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Tuesday, 15 October 2002
Page: 5197

Senator COOK (7:37 PM) —I want to speak tonight about two major events which will have a dramatic impact on the Australian economy in the future. I only hope that the Minister for Trade, Mark Vaile, and this government are up to taking advantage of them. The first event occurred on 22 September, when voters in Germany went to the polls. It now appears, given the talks this week between the Social Democrats and the Greens, that Gerhard Schroeder, the previous chancellor of Germany, will form a government and be returned again as chancellor. The only issue that remains is the sorting out of portfolios within the new coalition.

This is a notable election result for several reasons. Schroeder came from behind. He was buoyed by an exhibition of competent management on his part in dealing with the European flood crisis and he ran hard on an anti-war platform. For European Social Democrats there have been tough times over the past several years. Social democracy in Europe has lost in Italy, to the right, and in Spain, France, Portugal and Holland. The defeat of each of those Social Democrat parties was orchestrated by a Tampa-like exploitation of xenophobia and a fear of foreigners and refugees in those countries. Germany was the first country to turn this around.

The conservatives in Germany certainly ran a xenophobic campaign against Schroeder. He ran a campaign on competence and against the war. And for the first time, in a clash between those two issues in the German election, the war trumped the anti-refugee sentiment. Schroeder ran, as well, on a job creation platform but his vote fell by 2.4 per cent to 38.5 per cent. The Greens vote rose by 1.9 per cent to 8.6 per cent. The conservative coalition of Mr Stroiber also registered 38.5 per cent of the primary vote but is unable to attract any partners. I believe the new Social Democrat-Green government will now take office in Germany. That is the first significant event and I will come back to that in a moment.

The second event is the historic announcement by the European Union, only three weeks after the election in Germany, of a big bang expansion of its membership, with 10 new members: Cypress, the Czech Republic, Estonia, Slovakia, Poland, Malta, Lithuania, Latvia, Hungary and Slovenia. This means that 75.7 million new citizens have joined the EU. The pact to usher them into full membership will be signed next April so that elections can take place in 2004 for the European Parliament. Bulgaria and Romania are set to join in 2007.

I believe that this has huge significance for Australia. The two events come together from an economic point of view in the following way. The bane of Australian trade and agriculture is, of course, the common agricultural policy in Europe. For example, a French cow earns $4 per day in European subsidies, which, according to the Catholic Social Justice Commission, is more than the daily income of half the world's population. A French cow could fly annually from France to Australia and it would not have to travel cattle class; it could get a business class ticket to do so! Such is the grotesque level of subsidies provided to agriculture in Europe.

The first of three salient issues that come from this is that the expansion of the EU means that Europe now has more than twice the number of farmers that it had before. There are more farmers in Poland than in the entire old EU, and the subsidies, while they will be phased in and juggled, potentially mean that the common agricultural policy's cost is set to double.

The second issue is that, in 2000 at Lisbon, European heads of government sat down and worked out an ambitious agenda to reduce unemployment in Europe. Their agenda was not one of empty rhetoric and vague goals. They actually named targets and set performance indicators and time scales within which they would achieve reductions in unemployment. That requires a considerable reinvestment from the budgets of most of the government's in Europe. And that is an important goal in Germany.

The third issue is that the German budget is now considerably stretched. It pays for most of the common agricultural policy subsidies. Most of those represent a transfer from the German exchequer to French farmers. Germany is also determined to meet the Lisbon targets that have been set down for 2005. In Germany, as well, there are big outlays in cleaning up the environment, particularly in the old East Germany, where environmental degradation has destroyed the quality of life for people in that part of the country.

As well, Germany is committed to phasing in an equalisation of pension entitlements for East German workers to match the pension levels of their West German counterparts. Under the old system in East Germany, of course, the state provided a pension, and under the new system, in a more private economy, there are no pensions to speak of, awaiting the population bulge coming through with the greying of the East German population. The united Germany has to foot a huge bill in pension payments for those workers. As well as that, the German budget will be facing an extra load in the subsidies that an expanded EU has to confront. They cannot bear that load.

As a consequence, I believe that there is an opportunity for Australia. Just recently Franz Fischler, the agriculture commissioner for the European Union, lost an argument in the EU over what was a modest plan to reform the common agricultural policy. A watered down package has been substituted for what was a fairly temperate and somewhat modest reduction in subsidies planned by Fischler.

I believe all of this adds up to the fact that Australia cannot neglect these circumstances and developments in the European Union. In recent debate we have focused our attention on concluding an Australian-US free trade agreement, in which agriculture is an important element. The prospects of getting that through look extremely difficult in the current political circumstances in the United States, not to mention the economic ones. The reason we cannot neglect Europe is that the subsidies that have sustained the common agricultural policy for so long look like they will not go into the future indefinitely.

It is too soon, and it would be too bold, to say that the CAP is over. That is certainly not true. But the CAP is looking a bit more sluggish and is beginning to fray around the edges. Recently I had the opportunity, along with the Speaker of the House of Representatives, to meet with members of the European Parliament in Brussels. For the first time in my experience of dealing with Europeans, I encountered a great deal of scepticism about the common agricultural policy. In all of my previous experience in Europe, there would have been nothing but stout defenders of this grotesque form of subsidy. However, just in the last few weeks there were a number of people prepared to come out and frankly criticise this misallocation of economic resources and the high levels of protection in Europe.

Australia has an opportunity to exploit some of these advantages. When Labor formed the Cairns Group of free-trading agricultural countries in 1983, we wanted to form a lobby group for Australian farmers to liberalise protection for agriculture in the world. The Doha Round of trade negotiations offers us an opportunity to push that opening further. An enlarged Europe and a fiscally focused Germany, brought together, mean the debate within Europe is now about how the economies will meet the other necessary targets that governments in Europe have to deliver to their voters. By doing so, I think it puts what could be terminally financial constraints on the continuance of the common agricultural policy. I hope the Australian government can provide a better, closer focus on lobbying in Europe, building bridges with European industry and working with those who were the victims of this misallocation of economic resources. (Time expired)