Senator EGGLESTON (6:22 PM) —I rise to speak on the Appropriation (Parliamentary Departments) Bill (No. 2) 2003-2004, Appropriation Bill (No. 3) 2003-2004 and Appropriation Bill (No. 4) 2003-2004. One thing I am sure will certainly benefit the Australian economy in a major way across the board is the Australia-United States free trade agreement, which will offer wide benefits to this country in many ways.

Senator Carr —You will need a lot of time to prove that proposition.

Senator EGGLESTON —We probably do need time, but I am sure time will show—with the increased access that Australian goods will have to the United States market in agriculture, access to the procurement programs of the American government and access of Australian goods in general to the United States market, which is the biggest market in the world—a great boom in the Australian economy, riding on the back of the signing of the free trade agreement.

There is no doubt at all in my mind that the free trade agreement between Australia and the United States, which is the first time the United States has signed a free trade agreement with a major First World country, will set a standard that the rest of the world will follow. It offers the achievement of an objective that most of the countries in the Western world have been following in economic terms for many years—that is, the liberalisation of the international market. The liberalisation of the international market will mean that countries around the world will benefit from freer trade and access to markets that otherwise they might have been unable to get into.

One of the most protected markets is that of the European Union. After its formation it built a tariff wall around itself, and countries like Australia, which under the old system of the British Empire preferences had access to the British market, found they no longer had the same kind of access to the UK once the UK had joined the then Common Market. It is said that the Europeans heavily subsidised their agricultural produce because they have had the experience of going through two world wars in the last century and they needed to ensure that Europe was able to feed itself and did not have to depend upon the arrival of food from overseas countries to feed the European population. For that reason, the Europeans developed a protectionist barrier and very heavily subsidised their own farmers. So farmers, especially in countries like Germany and France, found that their properties became very valuable because they were paid so much for their produce—in some cases they were paid exorbitant amounts, which really distorted patterns of world trade.

Unfortunately, the Europeans in developing their agricultural sector found that the subsidies produced such an abundance of produce that they had a problem: the `mountain of butter' as it was called. The Europeans rather irresponsibly began dumping their excess produce in other countries around the world and they cut out the markets of many smaller developing countries, so that the economies of these smaller developing countries were disadvantaged because the Europeans undercut them at every opportunity. That caused great economic hardship and the loss of agricultural sectors in many Third World countries.

One of the objects of Australian policy in agriculture for a very long time has been to get better access to the European Union and to generally support the idea of freer international trade. To that end, the Australian government called a conference in Cairns of largely agriculture producing countries. That group formed a lobby group that became known as the Cairns Group, and it sought to achieve a lowering of European tariffs in particular and to gain better access for produce from countries like Australia and some of the South American countries to the European Union, or the Common Market as it was at that stage.

There is a natural synergy, no doubt, between the highly developed and sophisticated Continent of Europe and its market and the countries that are largely resource and agricultural producers. It makes more sense to have a balance between the countries in the world that produce manufacturing goods and the countries that produce commodity outputs and to have a freer level of trade between them. Australia in its relationships with China in recent years has developed that sort of balance, a synergistic relationship whereby we sell commodities into the Chinese market. We sell not only iron ore but also coal and, increasingly, large amounts of gas, which produce energy for the growing industrial base of the Chinese economy. Of course, we sell agricultural products as well. In return, the Chinese export manufactured goods to us. They are successful in doing this because labour costs in China tend to be lower than in Australia and because a lot of the manufacturing plants being developed in China have modern technology, which means computerisation, and their production costs overall are quite low.

The idea of locating production and manufacturing facilities for industrial products in Third World countries, where labour costs are low, has been around for some time and is described as the new international division of labour. It suits some of the great multinational companies to manufacture their goods and components and have those components assembled in countries like Indonesia and Malaysia, where labour costs are lower. Malaysia is an interesting example because, as the Malaysian economy has developed, wages have gone up and there has been less component production there than there was in the past. It is now done more in countries like Indonesia and Vietnam, where costs continue to be low. Manufactured goods are exported from these Third World countries to developed countries such as Australia, Canada and the United States, and the European countries, where they sell well. The total cost of production—even including the cost of transporting what are often whitegoods, radios and other electronic goods—ends up being lower than it would have been if the products had been manufactured in those highly industrialised countries. Australia has pursued its role as a commodity producer really since first settlement, but it has sought in more recent years to shift away from exporting minerals and agricultural products to being a clever economy and developing and exporting financial services, information technology services, management services and governance services.

About this time last year I went to eastern Europe with the trade subcommittee of the Joint Standing Committee on Foreign Affairs, Defence and Trade. It was very interesting to find that the banking system in countries like Poland and Czechoslovakia used software and computer programs produced by Australian industry. While under communist regimes these countries effectively stood still from the late 1940s. Their banking services, for example, were very far behind those in the West, and they did not have sophisticated services such as ATMs, which we have now become very accustomed to. Since then Australian technology has enabled services like ATMs and has facilitated the availability of computerised records at any branch at any bank. Going to the bank five or 10 years ago in Poland was like what it must have been like in Australia in the 1940s or 1950s. Accounts were only kept on paper, there was no means of accessing records from other branches or from distant places other than post, which took a long time, cheques were cleared by post and so on. Australian computer software and technology has established in eastern Europe the kinds of banking facilities we in Australia have long taken for granted. You can look up your account balance and exchange money electronically by pressing a few computer keys.

The Australian economy is evolving away from being commodity based to being a clever economy and providing services. I was in Vietnam 18 or so months ago, and one of the most interesting examples of Australian aid I saw was the provision of governance services to Vietnamese governments from the top level down to local government level. AusAID provided schools for local officials involved in the provision and delivery of local government services to teach the Vietnamese people the principles of good governance. That is another example of Australia becoming a more clever economy. We are exporting aid and services other than commodities.

The Cairns Group, which I was talking about some minutes ago, has over its history been very effective at ensuring that the Europeans were aware of the case being put by the South American countries and Australia of the need for a more liberalised trade environment, especially for agricultural produce. That is a very important thing to have achieved, because the Europeans tend to be somewhat isolationist. Diplomats from Australia and other countries like Brazil have presented arguments for freer trade in the interests of the world and the global economy, sending a very useful message to Brussels. Progress has been very slow. The Europeans, no doubt because of their history—because of the devastating impact of the wars of the last century—have been very slow to bring down their tariff barriers and to allow increased access to their market. The European Union will be one of the biggest markets in the world after the addition of 10 countries, due to occur in May. The European Union will expand from 15 to 25 nations and will have a market approaching 400 million people, which will offer enormous opportunities for countries like Australia to service in a wide variety of ways.

Unfortunately, one of the features of recent international trade meetings and negotiations—the World Trade Organisation meeting at Cancun was an example—is that they are not progressing as well as was hoped in terms of achieving their objective of reducing tariffs and liberalising world trade. There have been a lot of opinions put forward about the reasons for this. One of the views is that organisations like the World Trade Organisation are now so big that there are just too many interests to serve and that many of the African countries in particular who have now joined the World Trade Organisation are not necessarily interested in trade liberalisation in a general sense because they have preferential trade arrangements with many of their previous colonial owner countries. Rather than see those preferential access agreements compromised by allowing a broad liberalisation of trade, there is a view that the African countries in particular are not interested in a multilateral approach to the liberalisation of world trade. That has led Australia to give some consideration to its approach to multilateral agreements.

Australia has begun to develop bilateral free trade agreements. The United States free trade agreement—which has recently had its negotiations concluded, but the details of which still need to be endorsed by both the United States Congress and the Australian federal parliament—is but the latest of these bilateral agreements which Australia has entered into. In the last 18 months or so Australia has entered into a free trade agreement with Singapore, which is, of course, one of our closest neighbours and a very dynamic economy. In many ways the Singaporean systems of government, the systems in their professions and their general legal approach are very similar to ours because Singapore was a British possession and so its systems are British. That is one of the great legacies that the British have left to the world: long after their colonial empire has gone and the Commonwealth has been established, consisting of independent countries, one finds that the systems in these countries—from the Caribbean through the South Pacific, Australia, New Zealand to the African countries—is much the same. They have the same legal system, the same professional system, the same university and educational system, and very similar systems of government with bicameral parliaments. For example, Nigeria has a House of Representatives and a Senate. In that country there are state governments. Nigeria has many states and a very big population, but fundamentally its system is similar to that in Australia.

We have a situation, as I said, in the World Trade Organisation where it may be that that multilateral approach is not going to produce the results that were hoped for. So Australia is turning to bilateralism. The Singapore free trade agreement was a landmark agreement because it gave access to Singapore for Australian services, such as finance. It meant that Australian lawyers from some of the law schools in Australia—not all of them, but most of the well-established ones—were able to be admitted to the bar in Singapore. Also, it allowed Australian doctors to practice there. The Australian government has also sought to establish a free trade agreement with Thailand. Thailand is a country which does have very high tariff barriers. While we have a free trade agreement in the making there, the timelines are very long so it will be a long time before there is free and open trade between our two countries. Free trade agreements are all part of the economic mix in Australia. Australia has proceeded a long way down the road of trade liberalisation.