The Economic Dimensions of Foreign Policy. Security and sovereignty are the key national interests but in times of relative security economic issues become.

The Economic Dimensions of Foreign Policy

Security and sovereignty are the key national interests but in times of relative security economic

issues become more important. Even with a world in some turmoil the economic arena provides a range of opportunities for enhancement. It is also the key

focus for globalisation and internationalism. This reinforces the significance of economics on the world stage. For those poorer countries it has

potential for development but also further exploitation. We must look at both Globalisation and Internationalism from the perspectives of developed

and developing states.

Australia’s National Interest

• What are our goals in terms of national interest given the economy and foreign policy?– Grow the economy– Increase investment in Australia– Trade liberalisation– Improve the balance of trade ie exports– Access cheaper imports– Access technology– Enhance our international good standing and

influence

• Domestic political impact of the economy reinforces the significance of economic factors on foreign policy.

• DFAT reflects the relationship of trade and foreign relations. 1987.

• Australia has a relatively small economy and therefore the growth of that economy is important in terms of our national interest. Note our reliance on agricultural and raw resources.

• What is the impact of our great and powerful friend on our economic situation?

• Competing interests – political versus economic eg global warming versus economic costs

The British Connection

• Trade, migration and investment until the 1950’s.

• Loyalty to England compromised trade eg the Depression

• Preference to England. Discriminatory trade.• Move to other markets eg Japan saw Britain’s

share decline.• Britain joined the EEC

The American Connection

• Competitors – eg wheat and beef• US heavily subsidised eg wheat• US major source of investment in Australia• Trade imbalance – favours US

$11,000,000,000 – 2007

The Asia Connection• Initially wary of Asia• Aust / Japan Commerce Treaty – complemented each other• Whitlam saw the political / economic potential of Asia.• 25% reduction in tariffs to encourage trade.• Asian Development Fund and Export Payments Insurance Corporation to promote

trade.• Resource diplomacy to promote trade.• Fraser consolidated trade with China and other Asian states.• Hawke and Keating restructured the Australian economy and worked with ASEAN

and initiated APEC. Central forum for negotiations and the promotion of both trade and political links.

• Importance of Asia in terms of trade 2007 – Approximately 50% of Australia’s trade is with Asia.

• Asia economic crisis – loss of confidence.• Howard tried to integrate economically – FTA’s – Singapore / Thailand / USA / NZ

(CER)• Rudd government is working on FTA’s China / Malaysia / Japan etc

Multilateralism • The emphasis on bilateral relationships proving inefficient. A

new focus on regional and multilateral links. Linked to market liberalisation and a reduction in trade barriers eg subsidies by the EEC.

• Initially unsuccessful under Whitlam but Fraser, Hawke and Keating refined the model and introduced forums and systems that made it more efficient eg DFAT / APEC

• Barriers to free trade still remained – tarriffs / subsidies etc but the GATT and later the WTO began to work on trade liberalisation. The Hawke government introduced the Cairns group of agricultural traders.

Multilateralism • APEC- Australia led the move to set up APEC. Keating was

instrumental. Note it now has 21 members, represents 33% of the world’s population and 60% of its GDP. Asia the economic dynamo was the key.

• As Scott said “ APEC has allowed Australia increased leverage against the EU and its subsidised agricultural markets, as well as ensuring US participation in the Asia Pacific. Thus shoring up stability and security in the area.”

• Multilateral forums allow and encourage middle powers to play an active and successful role in international relations.

• Australia’s role in the Cairn’s group helps legitimise our participation and is consistent with our international standing.

WTO - Uruguay Round – 1986 – 1994

A round to end all rounds?

WTO - Uruguay Round – 1986 – 1994

• The seeds of the Uruguay Round were sown in November 1982 at a ministerial meeting of GATT members in Geneva. Although the ministers intended to launch a major new negotiation, the conference stalled on agriculture and was widely regarded as a failure. In fact, the work programme that the ministers agreed formed the basis for what was to become the Uruguay Round negotiating agenda.

WTO - Uruguay Round – 1986 – 1994

• Nevertheless, it took four more years of exploring, clarifying issues and painstaking consensus-building, before ministers agreed to launch the new round. They did so in September 1986, in Punta del Este, Uruguay. They eventually accepted a negotiating agenda that covered virtually every outstanding trade policy issue. The talks were going to extend the trading system into several new areas, notably trade in services and intellectual property, and to reform trade in the sensitive sectors of agriculture and textiles. All the original GATT articles were up for review. It was the biggest negotiating mandate on trade ever agreed, and the ministers gave themselves four years to complete it.

WTO - Uruguay Round – 1986 – 1994

• Nevertheless, it took four more years of exploring, clarifying issues and painstaking consensus-building, before ministers agreed to launch the new round. They did so in September 1986, in Punta del Este, Uruguay. They eventually accepted a negotiating agenda that covered virtually every outstanding trade policy issue. The talks were going to extend the trading system into several new areas, notably trade in services and intellectual property, and to reform trade in the sensitive sectors of agriculture and textiles. All the original GATT articles were up for review. It was the biggest negotiating mandate on trade ever agreed, and the ministers gave themselves four years to complete it.

WTO - Uruguay Round – 1986 – 1994

• Two years later, in December 1988, ministers met again in Montreal, Canada, for what was supposed to be an assessment of progress at the round’s half-way point. The purpose was to clarify the agenda for the remaining two years, but the talks ended in a deadlock that was not resolved until officials met more quietly in Geneva the following April.

WTO - Uruguay Round – 1986 – 1994

• Despite the difficulty, during the Montreal meeting, ministers did agree a package of early results. These included some concessions on market access for tropical products — aimed at assisting developing countries — as well as a streamlined dispute settlement system, and the Trade Policy Review Mechanism which provided for the first comprehensive, systematic and regular reviews of national trade policies and practices of GATT members. The round was supposed to end when ministers met once more in Brussels, in December 1990. But they disagreed on how to reform agricultural trade and decided to extend the talks. The Uruguay Round entered its bleakest period.

WTO - Uruguay Round – 1986 – 1994

• Despite the difficulty, during the Montreal meeting, ministers did agree a package of early results. These included some concessions on market access for tropical products — aimed at assisting developing countries — as well as a streamlined dispute settlement system, and the Trade Policy Review Mechanism which provided for the first comprehensive, systematic and regular reviews of national trade policies and practices of GATT members. The round was supposed to end when ministers met once more in Brussels, in December 1990. But they disagreed on how to reform agricultural trade and decided to extend the talks. The Uruguay Round entered its bleakest period.

WTO - Uruguay Round – 1986 – 1994• Despite the poor political outlook, a considerable amount of

technical work continued, leading to the first draft of a final legal agreement. This draft “Final Act” was compiled by the then GATT director-general, Arthur Dunkel, who chaired the negotiations at officials’ level. It was put on the table in Geneva in December 1991. The text fulfilled every part of the Punta del Este mandate, with one exception — it did not contain the participating countries’ lists of commitments for cutting import duties and opening their services markets. The draft became the basis for the final agreement.

APEC Bogor Goal – 1994

“free and open trade and investment in the Pacific Rim by the year 2020."

The Bogor Declaration Outlined seven major principles regarding the goal of trade and investment

liberalization:

• The goal will be pursued promptly by reducing barriers to trade and by promoting the free flow of goods, services, and capital throughout the APEC countries

• The goal will be achieved in a GATT-consistent manner• The goal will be achieved no later than the year 2020• The pace of implementation will reflect differences in economic development

across the region, with industrialized countries achieving the goal by 2010 and developing economies having an additional ten years

• APEC opposes the creation of an inward-looking trade bloc, and thus the goal will be pursued in a way that encourages worldwide trade and investment liberalization

• APEC liberalization will not only reduce barriers among APEC economies but also between APEC and non-APEC economies

• Special attention will be given to ensuring that non-APEC developing countries benefit from APEC liberalization in conformity with the provisions of the General Agreement on Tariffs and Trade and the World Trade Organization (GATT/WTO)

WTO - Doha Round – 2001 onwards• Issues> implementation> agriculture>

services> market access (non-agriculture)> intellectual property> investment> competition> transparency in government procurement> trade facilitation> anti-dumping> subsidies> regional agreements> dispute settlement> environment> e-commerce> small economies> trade, debt and finance> trade and technology transfer> technical cooperation> least-developed countries>

special and differential treatment

• Note the range of issues and recognize that the aim is to promote trade and remove barriers to trade. It is important to note the use of the name of the city in discussing the talks ie Doha round of negotiations.

Trade Policy under Howard• From multilateralism to multifaceted. The difference is that

you focus on– Regional issues– Bilateral – including Preferential Trade Agreements’s –

PTA’s – highest priority• America / Singapore / Thailand• Negotiating – China / Japan / Malaysia etc

• Multilateralism – is seen by the coalition as being weak and slow eg Doha

Trade Policy under Rudd• Focus on multilateralism – WTO – Doha round. Reflects

greater emphasis on internationalism. Recognises the need of the weaker and poorer nations whereas the Coalition is making deals that specifically benefit Australia.

• Cairns group – strong leadership• Linking WTO aims to regional focus through ASEAN / APEC.

Restore APEC and therefore restore Australia.• ASEAN plus 6 = East Asia summit. The 6 are the US / Japan /

China / South Koreas / Australia / NZ• Rudd – proposal of Asia Pacific Community – broader focus

security / resources etc• FTA’s can enhance and deepen liberalisation methods.

Aid and Official Development Assistance – ODA

• Reduce poverty / sustainable development• Facilitate growth and improve infrastructure rather than handouts.• 2002/3 – 1.815 billion • Rudd increasing aid as a % of GDP. From .3% to .38% in 2011/12. Note it will

occur during the GFC• Regional focus = regional security = votes in multilateral forums = trade

liberalisation = better for Australia.• Asia Pacific – MDG’s – Priority Pacific and PNG• Total ODA

– PNG and Pacific - 999.5 m– Indonesia and East Asia – 1038.7 m– Africa, South and Central Asia – 727.5m– Core contributions – 894.2

• What does this say about Australia’s ODA program?• Where else is our commitment to other nations shown eg Afghanistan / Iraq?