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Thursday, 8 February 2007
Page: 8

Mr TRUSS (Minister for Trade) (11:26 AM) —May I at the outset thank members for their contributions. Some of the contributions were a little on the colourful side, and few were actually relevant to the nature of the bill and instead were a general discussion in relation to trade and trade performance, as reflected in the opposition’s amendment which, needless to say, the government will strongly resist. It does so because the amendment is fundamentally flawed and is not relevant to the legislation.

The honourable member for Hotham, in his response, said a number of things with which I agree and much with which I do not agree. His speech contained numerous factual errors and misrepresentations of the government’s position and was mainly devoted to criticising Australia’s trade performance. In particular, he referred to the Australia-US Free Trade Agreement in less than complimentary terms. I think he has misrepresented substantially the performance of the Australia-US Free Trade Agreement. The figures for the financial year 2005-06 show that Australian exports of both goods and services to the United States have increased. You would not get that impression from the comments of the honourable member for Hotham. Services exports, which comprise about a third of all of our exports to the United States, increased by 5.7 per cent, to almost $5.4 billion. There were significant increases in a range of contracts, particularly new government procurement contracts. We have seen over $95 million worth of government procurement contracts which simply would not have been possible without the Australia-US Free Trade Agreement because Australian companies were precluded from those contracts prior to the agreement.

There have been some increases in significant agricultural products, in dairy in particular and in lamb and mutton, as a direct result of the benefits of the free trade agreement. But it must be said that, historically, Australia has had a trade deficit with the United States which has been going on for generations. I wish we could turn that around, but the reality is that the US is the source of a lot of the technology that is essential for the growth and development of Australian industry.

A couple of other things have happened which have made an enormous impact on the Australia-US trade balance. The first is that, when the Australia-US Free Trade Agreement was negotiated, the value of the Australian dollar was significantly different from what it is today. In 2001, for instance, the average exchange rate for the US dollar was A52c. In 2005, it was A76c. That clearly makes a difference to every figure in the trade balance, but it also alters the competitiveness of Australian products in that particular market.

Another major factor has been the diversion of Australian crude oil to Asia for refining, which has significantly altered the impact on our trade balance. I will also refer to the impact of the decline in beef exports to the United States. There has been a reduction of around $500 million worth of beef exports to the United States since the Australia-US Free Trade Agreement was put in place. Essentially that is because markets in Japan and Korea became very much more attractive following the BSE outbreak. We now have as much as 90 per cent of some of those markets; hence, that product has been diverted away from the US and into those markets, though probably only for the short to medium term.

The member for Hotham also referred to the decline in US investment in Australia without acknowledging that most of that can be attributed to the changed arrangements resulting from the restructure of News Corporation. That has had a significant effect on that statistic, but Australian investment in the US has grown substantially. I am sure that the US’s interest in Australia has also benefited from this free trade agreement.

Everyone can selectively quote statistics. The honourable member for Hotham made a quite extraordinary statement in the Age a few weeks ago that, if you projected the figures on trade under Labor today, we would have billions of dollars of trade surpluses. I responded that, if you use that same methodology, we would also have government debt running into trillions and budget deficits would be in the hundreds of billions. The reality is that the methodology is unsound; things change in time. I am not suggesting that Labor would be running deficits of hundreds of billions—probably many billions, but not hundreds of billions—therefore the arguments that the honourable member for Hotham put were simply mathematically unsound.

I would obviously like Australia’s trade to always be in surplus, and that must be an objective that we all work to, but I was surprised at the statements by the honourable member for Blaxland and the honourable member for Rankin. The member for Hotham also made a complaint about the fact that Australia has not been able to take maximum advantage of the resources boom that is occurring at the present time. I have some sympathy with that view—I think it is a pity that Australia has not been able to sell more to the markets that want our products—but then they avoided the reason for the problem: that is, 50 ships lined up at Newcastle and Dalrymple Bay because the state governments did not have the initiative to provide the port facilities that were required. The infrastructure—railway lines and so forth—is inadequate, but it is all controlled by Labor state governments. They should not point the finger of blame at this government; they should look at the reason for the failure to get a lot of those minerals out of the country in a timely way.

Labor also suggests that there have not been any new mines. I agree there have not been enough new mines, but who stopped the mines? The problem is at the state level, with the red, green and black tape that has been put in the way and that encouraged Australian mining companies to look to other parts of the world. I think the states also need to look very seriously at how on earth we can take advantage of the available commodities boom when so much red tape has been put in the way.

I would remind members opposite also, when they are lamenting the fact that we have not sold enough coal, that there are some amongst Labor who want to stop coal exports altogether. Some want to close down coalmines in the Hunter Valley. That kind of woolly thinking needs to be stamped out if the Labor Party want us to believe that, somehow or other, they would achieve higher commodity exports if they were in government.

The Australian trade performance has some quite pleasing elements. It is clear that exports are growing substantially. Even last month, when we had a disappointing trade balance, it was actually the fifth-highest month for exports on record. Indeed, we have had most of the highest months on record in the last 12 months. Our exports are growing substantially, but they have been offset by a growth in imports, mainly in consumer goods but in some instances in the equipment we need to upgrade our mining industry and to improve our manufacturing sector so that it can be more competitive into the future.

Another factor which will have an impact on the Australian trade figures over the months and years ahead, and which was reflected last month, is the importation of aircraft. Last month imports for the defence forces were significant, with the importation of the large new C17 aircraft making an impact on our trade balance. We also imported a lot of munitions in that month. Qantas have orders on the books for something like $50 billion worth of aircraft. When those aircraft come into the country it will have a big impact on our trade balance. On the other hand, we are exporting parts for those aircraft, and that provides a useful boost for Australian industry. There will be some improvements also on the export side.

We still have a long way to go in improving the world trade environment so that trade is freer and fairer. We all need to work constructively towards ensuring a better outcome from the Doha Round and any multilateral and bilateral free trade agreements we are able to achieve. Many countries want to do free trade agreements with Australia and we need to encourage that process. On the other hand, Australia sets high objectives for these free trade agreements. We want high-quality, comprehensive agreements. We do not believe there is a benefit in just putting marks on the wall for all the agreements we have; it is the quality of those agreements that counts. A lot of effort needs to go into negotiating the best quality agreements.

Doha remains the Australian government’s highest priority, and maximum effort will be put into ensuring a good outcome. I assure the honourable member for Hotham and others who are interested that that multilateral arrangement remains our highest priority. We will not compromise the resources available to those negotiations to pursue other free trade agreements with countries like China and Japan. They are high priorities and we will put the necessary resources into them as well, but it will not be at the expense of our multilateral work. The next six months or so will be critical in knowing where we are heading in relation to multilateral trade outcomes and Australia will be putting the maximum effort into achieving a good result. But we are interested in other multilateral trade agreements and bilateral agreements that can benefit Australia. We will certainly also focus our attention on that work.

Turning to the Export Finance and Insurance Corporation Amendment Bill 2006 and the reason for the discussion, I note that the opposition has indicated its willingness to support the bill and the proposed changes. This bill is a response to the Uhrig recommendations under which the government is reviewing corporate governance of statutory authorities and office holders. The response in this bill reflects the Uhrig recommendations and as a result will deliver an EFIC arrangement that is the most effective and that delivers good accountability and governance structures for the organisation. In the Foreign Affairs and Trade portfolio six statutory authorities, including EFIC, have been reviewed under the Uhrig arrangements. The Australian Trade Commission recently implemented changes to its governance structure as a result of this process.

The bill provides for the EFIC board to have the power to appoint the managing director and deputy managing director after consultation with the minister. It provides for the removal of the managing director of Austrade from the EFIC board. The size of the EFIC board is to be limited to between six and nine members and the quorum of a meeting of the EFIC board is to be reduced to three. Appointments to the EFIC board other than in respect of the government member will be limited to three years, with the introduction of a limit of two terms, or three terms for the EFIC board members who serve as chairperson. These changes are also consistent with the recommendations of the Uhrig report. The Senate Standing Committee on Foreign Affairs, Defence and Trade examined the bill in September 2006 and has recommended that the bill be passed. It is relatively uncontroversial and will have no financial impact. EFIC’s mandate and function will not be affected in any material way by this bill.

I thank honourable members for the debate on trade issues. It is important that there be opportunities to discuss those issues about which there is a reasonable degree of bipartisanship in what our objectives are. Some may disagree about what the right route to get to those outcomes is, but all Australians want our country to sell more goods. Everybody says that we want fewer imports, but it is in their hands to guarantee that we have fewer imports: buy Australian goods and do not buy imported goods. But the reality is that they do not do what they say. When it comes to the supermarket, they buy what is cheapest or what they think is best for them. When they go to the electrical goods store or wherever it might be, they tend to buy increasing amounts of imported goods. So this is a classic case where ordinary Australians can actually do something about our exports and our trade balance. They can buy more Australian goods and encourage Australian industry, and those who adopt those sorts of practices deserve encouragement and support. Thank you to those who have made a contribution. I commend the bill to the committee.

Question negatived.

Original question agreed to.

Bill read a second time.

Mr Martin Ferguson —I would like to pose a question to the minister.

The DEPUTY SPEAKER (Hon. AM Somlyay)—Do you want to speak on indulgence?

Mr Martin Ferguson —Yes, please. I seek the views of the Minister for Trade as to the very strong view expressed by the 2007 Australian of the Year, Mr Flannery, on Lateline last night, that we should now very seriously start to reduce as a matter of urgency our coal exports.

Mr Truss —Reduce our coal exports? In response to the honourable member’s question, I have to say that I found the remark quite extraordinary. It is not a policy that the government intends to pursue. The government does, however, recognise that we need to do what we can to improve the technology associated with the burning of coal in power stations and in industry. We support the introduction of clean coal technology. We have done that through research and development, direct financial support and encouragement to the sector. It is very important for a country like Australia, which is a major supplier of energy, to be responsible in playing our role in reducing global greenhouse emissions. But to stop exporting coal from Australia would in my view probably not reduce emissions, because the coal would simply come from other parts of the world that do not have such high standards. His call was not well founded and does not reflect government policy.

Ordered that the bill be reported to the House without amendment.