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Monday, 15 June 2009
Page: 5999

Mr BYRNE (Parliamentary Secretary to the Prime Minister and Parliamentary Secretary for Trade) (4:54 PM) —I would like to talk about trade and the Appropriation Bill (No. 1) 2009-2010 and the Appropriation Bill (No. 2) 2009-2010. We know that trade has been hit hard by global recession. In fact, we know that the World Trade Organisation is predicting global exports will drop by nine per cent this year and that Australia forecasts that global trade flows could shrink by as much as 11 per cent this year. If realised, this would be the sharpest fall in world trade in the postwar period.

For export-reliant economies in the Asia-Pacific this downturn is being felt very hard. Jobs have been lost and incomes have fallen. In this region, both workers and decision makers understand that trade is integral to continued national prosperity. Under these tough circumstances many APEC economies have felt the pressure of calls for protectionism. It has been hard to contain these protectionist measures and pressures. The Australian government remains confident that we have the structure to deal with the worst of the protectionist tendencies—that structure is called the World Trade Organisation—and that there are effective disciplines within that system that guard against protectionism.

In April, G20 leaders also renewed their commitment to concluding the WTO’s Doha Development Round, the successful conclusion to which would help underpin the global economic recovery. We have seen continued progress at the recent Cairns Group meeting in Bali, hosted by the Minister for Trade, Simon Crean. On 24 and 25 June, trade ministers will attend the OECD meetings in Paris, fittingly on the theme ‘The crisis and beyond: building a stronger, cleaner and fairer world economy’. This provides another opportunity for discussions aimed at concluding the round at the political level ahead of the G8 summit in Italy in July. The G20 grouping has provided great leadership also, reaffirming the commitment of that grouping to avoid the past protectionist mistakes.

Protection and protectionism shackle growth in Australian employment, growth in Australian exports and growth in Australian prosperity. Protectionism leads to artificial barriers being created against higher quality, more competitive production and improvements in the volume of our exports. It actually borrows from Peter—and not Peter Costello—to pay Paul. Protectionism unites disparate political traditions—the collective wisdom is clearly on the side of free trade. In fact, somewhat incongruously, I quote former US President Ronald Reagan in his weekly radio address to the nation on 5 December 1988. He prefaced his remarks on trade by observing that the United States declared its independence for a variety of reasons, one of which was the restriction of trade with other European powers. He made the following observations regarding the policies exemplified by the Smoot-Hawley Tariff Act:

America’s most recent experiment with protectionism was a disaster for the working men and women of this country. When Congress passed the Smoot-Hawley Tariff in 1930, we were told that it would protect America from foreign competition and save jobs in this country-the same line we hear today—

over and over again. He went on:

The actual result was the Great Depression, the worst economic catastrophe in our history; one out of four Americans were thrown out of work. Two years later, when I—

that is, Ronald Reagan—

cast my first ballot for President, I voted for Franklin Delano Roosevelt, who opposed protectionism and called for the repeal of that disastrous tariff.

Ever since that time, the American people have stayed true to our heritage by rejecting the siren song of protectionism. In recent years, the trade deficit—

and this is more recently—

led some misguided politicians to call for protectionism, warning that otherwise we would lose jobs. But they were wrong again. In fact, the United States not only didn’t lose jobs, we created more jobs than all the countries of Western Europe, Canada, and Japan combined. The record is clear that when America’s total trade has increased, American jobs have also increased. And when our total trade has declined, so have the number of jobs.

Part of the difficulty in accepting the good news about trade is in our words. We too often talk about trade while using the vocabulary of war. In war, for one side to win, the other must lose. But commerce is not warfare. Trade is an economic alliance that benefits both countries; there are no losers, only winners. And trade helps strengthen the free world.

In fact, I will refer to another United States President on this very same issue. Upon signing the landmark Trade Expansion Act on 11 October 1962, Mr Kennedy said:

This act recognizes, fully and completely, that we cannot protect our economy by stagnating behind tariff walls, but that the best protection possible is a mutual lowering of tariff barriers among friendly nations so that all may benefit from a free flow of goods. Increased economic activity resulting from increased trade will provide more job opportunities for our workers … Lowering of our tariffs will provide an increased flow of goods for our American consumers. Our industries will be stimulated by increased export opportunities and by freer competition with the industries of other nations for an even greater effort to develop an efficient, economic, and productive system. The results can bring a dynamic new era of growth.

That was in 1962, involving the same issues. Recently, following the G20 meeting in April, US President Barack Obama observed:

… we have rejected the protectionism that could deepen this crisis. History tells us that turning inward can help turn a downturn into a Depression. This cooperation between the world’s leading economies signals our support for open markets, as does our multilateral commitment to trade finance that will grow our exports and create new jobs.

That is all on the growth front.

As you can see, Mr Deputy Speaker, there is a common theme emerging here historically. In his tribute to the late John Button in the Australian last year, former Prime Minister Paul Keating recounted a phone call to John Button—then the Minister for Industry, Technology and Commerce—on a Saturday morning in 1991 and urging him to commit to a reduction to five per cent in the general manufacturing tariff by 2000. Paul Keating said, ‘In for a penny, in for a quid,’ and Button agreed. Keating described Button as someone who recognised that the historic economic defence of the Australian model was outmoded and as someone who saw his constituency interests in the longer term perspective. He was right.

The current account deficit for the March quarter 2009 fell 27 per cent to $4.6 billion—the lowest quarterly deficit since the September quarter 2001. The March quarter trade surplus of $5.1 billion was the largest recorded by the ABS since it began recording these figures in the September quarter of 1959. These positive figures exist because of a generalisation of sustained trade liberalisation and because we have rejected the insular and the protectionist impulse.

On 1 June this year, the Minister for Trade, Simon Crean, launched The benefits of trade and trade liberalisation, a report by the Centre for International Economics which demonstrated that trade liberalisation—the rejection of the protectionist approach—benefits Australian families to the tune of $3,900 per year, with higher skilled and higher paying jobs. This is the perfect example of how trade is not to blame for the worldwide recession but can be part of the solution. Evidence shows that an increase of just one percentage point in the ratio of trade to gross domestic product can raise income per person by up to two per cent. On the upside, when economies do recover, there is every chance that trade can rebound just as fast as it fell.

The Australian government is doing its part to bolster the international community’s effort to support recovery. We are implementing a nation-building and jobs plan, injecting fiscal stimulus into our economy in line with the efforts of the G20 and APEC countries. At the G20 summit, we joined with other countries in efforts to reform the international financial architecture. This is all consistent with solid and improving macroeconomic conditions in China that would suggest that recovery may not be too far away. Protectionism in this country would only stifle this recovery and lead into a downward spiral of retaliatory measures. As an example, China has been a major driver of export growth for Australia in the past decade and continues to be a major partner and a major destination for our exports. In this context, reported moves by the NSW government to ban exports from China and elsewhere—if this report is true—are entirely self-defeating.

The premise of this protectionist move is that it will protect jobs in New South Wales and Australia, reportedly, through an inbuilt discount of 20 per cent on Australian products when compared to products sourced overseas. This ‘protection’ is a misnomer. Protectionism reduces competitiveness. It does not promote growth. It leads to the closing of overseas markets for other producers. It protects nothing. I will tell you one thing: it will hurt Australian exporters if this example is followed. This is no doubt a well-intentioned approach to dealing with the global financial crisis but it will undermine the good work that this government is doing to open up new markets for Australian exports, protecting and creating jobs not just in New South Wales but throughout Australia through both more trade and trade that is free.

What would be the effect, for example, if this measure were followed federally? If you add North, South and South-East Asia, these regions together now account for about 68 per cent of our total merchandise exports. The contribution of this trade to Australia’s prosperity is enormous. In 2008, Australia’s merchandise exports to Asia as a whole were worth more than $150 billion. We have gained and continue to gain real economic benefits from Asia’s growth, and trade has been the instrument that has tapped Australia into Asia’s growth. If we fell for what President Reagan termed the ‘siren call of protectionism’, New South Wales and every other state would soon find doors closed on these opportunities in Asia, resulting in this country having lower prosperity and lower employment.

On 3 June, I had the great pleasure of attending the 2009 Australian Export Hero Awards presentation dinner. This dinner recognises, as the name suggests, export heroes, with an export hero being an individual who has demonstrated outstanding vision and made a significant and unique impact whilst achieving success for their organisation and Australia in the international marketplace. The Australian Export Heroes program recognises contributions made by Australians in building our modern export enterprises and helping to further develop a uniquely Australian export culture. This program is an initiative of the Australian Institute of Export and its partners and highlights outstanding careers, dedication and commitment to building Australia’s export and international interest. It recognises the champions of Australia’s export community. These export heroes are role models for future generations of Australian exporters. The Australian Export Heroes Awards recognise extraordinary contributions made by individual Australians in building our modern export enterprises and helping to further develop a uniquely Australian export culture. These are precisely the sort of people we need to be encouraging, again, by removing protectionist barriers rather than erecting them.

Pursuing further great trade integration with Asia remains vital to our national interest just as it is important for Asia’s own economic development. It is clear that trade is a driver of economic recovery. For example, according to the IMF, evidence from past recessions in Asia shows that exports have been the main engine rooms of recovery. To be more precise, six of the 10 recoveries in Asia have been led by exports and, during the recovery phase, export growth has tended to rebound strongly. Asia’s recovery can be export led as can ours in concert with a targeted, timely stimulus package. Trade reform is vital to helping our economy recover quickly and robustly. All the evidence shows that export-led recovery in Asia has also been accompanied by growth in developed markets, which is why—as G20 leaders have called for—a combined approach on the parts of governments injecting fiscal stimulus into their economies and committing themselves to reject trade protectionism is of the utmost importance. We in this country and the federal government are of course pushing hard against protectionism. For example, we have registered our strong opposition against the United States government’s plans to introduce dairy export subsidies following on from the recent introduction of the European Union’s dairy export subsidies. On a wider point about protectionism, it is a development we must resist if we are to see true economic growth return.

The IMF’s latest outlook forecasts several Asian economies to continue to grow this year and the next. Looking ahead at 2010, Australia forecasts key Asian economies to be amongst those showing positive signs of growth. This is the area that we are most integrated into in trade at the present time. China is growing at eight per cent; Hong Kong, South Korea and Singapore are growing at 2¾ per cent; Indonesia, Malaysia, the Philippines, Thailand and Vietnam are growing at 2½ per cent; and India is growing at 4¾ per cent.

With our bilateral trade agenda, Australia is negotiating free trade agreements with China, Japan, Malaysia and the Gulf Cooperation Council. We held the first round of the free trade agreement negotiations with South Korea several weeks ago. Australia will also be joining negotiations towards a trans-Pacific partnership agreement, with other parties likely to be New Zealand, Chile, Singapore, Brunei, Peru, the US and Vietnam. And, of course, there is the recently signed ASEAN-Australia-New Zealand FTA, which I will speak about briefly in a moment. If you are wondering why Australia is so vigorous in pursuit of these bilateral and regional trade agreements, it is because we strongly believe that they are the building blocks for multilateral trade liberalisation and regional economic integration. FTAs can make a positive contribution to the global trading system. Why and how? Because they are comprehensive and truly trade-liberalising across all sectors.

There is no better example of our benchmark for success than the ASEAN-Australia-New Zealand FTA, or AANZFTA, as it is known. Let me briefly outline why. This is the first FTA Australia has signed since the onset of the global financial crisis. In the face of rising pressures to put up trade barriers, there is no better demonstration of a resolve, putting our money on the table, to fight protectionism than settling a comprehensive regional free trade agreement. The AANZFTA has put our region at the front of the global efforts to fight protectionism. For Australia, it is the largest FTA we have ever negotiated. In 2008, our two-way trade in merchandise with ASEAN and New Zealand alone was worth $88 billion, or 20 per cent of Australia’s total merchandise trade. For ASEAN, AANZFTA is the most comprehensive trade agreement it has ever concluded. It covers goods, services, investment, intellectual property, intellectual commerce, temporary movement of businesspeople and economic cooperation. It provides for substantial commitments on tariff elimination and what is known as WTO-plus commitments in other areas. For example, it binds current low tariffs and eliminates tariffs over time from the more developed ASEAN member countries and Vietnam on between 90 per cent and 100 per cent of national tariff lines. These tariff cuts cover 96 per cent of our current exports to the region. Perhaps not surprisingly, few countries find it easy to cut trade barriers at the stroke of a pen. Opening up trade involves painstaking technical work and engagement at the political level. But the successful conclusion of the free trade agreement with ASEAN and New Zealand shows it can be done.

Today the US charge d’affaires, Dan Clune, rejected the assertion in the Australian that the US Department of State assistant secretary-designate, Kurt Campbell, is opposed to the Prime Minister’s plan for an Asia-Pacific community. In distancing Secretary-Designate Campbell from this perspective, Clune quoted Campbell, who said:

I think the fact that there is a greater interest in finding appropriate forums, not just in Australia, but in China, Japan, the United States, is a healthy thing—

appropriate forums being avenues for tackling the common problems we face, most obviously the global financial crisis, from all concerned nations, providing the framework for a sustained recovery and a return to economic growth. Through strengthening regional architecture, as Clune has observed, we are better able to pursue these collaborative opportunities. That is precisely what our government intends to do.