Australian Embassy
Thailand

Speech_TAFTA 2015

The Australia – Thailand Business Forum:
Perspectives on Investment and Trade

Thursday 25 June, 2015
Shangri La Hotel, Bangkok
OPENING REMARKS
His Excellency Mr Paul Robilliard
The Australian Ambassador to the Kingdom of Thailand

 

Good morning to you all. It’s a great pleasure for me to be here as part of the opening of this occasion.

I have to apologise in advance as I have to leave to attend the opening of a new Australian enterprise here in Bangkok, Pie Face, which is opening a franchise today.

I am very grateful that His Excellency Mr Sommai Phasee, Minister of Finance, Kingdom of Thailand, found the time to be here. I should like to recall our congratulations to him for his son’s outstanding performance at the recent South East Asian Games.

And on a personal note, it’s a great pleasure for me to see a great friend, Innes Willox, CEO of the Australian Industry Group, here today.

It’s really great he has been able to come here and join other distinguished guest speakers.

As you know we are here to commemorate and celebrate the tenth anniversary of the entry into force of the Thailand Australia Free Trade Agreement (TAFTA).

We will mark it in a number of ways during this year. This is one particular occasion that we have that opportunity.

Australia’s Foreign Minister Ms Julie Bishop visited Thailand in May. She made a particular point of talking with Ministers here about how well-served our two nations have been by TAFTA over the past decade.

But she also made the point at the breakfast of business leaders that she addressed that TAFTA should be updated. It needs to be updated to better reflect our contemporary trade and investment relationship.

When Ms Bishop met with Prime Minister Prayut, he also emphasised the importance of improving trade and economic relations. He said he wanted to see trade increase by 20 per cent by 2017. That’s an ambitious target. So it’s our job to see what we can do to meet that level of ambition.

Discussion by officials to address trade and investment matters and facilitate resolution of trade impediments is underway.

Governments have an important role in promoting trade and investment. Ultimately of course it’s for business to make commercial decisions. But the role of government is to ensure that business has the opportunity to trade and invest in the freest way possible. Governments can do a lot to make things difficult for business. The role of governments is to make things as easy and straightforward for business as possible.

So twice this year, we’ve already had meetings of TAFTA’s Market Access Implementing Committee to address how TAFTA could and should be updated to provide better access to the markets of both countries, across a whole range of sectors, but with a particular focus on services and our agricultural sectors. And that’s in response to industry’s concerns and interests. That’s how we should do this. It should be an agenda that is set by industry which the government seeks to implement.

A lot of work remains. And that is why today is an important gathering and it will play an important part in how we approach TAFTA. It will give us, government officials a better sense of business perspectives on our trade and investment relationship.

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Trade and investment is an integral component of our bilateral relationship. Thailand is now Australia’s ninth largest trading partner.

TAFTA was a land mark agreement – it was Thailand's first bilateral free trade agreement and Australia's second in South East Asia.

Its tenth anniversary marks an opportunity for us to take stock of what we have achieved and also identify what we need to improve.

Doubling of trade between Thailand and Australia over the last 10 years is in no small part due to TAFTA.

We cannot say with certainty what trade would have been without TAFTA. But I think it’s reasonable to assume that TAFTA has made a significant contribution to the increase in trade.

Thailand has been a particular beneficiary of TAFTA. While supermarkets in Thailand now stock more Australian beef and lamb, fruits, vegetables, cheeses and a lot of dairy products, it is Australia’s imports of goods and services from Thailand that has accounted for over 75 per cent of this trade growth.

That is a source of grumbling by some Australian business people. And we recognise that and we need to address how we can ensure the future is beneficial for both sides. But both sides have mutually benefited but Thailand has certainly done very well in terms of TAFTA.

Thai merchandise exports to Australia dominate the bilateral trade profile - particularly Thai exports of automobiles and auto parts.

And TAFTA has helped Australian and Thai investors make a welcome contribution to investment.

The growth in the stock of Thai investment in Australia since TAFTA entered into force has been impressive. Thai investment in Australia stood at less than A$1 billion in 2004. It has now increased to over A$6.5 billion in 2014. Thai investment in Australia is focused on agri-business, renewable energy, mining, oil and gas, tourism infrastructure and pharmaceuticals. It’s productive investment, delivering jobs and contributing to growth.

The stock of Australian total investment in Thailand has increased almost five-fold over ten years, from around A$600 million in 2004 to about A$3 billion in 2014. Australian investment in Thailand is focused on mining, logistics, manufacturing and professional services.

So it’s a good news story over the last decade. But is obvious scope to deepen the bilateral trade and investment relationship further, including through an expansion of Australian exports to Thailand, and an expansion of Australian investment in Thailand.

As I said, ultimately that will be determined by commercial decisions but our job, the job of government is to encourage those commercial decisions in a positive fashion.

As Foreign Minister Bishop said during her visit to Bangkok last May, we can’t be complacent; we need to be alert to opportunities, and to review and enhance the agreement.

We will hear later this afternoon a number of views from business on what’s next for firms in Thailand and Australia. The Finance Minister has given us a good insight into what some of those opportunities will be.

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It’s important to remember that TAFTA was never intended to be a static agreement. Australia is strongly committed to improving it.

At the same time, we need to recognise that it is not the only vehicle for trade and investment liberalisation. The regional free trade agenda was almost non-existent at the time TAFTA was negotiated. But it has taken off since then.

We have the ASEAN-Australia-New Zealand FTA, or AANZFTA, provides an important framework for regional trade liberalisation. It entered into force between Thailand and Australia in March 2010.

And we are looking to negotiations in the Regional Comprehensive Economic Partnership, or RCEP, to build further on AANZFTA.

RCEP and the proposed ASEAN Economic Community, or AEC, are both intended to come to fruition later 2015/2016. Given Thailand’s central location within ASEAN, the Thai Board of Investment puts forward a good case for Thailand as a regional hub to access the proposed single market of over 600 million consumers.

The challenge before our two governments is how to take advantage of the cumulative opportunities presented by these processes – TAFTA, AANZFTA, RCEP, the AEC, and the Trans Pacific Partnership – to create the best conditions for Thai and Australian firms to expand the total trade and investment relationship.

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Parallel to trade policy settings, the strength of our respective economies will be critical to generate demand. Its going to always be an important underlying factor in firms’ decisions.

Again, in her address to business leaders in Bangkok in May, Ms Bishop said that as Thailand works on resolving its political challenges, one thing was clear: a strong, robust economy and a vibrant private sector would be fundamental to recovery and growth.

This time last year the Embassy supported AustCham’s business conference on “Enabling prosperity: Moving Thailand beyond the Middle Income Trap”.

That conference considered opportunities for the Thai and Australian private sectors to assist Thailand's economy to develop sufficiently to obtain high-income status according to World Bank measures.

There was no lack of solutions or recommendations but one major recommendation was that Thailand could boost its productivity by opening its services sector to greater foreign investment.

And this is where the focus of this year’s forum is particularly important and relevant. The topics in each of the sessions today invite us, on the occasion of TAFTA’s tenth anniversary, we can further improve our relationship.

I think it would be very useful for you to consider in general terms how trade policy agreements can be an enabler for positive economic reform. By driving new policy settings, FTAs have the potential to create a freer, more competitive and transparent environment. They can encourage innovation, build new skills sets and new employment opportunities. All of that is a hallmark of resilient economies.

Secondly, given the comprehensive program of engagement between Australia and Thailand this year on trade matters, we have a real opportunity to advocate for changes to maintain TAFTA’s benefits over coming decades.

Particularly, TAFTA’s coverage of services and investment is limited, reflecting the situation when the Agreement was signed. Now there is a real need to start work on TAFTA’s inbuilt agenda on services.

And frankly, we need to address the trade-restrictive effects of Thailand’s application of special agricultural safeguards which limit the amount of Australian produce that is supplied to Thai consumers at the TAFTA tariff rates, to unlock growth and productivity gains.

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So this year we’ll see an opportunity for Australia and Thailand to charter a new strategic direction and inject higher ambition to our bilateral free trade agreement.

We want to work together to develop policy settings to foster real commercial opportunities for firms, not just in TAFTA, but through regional economic integration.

Our trade and investment relationship has the potential to complement Thailand’s efforts to drive its economy further.

So I thank you very much to AustCham for its continuing commitment to developing a space to strengthen business links between Australia and Thailand.

I understand today’s discussions will shape the final version of an AsiaLink Starter Pack on doing business with Thailand which will be a valuable and long-lasting resource to promote greater bilateral trade and investment.

So on this occasion we have the real opportunity to reflect and discuss what has been achieved so far and how we can take that forward through a strong partnership to benefit both countries’ economies, to the benefit of business and consumers in both countries.

Thank you very much for the opportunity to speak to you today.