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Transcript of Speech to the Commonwealth Trust Dr John Hewson, Leader of the Opposition Commonwealth House, London UK



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Leader of the Opposition

12 July 1991 -

TRANSCRIPT OF SPEECH TO THE COMMONWEALTH TRUST DR JOHN HEWSON, LEADER OF THE OPPOSITION Commonwealth House, London, UK

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Thank you very much Sir Peter for the very warm welcome.

Distinguished guests, ladies and gentlemen. ,

I am delighted to be back in Britain. I have visited this

country many times and in many capacities - as an academic, as a business person and as a politician - and I always find it a very refreshing experience to come back and have a frank and full exchange of ideas with a wide cross-section of people. I am British to the core in the sense that my mother was b o m in this

country, in Penzance in Cornwall and we have many family links as wel1. -

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The visit to Britain is part of a longer trip. I started out in the United States where I- have spent about 10 days and I am going on to the European Community, to Brussels, on Sunday.

In the United States I was afforded excellent access right across the board from President Bush, down through Secretary Baker, Security Adviser Brent Scowcroft, Treasurer Secretary Brady, US Trade Representative Carla Hills and others. I had a unique opportunity not only to update on that country but to put some particularly important views from the Australian, point of view, not the least of which was agricultural protectionism, a subject

that I'll come back to in a moment.

I have also had very useful and high level discussions in your country with Foreign Secretary Douglas Hurd, Trade and Industry Secretary Peter Lilley, the Chancellor of the Exchequer this morning who, I must say, was beaming - he must have just lowered

interest rates or something, as well as the Commonwealth

Secretary-General, Chief Anyaoku.

Parliament House, Canberra, A.C.T. 2600 Phone 277 4022

COMMONWEALTH PARLIAMENTARY LIBRARY iviiCAH

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This is my first visit to the United States and Britain as Leader of the Opposition. My previous visits since I took over that job about 16 months ago have concentrated on the Asia-Pacific region more directly.

I have embraced that region in a strategic sense as far as our Party is concerned.

I believe that we should aim, as a nation, to be a more

significant economic and political force in the Asia-Pacific region by the year 2000. Everything we do, everything we say in relation to economic policy, foreign policy and defence strategy is brought back from that strategic objective.

While I emphasise the importance of that region we are not in any sense regional isolationists in Australia.

We have very important and well developed ties in other parts of the world that we need to develop, we need to foster and we need to keep an eye on because they change. There are very important economic and security interests in Europe.

It is true that the Asia—Pacific region will be the fastest growing region of the world for the next 40 or 50 years. By the year 2030 it will be a market that is more than double the size of the North American and European markets together and offering a country like Australia - uniquely placed on the bottom edge of

that market - opportunities right across the board in our

traditional fields of agricultural and mineral exports, but also importantly in value added in both, in other manufacturing and in the service sector as wel1.

I have come to London and Brussels for a variety of reasons. I want to exchange views first hand with some of the leaders of the new Europe. I want to reaffirm some important and continuing interests that Australia has in this part of the world. And I

want to convey a sense of the new opportunities which, are opening up for Australia in Europe, as well as some of the new dangers that I believe have been created by recent events.

I wish to take this opportunity which you have given me today to comment on two particular issues. First, the changing face of Britain and Europe (of which Britain is part) and second, how this dramatic pace of change is likely to affect Australia's

relations with Europe, in general, and with the United Kingdom, in particular, over the course of the 1990's.

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Let: me begin with, some comments on the pace of change in Europe.

Over the past two or three years, Australians have kept a close watch on the almost bewildering pace of change in Europe:

- the re-unification of Germany;

- the decline of the super-power military confrontation and the trend towards military disengagement;

- the momentum towards the Single European Market by 1992;

- the disintegration of communist rule in Eastern Europe;

- the enormous economic task of modernising and revitalising the economic infrastructure of Eastern Europe;

- and the increasing likelihood of some kind of

disintegration within the Soviet Union, as well as within * other Eastern European nations or confederations.

Taken separately, each of these changes are dramatic and historic developments that have ushered in a new post-Cold Mar era in international relations. Taken together, they constitute nothing less than a revolution of ideas and a basic shift in the balance of world power.

Of course, many questions still remain to be answered. Questions like:

how will the political and economic future of the Soviet Union affect the new Europe?

what are the security implications of a European balance of power no longer based as they were on NATO and Warsaw Pact forces?

what will be the future of the United States and Japan in Europe?

to what extent will Eastern Europe attract European

Community capital investment?

what is the future for political and. monetary union in Europe.

Those and a host of other questions, very important questions of course, are yet to be answered.

Much has been said and written about the changes that have

already taken place in Europe and those that lie ahead. Today I want to focus on the implications of these changes for

Australia-Britain relations, on the one hand, and for Australia's broader relations with Europe, on the other.

In a climate of dramatic economic and political change as has occurred in Europe, it is as false to pretend that everything has changed as it is to pretend that nothing has changed. Let me give you one example.

There are those in Australia who are now arguing that Britain's new priorities in Europe and the changing regional focus of Australian policy mean that Australia's continuing constitutional ties with Britain are now outdated. That is, they believe that

the time has come for Australia to become a republic.

Even the Australian Labor Party, which is the governing party in Australia, recently endorsed the objective of an Australian republic by the year 2000.

I believe that such talk is shallow. I believe that such talk is totally inappropriate. I believe that, fundamentally, such talk is simply a distraction from other events.

It is shallow because there is nothing inevitable about Australia becoming a republic, despite the changes here and despite the changes in Australia.

When I went to Canada 25 years ago I used to hear the same

argument. It was inevitable that Canada would become a republic, it was said. It hasn't happened and one might say there have been a lot of other forces at work in Canada that might have more easily pushed Canada to become a republic. It certainly wasn't

inevitable. It certainly still isn't inevitable.

Secondly, it's inappropriate to talk like that in Australia because the form of government which has served Australia well in the past, and which continues to do so, is that of an

independent constitutional monarchy under the Westminster system.

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I think, importantly, this sort of talk in Australia today is very much a distraction from the more urgent tasks that are facing the Australian Government and to which they seem to have no answer. Things like recovery from the recession, the deepest

and most protracted recession in 60 years. Issues like the reform of our basic economic infrastructure and the fact that we can do all we need to do under existing constitutional

arrangements. It is a diversion and a distraction, not a debate of substance.

There is nothing subservient or inferior about the existing constitutional relationship between Australia and Britain. Quite frankly, what is not broken, doesn't need fixing.

More broadly, I believe that Australia-Britain ties will continue to grow particularly in terms of our economic links and the , people to people links that exist and are well developed between the two countries. .

I believe that the Commonwealth will continue to provide an important focus for co-operation between Australia and Britain. I know that the value of the Commonwealth does not need any

justification in a forum such as this. I should also emphasise that the Opposition Parties which I lead have always been very strong supporters of the Commonwealth for many years. I was pleased to confirm that ongoing commitment in my meeting

yesterday with the Commonwealth Secretary-General.

But I'd have to say that the Commonwealth is facing a critical phase in what can be called this post-South African phase that it is now entering. The issues of apartheid, and the sanctions imposed on South Africa as a result, have been the dominant

issues within the Commonwealth now for over a decade. I believe that the Commonwealth's agenda is rapidly changing as a result of the irreversible reform movement which is now taking place and which is now well under way in South Africa.

The Commonwealth is currently facing two major changes to its effeetivenes as an organiation in the 1990's.

The first is not to be left behind on the South African sanctions issue.

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I should, make it plain that the Opposition Parties in Australia have believed for some time that the situation within South Africa has warranted the lifting of a range of economic and sporting sanctions. We recognise that this approach was ahead of the prevailing consensus view within the Commonwealth.

Indeed, our Parties have quite frankly never believed in punitive sanctions as the best way to bring about change. To us, they tend to disadvantage those who have had the greatest needs or who you are trying to help the most.

The European Community, Japan, and now the United States, have recently implemented a policy of relaxing sanctions as has the International Olympic Committee. In these circumstances I believe that the Commonwealth needs to move in a similar

direction - not just because others have, but because a rational assessment of events within South Africa demands that they do. To be clear, I think the time has now come for all sanctions, except certainly sanctions like the UN arms embargo, to be

lifted.

Things are moving pretty quickly now as we observe the events in South Africa. They're moving a lot quicker, it's fair to say, than people imagined they would just a couple of years ago. Think back a couple of years ago as to whether you would

realistically have imagined that the basic legislative pillars of apartheid might be removed in such a short space of time. Or that there would be a re-admission of South Africa to the Olympic Games and other international sporting events.

That's not to say that there aren't still important steps to be taken in South Africa.

There's still a long way to get fair and free elections based on a non-racial constitution as the single most important remaining task. I

I put it to you that the objective we can work towards would be the re-admission of a democratic, non-racial South Africa within the Commonwealth. I don't see that as an immediate prospect but I think it's the sort of objective we should keep clearly in our mind, as we assess the process of change in South Africa and as we look forward to the role that the Commonwealth might play in

the 1990's.

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The second challenge for the Commonwealth in the 1990's is to define a clear set of objectives for itself now that the emphasis on the South African issue has begun to wane. In what are likely to be years of fiscal restraints for its member states, the Commonwealth needs to be realistic and to recognise that it may

in fact achieve more by aiming to do less than it has done in the past.

It would seem that the Commonwealth's best interests lie in focussing on a couple of major areas of activity such as

practical economic development programs in the less developed countries of the Commonwealth and, importantly, in giving assistance in developing democratic political systems within the members1 states.

I can assure you that the Opposition Parties in. Australia will remain fully committed to a dynamic role for the Commonwealth in » the sorts of areas that I've identified.

Let me move on and say something now about Australia-Europe relations.

The momentum which is building towards the creation of a Single European Market by 1992 promises to bring with it historic changes - historic changes both within Europe and in Europe's relations with countries such as Australia. The new EC market will be one of over 340 million consumers. It will be the

largest, most sophisticated and most efficient single market in the world.

Consumer spending in the European Community is forecast to rise by over 50% in the next five years. The Single European Market will involve a basic restructuring of the industry of the

European Community making for a more competitive and a more dynamic European economy.

The Single Market will open up exciting possibilities for many Australian companies and exporters particularly in transport, banking, insurance and also in telecommunications, building materials, pharmaceuticals, the food industry and so on.

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These opportunities, however, will only be maximised if two conditions are met.

First, Australian economic enterprises, and indeed our economy, must become more productive and more genuinely internationally competitive. Australia's international economic performance has simply got to improve, not just in the Asia-Pacific region but

right across the board. We simply cannot afford to try and pick winners in one geographic area against another, or in one

geographic area to the exclusion of another.

That is why the Opposition Parties in Australia have set out a program of fundamental reform which we believe is necessary for Australian export industries in particular to achieve what I would describe as best international practice.

The main elements of our reform agenda which we have now been detailing for the last 15 or 16 months are tax reform, including substantially reformed personal taxes and the introduction of a broad based goods and services tax - or as you might know it, value added tax - as part of that reform agenda.

Secondly, substantial labour market reform, moving away from a centralised system of wage determination to work place wage negotiations. It is the only way we will get an effective link between productivity and performance. To do that we need to make

some important legal changes. We need to outlaw compulsory unionism and closed shops, and we need to facilitate the

development of enterprise based unions rather than a few large and very powerful national unions.

Thirdly, there is a range of reform proposals in relation to the waterfront, land transport, shipping and telecommunications. That is fundamental to eliminating a lot of the cross

disadvantages that presently impede the capacity of our exporters to make their way in international markets.

Fourthly, the pronounced program of reducing the size of

government both by cutting government expenditure directly and also by privatising a very large range, a very long list in our case, of publicly owned and publicly managed business

enterprises, and contracting out a whole range of government services to the private sector. The Government continues to pay for the delivery of those services. They are clearly not the most efficient way in many cases of delivering those services.

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We have also embraced the objective of zero tariff protection in Australia by the year 2000 which will mean substantial

downscaling of tariffs in industries like textiles, clothing, footwear and automobiles.

We have also developed a specific proposal in the Asia-Pacific region for using the organisation APEC - the Asia-Pacific Economic Co-operation - forum to foster trade liberalisation in the Asia-Pacific region: to use that forum, not in any exclusive sense but particularly in a GATT consistent sense, to lower protection throughout the Asia-Pacific region. We believe it is possible in the course of this decade to establish an Asia-

Pacific free trade zone on the basis of that proposal.

These reforms will not only maximise Australian, interests in the Single Market in Europe but they are also essential if we are to continue to attract European capital at a time when competition for capital is likely to increase quite significantly on an

international scale right throughout the 1990's. *

There is, however, a second requirement for the development of Austral!a-European Community relations in the decade ahead. The Single Market must be a genuinely outward looking market and not an introverted market, not a self-serving market and particularly

not an exclusive market. The Single Market must result in a genuine elimination of trade barriers and discriminatory regulations. It must not just push out the internal walls of protection to the European Community's external borders.

Australia has important interests at stake on this issue. Almost a fifth of our exports go to Europe. Europe provides over one- quarter of our imports and Britain remains one of the largest suppliers of investment capital to Australia.

The reasons for Australia's concerns about the possibility of a fortress Europe in the future relate not just to the scale of our economic interests in Europe.

They also relate to the fact that another European experiment in common economic policy, namely the Common Agricultural Policy, has been deeply introspective and pursued at a very high cost to both Australia's efficient and non-subsidised agricultural producers as well as to the serious disadvantage of the consumers within Europe.

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We feel it particularly in Australia at the present time when our agricultural producers are among the most cost effective, if indeed not the most cost effective producers in the world. We don't subsidise them and their life is getting increasingly difficult in competing with subsidised exports of agricultural commodities from the European Community.

During my recent visit to the United States I made it absolutely clear to both the Administration and to the Congress, the

Congressional representatives that I met, that Australia was deeply concerned about the damage being done to it by American agricultural subsidies administered under the Export Enhancement Program.

I also made it crystal clear that I recognised that the European Community was the prior and the major source of the

inefficiencies created by subsidisation.

Of course, the Americans argue that their EEP program - Export Enhancement Program - is simply a response to the Common

Agricultural Policy of Europe designed to put pressure on the Europeans, put pressure on them by making them spend more money to sustain that Common Agricultural Policy and hopefully to increase the chances of substantial trade liberalisation down the

track.

From an Australian point of view our producers suffer a double whammy. We get hit by the Europeans in terms of the extent of agricultural assistance and subsidy from Europe and then we get hit one more time by the Americans under the Export Enhancement

Program.

You can imagine what the circumstances are like in Australia at the present time in its worst rural crisis for 60 years. Wool and wheat in particular have gone bad at the same time, an

unusual event given the nature of our history. It’s a situation where neither the Government nor the Opposition is prepared or able to begin unjustified assistance and, in fact, we don't believe in it. I

I don't think you solve problems by adding inefficiency to what are already efficient producers. The pressure is very real and the arguments are very strong and what have been traditionally very supportive, conservative constituencies in Australia in our

rural sector are now lashing out very widely and very outspokenly against that sort of situation, which is described in Australia, as corrupt marketing practices.

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The scale of the market distortions and inefficiencies being created by the Common Agricultural Policy is easily summarised by reflecting on a number of facts.

Agriculture accounts for 3% of GDP in the European Commun ity but 1% is returned to agriculture by way of subsidy.

Secondly, 20% of the European Community's farmers account for 80% of production and around 80% of subsidies.

Third, expenditure on agricultural subsidies in the European Community total 260 million pounds per day or 14,000 pounds annually for every one of the 6.8 million farmers in the European Community. Over the past three years European Community farm #

support costs have increased by 24%.

It 1s been said in fact that every cow in Europe has more spent on it annually than half the world's population has in disposable income.

There is a very depressing irony in those very stark facts. The paradox is that at a time when the European Community is

eliminating discrimination in its internal market, it is doing the opposite in terms of its external economic policy. Quite frankly, if it's good for the European market it's even better for the world market.

The argument applies that you should break down tariff barriers and subsidy barriers within the European market. It applies even more importantly within the world market. Balanced against the Single Economic Market on the one hand is the fact that the

European Community has systematically entrenched and strengthened the policy of subsidisation targeted against the most competitive foreign suppliers.

So for all kinds of reasons, including efficiency reasons, reasons in relation to consumer rights, reasons in relation to the inherent logic of the market, this divergence between the Community's external and internal economic practices cannot

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Despite the serious damage currently being done in Australia I must say I am optimistic about the outcome of a review of the Common Agricultural Policy of Europe and the GATT processes.

I don't underestimate the magnitude of the task that is before us but I think it is fundamentally important that we recognise that getting a substantial outcome from the GATT Round, which means getting a substantial outcome in terms of lower

agricultural protection, should be considered to be the single most important international economic policy issue at the present time. I hope that is recognised.

The Economic G7 Summit is to take place here next week, a unique opportunity to give that process a genuine and substantive kick start. If you think about it, we have the major powers in the » world and they can provide a lead. I think a lot of the work is

going to have to be done by John Major and George Bush in terms of putting the case and making the argument. It is possible that the G7 Summit could actually give the GATT process a degree of substance and a sense of urgency that it hasn't had up until now.

There is very great pressure at the present time within Europe for some change. The magnitude of the problem that exists, for example, within Germany in terms of the re—unification of Germany - the unestimated or unexpected size of that problem - must be putting some very real pressure on German economic management and

it begs the question of just how long German and other European producers will be happy to continue subsidising inefficient farmers in other parts of the Community, particularly those in France.

So we do have a unique opportunity right now, I believe, to kick start the process of GATT. Let's not wait till 1993 and the eve of that final date before there's a sense of urgency. Let's hope that the Economic Summit next week clearly establishes that sense of urgency and gives some substance to that process.

I'm optimistic about the importance of, and the prospects for, Australia-Europe relations in the years ahead.

On the one hand. Australia must put its own economic house in order. It is fundamentally important that we don't just make these arguments offshore, that we too put these arguments in place onshore. .

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That is why, as I said, we have decided to provide something of a lead. The Opposition. Parties have advocated zero tariff protection by the year 2000 as a firm commitment. We've also outlined in detail a very significant - and some would say

radical - reform agenda which we have prepared as a platform to the next election. We aren’t making any promises to the people of Australia that can't be delivered. We simply say that if you change your behaviour, if you become more productive, if you become more internationally competitive, if you increase your

savings then, you will better the country and you will better yourselves.

I don't think there is any alternative in current circumstances of the worst recession in 60 years that we, responsibly from Opposition, just simply tell it the way it is and promise to make the changes that have to be made even if some of those are going

to be difficult to sell politically.

Equally though, I think it's up to Europe to start to give ground in relation to some of its unjustified practices. In the

(inaudible), illogic if you like, of advocating lower levels of protection and lower levels of subsidisation within. Europe while expanding that activity beyond Europe is probably the most damning indictment of the attitude that exists at the present

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So I finish my remarks, Mr Chairman, by saying that I remain very confident of the prospects for Australia-Britain and Australia- Europe relations. But we are going to have to make some changes, some very fundamental changes, in this post-Cold War era that is now upon us.

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