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Australia and the Asia-Pacific region

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PRESS NO. TREASURER (.RELEASEV r ■ — J JEMBARGOADDRESS BY THE TREASURER OF THE COMMONWEALTH OF AUSTRALIA THE HON PAUL KEATING, MP ' ' ‘INSTITUTE OF INTERNATIONAL RELATIONS AND INTERNATIONAL ECONOMY - MOSCOW, 7 JUNE 1989AUSTRALIA AND THE ASIA-PACIFIC REGIONThank you for the opportunity to speak to you today*When invited to visit your Institute, I was told a topic of particular interest*to you was economic developments in the Asian-Pacific region.I will turn to discuss that issue in more detail shortly, but first I think it would be appropriate for me to sketch a little of the background to the growing links between our two countries. .Of course, for many years, relations between the USSR and Australia, like other nations of the Western alliance, were marked by mutual suspicion, if not, at times, outright hostility.Happily, that sLctLe of affairs has changed substantially.On the Australian side much of the credit for that change must go to our former Prime Minister, Mr Gough Whitlam, who led the Party of which I am a member in Government in the period 1972 to 1975.More recently, the return to power of a Labor Government in Australia has coincided with significant changes in Soviet foreign policy and with dramatic internal changes in your country.As a result increased effort has been made in both our countries to broaden and deepen our links.This has been reflected in the high level contacts between Australia and the USSR.Your Foreign Minister, Mr Shevardnadze, visited Australia · in March 1987, with our Prime Minister, Mr Hawke, coming here in December of that year.Those visits were followed by Deputy Prime Minister Kamentsev and Environment Minister .Israel·going to Australia last year.


The increase in personal contacts has also been matched by a strengthening of other links·

We now have in place bi-lateral agreements between Australia and the UGCIl covering fioldo aa diverse as trade# coaonee and technology# culture, space, medicine, agriculture and sport·

A further six - covering fisheries# commodities, human contacts, consular relations, civil aviation and the environment -are either already completed or under negotiation or consideration.

We also welcome the willingness of your Government to listen to our views on disarmament and arms control# and equally we welcome the positive measures of your Government on human rights, particularly in cases involving Australia.

The trade relationship between our two countries is also substantial, with two-way trade running' at up to $1 billion Australian dollars - that is around 400 million Roubles - annually· e

But beyond commercial links, personal links between the peoples of our two countries are also growing substantially.

Of course, given that our two countries are so far apart geographically, there are limits to the extent of personal contact possible·

But during the visit of a few days that I made to Leningrad before coming here to Moscow, I was genuinely suprised by the number of Australian visitors in that city.

Such personal contact can only augur well for the future relationship between our two countries.

But to return to the main theme of my address, what makes the topic of the Asian-Pacific region relevant to both speaker and audience, is that both of our countries are part of that region.

But it is equally true that both of us have not until recently given full recognition to that fact.

In Australia’s case, while unambiguously our geography identities us as an Asian-Pacific nation, for many years we tended to identify ourselves more with Europe.

In the case of the USSR, given the concentration of your population, you too have tended to develop your economic links in that direction.

But in my part of the world there has been great interest in the USSR]s intensification of its interest in the Asian Pacific region, generally seen as being begun by Mr Gorbachev's Vladivostock statement of 1986.


Both of our nations recognise that the Asia-Pacific region includes the most dynamic and fastest growing economies in the world today.

In fact, the Asia-Pacific region, in its broadest^definition, now accounts for over half of the world’s production#

For our purposes, however, the concept of the Western Pacific region is probably more useful. ■

This comprises Japan, the Asian newly industrialised economies, the remaining association of South East Asian Countries, of course China, plus Australia and Mew Zealand.

This region now accounts for nearly a quarter of the world's GDP, or about the same share as the European Community.

In terms of growth, the pearls of the region are what are referred to as the Asian newly industrialised economies - South Korea, Hong Kong, Taiwan and Singapore,

Consider how these economies grew in 1988 alone.

Current estimates place South Korea’s growth at around 12 per cent, Taiwan’s at 7 per cent, Hong Kong's at 7 per cent and Singapore's at 11 per cent.

This spectacular performance contrasts starkly with that of the more mature industrial countries, which in 1988 grew on average by 4 per cent.

Other countries such as Thailand and Malaysia are following closely on the heels of the leading four.

What is especially significant about the rapid progress of these Asian-Pacific nations is that much of it is based on international trade.

The four Asian newly industrialised nations I referred to earlier alone account for about 9 per cent of world exports.

Combined with ASEAN this figure rises to 13 per cent, which exceeds that of either Japan, the United States or West Germany. .

It is notable that Asia-Pacific trade is increasing at a much faster rate than world trade.

Whereas trade volumes between the EC and North America increased six fold between 1970 and 1987, trade between Japan and North America increased tenfold, trade between Japan and the four Asian newly industrialised countries rose nearly

twentyfold and trade between North America and those four grew a massive fifty times.


It is this trade triangle - Japan# North America and the Asian newly industrailised economies - which so dramatically has been redrawing the contours of the world economy.

It is the outcome of a quite deliberate strategy of development through trade, and is a testimony to outward-looking policies and to structural change·

Countries in the region have made such rapid progress not by inward looking development or by sitting back and waiting for the world to come to them# but by creating their own place in global trade and investment·

These economies, many of which are small, with few natural resource endowments# have developed their strengths to such an extent that they have not only survived in a competitive world, they have thrived·

They know that to survive they must continually adapt, not only to a changing world environment# but also to the changes brought about by their own progress.

What we are witnessing in the Asia-Pacific region is a model process of interconnected evolution, accelerated by a preparedness to embrace change that brings with it improved living standards.

Structural change in Japan has opened possibilities for the Asian newly industrialised economies to move into areas of industrial production and trade in which Japan previously


At the same time, countries at earlier stages of development, for example the ASEAN economies and China, are starting to produce in areas which were the newly industrialised economies strengths last decade.

In other words, the consecutive "take-offs’ * of Japan in the 1960s and other Asian countries in the 1970s have fostered an interconnected development chain, and so the process continues. ‘ '

And of course ultimately the dynamism and rapid growth of these Asia-Pacific economies benefits not just themselves, but other economies in the region, and indeed the whole


How does Australia fit into this broad canvas?

. The geographical .significance is obvious.

But Australia's commercial links with the region are now also extensive.


Already about half of Australia’s exports and imports are directed to or sourced from the Western Pacific region, and this rises to two-thirds with the inclusion of North America·

Around half of all foreign investment in Australia originates from the Asia-Pacific region# and almost 60 per cent of ( all Australian investment abroad is located in the Asia-Pacific region·

Eight of Australia's ten largest export markets can be found ' there. ,

But we in Australia have been working hard to tap even more firmly into the dynamic forces at work in the region.

We fully appreciate that in order to do so we have had to establish an outward-looking# competitive and adaptive economy# in marked contrast to the Australian experience of the 1950s# 60s and 70s. .

In pursuit of that end we have taken major steps to increase the efficiency of the Australian economy and boost its long-term growth prospects.

These include the floating of the Australian dollar, leaving it to the world market to price our currency, the total deregulation of our financial markets# a huge change in fiscal policy from a deficit of 5 percentage points of GDP

to a surplus of 2 per cent, liberalisation of foreign investment policy, taxation reforms# deregulation of crude oil marketing and domestic aviation and measures to reduce significantly industrial protection levels and open Australia's markets to international competition.

As a result Australia's role within the Asia-Pacific region is undergoing significant changes.

In addition to remaining an efficient and low cost supplier of agricultural products and minerals, Australia is increasingly an exporter of manufactured goods and services.

We are confident we are well down the road to putting in place an economic framework which will enable us to participate further in the dynamism of our neighbourhood.

Implementing these reforms has not always been easy.

But we are confident that the benefits of this process will be substantial and make it very worthwhile.

It ill becomes a visitor to speak whereof he knows little, but I am tempted to say that this lesson I draw from Australian experience is not irrelevant to many of you in this room.

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Australia recognises and commends the efforts you are making to open and restructure your economy and to devolve responsibility for economic decision making.

We strongly encourage you to continue down this path, even though at times it can be painful and slow.

Our own efforts at what you call ’perestroika* strongly • .underline that pay-offs are a long-term phenomenon, and in the shorter-run there can indeed be negative political consequences.

Be that as it may, I am unshaken in my conviction that in today’s world resisting change is unlikely to mean merely maintaining the current position, but worse, to end up going backwards.

Of course the USSR too, through your Par East region, is also seeking to intergrate more into the Asia-Pacific area*

Australia has noted with interest and welcomes the efforts now being made by you to develop the Soviet Far East and strengthen its economic links in the Asia-Pacific region.

Clearly, this has the potential for significant benefits for the USSR.

These developments are of long-term commercial interest to Australia and other Asia-Pacific countries.

From what I have said# you won’t be surprised if I urge that the Soviet Far East's relationship with the region be on market oriented terms, avoiding exclusive bilateral and other restrictive arrangements.

This is not said from some ideological perspective, but from the pragmatic view of what is necessary to join the region’s dynamism as a participant rather than a spectator.

For its part Australia looks forward to developing a greater commercial relationship with the Far East, and indeed with other regions of the USSR.

It is a measure of Australia’s interest that we are now in the process of preparing a major trade display to be held in Vladivostok next year.

We look forward to the Soviet government's foreshadowed comprehensive development economic plan for the Soviet Far East.

We would also welcome further information on your intentions with regard to conditions for foreign investment and establishment of special joint venture enterprise zones.


' we return Lo my broader th*me, like many wuiLliwhile thingo in lifei the economic relationship between the major industrialised countries and the up-and-coming Asian-Pacific countries is a two way street·

Their "graduation" as industrial economies means changing responsibilities commensurate with growing economic strength.

They must remove barriers to trade, allow their exchange rates to reflect underlying market forces, and work at removing domestic structural rigidities·

The Asia-Pacific region has a lot to contribute to the world economy.

But it can only do so in the right environment.

The economies of the Asia-Pacific region have benefitted greatly over recent decades from an open, multilateral trading system. ,

The maintenance of such an order is, in the Australian Government's view, critical to the continued rapid growth of the region and the world.

Sustaining and furthering multilateral trade liberalisation and strengthened multilateral disciplines of the kind which a number of countries are pursuing through the Uruguay Round of the General Agreement on Trade and Tariffs are thus vitally

important for the Region.

Australia has played an important role in this process through its chairmanship of the fourteen member Cairns Group of primary producer nations.

This group played an important role in achieving a breakthrough in the GATT negotiations on Agriculture in April,

This multi-lateral approach of dealing with economic issues has increasingly included countries of the Asian-Pacific region, a trend Australia regards very favourably.

The Western world's acceptance of the growing weight of the East-Asian region was reflected in a new departure in January 1989, when a Seminar between OECD countries and the Asian newly industrialised countries took place.

These discussions were initiated by .the OECD countries to develop dialogue and co-operation with those Asian countries.

In a sense, it was an extension of what has been going on in the region itself.

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Increased interdependence and integration has led to development in recent years of a number of regional forums for discussion and co-operation, reflecting commonality of interests.

This is not to say there are not important cultural, political and economic differences between countries of the region.

But the fabric from which to fashion increasingly meaningful cooperation is being constantly woven by regional interdependencies which are becoming deeper and wider.

Closer cohesion is being created in the Pacific community through trade# commerce# investment and tourism.

Pacific countries* trade with each other is almost twice as large as their share of world trade.

Intraregional investment has risen dramatically in recent years.

Tourism literally exploded in the Pacific in 1988 with Korea, Australia, Hong Kong, Malaysia# Singapore# Taiwan and Thailand all recording remarkable growth.

Forums such as the Pacific Economic Co-operation Conference, referred to as PECC, a joint Australia/Japan initiative, was established in 1980 with the aim of promoting economic co-operation and development among its members.

Australia has welcomed observer attendance by Soviet representatives at meetings of the PECC.

We are aware that you intend to be represented as an observer at the next PECC Conference in New Zealand and wish to be considered there for full membership.

The Australian national PECC Committee has given consistent support to the concept that PECC should operate on a non-exclusive basis and accordingly, has welcomed Soviet participation in the work of PECC task forces.

Australia hosts the Secretariat of one of those task forces - that for the Minerals and Energy Forum;

There would seem scope for furthering cooperation between our two countries in this area.

My Government has noted the Soviet offer to host a meeting of the PECC Minerals and Energy Forum in the Soviet Far East next year. .


As to other forums* our Prime Minister, Mr Hawke, announced Australia's support for developing a more formal, inter-governmental vehicle for regional economic co-operation during his visit to the Republic of Korea in January this year.

Whilst existing structes are operating effectively in terms of their separate objectives and mandates, in our view none of these quite meet the requirement for a broad regional dialogue at the intergovernmental level, aimed at identifying

and advancing common economic interests.

Our Prime Minsiter's initiative comes from our recognition that Australia's future is intertwined in many ways with that of the region and from recognition of the benefits attainable to all from greater discussion and understanding on regional economic issues.

The potential benefits of wider co-operatin are substantial.

They include improving our chances of worthwhile progress in the Uruguay Round, the further dismantling of trade barriers within the region on a non-discriminatory basis and capitalising in new and more effective ways on the interdependencies

between regional economies.

We have no fixed ideas on the form that regional co-operation might take. .

What is crucial is that any arrangement be of a kind that can influence government policy making and possess the type of information flow and analysis to help countries' understanding of the effects on the region and the world of economic policy decisions. .

Other groupings have shown what can be achieved when nations co-operate.

Australia has not sought, and does not now seek, to draw a complete blueprint for regional economic co-operation.

In consultation with regional countries we will seek to find a format which reflects the views of those countries and will be suited to Asia-Pacific characteristics. .

Some points about the proposal should be emphasised.

The initiative is designed to support an open, multilateral trading system. ,

Australia has emphasised repeatedly that it is not proposing a regional trading bloc.

Australia's bona fides in this respect are well and truly established.

We will be looking to complement, rather than compete with, existing organisations such as the PBGC.

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Indeed, the PECC·Standing Committee has indicated_its willingness to contribute to realising the proposal, in the first instance through submitting ideas on the agenda for the inaugural ministerial meeting.

Membership questions will be a matter for regional countries involved.

For our part# Australia sees the extent of a country's economic linkage within the region and its willingness to contribute to the co-operative process as the key criteria for membership.

In this regard, I note that Australia has no ideologically-based objection to Soviet participation in any Pacific region co-operation group.

The Prime Minister's proposal does not envisage, by any means, a closed club.

But as we see the appropriate criterion for membership as significant economic links with regional countries, we feel that the question of participation of the Soviet Union should come after, rather than lead, the evolution of deeper economic

involvement in the region.

Finally it is impossible at this moment to conduct any realistic dicsussion of Asian affairs without reference to the tumultuous events taking place in China.

Details are still sketchy, but their is mounting evidence that possibly 1,000 people have died as troops have acted against the demonstrations in favour of greater freedom of expression.

The Australian Government has protested strongly to the Chinese Government about these events, and Government contacts have been suspended as a result.

I personally was particularly upset to hear of this tragic turn of events, for only a month ago I was in Beijing attending a metting of the Asian Development Bank.

I then witnessed the beginnings of the student protests# and in watching the nightly news bulletins since, I have nurtured the strong desire that their objectives would be achieved without bloodshed.

Tragically,, that has not been the case. .

These events underscore a fundamental principle in the process of reform.

And that is that it is impossible to derive the benefits and efficiences of a market based economy without allowing the people the proper means of expressing the signals which bring about those outcomes.

A free market will only work properly with a free people.

And has been demonstrated the world ovefc# it is only a free market that can best serve the needs of the people.

It seems the administration in China has meet this dilema with force. .

Hopefully it will soon see how wrong that response was and the positive process of political and economic reform underway in China for the past decade will be resumed.

Thank you. ' -