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Forging an active trade agenda: speech at the Asia Pacific Council, Macquarie University, Sydney.



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Speech

Minister for Trade and Deputy Leader of the National Party, The Hon Mark Vaile MP at the Asia Pacific Council

Sydney, 31 July 2002

Forging an Active Trade Agenda (Check against delivery)

Introduction

Thank you Chairperson, ladies and gentlemen.

The Asia Pacific Council does a great job in bringing important policy issues to public attention and debate. As Australia's Trade Minister, I'm delighted to have been given this opportunity to talk with you today about our trade policy and particularly with a view to East Asia. So I'd like to thank you for inviting me to speak on the subject of our trade policies today.

Change and continuity - patterns of Australia's international trade

At Federation, a little over 100 years ago, we were, quite accurately recognised as a mine and farm, producing commodities for Great Britain and a few other countries. The ‘mother country', as of course Great Britain was known to most Australians, was the dominant customer for Australia's predominantly rural exports - particularly wool and meat. Similarly, we bought British. Most of what we bought were finished products - agricultural and industrial machines, and consumer items such as textiles and footwear - often made from Australian raw materials.

In 1901 the United Kingdom purchased more than half of our exports, and supplied almost sixty percent of our imports. And we also traded with South Africa, the United States and a few European countries. 100 years ago Asia simply didn't figure. In fact, the only country in Asia with which we traded in any significant way was Ceylon - products such as jute and hemp - principally to service the packaging of our wool and coal exports. Otherwise we maintained a high tariff, high export and low import trading regime and our investment abroad was negligible.

Events in the first half of last century changed all that. By 1950 we were faced with a radically changed international environment. Europe, North Africa and Asia had been shattered by war. The United States had emerged as the new, central power. A new internationalism - the UN system and Bretton Woods institutions - had emerged. And the cold war was underway. Australia, too, had changed. No longer could we be dependent on great powers for our security and prosperity. World War II had driven home to us the need to be more independent. We became much more conscious of our regional environment - not just in terms of potential threats, but most importantly through regional opportunities. So while our trading patterns were not markedly different by mid-century, the advent of new markets brought on by new technologies like containerised shipping were providing our exporters with significant new opportunities.

Many factors, including mass immigration … domestic industrialisation … the emergence of Asian markets … the consolidation of US power … the decline of the British empire … and the gradual consolidation of a new Europe, all served to dramatically change our outlook on the world.

The establishment of the European Community and intra-European preferential trade in

1974 did more to jolt us from our traditional complacency in trade than any other economic or geopolitical change of the time. As a nation we finally realised that we were on our own, and that we had to make our own way. Successive governments recognised that we needed to dismantle our external barriers to trade, and to lead the cause of trade liberalisation in markets abroad.

In 1950, Japan alone in East Asia figured among our major trading partners, and even then it accounted for only 6.3 percent of our exports, and almost none of our imports. Fortunately it was at this time we witnessed the explosion of trade with East Asia - in particular with the economic powerhouses of Japan, Korea and, increasingly, China - as well as with South East Asian countries.

Today, six of our top ten trading partners are East Asian nations: Japan, China, Korea, Singapore, Taiwan and Malaysia. And Indonesia, Hong Kong and Thailand are 11th, 13th and 14th respectively. Our trade is diversified across the world - to Asia, to North America, to the Middle East, and to Europe. More than a third of our exports go to countries other than our top ten export destinations.

The Middle East, in particular, is a great example of where we have diversified our trade both in new products, and in new markets. Our exports to the Middle East grew 39 per cent last year. In fact, our auto exports to the Middle East have grown an average 73 per cent each year since 1996. Not only has the direction of our trade changed, the composition of our trade has significantly changed as well, reflecting a diverse, sophisticated and mature economy.

Agriculture and minerals, at 47 percent of our exports, of course remain critically important to the overall well-being of our economy. But manufactured products - motor vehicles, telecommunications equipment, computer parts, industrial machinery - now account for 33 percent of our exports. And our services exports - now 20 percent of the total - are an increasingly important component of our overall trade, especially in education and tourism.

Lessons of the past

Ladies and gentlemen. Our standard of living, the quality of our communities … the prosperity of our families … the security of our jobs, depend more than ever on our ability to compete in the global marketplace. We need to continually ask ourselves: how can we continue to maximise our competitiveness through domestic and trade policies.

What are the lessons of the past? How do we ensure that our farmers, our miners, our manufacturers, and our service providers can continue to sell their products overseas, and provide a higher standard of living for their families and communities? The lesson I have learned in three years as trade minister, is to be flexible, pragmatic, creative and diverse in our approach to trade policy.

In 1999, the WTO membership had not prepared the ground to launch a new round of global trade negotiations at the Ministerial meeting in Seattle. It was a tough but important lesson for all of us and one that ultimately delivered a good outcome in Doha two years later. There simply wasn't consensus to start with - either among WTO members or especially in the broader community.It was remarkable that, under Australian leadership with the assistance of the Cairns Group and the USA, we got as close as we did to agreement on a negotiating mandate for agriculture.

With the experience of Seattle, WTO members have better prepared the ground for a consensus to liberalise trade - which resulted of course in the successful launch of a new round at Doha in November 2001. This was a major achievement for Australia and the Cairns Group as we had been pursuing the launch of a new multilateral round for many years.

Seattle proved that launching new multilateral negotiations will always be difficult - especially given the much larger WTO membership, and a much more complex and broad agenda. These recent experiences serve as a reminder that we need to use all available mechanisms to keep the trade liberalisation agenda on top of the global priority list.

Australia's role

That's why Australia's overall trade strategy is to pursue every opportunity at the multilateral, regional and bilateral level. Those opportunities must complement each

other - and ultimately must support the global trade negotiations now under way at the World Trade Organisation. We remain fully committed to the WTO negotiations, as the best way of pursuing global trade liberalisation. We have dedicated sixty-six of seventy-two officials in the newly created Office of Trade Negotiations to this task. We want significant improvements in market access - in agriculture, services and industrial products - as quickly and productively as possible. So far, the discussions have focused on procedural issues. The substantive negotiations have not yet begun.

The Doha round will be more complex than its predecessors. There is a broad and ambitious agenda, and we have a tight deadline. There are now 144 WTO members -including China - all with their own interests compared with only 86 at the end of the Uruguay Round. To succeed the Doha Round will take time and dedication. It will also stretch our patience, and our resources.

Of course, it is important that the global negotiations underpin and add value to what we do in our region, and with individual countries. The relationship between these activities is symbiotic. If, for example, there are things that we can do bilaterally - more quickly, and with greater effect - that will help drive the multilateral agenda, this should be seen as a clear positive.

In our core area of interest, the Asia-Pacific, our strategy is simple. That strategy supports the vision set by APEC leaders at Bogor in 1994 for free trade by 2010, for developed countries, and by 2020, for developing countries. It is about encouraging progress toward that goal, so that the momentum is maintained, and so that the benefits remain clear to everybody. That is why we continue our work in APEC - on transactions costs … on governance … on non-tariff barriers … and on trade and investment facilitation. That is why we have established a closer economic partnership to better integrate Australia, New Zealand and the ten members of ASEAN. That is why we are negotiating bilateral agreements with Singapore and Thailand that will free trade and investment, and provide a platform for developing the kind of integration we have with New Zealand. And that is why we have agreed to negotiate bilateral economic agreements with China and Japan, and to explore better economic ties with South Korea.

With East Asia taking 57 per cent of our exports, I'm sure it is no surprise to anyone here today that we would want to take such an active and ambitious approach to forging new and stronger trade arrangements with the region.

Agriculture

Ladies and Gentlemen, agriculture continues to contribute vitally to our nation's export performance. One in four dollars earned from selling Australian goods overseas is earned by agriculture. Two-thirds of our agricultural production is exported. And agricultural markets are perhaps the most corrupted of all international markets.

Australia has continued to take the leadership role in the fight for agricultural trade policy reform, especially as Chair of the Cairns Group. The Doha Declaration contains a strong commitment by WTO members to negotiate reform in agriculture. The three key Cairns Group pillars are identified in the Declaration. They are substantially improving market access … substantially reducing trade-distorting domestic support … and reducing - with a view to phasing out - all export subsidies.

Now - there are some critics who say that this government concentrates too much on agriculture. They say that the international trade agenda is a broad one and that agriculture, being a very sensitive area, shouldn't be allowed to hold back other sectors. Those who make the claim fail to understand the dynamics of the multilateral trading system - the key to a successful conclusion to the Doha Round of multilateral trade negotiations is agriculture.

Without an acceptable outcome on agriculture there can be no conclusion of the round and therefore no progress in other sectors. Why? Overwhelmingly - and happily for our interests - because of developing countries. Developing countries - more than 100 out of the 144 WTO members - are overwhelmingly agricultural exporters. Developing countries are no longer prepared to accept that rich countries insist they open their markets to industrial products, services and intellectual property rights, while rich countries continue to shut them out of areas where they are competitive - particularly in agriculture and textiles.

Strategically, there will be no Doha Round outcome without an outcome on agriculture. And all WTO members know it.

Free Trade Agreements

We have arguably the most ambitious trade policy agenda of any government in Australia's history. As well as our very assertive approach to the multilateral agenda we also have a very ambitious bilateral agenda.Our position is simple. We are open to concluding Free Trade Agreements if they deliver gains that cannot be achieved in a similar timeframe elsewhere.

Some people suggest that negotiating FTAs will undermine our ability to negotiate in the WTO and the new trade round. That is rubbish.

FTAs can complement - and even help drive - our wider trade objectives in the WTO. And any FTA Australia enters into will comply fully with WTO rules. They are building blocks not stumbling blocks for the multilateral system.

As I said earlier - that is why we are confident of obtaining a comprehensive and genuinely liberalising agreement with Singapore very soon. It is also why we are negotiating an “FTA-plus” agreement with Thailand - liberalising not only trade in goods - including agriculture - and services, but also facilitating further trade and investment links.

Of course, our key bilateral trade priority is an FTA with the United States because it stands to bring the most gain for Australia. One study has concluded that an FTA with the US could lead to an increase in Australia's GDP by as much as 4 billion dollars annually. And the difficulties we have had on the US Farm Bill and steel tariffs confirm the strategic value of an FTA.

President Bush and his Administration have made clear their readiness to discuss an FTA. Now that the US House has passed Trade Promotion Authority (TPA) and the Senate looks likely to pass it this week we hope to take up the discussion in coming months. Some commentators are sceptical about FTAs, and have been particularly critical of one with the United States. Some have argued, for example, that it would discriminate against our big trading partners in Asia. Yet, many of those same countries are discussing or negotiating FTAs with one or more other countries, including with the United States. And none have expressed any concern about our preliminary discussions with the US.

Other sceptics have argued that it will be too hard to negotiate with the United States on agriculture. No one, least of all an Australian trade minister, underestimates the difficulty of this. But this is no excuse for avoiding the challenge, or for allowing our competitors to negotiate preferential access ahead of us.

It would be irresponsible of me not to accept the challenge of negotiating a Free Trade Agreement with the world's largest and most dynamic economy. Such an agreement has the potential to remove trade barriers … to attract new investment … to forge commercial links … and to minimise competitive disadvantages we face as a result of current and future US agreements with other countries.

Doubling the number of exporters

What does all this mean to Australians? It means more and better paying jobs. Companies that export pay better wages - on average about $17,400 more each year. One in five jobs in Australia rely on exports. One in four jobs in country Australia. That's why we made the commitment to try to double the number of Australian exporters by 2006.

I am determined to expand the assistance we give to both prospective and existing exporters. Only then can we truly build on the base we have given our exporters - sound macro-economic and tax policies, and the strongest economy in the developed world.

Research by Austrade found that Australia has enormous untapped export potential. Just 4 percent, or 25,000, of our companies export their products, a low figure by international standards. Exporters generate infrastructure and production facilities that benefit communities throughout Australia. And trade means that we all get access to a wider range of products at lower prices.

Having more exporting companies is good for the Australian economy, it's good for strengthening country towns and it's good for employees. So our trade promotion effort

in the next five years will focus on exposing Australian companies and communities to the benefits of exporting.

Conclusion

Ladies and gentlemen. The Government is pursuing an integrated multilateral, regional and bilateral approach to trade policy. We are working hard at all those levels to secure Australia's trading future. And we are not prepared to miss opportunities that could lead to better market access and the possibility of increasing our exports.

I have seen too much economic despair- especially in rural and regional Australia - to let those opportunities pass us by. We intend to do our utmost to ensure that Australia's trade policy continues to take us forward into a future of greater economic security and prosperity. And we believe that our global, regional and individual country trade initiatives, marching in lockstep will deliver a strong trading future. Thank you.

 

This page last modified: Wednesday, 31-Jul-2002 13:09:21 EST

Local Date: Thursday, 01-Aug-2002 14:28:34 EST