Tim Harcourt| The Airport Economist

In 1966, Geoffrey Blainey wrote his famous book “The Tyranny of Distance” on how Australia’s destiny had been shaped by its remoteness from the United Kingdom and Europe. Coincidentally, 1966 was the very same year that Japan overtook the UK as the number one naval destination for Australian shipping.

In the decades since then our integration with the Asia-Pacific region has increased exponentially. From exporting coal and iron ore – which we still do in huge quantities – Australian lawyers, architects and accounts have played a key role in the rapid development of India, western China and Indonesia.

Today, if Professor Blainey were to contemplate another book through the lens of the past four decades his title might be “The Power of Proximity” to describe Australia’s more recent good fortune in being part of the Asia-Pacific.

It is a momentum which has reached its most significant point with the announcement of the Trans-Pacific Partnership (TPP) comprising (so far) nine of the key economies of our region.

And with Greek debt and Roman ruins undermining the “old world” economy of Europe, the Asia-Pacific presents as the main hope for economic growth and Australia is indeed lucky to be an increasingly integrated part of the regional economy. But is luck we earned following the Hawke Government’s decision to open the Australian economy and the instincts of all sides of the Australian economic and political divide to continue to embrace the Asia Pacific region.

As the culmination of that momentum, the Trans-Pacific Partnership is probably the most significant economic announcement of the 21st century so far in terms of Australia’s future.

Joining with the US and Japan along with Singapore, New Zealand, Malaysia, Brunei, Vietnam, Chile, Peru and even perhaps Canada and Mexico in a meaningful trade bloc is a major opportunity to streamline supply chains, regulations and rules of origin across the region, as well as to facilitate trade of green and digital goods.

It could also lead the way to an even larger trade grouping encompassing all of the countries of the Asia-Pacific Economic Forum, perhaps including – after the requisite diplomatic manoeuvrings – China.

It is Australia’s great fortune that we reformed our economy in the 1980s and 1990s just as the whole Asian region started to grow. That growth has gone beyond the traditional resources and manufacturing sectors and exploded into professional services and “stateless” services such as cloud computing, environmental technologies and other areas where Australia has developed competitive advantage.

Our $1.3 trillion superannuation industry is the envy of the world and our finance professionals occupy leading roles in regional financial institutions. Integrating our financial sector, in particular our funds management industry, with the Asia-Pacific is another major opportunity which can only benefit from the TPP initiative.

A key theme of the next decades will be the low carbon economy, and the APEC meeting took the step of cutting tariffs on environmental goods to five percent.

This is excellent news for the many innovative Australian cleantech companies whose prospects have already been boosted by the passage of the Government’s carbon pricing legislation. Lower tariffs can only benefit the push for Australian manufactured environmental goods to penetrate Asian markets. It will really put the green back into the green and gold.

Trade initiatives are important for workers as well as business. Exporters, on average, pay 60 percent higher wages and provide more job security than non-exporters.

APEC is often seen as little more than an annual Colourful Shirt Convention where world leaders gather and wear the national costume of the host country, but the TPP initiative is proof that APEC does matter, and is starting to deliver.

While the Doha Round of world trade talks ground to a halt and with it the whole World Trade Organisation process, the TPP announcement – and Japan’s support – give us concrete reasons for regional optimism.

In 1957, Japan helped Australia get into Asia by forging a commercial partnership with Australia, just 12 years after World War 11. With the TPP, Japan has supported what could be the most significant partnership to date in the 21st century.

The exciting part is that it means so much more than commodities, agricultural products and old style manufactured goods. The TPP could give our transition to the low carbon, goods and services economy of the 21st century some major momentum.

With the TPP in place Australia will really see the Power of Proximity in action and the Tyranny of Distance no longer holding fears for trade and commerce beyond our shores.

Tim Harcourt is the first J.W. Nevile Fellow in economics at the Australian School of Business at the University of NSW and author of The Airport Economist www.theairporteconomist.com