Diplomacy weighs on Tony Abbott’s Asia trade mission

It was either an ambitious statement of intent or a blunder that will make Tony Abbott, Australia’s prime minister, a hostage to the vagaries of Asian politics.

His post-election pledge last September to sign free trade deals with Japan, South Korea and China in 2014 will be tested this week as he leads Australia’s largest-ever trade mission to a region beset with historical rivalries.

Mr Abbott will also seek to reboot Canberra’s diplomatic relationship with China, which has been on ice since Beijing last year declared an air defence zone in the East China Sea, an area that included disputed islands also claimed by Japan.

Mark Beeson, professor of international politics at Murdoch University in Perth, said: “Mr Abbott has set a very high benchmark by seeking to close all three free trade deals in a year.”

Mr Abbott will aim to finalise the first of these – an economic partnership with Japan – when he meets Prime Minister Shinzo Abe on Monday. He then flies to South Korea to sign a trade agreement with Seoul, before laying the groundwork for a deal with China when he meets President Xi Jinping on Friday.

Canberra is prioritising these three bilateral trade deals ahead of a wider Trans Pacific Partnership trade deal, which is currently being negotiated between the US, Japan, Australia and nine other Pacific Rim countries. Mr Abbott is taking a pragmatic approach to Australia’s trade policy given the multilateral TPP talks are currently stalled.

The US has recently accused Japan of blocking progress on the 12-country TPP trade deal by not allowing open access to its markets for agricultural products and motor vehicles.

Andrew Robb, Australia’s trade minister, told the Financial Times he felt a TPP deal could be possible within 12 months if Japan and the US could keep in mind the enormous benefits that would flow to their economies and sell it to the public.

“They are both tough negotiators but I think they are making progress,” said Mr Robb.

On the eve of his arrival in Tokyo on Saturday for the week-long mission, Mr Abbott said: “As global strategic and economic weight shifts towards Asia, our longstanding relationships with key partners in our region will continue to grow.

“The prosperity of our country, and other countries in our region, depends on increased trade and investment.”

A former Rhodes scholar at Oxford university, Mr Abbott is a renowned Anglophile who favours bolstering Australia’s military ties with the US and recently re-established the regal honours of knights and dames.

But since becoming prime minister in September he has promised to put Asia at the centre of his administration, declaring “the Asian century will be Australia’s moment too”.

The scale of the Australian trade mission, which includes 600 business representatives, politicians and officials, is testament to the importance Canberra has attached to Asia. A recent British mission to China had 100 representatives.

Mr Abbott’s emphasis on ties with Beijing is driven by economics. China overtook Japan as Australia’s largest trade partner in 2007. Last year two way trade between the countries was worth A$129.5bn (US$120.2bn).

Billions of dollars worth of exports of natural resources such as iron ore and coal to China has helped fuel an economic boom in Australia over the past decade. But a slowdown in a mining investment boom is prompting Australian policy makers to target exports of agricultural products and services as a way to diversify the economy and stave off what would be the first recession in 22 years.

But balancing his pro-western foreign and security policies with his economic ambition to boost economic ties with China will see Mr Abbott walking a diplomatic tightrope in a region riven with territorial and historical disputes.

Mr Beeson said: “There is potential for difficulty that could expose tensions in Australia’s growing reliance on its trading relationship with China and its existing strategic alliance with the US.”

Relations between Beijing and Canberra suffered a setback when, a month into his job, Mr Abbott labelled Japan as Australia’s “best friend” in Asia, alienating both South Korea and China.

Mr Abbott has set a very high benchmark by seeking to close all three free trade deals in a year . . . There is potential for difficulty

The prime minister also refused to lift a ban on allowing Huawei, the Chinese telecoms company, to participate in building Australia’s national broadband network, which involves tens of billions of dollars of investment, on national security grounds.

In November, Wang Yi, China’s foreign minister, rebuked Julie Bishop, his Australian counterpart, after she criticised Beijing’s declaration of an air defence zone. Mr Wang told the media at a joint meeting with Ms Bishop, on her first trip to Beijing, that Australia’s actions “jeopardised mutual trust and the sound growth of bilateral relations”.

Some viewed the episode as an avoidable diplomatic blunder, citing Mr Abbott’s lack of diplomatic expertise and his pro-US philosophy.

“[Australia’s] handling of the issues with China over the past few months has been more of a neoconservative, confrontationist US view of China than an Australian view of Australian interests,” said Stephen FitzGerald, a former Australian ambassador to China.

Mr Abbott will attempt to avoid diplomatic controversy on the mission and follow a pragmatic policy of separating Australia’s economic relationship with China from military and strategic issues.

Mr Robb added: “Our relationship has reached a point of maturity where we can have differences and continue to move forward in a constructive way.”

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Trade deals: Australia’s three-way ambitions for 2014

China Negotiations on a trade deal with China began in 2005 but are extremely complex on both a technical and political level. About 11,000 tariff lines need to be agreed upon, with Australia pushing for cuts in tariffs on agricultural products, services and manufactured goods and China seeking a relaxation of rules on investment and labour mobility. Mr Abbott has targeted a deal by the end of 2014, but whether he achieves this depends on a number of factors, notably whether he can develop good personal relationships with China’s leadership, as well as how wider diplomatic and strategic issues play out over the year. Yet the prize could be huge. Australia has looked on enviously at New Zealand since it clinching a trade deal with China in 2008. New Zealand last year exported NZ$10bn goods to China, a rise of 45 per cent on 2012.

Japan Australia and Tokyo are negotiating a free trade deal that would cut tariffs on goods and break down barriers to exporting services and inward investment. A deal will depend on whether Shinzo Abe, Japan’s prime minister, can face down the country’s powerful agricultural lobby, which is worried about cuts to agricultural tariffs, particularly in the beef and dairy sectors. Australia, in turn, is sensitive to any cuts in tariffs on Japanese car imports. Tokyo could seek to delay the signing of a bilateral deal with Australia until it has evaluated a wider trade deal currently being negotiated between the US, Japan and 11 other Asian countries. However, Canberra is hopeful a deal can be signed in July.

South Korea Canberra has already agreed a bilateral deal with South Korea, which Mr Abbott will sign formally in Seoul on Tuesday. Canberra estimates the agreement will increase trade between the two nations by 73 per cent over the next 15 years. It has also forecast the deal will boost the Australian economy by A$650m every year up to 2030 by eliminating tariffs on 99.8 per cent of exports. Tariffs remain on exports of rice to South Korea.