Institute for International Trade

A message from the director

What a difference a week makes. In Australia we have been alarmed, although sadly not surprised, by Beijing’s belligerence towards Taiwan in the wake of US House of Representative’s Speaker Nancy Pelosi’s visit there. Prior to this, albeit with caveats aplenty, Canberra and Beijing were engaging in a delicate process of resetting bilateral relations. No doubt these are complex matters but the de facto blockade of Taiwan, and what this portends for the future, establish a new baseline for the mooted reset.

In this context our first feature piece, a Policy Brief written by ex-DFAT trade analysts, explores the now more pressing case for, and options pertaining to, diversification of Australia’s trade partners and structure. The authors argue there is no quick fix, and that doubling down on domestic productivity-enhancing reforms is the best guarantee of success. We will shortly release two more papers on this topic that the authors are working on – watch this space.

The second, an opinion editorial by Visiting Fellow Jim Redden, sets out a case for selectively engaging China in the context of building common approaches to addressing the needs of Pacific Islanders. After the PLA’s weekend military escapade that may seem a very distant prospect, but I encourage you to read the piece nonetheless. No doubt at some stage Australia and China will have to learn to cooperate, and addressing the very real challenges faced by Pacific Islands may just offer a test case.

In the final piece Visiting Professor Andreas Freytag and I dissect the various meanings of the G7 Summit in relation to unfolding geopolitical dynamics concerning Russia and (pre-Taiwan blockade) China. Whereas some commentators dismissed the Summit as a talk shop and/or distraction from the G20, we take a substantially more favourable view – one reinforced over the weekend. Furthermore, I struggle to see how the G20 Heads of State forum – soon to meet in Bali – will survive. Do I hear the siren call of a G7+ ‘League of Democracies’?

Enjoy the reads.

Professor Peter Draper

POLICY & ENGAGEMENT 

Australia’s response to Chinese economic coercion: towards a comprehensive strategic approach to export diversification. 

On a range of measures, Australia’s exports have become more concentrated on China since 2000. Yet geopolitical tensions, intensified by China blocking key Australian exports over the past two years, has fuelled a debate over export diversification to reduce vulnerability to economic coercion. This policy brief argues that much of the debate misses key facts about Australia’s economic options, and argues for economic reform and regional cooperation to support diversification.

Mike Adams, former Department of Foreign Affairs and Trade (DFAT) economist. 
Ron Wickes, past Director of the Trade Analysis Section of DFAT, 
Nicolas Brown headed DFAT’s branch for analysis and strategic advice on trade and economic issues. 

New Trade and Aid Paradigm Needed for China and Pacific Relations

Australia’s regional economic diplomacy has lost its way in recent times in the Indo-Pacific region. The new Albanese-led Labor government recognizes that there needs to be a reset in its trade and aid paradigm in the Indo-Pacific, in order to restore strong relations with our Pacific neighbours, as well as thaw the diplomatic freeze with China on trade. This op-ed identifies four components that could serve as the foundation for this new paradigm.

Jim Redden, Trade and Development Expert, Institute for International Trade, University of Adelaide

The G7-Summit delivered more than expected

Over 3 days at this year's G7 summit under the German presidency the heads of government of the United States (USA), Great Britain, France, Germany, Italy, Japan and Canada - met in a castle tucked away in the Bavarian Alps. They were joined by the President of the European Commission and, as guests, the heads of government of India, South Africa, Indonesia, Argentina and Senegal. President Zelensky was also present as a virtual guest. Their aim was to constructively address the major challenges facing the world today, not least the war in Ukraine.

Andreas Freytag, Professor and Chair of Economic Policy, Friedrich Schiller University, Jena and Visiting Professor with IIT

Peter Draper, Executive Director of the Institute for International Trade and Deputy Dean (International), Faculty of Arts, Business, Law, and Economics, University of Adelaide

NEWS AND EVENTS 

The EU is in the final stages of bedding down its Carbon Border Adjustment Mechanism legislation. With funding from our Jean Monnet Centre of Excellence IIT recently released a major report exploring the issues around CBAM design in relation to inevitable global discussions on this topic, prompted by the EU’s first-mover template. Author Professor Mike Young sets out ten key principles that should govern the design of any border adjustment mechanism, whether restricted to carbon or more broadly framed. He and I took these ideas to key European capitals, engaging a range of key institutions and players from the EU’s Directorate Generals for Trade and Tax, respectively, to the OECD. The picture shows us as well as former senior OECD officials Ken Ash and Anthony Cox, with HE Brendan Pearson, Australia’s Ambassador to the OECD.

Click the link below to read Prof Mike Young's report. 

For more on work conducted through our Jean Monnet Centre of Excellence CLICK HERE

PUBLICATIONS - IIT ACADEMICS

McDonagh, N., (2022) ‘China’s socialist market economy and systemic rivalry in the multilateral trade order’, Australian Journal of International Affairs, 02 Aug.

Thangavelu, S.M., D. Narjoko and Shujiro Urata, 2021. 'Impact of FTA on Trade in ASEAN and Australia using Custom Level Data' Journal of Economic Integration, Sept, 36(3), 437-461

Wang, Wenxiao, Shandre M. Thangavelu, Lin F., 2021. 'Global Value Chains, Firms, Wage Inequality: Evidence from China', China Economic Review, vol (66), 2021.

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