Institute for International Trade

A message from the Director

In our final newsletter this year we feature two big topics on the international trade agenda: diversification, and sustainability.

In an absorbing dive into historical data as captured in their Working Paper, and employing international economics’ methodologies, Wickes, Adams, and Brown detail familiar dilemmas concerning the challenge of diversifying Australia’s export basket and destinations. In their Policy Brief they remind us that there is no substitute for doubling down on unilateral, productivity-enhancing economic reforms and maintaining high levels of cooperation with regional partners. Then Richard Pomfret reminds us that China, too, has options – in this case in Central Asia. His reflections on the Shanghai Cooperation Organization meetings recall President Xi Xinping’ s recent visit to Saudi Arabia, in what has been his busiest year on the international stage since the pandemic broke out. Finally, former colleague Naoise McDonagh reflects on the reasons why China’s economic coercion campaign against Australia failed, and what this interesting case study might suggest for others pondering how best to relate to China.

The second grouping goes to the twin themes of environmental sustainability and subsidies. Unlike the electric vehicle subsidies to be doled out under the US’s Inflation Reduction Act – a subject of much concern for US allies owing to the Buy (North) America conditions attached to them – our concern is with that old chestnut: agricultural subsidies. Payment of these subsidies is highly concentrated in ten countries and five commodities, and they have a variety of trade-distorting effects as is well known. Less well-known is their potential harmful environmental impacts, the focus of our recently released Working Paper written by Ken Ash and Anthony Cox. The paper has been presented in a variety of forums, in-person and online, and for those seeking subsidies reform it is must-read. The fact that agriculture subsidies reform did not make it into the hard-won package of understandings and agreements reached at the June Twelfth Ministerial WTO conference speaks volumes.

We’ll be back in the New Year with more analysis. I wish you all the best for the Festive Season.

Best regards

Professor Peter Draper

POLICY & ENGAGEMENT 

Measuring diversification in Australian Goods Exports

China’s blocking of sales of Australian commodities has led to increased interest in diversification of Australia’s exports, to lessen dependence on the Chinese market. Australia’s export market diversification increased in the second half of the 21st century, with the Australian government forging trade agreements with emerging Asian economies. However, export concentration, both geographically and in products and commodities, has increased since the start of this century. This paper measures the geographical export concentration and product concentration of Australian exports to China and the World over the previous 20 years, and sets out the policy implications. 

Ron Wickes, former Director of the Trade Analysis Section of the Department of Foreign Affairs and Trade (DFAT)
Mike Adams, former DFAT economist with extensive international trade experience.
Nicolas Brown, former head DFAT’s branch responsible for analysis and strategic advice about trade and economic issues, 2003-2008

Agriculture Subsidies and Harmful Environmental Impacts

There is broad agreement that much of the government support provided to agriculture today is environmentally harmful. This report explores the impacts of production and trade-distorting domestic support in agriculture on climate (i.e., greenhouse gas emissions) and the environment (i.e., water, biodiversity, and land degradation). Global reform is needed, however agriculture is a highly sensitive sector, one that is crucial for national food security. Gaining momentum for policy change can be difficult. Successful policy reform requires coalition building. A sustained evidence-based networking initiative that incorporates active public engagement and global coalition building should be developed on a priority basis.

Ken Ash is a Visiting Fellow at the Institute for International Trade, University of Adelaide, the Director of Ash Global Insights, and the former Director of Trade and Agriculture at the OECD.

Anthony Cox is a Senior Policy Advisor at  Ecologic Institute, Berlin, and the former Deputy Environment Director at the OECD.

EVENTS

Agriculture Subsidies and Harmful Environmental Impacts Webinar

IIT recently collaborated with the Hinrich Foundation to deliver this important webinar on a timely, and too-often ignored topic: the environmental impacts of agriculture subsidies.

The bulk of government support for the farming industry comes in the form of trade subsidies. But quite often, such support leads to unintended consequences for global trade and the environment. 

Conference on International Economic Cooperation and Integration 2022 

IIT Executive Director Professor Peter Draper presented at the Conference on International Economic Cooperation and Integration 2022 (CIECI 2022) last month in Hanoi, Vietnam. The conference theme was International Economic Integration: Journey to new-generation FTAs. Associate Professor Shandre Thangavelu also attended.

Peter spoke to the drivers of change in the global economic system and the implications for future (new generation) FTAs. In speaking to the media following, Peter discussed how free trade agreements can increase market access for both exports and imports, with benefits for producers and consumers alike through increased profits and cost reductions.

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