‘because the FTA and the CPTPP are complementary to each other we're aiming to make sure that the FTA gives us a head start on joining the CPTPP, so that has helped us identify any administrative changes that may need to be made.’
4.14
Mr Graham Zebedee, Chief Negotiator for United Kingdom Accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership spoke on the overlap of the UK free trade agreement under negotiation and the UK’s accession process to the CPTPP:
As you know, we have agreement in principle. We have closed the majority of chapters on the FTA, so the complementarity with where we want to be with the CPTPP has been a vital part of the process.
4.15
The Australian British Chamber of Commerce endorsed completing the FTA with the UK prior to negotiating accession to the CPTPP:
…[we] are particularly keen to ensure that the Australian UK Free Trade Agreement is delivered before Australian support for the UK’s accession to the CPTPP is provided, to ensure that we complete the comprehensive and ambitious FTA that we are seeking bilaterally.
4.16
The Export Council of Australia stated that the FTA negotiations can act as a platform to launch the UK’s CPTPP accession from:
While Australia is already negotiating a bilateral agreement with the UK, we can build on this when the UK negotiates under the CPTPP. This could enhance certain commitments and benefits that could not have been achieved under the bilateral arrangement.’
4.17
techUK reflected on negotiating the UK’s free trade agreement (FTA) with Australia and noted that ‘the CPTPP provisions should be seen as a minimum of what can be achieved with Australia bilaterally.’
4.18
Former Australian Prime Minister, the Hon Tony Abbott AC suggested that the ongoing UK-Australia free trade agreement in combination with British CPTPP membership, would ‘be a significant boost to local and global trade.’
4.19
Since receiving evidence for this inquiry, the Australia-United Kingdom Free Trade Agreement was signed on 17 December 2021. The UK and Australian Governments have stated that they will commence parliamentary tabling, treaty scrutiny processes, and legislative reform as needed to ratify the agreement.
4.20
The UK Government’s submission to this inquiry was sent directly from the Rt Hon Elizabeth Truss MP, former United Kingdom Secretary of State for International Trade and President of the Board of Trade (and current Secretary of State for Foreign, Commonwealth and Development Affairs). It is notable that while the inquiry was underway, Minister Truss and Australia’s Minister for Trade, Tourism and Investment the Hon Dan Tehan MP were leading negotiations on a bilateral FTA.
4.21
Engagement between governments, including at the ministerial level, is an important part of Australia’s FTA’s. DFAT submitted that ‘[t]he institutional frameworks in each of our FTAs ensures regular and open dialogues with our trading partners. The CPTPP provides for ministerial and officials’ level dialogues with CPTPP trading partners.’
4.22
As well as ministerial and officials’ level interactions, DFAT explained that ‘CPTPP Commission and Committee mechanisms provide forums to address the better functioning of trade rules and supply chains in our region, while the CPTPP’s development provisions encourage cooperative activities aimed at enhancing broad-based economic growth.’
4.23
One of the issues raised with respect to the UK’s request to join the CPTPP is that it is not geographically placed in the Indo-Pacific region.
4.24
The Perth USAsia Centre raised that the UK may not be a natural fit with the CPTPP due to its physical distance from the region:
Until very recently, the UK was not considered a leading prospect. It is not in the Indo-Pacific, has much thinner trade ties with regional economies, and its trade policy agenda has been near-exclusively consumed by negotiations surrounding Brexit.
4.25
Former Australian Prime Minister, the Hon Tony Abbott AC supported the inclusion of the UK, submitting that ‘the TPP should be a step towards freer trade globally, at least amongst countries under the rule of law, rather than an insular trade bloc ruled by geographical determinism.’
4.26
The Hon Tony Abbott AC further stated that:
…the Trans-Pacific Partnership need not be geographically exclusive, and the admission of the United Kingdom would certainly send a very strong signal that the Trans-Pacific Partnership is an outward-looking entity that wishes to welcome into its ranks all countries that wish to trade freely and adhere to the rule of law.
4.27
Similarly, the Australian British Chamber of Commerce expressed the view that ‘Australia’s positioning as an open and liberalised market open to maximising trading opportunities’ should be ‘with partners not only in our region but around the world.’
4.28
The Northern Territory’s Department of Industry, Tourism and Trade also emphasised that the expansion of the agreement should not be limited by its members physical location:
Consistent with the CPTPP’s history as an inclusive, open-architecture arrangement, the expansion of new members into the CPTPP should not be limited by geography. Eligibility should reflect the membership’s common commitment to market principles, and recognition that accession to harmonised, high-standard ‘software’ for trade can play a major role in driving shared prosperity, bolstering competitiveness and setting global rules and standards on key issues.
4.29
As the first economy to undergo the accession process, the UK has also identified room for improvement. Mr Graham Zebedee, UK Chief Negotiator to the CPTPP, stated:
…there could be a bit more guidance for aspirant economies. At the moment there is an accession decision, which is public, which gives a little bit of information about that. But I think it would be good to set out in a bit more detail what the stages are and what economies would be expected to do at each stage. I think the CPTPP parties have that in mind and that they want to use, as High Commissioner said, the experience of the UK to inform that. I think that will help demystify the process for other aspirant economies and hopefully encourage applications from further economies who meet the rules. The bar needs to be high in terms of substance, but it shouldn't be an impenetrable process. So I think there could be some improvements in that regard.
4.30
Mr Bryan Clark, Director, International at the Australian Chamber for Commerce and Industry (ACCI) stated the pathway for accession remained ambiguous:
The whole process of accession doesn't appear to be terribly clear, despite there being a formulaic process which can be followed on the formal website for the agreement, hosted by New Zealand… I think there are a number of steps that need to be sorted out, and the process for accession needs to be very clear and understood so that the members collectively express a view of which nations they find appealing to join and which they don't.
4.31
In her submission on behalf of the UK Government, the Rt Hon Elizabeth Truss MP, former United Kingdom Secretary of State for International Trade and suggested the UK’s accession to the CPTPP would expand the agreement’s impact:
By joining, the UK would transform the CPTPP to a truly global framework, promoting it to prospective future members both in the region and beyond. As potentially the first aspirant economy to become a Party to the CPTPP, the UK will set the precedent and make a case to other nations for expansion, which would further increase the CPTPP’s coverage, which would be beneficial for current members.
4.32
Ms Truss MP noted that ‘the UK recognises that the CPTPP is designed as a living agreement and we believe that our accession will set a precedent on how CPTPP could evolve.’
4.33
The Committee recommends that the Australian Government works with other CPTPP members to leverage the process that applied to the United Kingdom as the first aspiring economy to formally request accession as a template for future aspirant economies while also learning lessons from the United Kingdom experience including the:
a)benefits that accrue from negotiating a bilateral FTA with the United Kingdom while concurrently encouraging and facilitating its accession to the CPTPP;
b)importance of government-to-government engagement during the CPTPP accession process, including at the ministerial level;
c)value of clear guidance on the CPTPP accession process such as deal stages and related expectations.
The case for UK accession to the CPTPP
4.34
The Committee heard both economic and strategic arguments about the UK acceding to the CPTPP.
4.35
HE Vicki Treadell CMG MVO, British High Commissioner to Australia noted that the UK’s application to join the CPTPP reflected the UK’s ‘commitment as an important trading and investment partner of Australia and the other CPTPP member countries.’
4.36
The Department of Foreign Affairs and Trade (DFAT) welcomed the United Kingdom’s (UK) formal request for accession to the CPTPP and highlighted the potential economic benefits:
As the world’s sixth largest economy by GDP and Australia’s fifth largest trading partner (in 2019-20), the UK would significantly increase the CPTPP’s reach, and enhance opportunities to expand trade and investment.
4.37
Mr Graham Zebedee, Chief Negotiator for United Kingdom Accession to the CPTPP, stated that CPTPP members were interested in improving trade with the UK, both bilaterally and through the CPTPP:
The [CPTPP] parties certainly wanted to upgrade the bilaterals that in some cases they had with us. We have bilateral agreements, or will have before very long, with all the current CPTPP parties. But those agreements… are not as comprehensive as the CPTPP. In choosing to engage with this dialogue… they were wanting deeper economic ties with the UK and were also seeing the advantage of having the UK, as a large economy, as part of the agreement.
4.38
The Perth USAsia Centre submitted that the UK’s ‘accession would bring several benefits for existing members.’ Namely:
It would be the second-largest member behind Japan, and increase the size of the bloc by 25 percent;
Its services-based economy would be a good fit with the CPTPP’s emphasis on “21st century” trade issues, such as e-commerce, intellectual property and investment;
It already has bilateral trade instruments of some kind with seven of the CPTPP members, and is presently negotiating FTAs with Australia and New Zealand; and
Similar to Korea, the UK could be appealing as a ‘straightforward’ early accession option, which paves the way for more challenging partners in the future.
4.39
Former Australian Prime Minister, the Hon Tony Abbott AC advocated for the UK’s accession as ‘Britain is already strongly integrated with many of the countries of the TPP; therefore, it makes sense to build on that by making it a full member.’
4.40
The Hon Tony Abbott AC further stated that as ‘one of the world’s greatest trading nations, Britain would increase the TPP’s coverage by about 20 per cent.’
4.41
On behalf of the UK Government, the Rt Hon Elizabeth Truss MP, former United Kingdom Secretary of State for International Trade and President of the Board of Trade (and current Secretary of State for Foreign, Commonwealth and Development Affairs), expected ‘to see trade between our nations grow as a result of the UK’s accession to CPTPP.’
4.42
Ms Truss also expected the UK’s accession would:
…provide further export opportunities of goods and services to the UK, lower trading costs through simpler procedures, the easier movement of business people, and so on. The UK is known as a prime location to test global markets and have successes easily communicated to global markets due to its strong media presence.
4.43
The National Farmers Federation (NFF) stated that ‘demand in the UK for Australian agricultural produce in strong.’ The NFF explained that prior to the UK’s entry into the European Union (EU), ‘during the 1950’s approximately 40 per cent of Australia’s goods exports were bound for the UK,’ the majority of which were agricultural products.
4.44
The NFF believes that because of the UK’s withdrawal from the EU, there is now a ‘once-in-a-lifetime opportunity to re-establish this relationship,’ particularly in the following markets:
4.45
The NFF suggested that while UK accession negotiations formally continue, the Australian Government makes the following request of the UK:
…that its trade-distorting agricultural subsidies – provided for in the Direct Payments for Farmers Bill 2020 – be phased out, preferably earlier than the seven-year period currently scheduled.
4.46
Regarding the UK’s accession to the CPTPP, the Export Council of Australia highlighted areas of opportunity for Australian business:
On services, opportunities in the UK are likely to be in the provision of business services, financial services (such as superannuation funds investing in infrastructure), construction and engineering, health, retail, as well as ICT. A trade agreement that leads to mutual recognition of standards and qualifications, and improved visa arrangements, would enable these opportunities.
4.47
The Export Council of Australia also submitted that the UK’s accession to the CPTPP would lead to increased investment in Australia, benefiting small businesses in particular:
On UK direct investment into Australia, the opportunities are in food and agriculture (including among Indigenous businesses), renewable energy (including hydrogen) and advanced technologies (such as AI). We anticipate that it would be mostly small and medium enterprises that would benefit from such investment.
4.48
In order to facilitate increased UK investment in Australia, the Export Council of Australia recommended that the Australian Government undertake initiatives to incentivise investment in regional areas, and strengthen intellectual property protections:
But it would require strategic and complementary initiatives by the Government to ensure such investments do take place. For example, the Government could simplify foreign investment review (if the investment is targeted at a particular geographic or regional area within Australia), and strengthen intellectual property right protections in areas such as Indigenous products.
4.49
Mr David McCredie OBE, Chief Executive Officer of the Australian British Chamber of Commerce, noted that the CPTPP would result in unprecedented digital growth between members:
The place where it's going to be most felt and most seen is really around services across the board—everything from legal services to technology. Look at the arrangements that we're making around the digital economy. Those sorts of things are going to be where there's genuine value for bringing a partner into that scope so we can partner together. Whilst they might be a new member, the geography will still mean that it's not as easy for them to do business in our part of the world as it is for somebody who lives in our region.
4.50
The case for the UK to accede to the CPTPP goes beyond the economic merit of their application. As former UK Secretary of State for International Trade, the Rt Hon Elizabeth Truss MP, submitted on behalf of the UK Government that the ‘UK government regards CPTPP as a means to uphold the rules-based international trading system.’
4.51
The former UK Secretary of International Trade Ms Truss MP noted that the CPTPP would uphold the rules-based system by:
…establishing common standards and regulations, enabling transparency and helping to remove barriers to trade. Expanding the membership of the CPTPP would create a large free trade area that could exercise greater influence over rules and standards for the global economy, delivering benefits for all sections of the economy.’
4.52
Regarding the impact of the UK acceding to the CPTPP, former UK Secretary of International Trade Ms Truss MP expressed the view that ‘UK accession would send a powerful signal to the rest of the world that, as an independent trading nation the UK will champion free trade, fight protectionism and remove barriers to trade at every opportunity.
4.53
Mr Graham Zebedee, Chief Negotiator for United Kingdom Accession to the CPTPP stressed that in regards to adhering to the agreement’s high standards:
…we welcome that scrutiny. It's partly the high standards of the agreement that attracted us to it, and it's that process of demonstrating compliance with the rules which continues up to today.
4.54
Mr Abbott reaffirmed this notion of the CPTPP representing more than increased trade but helping to uphold a rules based regional system and for the UK to join the agreement, would act as ‘a timely sign of democratic solidarity in a world where democracies still need to stand together for global peace, prosperity and freedom.’
4.55
Speaking on the UK’s formal application for accession to the CPTPP, HE Vicki Treadell CMG MVO, British High Commissioner to Australia stated the UK ‘will work with like-minded partners to uphold the international rules and norms that underpin free trade, security and stability.’
4.56
High Commissioner Treadell emphasised the benefit of an agreement like the CPTPP where ‘a group of nations agree a common framework and set of rules which gives us all greater transparency about how we trade and it holds us all to account in the way that we trade, with the kinds of values that we all need to uphold.’
4.57
High Commissioner Treadell noted that the UK’s application to join the CPTPP reflected the UK’s ‘commitment as an important trading and investment partner of Australia and the other CPTPP member countries.’ She elaborated further:
…we are in this to create a better world, and trade is vital to all our economies. So, by joining the CPTPP, it is about what we can do together, not just in this region, but globally too.
4.58
High Commissioner Treadell stated that ‘joining the CPTPP is a priority for the UK and is a key deliverable of our Indo-Pacific tilt.’ She further remarked:
This is our engagement with this vital region, which will be the economic powerhouse in this century because it's geopolitically and geostrategically important. …Our FTA with Australia and our accession to the CPTPP are all part of that ambition.
4.59
According to High Commissioner Treadell the UK ‘is in a strong position to advance the ambitions of the CPTPP agreement in promoting the rules based international system and setting high standards for rules and standards… Its expansion to include the UK will create an even larger free trade area that could exercise greater influence over the global economy.’
4.60
The UK’s former Secretary of State for International Trade and President of the Board of Trade, the Rt Hon Elizabeth Truss MP, advocated the UK’s role in upholding the standards of the CPTPP:
The UK’s reputation for quality, safety and performance drives demand for UK goods and is key to our long-term prosperity. As such, the UK will be committing to maintain the high standards these countries share. CPTPP also recognises the importance of international standards and the UK is committed to working with like-minded partners to develop and promote them through a range of global forums.
4.61
High Commissioner Treadell outlined ‘the informal process’ preceding the UK’s formal bid for acquisition:
When our government set an ambition for us to accede to the CPTPP, it became an important collective diplomatic effort. I and my counterparts in every CPTPP country sounded out our host governments to get a sense of their level of interest and support and to identify the issues that they thought we might need to consider. We then brought that information together. Our Department for International Trade team then looked at that, and that helped shape and inform the next stage of our strategy—to put an ambition into a formal application and process.
4.62
Former UK Secretary of State for International Trade, the Rt Hon Elizabeth Truss MP, highlighted the benefit the UK’s accession will provide in a post-pandemic context:
Joining the CPTPP now opens the way to further increase trade with the economies of CPTPP, better enabling all Parties to recover from the Covid-19 health crisis by bringing more opportunities for our businesses and supporting jobs.
4.63
In discussing the UK’s ambitions for joining the CPTPP, High Commissioner Treadell observed that ‘ongoing economic development, economic growth, is vital, particularly now in a post-COVID world, as we emerge into a trading environment which is vital to regenerate the global economy.’
4.64
Former Australian Prime Minister, the Hon Tony Abbott AC highlighted to the Committee that as a result of the UK’s application to join the CPTPP, that ‘would mean that four of the “five eyes” countries are in an economic relationship as well as a security one.’
4.65
Mr Abbott emphasised the importance of the UK, as well as America joining the CPTPP given they are significant military powers which would help ‘ensure that revisionist powers appreciate the serious consequences of any unilateral revisions to the status quo (such as in the South China Sea and elsewhere).’
4.66
The Committee recommends that the Australian Government work with other CPTPP members to encourage and facilitate the accession of the United Kingdom to the CPTPP.
The People’s Republic of China (China)
4.67
China formally applied to join the CPTPP on 16 September 2021.
4.68
The Committee received evidence about Australia’s challenging trade relations with China and arguments for and against its accession to the CPTPP.
Challenging trade relations
4.69
The Australia-China trading relationship faces considerable challenges.
4.70
As outlined in the Australian Statement on the World Trade Organisation’s Trade Policy Review of China Trade 2021:
Over the past 18 months, China has increasingly implemented trade disruptive measures targeting a wide range of Australian products. These include increased and arbitrary border testing and inspections; unwarranted delays in listing and re-listing export establishments, issuing import licences and other restrictions; and the imposition of unjustified anti-dumping and countervailing duties. Such measures have severely limited or ended Australia’s trade with China across more than a dozen commodities, including barley, coal, cotton, hay, logs, meat, rock lobsters and wine. China has not provided satisfactory answers on how these actions align with WTO rules. We have initiated WTO dispute settlement proceedings in relation to China’s imposition of anti-dumping and countervailing duties and measures on Australian barley and wine.
4.71
The Australian Statement on the World Trade Organisation Trade Policy Review of China Trade 2021, outlined the Australian Government’s recent concerns regarding China’s politically motivated interference in trade and lack of willingness to adhere to WTO standards:
…Chinese importers of Australian goods are negatively impacted by the Chinese Government’s reported interventions in commercial decision-making – a practice that contravenes market principles. It is critical that enterprises make their own purchasing decisions to enable open, market-based trade. Australia therefore urges China to adhere more closely to market-oriented principles in its approach to trade policy.
We also encourage China to comply fully with the letter and spirit of its transparency commitments. Despite assurances in the Chinese Government report that it has ‘fully fulfilled’ its notification obligations, we note the Secretariat’s Report identified outstanding notifications. Meeting one’s transparency obligations provides other Members and traders with visibility and confidence that a Member is complying with WTO commitments.
4.72
This statement further outlined the Australian Government’s concerns regarding trading with China and the proliferation of state-owned enterprises (SEOs):
We are concerned, however, that market-oriented reforms have not progressed since Australia raised its concerns during China’s 2018 Review, including the need to embrace market-oriented principles to ensure exporters, consumers and domestic producers can fully benefit from the multilateral trading system. We note the [WTO] Secretariat’s Report recognised that China’s State-Owned Enterprises, and their high rate of financial support, may affect the functioning of market-oriented policies in China.
4.73
This statement detailed specific sectors where China has impacted Australian exports:
China’s measures have severely limited Australia’s trade with China of barley, coal, copper ores and concentrates, cotton, hay, logs, rock lobsters, sugar and wine; and also hindered or disrupted Australia’s trade with China of other commodities, including beef, citrus fruit, grains, and table grapes. Further, China has limited Australia’s market access for dairy, infant formula and meat, among other commodities.
4.74
This statement also raised Australian concerns regarding large government subsidies in certain sectors:
Australia remains concerned with the quality and timeliness of China’s notifications, especially for industrial subsidies and agricultural domestic support. China’s large subsidy programs, along with other nonmarket practices, distort global markets for major commodities. Improving the transparency of China’s policies would strengthen its contribution to the multilateral trading system.
Australia urges China to fully align its trade policies with its WTO obligations, for the benefit of all.
The case for China’s accession to the CPTPP
4.75
The Committee heard arguments for and against China acceding to the CPTPP.
4.76
The Department of Foreign Affairs and Trade stated China’s importance as an existing trade partner of Australia:
China is the world’s second largest economy by GDP, and Australia’s largest trading partner (2019-20). Australia’s bilateral trading relationship is underpinned by the China-Australia FTA, which entered into force on 20 December 2015. Australia and China are also signatories to the Regional Comprehensive Economic Partnership (RCEP), another significant regional trade agreement comprising the 10 ASEAN member states, Australia, China, Japan, the ROK and New Zealand.
4.77
The Embassy of the People’s Republic of China in Australia highlighted the depth of Australia’s existing trade relationship with China, and potential benefits for Australia should China join the CPTPP:
The Chinese economy and the Australian economy are highly complementary with enormous potential in cooperation. China is the biggest trading partner, largest export market and largest source of import for Australia. Australia is the eighth biggest trading partner, tenth largest export market and seventh largest source of import for China.
4.78
The Embassy of the People’s Republic of China in Australia described China’s commitments regarding the trade in goods, services, investment and dispute settlement mechanism elements of the existing China-Australia Free Trade Agreement (ChAFTA):
For trade in goods, China will eliminate tariffs on 96.8% of the tariff lines. By 2020, tariffs on 95% of the tariff lines had been eliminated, and the rest (1.8%, including monitors, LCD panels, diary products, etc.) will be eliminated no later than 2029. For trade in services, China, in addition to its WTO accession commitments, made high-level commitments to opening up in legal service, education, financial service, telecommunications, construction, elderly care, maritime transportation and other fields. For investment, China and Australia grant each other the most-favored-nation treatment. The CAFTA includes an investor-state dispute settlement mechanism and high-standard rules in areas such as rules of origin, trade facilitation, sanitary and phytosanitary measures, technical barriers to trade, trade remedies, intellectual property, electronic commerce, transparency and dispute settlement.
4.79
Mr David Olsson, National President and Chairman of the Australia China Business Council endorsed China’s accession to the CPTPP, stating that ‘it's an opportunity to address the behind-the-border, non-tariff barriers that continue to impede Australia's exports to China despite the elimination of tariffs under ChAFTA [China-Australia Free Trade Agreement].’
4.80
Mr Olsson further explained that the CPTPP ‘covers trade and investment issues that have emerged since the signing and negotiation of ChAFTA over that 10-year period, particularly those relating to new developments in the management of data, technology, and digital trade.’ In particular:
…there are detailed provisions around e-commerce that would enable us to secure greater certainty for the growing number of Australian SMEs [Small and medium-sized enterprises] that undertake e-commerce sales to China.
4.81
Mr Olsson expressed the view that the CPTPP would provide ‘a framework to address many issues affecting the broader business environment, including environmental issues, corruption, transparency and labour standards, none of which are contained in any of the existing trade agreements that we're a party to.’
4.82
Mr Olsson believed that ‘perhaps the biggest benefit to Australia, is the impetus that China's accession would have to structural reform within China itself.’ He further explained:
It would support China in achieving its aim of higher quality opening up, which has guided its economic policy for years. China has the second-largest economy in the world and is Australia's largest trading partner, so we have a fundamental interest in the extent to which the future development, at least, of the Chinese economy follows internationally accepted norms and standards.
4.83
The Australian Sugar Milling Council welcomed China’s application to the CPTPP to improve market access for Australian sugar exporters:
Australia currently competes for a portion of the WTO TRQ allocation of 1.945 million tonnes of raw sugar into this market at both the 15% (in-quota) and 50% (out-quota) rate depending on the marketer;
Of note is Australia did not achieve any preferential concessions for raw sugar in the China-Australia Free Trade Agreement (ChAFTA) but did secure a 0% duty for ethanol exports to China; and
Industry would seek no quota limitation and 0% duty for raw sugar to this market.
4.84
Mr Arnold Jorge, Chief Executive Officer of the Export Council of Australia, emphasised that discussions around potential Chinese accession could act as a circuit breaker for existing Australian-Chinese trade disputes:
…we believe that China should be given the opportunity to prove its credentials of meeting CPTPP requirements and that Australia should take this as our own opportunity to open and restart a new channel of dialogue with China, especially since all lines of communication seem closed at this time. We could use this to discuss with China our current disagreements on trade.
4.85
Ms Karen Batt, Head of International, Standards Australia was optimistic that China would adhere the CPTPP’s membership obligations:
…I think it'd be very likely that China would be able to meet the obligations that are part of the CPTPP accession process. But any party joining the CPTPP would need to be able to prove and go through that process of demonstrating that they can meet those obligations, which are a little bit above what would normally be the case for them to meet outside the WTO.
4.86
Mr Olsson of the Australia China Business Council expressed the hope that China’s accession to the CPTPP could provide Australian negotiators an opportunity to improve trade relations:
For Australia, it's also an opportunity to press China to resume high-level bilateral dialogue on a range of issues of mutual concern, including the current restrictions imposed by China on Australia's exports.
4.87
Regarding future trade relations, Mr Olsson stated that he believed China’s accession to the CPTPP could protect Australia from further actions by China:
… it could assist in lowering Australia's exposure to unilateral actions, such as those that we're currently experiencing, against a whole range of Australian industry sectors. Membership of the agreement by China would further enmesh China into a rules-based trading system and raise the cost of Chinese unilateral behaviour that contravenes the terms of that membership.
4.88
However, Mr Olsson from the Australia China Business Council, stressed that reengagement towards China should be attempted prior to CPTPP accession negotiations:
We need to reactivate the dialogues that were had in the past, particularly at the ministerial level. But, at all levels, commercial dialogues need to be resumed. As a minimum, a number of the restrictions that China has placed on some of our sectors which are not the subject of legitimate WTO actions ought to be either removed or the subject of serious discussion… We need to get China to the table first of all, on terms that are open and on which we feel comfortable in having the conversations, and then we can take it to the detailed negotiations.
4.89
Mr Michael Clifton, President of the New South Wales Branch of the Australia China Business Council expressed the view that Australia’s trade relationship with China overall is performing better than widely believed:
Now, clearly, there are a lot of people selling Australian wine in China who aren't very happy with their government at the moment. But, if you look at dairy, you see dairy is going gangbusters. It doesn't get much publicity. The politicians don't talk about it too often, but our dairy farmers are doing extraordinarily well out of China. Some might argue they are too exposed, but the dairy farmers are putting dollars in their pockets. They're quite happy.
4.90
Mr David Olsson, National President and Chairman of the Australia China Business Council suggested that the CPTPP may best accommodate the growing economic brinkmanship between America and China:
Australia's national interests are best served by having a global trade and investment system which accommodates the economic competition between the US and China but also, at the same time, maximises the scope for cooperation and collaboration. We believe this agreement is that sort of agreement. If we can bring our major trading partners, the US and China, into the equation then that would be the ideal outcome.
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Former Australian Prime Minister, the Hon Tony Abbott AC cautioned against considering lending support to Chinese accession into the CPTPP under the current circumstance:
…I think the last thing we need is further integration of China into the world economic order. I think China has demonstrated, by the way it's approached Australia, that that's not how it plays the game. For us to even countenance China's entry into the TPP while it's maintaining the current boycotts of Australian goods would be not just wrong but also a sign of weakness on our part. Given that Australia has been, to the government's great credit, steadfast and robust in its approach to Chinese bullying, the last thing we want to do is weaken that.
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Mr Elliot YL Charng, Representative of the Taipei Economic and Cultural Office in Australia expressed reservations about the openness of China’s markets:
Thank you for mentioning the Index of Economic Freedom by the Heritage Foundation. As you just mentioned, of the 11 current members of the CPTPP, Singapore's ranking is the highest at No. 1. Vietnam is No. 90, New Zealand is No. 2 and Australia is No. 3. Of the three new applicants, the UK is No. 7, China is No. 107, and Taiwan is No. 6. Taiwan's No. 6 means all markets are free. It's a free market. China's No. 107 means most of the market is not free. I just want to know why the second-largest economy is not free. This is the question that we all want to ask.
4.93
The Australia China Business Council recognised that any accession by China may not be a smooth process:
China already has FTAs with Australia, New Zealand, Chile and Singapore as well as with ASEAN, but there will undoubtedly be a range of challenges in the areas of state-owned enterprises, labour and data flows, to name just a few. Any negotiation to join would not be straightforward and may take time.
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The International Institute for Strategic Studies (IISS) contended that ‘admitting China to the CPTPP is unlikely to render it any less disposed to engage in unfair trade practices’:
To date, Australia’s trade agreements with China have not deterred Beijing’s use of trade sanctions, and the negative consequences of engaging in unfair trade practices are, in any case, too small to deter China.
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The Mr David Olsson, National President and Chairman of the Australia China Business Council stated that China will need ‘to undertake some very difficult internal reforms if it's going to meet the required standards.’
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Mr Olsson further expressed the view that ‘[n]onetheless, China's stated willingness to enter the discussion on these issues is welcome, and negotiations over its accession should be encouraged.’
4.97
Dr Patricia Ranald from the Fair Trade and Investment Network also expressed concern about China’s ability to adhere to the environmental and labour rights provisions of the CPTPP:
…we have had very consistent criticisms of the lack of human rights and labour rights in China. We raised those criticisms at the time that Australia was negotiating a preferential agreement with China from 2010 to 2015. We believe that China may have some difficulty in meeting even what we would regard as not the highest standards in the labour and environment chapters in the CPTPP…
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However, Dr Ranald felt that despite concerns about the China’s ability to adhere to CPTPP standards nonetheless ‘we believe that the process should be gone through.’
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Dr Jeffrey Wilson, Research Director from the Perth USAsia Centre, also expressed doubts over China’s ability to meet accession requirements as well as act harmoniously within the CPTPP:
…how China can get from where it is in its domestic policy settings to the TPP standards, about which there are divided views, that's certainly a very long march for them to take domestically. There are also broader political questions around admitting the PRC to a trade bloc at a time when it is midway through a multi-billion-dollar campaign of trade coercion against the Australian government and, indeed, has seriously strained diplomatic relations with several other TPP members at the same time. A question needs to be asked about China not being able to maintain existing WTO minimum standards.
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Mr Russell Wiese, Director at the Customs and Global Trade Law, stressed that Australia should ‘look at how China is actually complying with the China-Australia FTA before making assumptions about what levels they can meet under the CPTPP.’
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Mr Wiese raised whether Australia needed China to join the CPTPP at all:
We have an FTA with China. We negotiated for 10 years to get that FTA with China, and we achieved outcomes that many nations couldn't achieve with China. At the same time, China would have to work hard to become a TPP member. But, if it did, we would be effectively gifting Canada and Mexico an FTA with China which they don't currently have. Our agricultural exporters would have to compete against Canada and Mexico into China on level playing terms, whereas at the moment we're on advantageous playing terms. So it is definitely worth considering that sort of counterfactor as well.
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Mr Ash Salardini, Chief Economist at the National Farmers Federation supported China’s application, despite the ongoing trade disputes, to improve diplomatic dialogues and increase Australian market access:
Another benefit to a country like China perhaps joining the CPTPP is that we would get another chance to look at the market access issue and it would create other forums to have government-to-government dialogue as well. Even in the current situation, that could only be a good thing.
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Mr Sid Marris from the Minerals Council of Australia concurred with Mr Salardini, stating that ‘Yes, there are tensions at the moment, but we remain confident, certainly from a business-to-business point of view, that the trading relationship can be sustained and improved over time.’
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Mr Marris further expressed the view that including China in the CPTPP, as a regional agreement involving connected supply chains, will necessitate improvements to transparency:
For China to gain accession would mean that their relationship with the other members, particularly in the Asian region, would require the transparency that you've outlined. For Australia, that's important because the supply chains that operate across Asia mean that, increasingly, we might be supplying to a producer in Vietnam who then provides a finished product into China. It's about the grouping, as a whole, rather than just about us.
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The International Institute for Strategic Studies’ (IISS) detailed that China has been targeting its trade partners with coercive trade measures such as restricting the import and export of goods, as it has ‘since May 2020, targeted Australia with punitive trade measures.’
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The IISS also noted that China is pursuing ‘greater regulatory influence’, as it attempts to shape ‘international standards to the advantage of Chinese businesses and to the disadvantage of Australian businesses’ via enacting ‘international standards [that] reflect China’s authoritarian and state-capitalist preferences rather than liberal democratic values.’
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The IISS detailed that ‘the CPTPP can increase the country’s [Australia’s] geo-economic resilience via this multilateral trade agreement with recued trade barriers and greater access to a great variety of trading partners’.
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The IISS emphasised the importance of expanding the agreement’s membership for Australia to increase its “geo-economic resilience”:
The future evolution of the CPTPP, in terms of membership and provisions, will determine whether the trade agreement increases Australia’s dependence on exports of commodities to a small set of trading partners, or instead helps diversify Australia’s trading partners and its range of exports.
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The Australia China Business Council (ACBC) outlined that the CPTPP can act as a widely beneficial platform for Australia by accommodating both China and the US as the two largest, competing economies:
Australia is best served by a global trade and investment system which accommodates economic competition between the US and China, but which also maximises the scope of cooperation and collaboration. The CPTPP is a key platform through which the major powers can pursue shared interests. The ACBC supports extended membership of the CPTPP and looks forward to the Australian government taking a lead role in encouraging the entry of both China and the US into the CPTPP.
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The IISS recommended that Australia use the CPTPP as a collective means of strengthening its trade protections:
Australia and its partners should strengthen the remedies for unfair/coercive trade practices;
CPTPP members may look at mechanisms to circumvent punitive trade measures; and
an observatory to monitor third countries’ use of subsidies to support domestic firms and to assess the threat these subsidies present to competing firms in CPTPP countries.
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Mr Jon Berry, Director, Market Access at Article Three, a trade policy advisory firm, highlighted the potential influence of the United States over China’s application to the CPTPP due to the United States—Mexico—Canada Agreement (USMCA):
…Canada and Mexico, under the terms of their USMCA agreement with the United States, have a clause that they need to inform, and effectively have it approved by, the US whenever they seek a free trade agreement with a non-market economy.
I think it's fairly safe to assume that the US are not that positive about the idea of China joining CPTPP, and they have a way to effectively lean on Canada and/or Mexico to stop that happening.
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USMCA parties confirmed the existence of these provisions in a presentation to the WTO Committee on Regional Trade Agreements in August 2021:
…a Party intending to sign an FTA with a nonmarket country shall provide the other Parties with an opportunity to review the text, annexes and any side letters of the FTA for them to be able to review the FTA and assess its potential impact on the Agreement. If a Party enters into an FTA with a non-market country the other two Parties may terminate the Agreement on six months' notice, and replace it with a bilateral agreement between them which shall include the provisions of the Agreement except those which the Parties agree shall no longer apply.’
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The Committee recommends that the Australian Government work with other CPTPP members to encourage China to re-establish full trading relations including ending its coercive trade measures and reengaging in ministerial dialogue, and to demonstrate an ability and willingness to commit to the CPTPP’s high standards, prior to supporting the commencement of an accession process.
The Republic of China (Taiwan)
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Taiwan formally applied to join the CPTPP on 22 September 2021.
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The Committee heard evidence on the case for Australia pursuing freer bilateral trade with Taiwan and arguments for and against Taiwan’s accession to the CPTPP.
The case for freer bilateral trade with Taiwan
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The Department of Foreign Affairs and Trade (DFAT) submitted that ‘Taiwan remains an important economic partner for Australia in our region and a strong advocate for open markets and global free trade in APEC and the World Trade Organization.’
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In terms of Taiwan’s value to Australia as an economic partner, DFAT affirmed that ‘Australia is Taiwan’s largest energy provider, and Taiwan is our 12th largest two-way trading partner (2019-20), as well as our seventh largest goods export market (2019-20).’
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DFAT noted that Taiwan shares Australia’s trade objectives saying ‘[b]oth Australia and Taiwan are committed to pursuing freer regional and global trade through the multilateral system.’
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Mr Elliot YL Charng, Representative of the Taipei Economic and Cultural Office in Australia, affirmed the values that Taiwan shares with Australia:
Taiwan is also a trustworthy partner for Australia. It is a liberal democracy, and the governance and regulation are transparent for conducting trade and investment activities, in which Taiwan guarantees high predictability and stability.
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Mr Paul Shih, Immediate Past and Honorary President of the Taiwanese Chambers of Commerce in Oceania, emphasised the cooperative and complimentary trading relationship between Australia and Taiwan:
Australia's and Taiwan's industrial structures are highly complementary, which has led to an industrial relationship of mutual cooperation rather than just competition. Australia has a comparative advantage in fundamental research and supplies of raw material and natural resources, while Taiwan's niche lies in manufacturing, market development and the application and commercialisation of technology.
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Mr Vincent Chang from the Australia New Zealand Chamber of Commerce in Taipei, similarly noted the complimentary nature of the two economies:
These two countries are perfectly complementary to each other. There are no industries in these two countries that are competing against each other, so these are natural partners as far as we can consider. Australia would greatly benefit from Taiwan joining the CPTPP.
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Dr Shumi Akhtar from the University of Sydney Business School, endorsed Taiwan as a stable trading partner for Australia and the CPTPP:
…given the diversity and the resilience that Taiwan has shown so far and its stable supply chain management with its trading partners, it would be beneficial for Australia to team up with Taiwan… Taiwan and Australia have already demonstrated a good, long-lasting trade relationship in the past, so Taiwan is an ideal candidate.
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The Taiwanese Chamber of Commerce in Western Australia noted that ‘Australia and Taiwan’s industrial structures are highly complementary’ in this manner as:
Australia has comparative advantages in supplies of raw material, while Taiwan’s speciality is manufacturing, market development, and the application and commercialisation of technology.
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The Taiwanese Chambers of Commerce in Oceania highlighted key trading sectors where Australian goods are exported to Taiwan and vice versa:
Australia is Taiwan’s largest source of coal and iron ore. Meanwhile, Taiwan imports vast quantities of beef, dairy products, wheat and sugar, making Taiwan a very important export market for Australian agricultural and mineral products, as well as for education and tourism. Taiwan-made ICT products and bicycles are well received by Australian customers as GIANT taking the top brand in Australian bicycle market.
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The Taiwanese Chambers of Commerce in Oceania noted that although we are strong trading partners, Australia has neither a bilateral nor multilateral trade agreement with Taiwan, and has not entered into negotiations to that end:
Australia has signed or has been negotiating bilateral trade and economic agreements (ECAs) with all but one of Australia’s top ten export markets – Taiwan, let alone institutional arrangements under multilateral ones.
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Representative of the Taipei Economic and Cultural Office in Australia, Mr Charng, used New Zealand as an example to demonstrate potential benefits to Australia, were Australia and Taiwan to enjoy freer trade between them:
The main products exported to Taiwan from New Zealand and Australia are almost the same, such as milk and cream, fresh fruit, frozen beef, butter, and fresh, chilled and frozen sheep or goats. Compared with Australia, New Zealand's economic size is so small. But New Zealand can export a lot more to Taiwan than Australia can because there is the bilateral free trade agreement between Taiwan and New Zealand. That agreement was effective in 2014. This agreement allowed New Zealand's products to enjoy the advantage of zero tariff and also be competitive in Taiwan. We believe that if Taiwan were to be a part of the CPTPP, the market can also open up to Australian goods and Australian products. It means that you will give your farmers and your industries more market in which to expand. It would be a big benefit to your side.
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Mr Charng used the example of free trade agreements with New Zealand and Singapore to demonstrate Taiwan’s reliability as a trade partner:
We do have a free trade agreement with New Zealand and Singapore. As far as I know, on both sides, according to the agreement, implementation is very smooth. So far, we haven't had any trade disputes or other issues raised. It means that, in New Zealand, Singapore and Taiwan, we just implement the agreement and we also commit to our obligation.
The case for Taiwan’s accession to the CPTPP
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Mr Charng, Representative of the Taipei Economic and Cultural Office in Australia, endorsed Taiwan’s credentials as a trading partner:
As a member of the WTO and APAC, my government has been substantially participating and dutifully fulfilling its obligation in multilateral trading systems. My government has also been actively supporting numerous pro-trade initiatives in the Asia-Pacific region. Full participation in bilateral and regional economic integration has been a flagship of the TPKM's trade policy. Our membership of the WTO and various multilateral and bilateral agreements, including comprehensive and high-standard free trade agreements with New Zealand and Singapore, all reflect our commitment to greater market access in Asia-Pacific and around the world.
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Mr Charng outlined advantages to CPTPP members, were Taiwan to accede the agreement, highlighting increased access to Taiwan’s import markets, and improved regional economic integration:
Access to the CPTPP will undoubtedly bring us towards global integration, as CPTPP members will also have the advantage to be among the US$280 billion worth of imports entering our market each year. We also stand ready to harmonise our domestic regime with CPTPP standards. We embraced, with our organisation, CPTPP objectives to promote economic integration, strengthen [inaudible] protection, raise living standards, reduce poverty and promote sustainable growth. We strongly believe that the TPKM's resilience and ability also make it a strong candidate for CPTPP membership. Thank you very much.
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Mrs Tina Yeh Curtain, President of the Melbourne Taiwanese Chamber of Commerce, endorsed Taiwan’s global trade standing, and suitability as a member of the CPTPP:
Consider that Taiwan is already a member of the WTO and APEC. It is among the world's top 20 trading economies and is pivotal to high-tech supply chains with its respect for the rule of law and intellectual property. Taiwan would be in a perfect position to join the CPTPP.
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National Committee Member of the Australia-Taiwan Business Council, Mr Zac Lombardo, remarked that Taiwan’s accession to the CPTPP will improve Australia’s existing strong trade relationship:
The relationship is going from strength to strength, and that's in the absence of a high-quality trade agreement like the CPTPP. So, as far as our economic relationship with Taiwan goes, noting that it is a unique relationship, within the established economic parameters that we have, I think that the CPTPP will simply take us to the next level and unlock new levels of success for Australian businesses.
4.132
Formosa (Perth) Pty Ltd, an SME engaged in importing frozen food products from Taiwan, ‘strongly supports the membership expansion of the CPTPP to include Taiwan as a member country. This expansion will promote freer trade between Australia and Taiwan and yield benefits with respect to trade and economic collaboration between both countries.’
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In terms of Taiwan’s suitability for the CPTPP, the Taiwanese Chamber of Commerce Western Australia stated that ‘Taiwan has strong bilateral trade and investments with all 11 members, who account for more than one-fifth of Taiwan’s total exports and approximately 30 per cent of total imports.’
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Ms Janet Lin, Secretary of the Asia Business Council Western Australia remarked that ‘as the fastest-growing economy in Asia and a key player in global supply chains, the addition of Taiwan would provide more opportunities to expand trade and investment through mutual benefits in tariffs and by meeting the high standard of rules in this agreement.’
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Ms Jasmine Lin, President of the Taiwanese Association of Canberra supported Taiwan’s accession to the CPTPP, citing increased trade flows and expanded supply chains for Australia:
Regional trade like CPTPP will have effects on trade creation and trade diversion. The liberalisation of trade with Taiwan will create more trade flows among CPTPP members, and it will also enable expansion and the establishment of new supply chains among its members, including Australia.
4.136
Ms Lin from the Taiwanese Association of Canberra warned that members of the CPTPP would be at a disadvantage if Taiwan were not to be allowed to accede to the agreement:
The disadvantage would be that Taiwan plays a quite important role in the global supply chain, so without having Taiwan participating in the CPTPP, some members will miss out on opportunities to expand their technologies in their economies.
4.137
Formosa (Perth) Pty Ltd, an SME engaged in importing frozen food products from Taiwan, raised that Taiwanese accession to the CPTPP would benefit Australian small businesses:
As SMEs are key contributors to Australian employment and economic growth, Taiwan’s membership in the CPTPP will encourage the growth of SMEs through the elimination of tariffs and increased trade transparency.
4.138
Mr Demus King from the Minerals Council of Australia explained ‘the importance of understanding the multiplier effect in the region of a multilateral agreement such as CPTPP’ with particular emphasis on Taiwan:
…while we provide the raw materials to countries within the CPTPP membership, they will trade amongst themselves in various elements of those materials at various stages of finish. So you do get a significant multiplier effect. Particularly with Taiwan being a country that then exports the finished product across the region and the world, you will see a greater benefit associated with Taiwan participating in a multilateral agreement such as the CPTPP.
4.139
Mr Boris Chang, President of the Taiwanese Chamber of Commerce in Western Australia similarly highlighted the importance of Australia and Taiwan respectively broadening their trading relationships through the multilateral CPTPP:
With Taiwan's participation in the CPTPP, the multilateral benefits to this region will only grow, with unlimited potential, because we all value democracy and, most importantly, trust in each other. Australia, Canada and Taiwan simply cannot put all our eggs in one basket, as before, for some of our most important exports.
4.140
The Importers and Exporters Association of Taipei (IEAT) also highlighted that ‘Taiwan and Australia enjoy robust economic relations built upon reciprocity and complementarity’, and that this ‘could further expand if our trading relationship can be enhanced through a cooperation platform like the CPTPP.’
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Mr Charng further expressed the view that Australia’s endorsement of Taiwan in the CPTPP would be an act of solidarity in upholding the global rules-based system:
Externally, your support also demonstrates Australia's commitment to defending the concept of a liberal economy and ensuring markets are open and free. The open market in the region and the multilateral institutions are against the increasing temptation of restoring protectionism in trade practice. It also shows that Australia always insists on these values and takes action in a difficult time. For example, Australia played a vital leadership role in concluding the CPTPP and pushing for its enlargement, even when the most significant partner, the United States, decided to withdraw.
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Mr John Toigo, Chairman of the Australia-Taiwan Business Council (ATBC), advocated Taiwan’s accession to the CPTPP citing its shared democratic and free-trade values; the ease of doing business in Taiwan; and historic relations built on trust:
…Taiwan is a democratic country that values freedom of speech, tolerance, rule of law and democracy. It's also shown itself to be a model citizen on the world stage whose people are trustworthy. The point I want to make here is that this provides a stable platform to build a business relationship, as all truly successful business dealings are underpinned by personal relationships of trust and profit;
The second point I'd like to make is that Taiwan is a nation founded on free trade and it shares an interest in an open, inclusive and stable Indo-Pacific region;
…Taiwan is a place where doing business is easier than in many other countries. In last year's rankings by the World Bank on the ease of doing business, it was 15th out of 190 economies;
…established two-way trust that has existed for many years.
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The Queensland Federation of Taiwanese Associations, submitted that:
Taiwan is a safe investment and trade destination; and
The rule of law in Taiwan includes a well-developed commercial code, strong property rights, and an independent judiciary.
Taiwan is a partner for shared values.
Taiwan shares with Australia a commitment to freedom, democracy, and human rights. Taiwan is also a strong partner for environmental stewardship, labour rights, and progressive issues such as Indigenous and LGBTQ rights. Taiwan can help a promote global initiatives in these areas.
4.144
The Hon Gary Hardgrave, Vice Chairman of the Australia-Taiwan Business Council discussed Taiwan’s transformation over recent decades into a liberal economy, praising its flexibility and global role in international trade:
Taiwan is deeply integrated into the global supply chain. It is agile and active, constantly reforming to stay in the game worldwide. We know about its political isolation, but it hasn't stopped its commercial and trade transactions. Over the last 30 years so much reform has taken place, where it's gone from a central government-controlled circumstance to being a far more liberalised trade environment and economic environment and, in fact, society.
4.145
The Taiwan Power Company supported Taiwan’s accession, stating that the agreement ‘would immediately harmonise the regulations, streamline the administrative procedure, encourage further growth in trade and serve as a vehicle to freer trade opportunities between both economies.’
4.146
The Taiwanese Chamber of Commerce in Western Australia suggested that given this complementary relationship, Taiwanese accession to the CPTPP:
…would allow Australia to leverage off Taiwan’s strengths in many manufacturing areas and Taiwan to enjoy Australia’s strengths in many services sectors in their respective efforts to achieve a stronger and more diversified economy.
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Mr Boris Chang, President of the Taiwanese Chamber of Commerce Western Australia, noted further sectors where there are economic opportunities for Western Australia, including agriculture, resources, energy (both fossil fuels and renewables), education and tourism:
Economic and trading opportunities between Western Australia and Taiwan are numerous. I can only speak in terms of industries, including mining, agriculture, fisheries, education services, medical services and equipment, and IT, which Taiwan is good at in both software and infrastructure. There is also energy, especially hydrogen and other renewables.
…Perth Airport is now actively seeking to establish a direct flight between Perth and Taipei. To my understanding, there are two main purposes of this. First is to further expand WA's tourism industry and education exports. Secondly is to increase the direct export quantities from Perth to Taiwan of agriculture and fishery products, especially those with high unit value such as lobsters. With the recent development of WA, having Taiwan be part of the CPTPP means WA will surely be the big winner.
Market access opportunities if Taiwan were to join the CPTPP
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The Committee received evidence about potential benefits for different sectors of the Australian economy if Taiwan were to accede to the CPTPP.
Energy Sector
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The Taiwan Power Company highlighted Australian coal as a particularly desirable export, saying ‘to meet Taiwan’s future power demand with improved electricity generation efficiency and reduced CO2 emission, high quality Australian thermal coal would always be the best choice.’
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China Steel Corporation submitted that it is the sole ‘integrated steel mill with six blast furnaces operation located in Taiwan’ and purchases ‘US $2.9 billion worth of iron ores and coking coals from Australia every year.’
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China Steel Corporation (CSC Group) envisioned that were Taiwan to accede to the CPTPP, ‘new commercial opportunities between Australian industries and CSC Group shall be generated or further enlarged.’
4.152
The Bloomfield Group, a private group of Australian mining and engineering companies based in the Hunter region, submitted that ‘[o]ngoing certainty is one of the keys to our long-term relationships and we believe high quality trade agreements can support these relationships, help grow Australian businesses and support business in the countries to which we export.’ The Bloomfield Group further endorsed Taiwan’s accession saying:
Bloomfield strongly supports the expansion of the CPTPP to nations willing to meet the agreement’s high standards, including Taiwan that is a key customer of Bloomfield.
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CPC Corporation, Taiwan emphasized the value of trade between Taiwan and Australia in the energy sector, submitting that it imported ‘4.73 million metric tons of LNG from Australia, which represents 27% of our total LNG import.’ Further:
CPC invested AUD$3 billion into [the] Ichthys LNG Project and the Prelude Floating LNG Project. Those two projects resulted in Australia achieving the status of the world’s 2nd largest LNG exporter in 2019. According to the Northern Territory Chief Minister, the Ichthys LNG created an estimated 11,000 local construction job opportunities and more than 350 ongoing jobs. Prelude, located off Broome, Western Australia is the world’s largest floating LNG production facility, which CPC is among the project consortium with Royal Dutch Shell, INPEX, and KOGAS. CPC is proud to have received ANZCham’s Outstanding Business Award in 2020 for those two projects.
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CPC Corporation reported that it predicts that ‘[g]iven Taiwan’s set course for energy transition and Australia’s huge growth potential for LNG, renewables and clean hydrogen, we see abundant investment opportunities in the energy sector for Australia and Taiwan. Taiwan’s CPTPP membership could build an enabling environment that streamline our bilateral investments and facilitate much needed funding for the capital-intensive projects.’
4.155
Mr Boris Chang, President of the Taiwanese Chamber of Commerce Western Australia remarked on the opportunity for hydrogen energy to be exported to Taiwan:
I'd like to point out that the WA Mark McGowan government invested $61.5 million to boost WA's renewable energy industry. This was announced in the government's 2021-22 budget earlier this month. With WA's vast land and its geographical proximity to Taiwan, a huge amount of energy harvested from WA's hydrogen farms can export to Taiwan and generate significant state revenue for WA.
4.156
Taiwanese tea company, Presotea, noted Taiwan’s investment in Australian natural gas:
In-line with Taiwan’s New Southbound Policy, Taiwan’s national petroleum, natural gas, and gasoline company, CPC Corporation acquired an equity stake in Shell’s FLNG project at the Prelude national gas field, completing its first ever shipment in November 2018 with great success and results in a significant expansion of LNG receiving and distribution facilities in the near future.
4.157
Ms Tracy Chang, Treasurer of the Taiwanese Chamber of Commerce in Australia detailed one instance of a current Taiwanese investment in Australian lithium for developing electric car batteries:
…the company would establish a production centre in Australia, working with Australian suppliers by contributing patented technology in developing lithium-ion battery material. This investment would involve the injection of capital finance, cross-border trade and investment in the labour market. The final products would be manufactured in Australia and then exported to customers worldwide, including CPTPP members such as Japan and Vietnam.
4.158
Mr Andrew Cheng, Secretary General of the Taiwanese Association of Australia Melbourne Chapter, predicted that increased competition from Taiwanese manufacturers would benefit the quality of renewable energy equipment in Australia:
Anecdotally, the majority of the solar equipment used in Australia is made in China, and some manufacturers have strong state influence. A free trade agreement with countries such as Taiwan will produce quality green energy equipment, increase local competition, ensure the diversity of the supply chain and benefit the Australian consumer as a direct result.
4.159
Ms Jasmine Lin, President of the Taiwanese Association of Canberra, detailed the potential environmental benefits for Taiwanese accession to the CPTPP:
I think with the inclusion of Taiwan in the CPTPP there will be more business for Australia where we will be able to collaborate with Taiwanese scientists and technology companies in the field of renewable energy.
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Dr Shumi Akhtar from the University of Sydney’s Business School also highlighted that Taiwan can further Australia’s environmental energy and technology development:
…Taiwan is Australia's fifth-largest resource and energy market. Taiwan has some good wind-generating power production happening, which means that Australia can capitalise on collaborating with Taiwanese technology for our clean energy power production as we phase out coal power generation. For Australian investors, and also Taiwanese, it will provide good opportunities for good investment return and has the potential to generate a stable income while doing good for the environment.
Agricultural sector
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Mr Elliot YL Charng, Representative of the Taipei Economic and Cultural Office in Australia outlined the importance of Taiwan as an export market for Australian agricultural producers:
Taiwan imported about US$15.7 billion of agricultural products in 2020. Australia is one of Taiwan's top three import sources for wheat, barley, beef and milk powder, and it is also our fourth-largest source of overall food imports.
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Mr Chan-Feng Lin-Wu, Chairman of the Taiwanese Association of Canberra noted that reduced tariffs would advantage the Australian agricultural sector:
Generally, Australian agriculture and services attract about 16 per cent tariffs. By having either a unilateral or a multilateral relationship with Taiwan, this will make Australian agriculture and services much more competitive in Taiwan, and this will be more beneficial for Australian exporters as well as agriculture and farmers.
4.163
Mr Ash Salardini, Chief Economist and General Manager Trade at the National Farmers Federation (NFF) expressed the view that Australian agricultural exporters could gain much from Taiwan’s accession to the CPTPP:
Currently, we don't do a lot of trade with Taiwan from an agricultural perspective. I think red meat is around $250 million and dairy is $100 million, but that's in the single digits in terms of the total size of that market. We are a small player at that moment in a market that could be quite big. If we are five or 10 per cent of that market, there's a potential market of $3 billion to $5 billion there to compete in. Taiwan could become a very important market from a pure numbers perspective. The other very interesting part about the Taiwan story is that it has a burgeoning middle class. It's one of those markets that provides the opportunity to sell high-value, quality produce and products—for example, just-in-time fruit and vegetables—onto supermarket shelves that demand a premium.
4.164
Ms Rachel Triggs, General Manager Corporate Affairs and Regulation at Wine Australia, a statutory body operated under the Wine Australia Act that controls the export of grape products, outlined the competitive advantage of a zero-tariff rate for Australian wine in Taiwan, were it to accede to the CPTPP:
The MFN [most-favoured nation] rate is currently applied to Australian imports, and, as foreshadowed previously, the only one of our competitors that has managed to negotiate a zero-tariff rate, which gives them a significant advantage over Australian exporters, is New Zealand. That would be highly beneficial to Australian exporters. There are also some technical barriers to trade in Taiwan, relating to certification, labelling and oenological practices. Certainly, accession to the TPP by Taiwan would make excellent headway in resolving some of those market-access issues.
4.165
The Global Federation of Chinese Business Women of Australia also noted the Taiwan’s reforms to meet Australian export standards as part of it’s New Southbound Policy:
Taiwan has promoted related endeavours since launching the New Southbound Policy in 2016 and has signed the Australia-Taiwan Organic Equivalency Arrangement to foster trade in agricultural products under this policy.
Cyber security
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Dr Lennon Yao-Chung Chang from the Taiwanese Association of Australia Melbourne Chapter outlined Taiwan’s importance as a technology trading partner and security ally:
Its strategic significance in the region is recognised as one of importance by the Five Eyes in securing regional security. As the leading country of ICT development in the region, it also has been a responsible partner, supporting countries in the Indo-Pacific to develop their ICT environment. This is contributing to stronger cyber capacity and cybersecurity in the region and aligns with Australia's cyberstrategy and international cyber and critical engagement strategy 'for a safe, secure and prosperous Australia, Indo-Pacific and world, enabled by cyberspace and critical technology'.
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Dr Chang also further elaborated Taiwan’s technological manufacturing capabilities:
Taiwan is one of the leading developers and manufacturers of ICT. Taiwan Semiconductor Manufacturing Company is the world's largest contract chip maker. AAC Technologies Holdings is the world's largest chip packing and testing service provider. Foxconn is one of the world's largest iPhone assemblers and its affiliate, Eson Precision Engineering is a key mechanical parts supplier for Apple and Tesla. And, of course, you need [inaudible] chrome technology. It's also a major printed circuit board maker and key Apple supplier. There are numerous other ICT companies in Taiwan’.
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Mr Zac Lombardo from the Australia-Taiwan Business Council remarked that cybersecurity may be another area of growth between Taiwan and Australia as a result of the CPTPP:
I think Australian cybersecurity firms will be well positioned to export services to the Taiwan market under the auspices of the CPTPP. The regulatory certainty that CPTPP accession would provide for Australian providers looking to offer their services in Taiwan would only grow the export opportunities for Australian providers.
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Dr Chang stated that ‘Taiwan is always a test field for cyberattacks’ and as a result has a lot of experience and expertise that Australia can leverage as a member of the CPTPP:
There are a lot of things I believe the Australian government would be able to learn from Taiwan in how to counter disinformation campaigns, how to build a better cybercapacity and cyberability in countering illegitimate or unsolicited attacks… they will be able to collaborate with each other in terms of business ties but also to protect a safer environment in the region, to provide a better platform for digital trade and economic ties.
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According to the Queensland Federation of Taiwanese Associations, Taiwan’s expertise in IT and other high-tech areas can contribute to Australia’s prosperity. Taiwan’s accession to the CPTPP would allow it to do so at lower cost to Australian businesses.
Medicine and pandemic management
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Dr Aileen Yen, the Secretary General of the Australian-Taiwanese Friendship Association, emphasised the technological benefits Australia may be able to leverage from Taiwan:
We have seen the remarkable response of Taiwan to COVID. Australia has also learned from this response and there have been professional exchanges by video link. Technology wise, Taiwan has developed its own vaccine, which the WHO is also considering as a booster. It has listed it for consideration in its latest agenda. There are also technology aspects that the cultures of both countries can learn from each other. Taiwan has a digital minister. It has come up with and used technology which I think Australia can learn from to fight COVID in its response.
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Mr Chan-Feng Lin-Wu, Chairman of the Taiwanese Association of Canberra described Taiwan’s leading international efforts to contain the COVID-19 pandemic:
Before the pandemic, China was the biggest producer and manufacturer of PPE. At the beginning of the pandemic last year, there was a severe shortage of PPE in Taiwan, including surgical masks, so the government stopped exporting locally manufactured PPE to other countries and ramped up the production of PPE so that Taiwan is self-sufficient. This has led to an increase in production of PPE so that currently Taiwan is self-sufficient and it has been able to assist other countries who are suffering from the pandemic. Taiwan was able to donate quite a large amount of PPE to countries in need.
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The Taiwanese Association of Canberra stated that medical tourism was one area that might serve as a new opportunity for growth if Taiwan ascends to the CPTPP:
In terms of medical advances, Taiwan is probably one of the top countries in East Asia, and the cost for overseas visitors to visit Taiwan and receive medical treatment is comparable to places like Thailand and Vietnam. If Taiwan is able to join the CPTPP, this is something that can benefit both Australia and Taiwan as well as other member countries. In terms of what's available in medical tourism, from my research it's things like medical cosmetics, cancer treatment and transplants. Those are the main areas that the government is focusing on for medical tourism.
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The Taiwanese Chamber of Commerce Western Australia (TCCWA) emphasised that ‘Taiwan’s inclusion in the CPTPP will help in diversification of markets for both sides, make supply chains more resilient, and create back-up facilities.’
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The Taiwanese Chambers of Commerce in Oceania (TCCO) suggested that Taiwan’s inclusion in the CPTPP and diversification of Australian trading partners will assist in the post-pandemic economic recovery:
The rampant coronavirus (COVID-19) has disrupted global supply chains, a situation that highlights the risk of over-reliance on single market. The ECA or Taiwan’s inclusion in the CPTPP will help diversification of markets for both sides, make supply chain more resilient, and create back-up facilities.
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The Queensland Federation of Taiwanese Associations emphasised that Taiwan and Australia should move forward into reviving their economies from the pandemic together via closer bilateral and/or multilateral trade ties:
In 2020, via a series of humanitarian efforts, Taiwan and Australia joined forces to combat COVID-19. The two countries have also collaborated in the exchange of raw materials, that are used in the manufacture of critical medical supplies, such as face masks and hand sanitizer, that help to contain the spread of the pandemic. It is now a good time for Taiwan and Australia to move on to the next stage; proactively working together to revive our economies in the post-pandemic era.
People movement and the education sector
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Mr Alex Matos from the Australia New Zealand Chamber of Commerce in Taipei, detailed the strong links between Australian and Taiwanese people:
There is a large Taiwanese diaspora in Australia. The Working Holiday Maker program has seen tens of thousands of Taiwanese people go to Australia, many of whom support our farmers through fruit picking and our meat industry through working in factories. In terms of education, Australia is the second most popular study destination for Taiwanese students, second only to the US. It really is these people-to-people ties between Australia and Taiwan but have promoted this strong and healthy business relationship.
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The Taiwanese Chamber of Commerce Western Australia submitted that ‘more than 20,000 young people from Taiwan come to Australia under the reciprocal Working Holiday Maker (WHM) program – the fifth highest, and Australia is Taiwan’s second largest destination for students studying overseas.’
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Further, the Taiwanese Chamber of Commerce Western Australia noted that ‘[t]o increase the use of the English language, Taiwan has also announced the Bilingual 2030 policy and encourages English-language education at schools and also by providing more information and services in English. …Australia is and will remain a preferred education destination after COVID-related restrictions ease.’
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Ms Grace Yu, the Secretary General of the Melbourne Taiwanese Chamber of Commerce detailed the educational transfer between Australia and Taiwan:
…Taiwan is Australia's 11th-largest international education export partner. By 2030, Taiwan plans to go bilingual, thereby encouraging the public and private sectors to incorporate an English service. This plan will require Taiwan to send a large number of teachers to Australia for further English training. In return, Australia will have the opportunity for Australia students to have an English language exchange in Taiwan as part of this initiative.
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Dr Shumi Akhtar from the University of Sydney Business School stated education remains a great opportunity for growth between Australia and Taiwan:
Australia remains an attractive education provider for many Asian neighbour countries. To strengthen our collaboration with Taiwan, we believe that Australia could potentially become a high-quality education provider to them.
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The Hon Gary Hardgrave, Vice Chairman of the Australia-Taiwan Business Council highlighted Taiwan’s connection to the Pacific region:
Taiwan has a continuing role to play in the Pacific. It has deep cultural ties in the Pacific; it's not just simply a country that is based off the remnants of pre-1949 China, it has a deep connection to the Pacific. It belongs in this comprehensive CPTPP, it has a positive role to play and I look forward to the committee recommending exactly that.
Taiwan’s readiness to accede to the CPTPP
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The Committee heard evidence on Taiwan’s demonstration of readiness to accede to the CPTPP.
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Mr Elliot YL Charng, Representative of the Taipei Economic and Cultural Office in Australia, described to the Committee how the Taiwanese Government had been preparing for accession to the CPTPP since 2016:
Since 2016 my government has had increased coordination among government agencies. For example, we decided on a minister to oversee the cross-agency work for the joint CPTPP. We've also set up an office of trade negotiation, a cabinet level office to coordinate with other agencies regarding our negotiating positions.
The second step is the release of the initial CPTPP text. Our government has completed examination and ensured the compliance of our regulatory regime with respect to the CPTPP disciplines, chapter by chapter. We call that 'gap analysis'. If I remember correctly, 13 regulations were identified as having gaps. Since 2016, the amendment process, in line with the CPTPP regulations, has already been completed for nine of them. The remaining four proposed amendments will be completed soon.
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Mr Charng gave two examples of legislative reform in Taiwan in preparation for accession to the CPTPP:
On transparency, we encouraged government agencies to improve English on their official websites. In financial services, we simplified the procedures for establishing an offshore unit to offer national insurance. We are relaxing the requirements for the movement of foreign officials through 27 reform initiatives with respect to visas, employment, residence, finance access and insurance.
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Although Taiwan has many state-owned enterprises (SOEs), Mr Charng explained to the committee how Taiwan has undertaken legislative reform to ensure that all SOEs operate on free-market principles:
Taiwan's state-owned enterprises operate on free-market principles and compete fairly with the private sector companies under our Fair Trade Act and its enforcement rules. This act and also these rules have the purpose of maintaining trading order and protecting consumers' interests, ensuring free and fair competition and promoting economic stability and prosperity. All related domestic regulations are in line with stipulations under the CPTPP chapter 17 of state-owned enterprises and designated monopolies, and also according to our trade policy reviews, as in the WTO in 2018. Currently, in Taiwan, we do have 18 state-owned enterprises, because the gold standard is a typical characteristic of CPTPP, so we also upgrade our standards from WTO level to a WTO-plus level. For example, for some SOEs, we have just helped them to promote the privatisation of the SOE by liquidation or just the release of shares. So some SOEs in the public sector ownership are probably only 40 per cent or less than 40 per cent.
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Mr Chan-Feng Lin-Wu, the Chairman of the Taiwanese Association of Canberra, described the legislative steps Taiwan has taken to ensure it meets the CPTPP standards, such as in the areas of environmental protection and intellectual property:
Most of the legislation in Taiwan has already aligned with the CPTPP standards, but, as mentioned in our written submission, 12 laws were identified to have gaps. Since 2016, eight have already completed the amendment process, including those relating to environmental protection, intellectual property, patents, copyright and framework.
…Under the environmental chapter, CPTPP members recognise the importance of the conservation of marine life and the sustainable management of fisheries. Taiwan has passed amendments to three laws to prevent overfishing and illegal fishing activity. Under the intellectual property chapter, members should take necessary measures to prevent the abuse of intellectual property rights by right-holders and cooperate with other parties on patent protection. Taiwan has amended three pieces of legislation related to pharmaceutical affairs, plants and agricultural pesticides management. And there are three other amendment proposals on patent copyright and trademarks that are currently under review, and a new draft digital communication law is also under review.
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Mr Zac Lombardo from the Australia-Taiwan Business Council affirmed that Taiwan has undertaken legislative reform to meet CPTPP standards including in ‘e-commerce, which… will make it much easier for trading partners to access the Taiwan market;’ the ‘unilateral removal or reform’ of protectionist barriers more generally; as well as ‘reform in the fishing space.’
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Ms Erica Liu, President of the Taiwanese Chamber of Commerce in Australia also highlighted legislative reforms that Taiwan has undertaken to be compatible with the CPTPP standards:
Taiwan has already shown willingness to join and capability of joining the CPTPP, as can be seen from Taiwan taking legislative actions to harmonise its domestic regulations with the CPTPP standards.
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Dr Shumi Akhtar from the University of Sydney’s Business School stated that Taiwan has made efforts to ensure it will be able to adhere to the CPTPP’s high standards:
…this government has been actively promoting improved labour rights through its legislative reforms. These have appropriate protocols in place to respect and value IP protection and are also good supporters of sustainable development. These values actually mesh with our values and with those of some of our closest trading partners. Therefore it makes sense for Taiwan to be part of CPTPP.
China’s opposition to Taiwanese accession to the CPTPP
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The Sub-Committee received correspondence in October 2021 from the Embassy of China in Australia which reiterated China’s concern over Taiwan’s application to join the CPTPP stressing Taiwan’s bid was not a simple economic and trade issue but a highly sensitive political matter. The correspondence conveyed China’s hope that Australia would oppose the bid by Taiwan.
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Mr Elliot YL Charng, Representative of the Taipei Economic and Cultural Office in Australia stated that Taiwan expected China’s opposition to its application to the CPTPP:
The opposition from China is not unexpected to us. We all understand that China use every way to obstruct Taiwan from participating in any international organisations.
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Mr Charng further noted that many countries had endorsed Taiwan’s application, while only China had voiced opposition:
Since Taiwan announced it wishes to join the CPTPP, we have already received a lot of support from international friends. Only one voice on the other side is a negative. There is a lot of support for Taiwan to be a part of this big family.
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Mr David Olsson from the Australia China Business Council noted China’s opposition to Taiwanese accession:
The Chinese government have made it very clear that they don't want Taiwan to be a party to this particular agreement because they believe it's their own right to be the sole member of this organisation, that's very clear.
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Despite acknowledging Chinese opposition, Mr Olsson still endorsed Taiwan’s application, noting it as a reliable trade partner for Australian businesses:
Taiwan is one of the very few major markets that Australia does not have an FTA with at the moment. There are some very significant opportunities for Australian business should tariffs be reduced, particularly in the areas of meat, dairy and horticulture. It's also an economy with a burgeoning middle class, providing us opportunity to sell our high-value, high-quality goods at a premium price, so it ties into our diversification strategy.
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However, Dr Shumi Akhtar from the University of Sydney Business School highlighted that difficulty with China could have adverse effects on Taiwan’s own supply chains, impacting trade with Australia:
With Taiwan, as much as we are all going for Taiwan, in the future, in case it becomes quite influenced by a dominating nation, we have to be careful about the supply chain management they have in place: who are the second tier and the third tier? On the surface, the Taiwanese might be dealing with various suppliers, but those suppliers are also dependent on other levels of suppliers: are they going back to some of the countries that Australia does not have such a great relationship with?
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Appearing in a private capacity, Dr Richard Herr OAM, stated that Taiwan’s accession to the CPTPP is ‘a no-brainer’ due to its economic value and likely adherence to the agreement’s rules and that ‘there are no legitimate economic grounds for opposing or preventing Taiwan's accession.’
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Dr Herr emphasised that the “One China policy” this was not a ‘fundamental stumbling block’ due to:
…the language of the agreement itself allows for non-state accession. It talks about separate customs, territories and the like. Taiwan is already a full member of the WTO, and that same sort of language, clearly, could be used to allow and promote the accession of Taiwan to the CPTPP. A similar point could be made of Taiwan's membership in APEC, which it actually joined alongside of the PRC and Hong Kong.
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Herr and Bergin note that the ‘multilateral nature of the CPTPP offers the security of a collective, shared responsibility for any decision made regarding Taiwanese accession.’ The pair then referred to the RCEP agreement to demonstrate this collective decision-making importance for Taiwanese accession as ‘Beijing was able to directly prevent Taiwan from joining from within the association [RECP], the PRC is not currently a signatory to the CPTPP.
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The International Institute for Strategic Studies (IISS) stated that expanding the membership of the CPTPP to include Taiwan, will make ‘member countries nervous that doing so would antagonise Beijing.’
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Former Australian Prime Minister, the Hon Tony Abbott AC downplayed potential outrage from China:
The only argument that occurs to me is that it might upset China, but given that China is not a member of the TPP, is unlikely to become a member of the TPP and is already in a state of high dudgeon against Australia and many other countries, I don't see that China is going to be any more upset than it already is.
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Mr Chan-Feng Lin-Wu, Chairman of the Taiwanese Association of Canberra referred to Taiwan’s existing role in global trade and did not expect China to present any obstacles:
Taiwan is already part of the World Trade Organization and APEC and has a number of free trade agreements with New Zealand and Singapore, so I don't think there will be any barriers in terms of Taiwan joining the CPTPP.
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Mr Paul Lin, Commissioner of the Overseas Community Affairs Council, R.O.C. and Honorary President of the Australian-Taiwanese Friendship Association, highlighted past precedent where Taiwan has navigated non-political solutions to participating in international organisations such as the World Trade Organization and the Asian Development Bank:
…Taiwan is using a humble name to join the CPTPP. The name is not Taiwan. The name is the 'Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu'. This is the humble name. This name is not going to change or revise Taiwan's political status quo. It doesn't have to be nervous with this. Taiwan is now a member of APEC and the ADB—the Asian Development Bank—along with China. The other fact is that Taiwan and China have now joined ECFA. This is a sort of FTA between Taiwan and China. So there is always some sort of solution, something we can do to sort out the problem of the political issue.
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Dr Jeffrey Wilson, Research Director, Perth USAsia Centre suggested that China has instead warned the CPTPP’s existing membership over accepting Taiwan into the agreement:
…the [Chinese] Minister for Foreign Affairs said late last week, 'No international government should admit Taiwan into international organisations' is a different statement of how they have policed understandings of Taiwan's international status in the international trade system for the last 20 years. That is significant. As a diplomatic statement it is entirely intended to send a diplomatic message to the eight CPTPP members, who will have a decision on this in the commission, as to how they're going to play. It sends a message regarding how they will deliberate and form consensus on Taiwan's application. It would take not much cynicism to say it is a deliberate warning to those eight deciding members that there would be diplomatic consequences in the context of debates over one China principles and policy if Taiwan's application were allowed to proceed to an accession negotiation.
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The Importers and Exporters Association of Taipei noted that ‘despite its economic performance, Taiwan’s entry to the CPTPP requires the strong support of key current members’ and that it hoped ‘Australia will offer the support critical to Taiwan’s entry into the CPTPP so that greater business opportunities may be realised from enhanced regional economic integration.’
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The International Institute for Strategic Studies (IISS) suggested that as Taiwan is a crucial trading partner in the region, CPTPP members should use the agreement to help protect ‘Taiwan from becoming isolated as it faces increasing economic coercion by Beijing and potential invasion by mainland-Chinese forces.’
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Dr Richard Herr OAM and Dr Anthony Bergin submitted that ‘regardless of how the Committee might wish, or need, to characterise the country, we believe that it is in Australia’s national interest to support Taiwan’s accession.’
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Dr Herr and Dr Bergin advocated that ‘it is very much in Australia’s national interest to strengthen the international economic rules regimes to ensure these remain free, open and robust.’ They submitted that Taiwanese accession to the CPTPP could assist through:
committing to similar high standards;
promoting issues relevant to the values, rules and norms of the CPTPP; and
enhancing the role of the CPTPP as a vehicle for economic collaboration and cooperation.
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Dr Herr expressed the view that Australia should avoid rejecting Taiwanese accession solely due to Chinese opposition:
…if Australia retreats from the proposal to permit Taiwan's accession solely—and I underscore 'solely' there—in the face of PRC objections, it really would damage our standing as an effective global middle power by making it fairly clear that another country's interest has bent our interest to their will, and I don't think it's a good look for us to be seen to be sacrificing our own national interest in deference to another nation's interest.
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Mr Elliot YL Charng, Representative of the Taipei Economic and Cultural Office in Australia, described the importance of China as an economic partner to Taiwan:
I think we are well qualified to be part of this economic trading bloc. China is Taiwan's No. 1 trading partner. Also, between Taiwan and China, we have a framework agreement, which we call the economic comprehensive framework agreement. It's also under the structure of the WTO. If Taiwan were to become a member of the CPTPP, from an economic perspective, I don't think it would be a bad thing to China. We'd just follow CPTPP rules and regulations. We'd also commit to our obligations. I think this is not a bad thing to everyone.
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Dr Herr expressed the view that China accepts Taiwan’s economic independence:
The fact is that the PRC accepts that Taiwan has this economic independence, and it's important to the PRC that that economic independence be accessed and developed within the PRC's own economy suggests that they shouldn't have any objection to Taiwan acceding to the agreement and being part of those richer, more engaged economic relationships.
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The Hon Gary Hardgrave, Vice-Chairman of the Australia-Taiwan Business Council noted the depth of the economic relationship between China and Taiwan:
Taiwan's deep integration into the global supply chain includes the people on the western side of the Taiwan Strait. So there is a lot of direct Taiwanese investment, manufacturing and so forth that is done in the People's Republic. So there is integration across there. Despite all of the of the huff and puff of the so-called elephant, there is already that kind of real-world, agile approach when it comes to the trade front… Taiwan is in this very agile, very pragmatic, very trade-oriented headspace in its conduct.
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Dr Jeffrey Wilson, Research Director, Perth USAsia Centre contended that China is not so understanding of Taiwanese accession to the CPTPP as it has been previously with other multilateral trade frameworks:
It said it had no objection to Taiwan participating with other WTO members in WTO-compliant framework instruments, of which the CPTPP is one. So for the PRC in the last few days to declare, 'No, this is not the case,' involves a very different interpretation from the PRC of whether Taiwan is allowed to participate in international trade instruments going forwards.
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The Committee recommends that the Australian Government work with other CPTPP members to encourage and facilitate the accession of Taiwan to the CPTPP and to consider negotiating a bilateral Taiwan-Australia FTA concurrently, noting the benefit of a similar approach taken with the United Kingdom.
The Republic of Korea (South Korea)
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On 13 December 2021, South Korean finance minister Hong Nam-ki announced that South Korea will commence the application process for the CPTPP. It should be noted that the following submissions and witness statements predate this announcement.
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The Committee heard evidence on the case for South Korea’s accession to the CPTPP.
The case for South Korea’s accession to the CPTPP
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The Department of Foreign Affairs and Trade described the strong relationship between Australia and the Republic of Korea (ROK):
The ROK is Australia’s third-largest export market (AUD 27.6 billion in 2019-20) and fourth-largest trading partner (AUD 38.9 billion in 2019-20). Our economies are deeply complementary, with Australia exporting resources, food and manufactured products to the ROK, and importing products such as refined petroleum, cars, telecommunications equipment and computers.
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DFAT noted that ‘[t]he ROK indicated strong interest in accession during TPP negotiations, with President Moon expressing renewed interest in the CPTPP in December 2020.’
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DFAT submitted that ‘[o]ur trade relationship is supported by the Korea-Australia Free Trade Agreement (KAFTA), and the ROK is also a signatory to RCEP.’
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The Department of Agriculture, Water and the Environment (DAWE) highlighted that due to an existing free trade agreement between the two countries, ‘should [South] Korea join the CPTPP, there is potential for Australia to negotiate improved Agriculture outcomes of tariffs, safeguards and seasonal windows.’
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The National Farmers Federation (NFF) submitted that although Australia has an existing free trade agreement with South Korea, they supported South Korean accession:
The accession of South Korea to the CPTPP - which comes with a requirement to provide a new market access offer - is likely to improve the level of access for Australian exports even further.
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The NFF noted ‘that the South Korean government has officially declared that it intends to join the CPTPP. It has committed to, in 2021, adjusting domestic systems relating to sanitary and phytosanitary measures, fisheries subsidies, digital trade and state-run corporations in accordance with the membership requirements of the CPTPP.’
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Mr Ash Salardini from the NFF stated that Australia’s free trade agreement (FTA) with South Korea was out-of-date compared to more recent FTAs, and that the CPTPP would provide even better conditions for Australian exporters:
…we don't have a review mechanism in the Korea FTA. Since we negotiated those tariff reductions with the Koreans, there have been other FTAs that have overtaken us—for example, there's a 14 per cent differential between the out-of-quota tariff that we get charged versus what an American producer gets charged for beef. It's just a very simple point that, even with a country that we have an FTA with, there are benefits from a multilateral agreement.
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The Perth USAsia Centre described South Korea as ‘a model candidate.’ The Perth USAsia Centre cited Korea’s readiness for CPTPP standards, connections across the Indo-Pacific, and its existing bilateral agreements with CPTPP members:
First, it has domestic regulations which are already close to CPTPP standards, lowering the reform burden required and easing the negotiation process. Second, it is a natural fit with the bloc, given its location in the Indo-Pacific and deep trade and investment links with current members. Third, it already has bilateral FTAs with seven of the eleven CPTPP parties, reducing the complexity of market access negotiations. Korea would be a natural addition to the CPTPP, and the most straightforward of the potential candidates.
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However, the Perth USAsia Centre noted that ‘[t]he principal obstacle for Korean accession is difficulties in its bilateral relationship with Japan.’ It further stated:
Joining the CPTPP would function as a de facto FTA between Korea and Japan, which has proven a sensitive issue on both sides for over two decades. Recently renewed disputes between the two governments over several historical issues have also seen ties deteriorate badly, and led to a bilateral trade war over semiconductor components in 2019 that remains unresolved. Japan’s objections to recent proposals to invite Korea as an observer to the G720 indicate that bilateral ties will need to improve before a CPTPP accession is on the cards.
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Ms Rachel Triggs from Wine Australia, a statutory body operated under the Wine Australia Act that controls the export of grape products, noted that Australian wine exports have been performing well in South Korea after the entry into force of the Korea-Australia FTA, which eliminated tariffs on Australian wine:
The Australian market share in South Korea is eight per cent; and the Australian import share is eight per cent, and that's been steadily growing, over the last five years, at an average of 11 per cent. In the last 12-month period, the value in South Korea is up by 70 per cent. So that is a market that we're very interested in. Wine is already afforded a zero tariff in accordance with the Korea-Australia FTA and a zero tariff is applied to most of our competitors as well. Our major competitors are the EU, Chile, the US and New Zealand. South Africa and Argentina still pay the MFN rate of 15 per cent there.
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The Committee recommends that the Australian Government work with other CPTPP members to support South Korea in submitting a formal request to accede to the CPTPP, and to provide encouragement and facilitation of its accession upon a formal request being submitted.