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Tuesday, 23 November 1965


Mr McEWEN (Murray) (Minister for Trade and Industry) . - by leave - As honorable members are aware, I returned last week from an overseas visit to Britain, Europe, India and Japan. I thought it proper to inform the House of the nature of the discussions I have been engaged in whilst away. The principal specific purpose of my visit was to lead an Australian Delegation to the International Sugar Conference and I shall refer to the outcome of that Conference. I should first, however, like to comment on my visit to Japan.

I had talks with the Japanese Prime Minister, Mr. Sato, and other members of his Cabinet who had all taken office in Japan since my last visit some two years previously. Since my last visit to Japan, trade between our two countries has expanded considerably. In 1964-65, Australia's exports to Japan had a value of £221 million, and our imports from Japan amounted to £129 million. This great expansion of trade has made Japan the second largest market for Australia's exports and, except for Hong Kong, which is very largely a re-exporter, Australia has become Japan's second largest market after the United States of America. The growth of trade between Japan and Australia has been fostered by the Japanese Trade Agreement, and out of the closer trade ties has developed a whole atmosphere of respect and confidence between the Governments, the business communities and people of our two countries.

Much of my discussions with Japanese Ministers was concerned with the progress of negotiations in the Kennedy Round. Both countries have a vital interest in the objective of the Kennedy Round to negotiate conditions leading to an expansion of world trade. I made it clear to Japanese Ministers that Australia's main interest in the Kennedy Round was to negotiate arrangemens for agricultural products which would enable us to expand our markets for those products. In this we are looking to Japan as one of the world's great growth markets, to make such offers in the Kennedy Round as would enable agricultural exporters to obtain improved access and remunerative prices for their exports to Japan. Japanese Ministers on their part made it plain to me that they were greatly interested in expanding the export of Japanese industrial products to Australia. They see the Kennedy Round as providing the scope and the opportunity for Australia to make tariff concessions in return for successful arrangements for expanded trade in primary products. in the course of these discussions, I explained to Japanese Ministers the basis of the preferential arrangements between Britain and Australia and the basis of Australia's participation in the Kennedy Round. Britain, as I pointed out, gives Australia unrestricted duty-free access for our major bulk export commodities, while maintaining duties on the same products of many of our competitors. No other country gives us similar trade opportunity and this is the basis of the reciprocal tariff preferences which Australia affords imports from Britain. The previous British Government had stated its intention to participate fully in the Kennedy Round of tariff negotiations. Full participation would mean that Britain was prepared, with very few exceptions, to cut her tariffs on imports from non-preferential sources by 50 per cent. Since most of Australia's exports already enter Britain free of duty, a cut of 50 per cent, in the tariffs imposed on other suppliers would be equivalent to a 50 per cent, cut in the preferences hitherto accorded to Australia. If that should eventuate, Australia would be free to make reductions in the preferences enjoyed by Britain in the Australian market, and would thus be in a position to make a substantial Kennedy Round offer without reducing the protection given Australian industries.

Before I arrived in Japan I had previously had discussions with British Ministers. During those discussions I satisfied myself that the British attitude to participation in the Kennedy Round had not changed as a result of the change of Government in Britain. In other words, the new British Government is continuing the policy of full participation in the Kennedy Round negotiations, on the basis of a 50 per cent, cut in tariffs. Australia would therefore be in a position to make substantial offers in the Kennedy Round and would be prepared to do so in return for worthwhile arrangements in agricultural trade by industrial countries. The Japanese Government perceives the prospect that in the course of a Kennedy Round negotiation successfully taken to a conclusion, on both agricultural and industrial products, preferences in favour of Britain in the present Australian tariff could be reduced. I pointed out, however, that if in the final result the Kennedy Round failed to produce a solution in agriculture, even if it were successful on industrial products, Australia would have gained nothing and therefore would pay nothing in tariff concesions.

I am satisfied that, following these talks, Japanese Ministers appreciated the advantage there could be for their own country in making satisfactory arrangements in relation to Japan's imports of agricultural products. Arrangements, of course, will be different for the various commodities. At present Japan has a very small quota for beef imports and an even smaller quota on imports of butter. These are two of Australia's great export commodities on which we would be looking for more liberal arrangements to enable us to expand our shipments to the Japanese market. Japan at present imports substantial quantities of Australian sugar; she is, in fact, our largest market for sugar. However, Japan pays only world prices for this sugar and current world prices at less than £20 sterling per ton are ruinously low and far below the cost of even the most efficient producers. Japan is taking substantial quantities of wheat from Australia and as a major importer could make an important contribution to help to maintain world prices for wheat at remunerative levels.

These are the kind of issues which I discussed with Japanese Ministers. Since I had recently come from the unsuccessful International Sugar Conference, I placed great emphasis on the importance to Australia of obtaining remunerative prices for sugar. I told Japanese Ministers that it was my belief that Japan, as a major importer of sugar, could gain great credit by giving a lead in indicating a willingness to act to raise present depressed world prices for sugar. I am satisfied that Japanese Ministers fully understood the points that I was making.

On the domestic side, the Japanese Government is, of course, concerned to protect its own small farmers. In fact, some 27 per cent, of the Japanese work force is employed in rural industries as compared with some 10 per cent, in Australia. In discussions with Ministers I was able to make it clear that Australia was not seeking to negotiate arrangements that would damage Japanese farmers. Similarly, the Australian Government has its policy of protection for Australian industry and any Kennedy Round offer made by Australia would not be made at the expense of the development of its own industries. Whilst fully accepting the necessity for the Japanese Government to provide Japan's agricultural producers with stability, I am nevertheless convinced that Japan could adopt more liberal import policies for agricultural products without disturbing the protection given its own agricultural producers.

I mentioned earlier that the main specific purpose of my overseas visit was to lead the Australian delegation to the International Sugar Conference in Geneva. At the end of 1961, following the breach between the United States of America and Cuba, the then current International Sugar Agreement collapsed and export quotas were suspended. Since 1961 there has been a tremendous upheaval in world sugar markets with prices oscillating violently. At one time, in 1963, spot prices in London reached the highest point for over 40 years. At the present time the world price is the lowest for a quarter of a century.

It was the objective of the Sugar Conference which I attended to try to negotiate a new agreement which would effectively stabilise world sugar markets and bring sugar prices to remunerative levels. No country in the world can produce and sell sugar profitably at current prices, which return only about £20 per ton of raw sugar exported. Such low prices for sugar are a great hardship for Australian producers and ours is a very large industry by world standards. Australia is the second largest sugar exporter in the world and our industry is highly mechanised and very efficient. Today's open market prices involve hardship for Australian producers, but our producers do at least receive payable prices for about half of their production. That half is made up of sales on the domestic market, sales to Britain at the negotiated price under the Commonwealth Sugar Agreement, and now sales to the United States of America under the United States Sugar Act at something approaching the U.S. domestic price.

But, unlike Australia, many sugar exporting countries are very poor countries and their economies are heavily dependent upon earnings from sugar exports. The present very low world prices for sugar are disastrous for those countries, and there is therefore a great need to arrive at a satisfactory international arrangement that will bring sugar prices to a level remunerative to efficient producers. But the 80 nations at the sugar conference, roughly half of which are sugar exporters and half sugar importers, did not reach unanimous agreement at that first session. There were many reasons for this, which I do not propose to canvass here. The conference will resume when it is clear that meaningful negotiations can be undertaken, and 1 hope this will not be too long delayed.

In the meantime, the countries particularly concerned will be in contact in an effort to establish the basis of a firm and lasting agreement. Whilst Australia must certainly press for an export quota which is related to our actual arranged production capacity, it would be self defeating in present circumstances for Australia or any other exporting country to make inflated export quota demands. An obviously inflated total of such quota demands, would simply provide importers with an arithmetical basis to reject the exporters' request for an agreement. On the other hand, Australia cannot contemplate a quota lower than would enable us to export in accordance with the industry's arranged production capacity.

It is already clear, however, that the old types of international sugar agreement will not do for the present situation. Earlier sugar agreements have relied mainly for price stability, on export quotas as the controlling mechanism, with relatively minor commitments on importing countries. When world prices fell, under the old arrangement export quotas were tightened; when world prices rose, export quotas were increased. In other words, it was up to exporting countries to tighten their belts when prices fell in the hope that by so doing they would bring about a rise in prices. Most 'exporting countries have become disillusioned with such an approach; that is the old approach. They are looking to importing countries to take much firmer commitments in relation to the quantities they will import and the prices at which they are prepared to import, that is, the floor price and the ceiling price. In addition, developing countries are pressing for some recognition, in any new agreement, of their special position as low-income countries.

On this point, Australia, as one of the few sugar exporters that is not a develop ing country, must have recognition for the right of its own sugar industry to develop and share in the growth of world trade in sugar. As the conference progressed, importing countries were brought to accept the importance which exporting countries attach to a remunerative level of sugar prices. What has not yet been negotiated is the means by which a remunerative price can be maintained for sugar sold on the world's so-called free market.

I pointed out to Japanese Ministers that Japan and Canada were the only two major import markets for sugar enjoying, almost in full, imports at the present disastrously low world prices. I pointed out that Britain, the United States of America, and the Union of Soviet Socialist Republics, which are all substantial importing countries, operate arrangements which return to exporters more than double present world prices for at least a large part of their import requirements. Because Japan is one of the world's major sugar importers and Australia's biggest sugar market, an acceptance by Japan of the obligation to give a lead in bringing free market prices to remunerative levels would prove to be of tremendous importance to the whole of the negotiations on sugar.

I was very fortunate to have with me in Geneva as my Deputy Leader, the Premier of Queensland, Mr. G. F. R. Nicklin. The strong delegation of experienced industry advisers and Government officials, headed by the Deputy Secretary of the Department of Trade and Industry, Mr. A. J. Campbell, included the Chairman of the Queensland Sugar Board, Mr. O. Wolfensberger and the Queensland Agent General in London, Dr. W. A. T. Summerville.

In London I had talks with the British Prime Minister, Mr. Harold Wilson, and other British Ministers. I have already mentioned that one of my purposes in discussions with British Ministers was to comprehend and assess the approach of the new British Government to the Kennedy Round. Another objective was to discuss the implications for Australia of the new British National Economic Plan which had been announced shortly before my arrival in Britain.

The plan is by no means clear in its effects, and indeed will only become clear as it goes into operation. I read in the Press today that some legislation has now been related to the agricultural aspects of the plan. On the surface, however, it would seem that the operation of the plan could significantly reduce British imports of some agricultural products, which Australia exports.

For example, it is at the heart of the plan as put forward that there should be an expansion of beef production in Britain. That may ultimately result in less meat imports by Britain but also, because the calves for beef production will come from the dairy industry, it will probably mean a substantial expansion of British butter and cheese production more or less as a by-product. It could also mean an expansion of British cereals production to provide feed for fattening. At this stage the effects are still largely conjectural. As honorable members are aware, however, a conference of Commonwealth Trade Ministers is to be held early next year, on the decision of the recent Prime Ministers Conference, and this will afford further opportunities to explore the British proposals in greater detail.

While in Europe I conferred with Dr. Hallstein, the Chairman of the Commission of the European Economic Community and with Dr. Mansholt, Vice-Chairman of the commission responsible for agricultural matters. I also had talks with senior representatives of the French Government. The engrossing question in all these talks was, of course, the present impasse in the European Economic Community. While the impasse continues there is something of a stalemate in the Kennedy Round negotiations in agriculture. I was concerned to take soundings on the likelihood of an early solution. It is important for the Kennedy Round negotiations that the difficulties should be overcome before too long, because if the agricultural negotiations are to get anywhere they must make real progress in 1966. The authority of the President of the United States of America to negotiate cuts in tariffs expires in 1967. On the whole, I found that people in Europe who are close to the centre of activities in respect of the European Common Market have a degree of optimism that the impasse will be overcome after the

French elections in December. I also found agreement with my assessment that 1966 would be the crucial year in agricultural negotiations. It is to be hoped that early in 1966 there will again be sufficient cohesion in the European Economic Community to allow meaningful agricultural negotiations to proceed to a conclusion.

After leaving Europe I fulfilled a long standing invitation from Mr. Manubhai Shah, Minister for Commerce in the Government of India, to visit India in order to review progress in the talks on trade cooperation between India and Australia which have been going on at official level for some time. Honorable members will recall that Mr. Manubhai Shah visited Australia earlier this year. The discussions in India were very useful. I had discussions with the Prime Minister, Mr. Shah and other ministers, and with senior officials. My talks were helpful in further promoting the good relations that already exist between our two countries. India is, of course, wrestling with tremendous problems in endeavouring to make the best use of her economic resources. The official talks which have taken place over the last two years have already produced results helpful to India. Australia's imports from India have been increasing. In 1964-65 alone our imports from India increased by 16 per cent.

Various problems experienced in both countries in increasing trade with each other were examined frankly, and practical ways of overcoming these problems were explored. There were, for example, some problems arising out of the method of valuation of goods for the assessment of duty in Australia and the effect that this has on Indian exports. Details of some actual cases have been provided, and it looks as if part of the difficulties may be immediately overcome. The Indian Government has been pursuing a programme for the modernisation of its wool textile industry with a view to increasing the foreign exchange earnings from exports of woollen textiles. The International Wool Secretariat has helped in the technical analysis of what could best be done. Considerable progress has been made in the modernisation programme. However, the objective of making additional wool textile exports is being hampered by India's inability to find the foreign exchange for additional raw wool imports. I was very pleased, during my discussions in New Delhi, to be able to announce that in response to a request from the Indian Government, Australia was prepared to make a gift under the Colombo Plan of 4,000,000 lb. of wool to be used in the manufacture of textiles for export. Proceeds of the export sales of these textiles will be used to finance purchases by India of wool. Initially the gift wool will be sold by the Indian Government to textile manufacturers in India who will pay for it in Indian rupees, and the money so received will be used by the Indian Government to set up wool research establishments.

This is a practical example of help given in a way that should enable the people of India to build up a significant export industry and so make an addition to the basic industrial structure in that country. At the same time, as a result of the initial help given by Australia, India will continue as a buyer in the wool auctions for the quantities of wool needed to replace that manufactured into textiles, and in this way Australia gains by having another buyer active on the auction room floor. Indian Ministers expressed their thanks for this gift.

One of the problems that India faces is the necessity to expand its industrial structure. The Department of Trade and Industry is continuing to bring before Australian industry the possibilities for joint ventures in India. Australian industry, I think largely as a result of this is already represented in India by seventeen firms, engaged in joint enterprises with Indian interests. A number of other Australian companies are currently investigating investment possibilities. In my discussions with Indian ministers, they laid much emphasis on their desire to see more joint industrial ventures between our two countries. I assured Indian Ministers of Australia's interest in extending economic cooperation in this way, and it has been agreed that technical investigations should be undertaken into the feasibility of establishing in India a fellmongering industry based upon Australian sheep skins. Indian Ministers also stated their interest in exploring the practicability of setting up non-ferrous metal smelters and requested that I take an interest in this. This I agreed to do.

We had a very full discussion on Australia's proposal to introduce tariff pre*ferences in favour of less developed countries. Honorable members will recall that legislation to permit the introduction of these preferences has recently been before the Parliament. Mr. Manubhai Shah had earlier described this action as "bold and imaginative" and he assured me of India's support of our application under the General Agreement on Tariffs and Trade for a waiver to enable us to implement the preferences.

All the matters that I have described are of considerable importance to the future of all Australians living in a country which is so dependent on the export of a relatively few primary commodities. Much of my discussions have been concerned in some way or another with sugar. No other commodity has taken the knock in prices so severely in the last 12 months as has sugar. It is a commodity of great importance to the development of population of our north, and to Australia's balance of payments. Of our total export income last year, a year which did not reflect the full effect of low prices, £56 million came from sugar. The sugar farms and sugar mills are the mainstay of north Queensland. It is of overwhelming importance that importing countries should comprehend the necessity for reasonable access to markets and remunerative prices for sugar and that all countries should recognise the right of the Australian sugar industry, highly efficient and the world's second largest exporter, to develop and grow and to share in the expansion of world trade in sugar.

Australia needs, and must have, an expanding export income. The bulk primary commodities have always provided the mainstay of our exports and will continue to do so. How much of them we can find markets for, and the prices we are able to get for them, will determine in large measure the pace and the extent of Australia's future growth and development. The same problems which confront us in getting better trading conditions for primary products also confront developing countries. In working, in our own interests, to secure an improvement in our term of trade, we are able to share our experiences and concert our efforts with these countries.

In this way, as well as in other ways, we are, I am sure, making a contribution both to the advantage of Australia and to the advantage of the developing countries.

I present the following paper -

Overseas Visit by Minister for Trade and Industry - Ministerial Statement, 23rd November 1965- and move -

That the House take note of the paper.







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