Trade
Indonesian investment in northern Australian agriculture
Author: Ashley Vines, University of Melbourne
Indonesia is Australia’s oldest trading partner, with Aboriginal people from northern Australia having traded goods and produce with Makassan people long before European settlement. But this long-standing trade connection remains underdeveloped given the size, complimentary economies and proximity of the two countries. This is particularly the case in the agricultural sector.
While Australia is currently the leading market provider of wheat and live animal exports to Indonesia, exporters are yet to fully capture Indonesia’s growing middle-class market that is now consuming higher levels of quality protein and fresh produce. Navigating trade barriers, primarily in the form of non-tariff measures — such as import restrictions, licensing and quotas — is a key reason why exporting agricultural products to Indonesia is often framed as ‘too hard’ by Australian exporters.
The Indonesia–Australia Comprehensive Economic Partnership Agreement (IA-CEPA), which came into force on 5 July 2020, represents a shift in these trade relations. The agreement reduces trade and investment barriers and is the first Australian free trade agreement to have an entire chapter on non-tariff measures. Much of the discussion in the lead-up to this agreement was focussed on these export opportunities for Australian agribusiness.
But there has been minimal discussion regarding the possibility for Indonesian investment into Australian agriculture. Chapter 14 of IA-CEPA outlines an Investor–State Dispute Settlement mechanism that will give investors access to an independent arbitral tribunal to resolve investment disputes. If Indonesians invest in Australian agriculture and export produce back to Indonesia, they would also be subject to the same tariff and non-tariff measures in place for Australian exporters. The removal of some of these trade barriers increases certainty for potential Indonesian investors.
With a population of 267 million, Indonesia is currently the world’s fourth most populated country. It is also the world’s ninth-largest economy, with some economic forecasts suggesting it will become the fourth-largest by 2050. Indonesia faces challenges in meeting the consumption needs of its growing population, currently importing a large portion of its staple commodities — primarily wheat, soybeans, meat proteins, fresh fruit and dairy products. Like other food importing countries, such as China, Vietnam and Qatar, Indonesia may look to diversify its agricultural production base and reduce its reliance on buying agricultural commodities from international markets.
Northern Australia is a region in close proximity to Indonesia, and in need of greater levels of investment in primary production and supply chains. Northern Australia has consistently been framed by successive Australian federal governments as a rare investment opportunity, with enormous agricultural ‘potential’, close to Asian markets. Live cattle is the largest agricultural industry in northern Australia and represents the strongest trade connection between the region and Indonesia.
Still, the region’s agricultural ‘potential’ in other industries has not yet been realised. Some reasons for this include the harsh climate, soil suitability, transport costs and logistics (particularly given its remoteness), the challenge of developing land under governance and land tenure arrangements, the profitability of growing particular crops, and a lack of infrastructure to access water resources. There is no doubt that investing in northern Australia’s emerging agricultural industries is high-risk.
Despite these risks, food importing countries are starting to invest in northern Australia. Chinese investment is particularly prominent, contributing to the growth of emerging agricultural industries in the region. For example, Kimberley Agricultural Investment (KAI) is a subsidiary of the Chinese company Shanghai Zhongfu Group. In 2012, KAI was chosen to be the developer for the Ord Irrigation District Stage 2, under the Ord-East Expansion Project. It is drawing upon Australian research and development to become a key player in the growth and development of the region’s emerging broadacre cotton and corn industry.
A Vietnamese company also recently bought three large cattle stations and signalled its desire to invest in broadacre cropping. These countries see the region as a long-term opportunity for agricultural expansion and diversification, despite the development challenges.
The question is, could…
Trade
Self-Reliance and Openness: Core Principles of China’s Third Plenary Session
The Third Plenum communique from the CCP indicates a prioritization of stability and compromise in response to China’s economic challenges. It highlights the concept of Chinese-style modernization and establishes political guidelines for balancing regulation and market forces.
The CCP’s Third Plenum communique signals a focus on stability and compromise in the face of China’s economic challenges. It emphasises Chinese-style modernisation and sets political directions for balancing regulation and market forces. While not as groundbreaking as previous plenums, it acknowledges the importance of market mechanisms and technological self-reliance, aiming to address issues like high youth unemployment and private sector uncertainty. The communique seeks to navigate the complexities of global competition and domestic innovation, potentially reshaping global supply chains and trade dynamics. Overall, it presents a pragmatic blueprint for China’s economic future.
Source : Self-reliance and openness central pillars of China’s Third Plenum | East Asia Forum
Trade
Trade Prevails Over Political Persuasions in China-Germany Relations
China and Germany maintain a strong bilateral relationship, rooted in economic cooperation despite ideological differences. Recent visits and agreements focus on expanding trade and addressing mutual concerns, navigating challenges while nurturing ties.
Evolving Bilateral Ties
China and Germany share a strong bilateral relationship, rooted in history since 1972. This connection has seen moments of cooperation intertwined with periods of tension. German Chancellor Olaf Scholz’s April 2024 visit underscores Germany’s commitment to fostering this partnership, reflecting a mutual interest in maintaining economic ties despite ideological differences.
Economic Pragmatism
As the second and third largest global economies, China and Germany’s economic interdependence is crucial. Germany emerged as China’s primary trading partner in 2023, with trade values reaching €254.4 billion (US$280 billion). In response to global scrutiny, Germany has taken a balanced approach, emphasizing economic stability over political discord. This was evident during Scholz’s prior visit in November 2022, where his diplomatic tone contrasted with broader EU sentiments.
Facing Challenges Together
Despite increasing public skepticism in Germany regarding China’s global influence and human rights issues, both nations continue to seek common ground. Their October 2023 Joint Statement highlights intentions to pursue cooperation in areas like carbon neutrality and open markets. To navigate these complex terrains, Germany can utilize its institutional frameworks to enhance dialogue, while also considering supply chain diversification to reduce dependency on China. The intertwining nature of their economies suggests that, despite challenges, both countries will continue to prioritize their substantial trade relations.
Source : Trade trumps political persuasions in China–Germany relations
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
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