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Opening of the Wool Seminar, Beijing.

For over 70 years, Australia and China have traded in wool

Since 1921-22 when Australian trade statistics first recorded direct exports of wool to China, Australia has been the principal source China's imports of high quality, fine wool

. in 1993-94 the value of our wool exports to China reached A$ 700 million, making up over a quarter of our total exports.

. We are already well-established partners in wool

. China, the world's largest textile producer, is Australia's largest market for wool.

And the complementarity of our respective strengths and interests in the international wool business are the guarantee that we have a long and productive future before us

. Australia's raw wool and wool tops are the best in the world

. China's industry is best positioned to add value at the intermediate and final processing stage.

The objective of the wool seminars, which begin today, is to enhance further the combination of these natural advantages to mutual benefit

. we are honoured by the presence of Madame Wu Wenying, Chair of the China National Textile Council

. the participation by representatives from all links in the wool processing chain indicates the importance of this issue.

The "Wool Australia" delegation is the largest and most influential of its kind to ever visit China, representing all sectors of the Australian wool industry

. nearly 50 strong, most delegates have visited China many times

. but this is the first time they have come together to explore ways of boosting co-operation with China.

Here, and at the next three seminars in Shenyang, Shanghai and Wuxi, we are honoured to have strong representation from China's key policy makers, importers and mill managers - our Chinese clients.

On the Australian side we have the International Wool Secretariat, representing the wool growers; wool processors; the bankers who fund the trade; the Australian Wool Testing Authority who ensure quality standards are met; the CSIRO, the research and development organisation who have contributed enormously to making sure wool fibre evolves to keep pace with alternative fibres through innovation; and others.

We also have representatives from the Textiles, Clothing and Footwear Development Authority which promotes early stage processing in Australia and advises on import access for Chinese textiles and clothing into Australia.

The Australian Government is represented by, Austrade; the Department of Foreign Affairs and Trade and the Department of Primary Industries and Energy.

The increased volume and importance of our trade comes at a time when China's economic system is undergoing immense change

. the wool industry in China is also undergoing a major restructuring.

The devolution of decision-making to the industry level poses new challenges to Australia in terms of building links and influencing perceptions

. as China continues to evolve into a market economy, direct relationships between Australian exporters and processors and Chinese mills and importers will grow increasingly important

. the changes in China are occurring at the same time as a major restructuring of the Australian wool industry.

Australian industry needs to be fully aware of these changes in China, what risks may be involved, and the implications for Australian wool

. this mission is here to learn about and to understand these changes.

Australia and China's natural partnership does not just reflect the fact that China is now Australia's largest market for wool

. it is also manifest in the fact that China has benefited substantially from Australia's abolition of non-tariff barriers and reductions in tariffs in the clothing and textile sectors

. Australia does not impose quotas or licenses; we are committed to open markets.

The strength of our partnership is also reflected in the level of technical co-operation

. Australia's has provided substantial technical assistance to China focused on improving both wool production and wool processing

. earlier this year, the Australian Government announced a A$ 4.1 million project designed to improve the ability of Chinese mills to specify and process wool and so to produce better quality, more competitive textiles and clothing

- this is a specially innovative project, to be implemented at the industry-to-industry level.

As Australia's Prime Minister Keating and China's Vice- - Premier Zhu agreed in June 1993, there is the potential to use this type of co-operation to develop new global markets for low cost, high quality woollen products

. there is also the potential to meet the gowing demand for fashionable woollen garments generated by China's increasingly affluent consumers.

So we all win!

But to realise the full potential of these natural complementarities and the opportunities that flow from them, we both need a more open and transparent wool market in China

. it will benefit Australian wool producers and processors

. and will also help China's wool industry as overall demand for woollen products increases.

China's tariffs on imports of wool and wool products unfortunately remain high

. given the strong demand by China's woollen textile industry for imported wool - imports account for nearly 70 per cent of domestic wool consumption - high tariffs, and other barriers to trade, limit the potential for growth in the industry

. as China moves to the production of higher quality textiles and clothing, continued subsidisation of domestic wool production at the expense of fine wool imports will delay investment in new technology to improve the quality of wool products

. this limits employment in the industry as well as harming China's domestic and international markets.

China's restrictions on wool imports in fact work in favour of cotton and synthetic fibre producers, not China's wool producers

. the success of wool in China's domestic and export markets depends on its ability to compete with substitute fibres.

We know that in some quarters in China there are concerns that the import of wool threatens the livelihoods of farmers in the poorer border regions.

Only last month, officials from Australia's Department of Primary Industries and Energy visited wool producers in the China's Inner Mongolian Autonomous Region and later held talks with officials from the Ministry of Agriculture in Beijing

. they discussed co-operative ways of alleviating concerns that imported wool threatens the livelihoods of farmers in China's minority regions

. and provided results of research that demonstrate that a more liberal wool import regime does not threaten domestic producers.

We welcomed the reduction late last year in the tariff on wool tops to 15 per cent, and the temporary reduction in the tariff on raw wool to 10 per cent, but we look to China to make further significant improvements in the context of China's accession to the GATT/WTO

. we are continuing our talks with Chinese officials to ensure that access for wool imports is effectively improved

. our major concerns include the level of tariffs, the operation of the licensing and quota systems and the use of restricted access to foreign exchange as a means of limiting imports.

We believe a tariff-only regime, preferably at zero or low levels, is the best way to ensure that the full potential of China's woollen industry can be realised, to our mutual benefit.

Wool consumption in China could well double over the next two decades

China's wool producers will take advantage of this growth in demand

. as we have found out in Australia, to our cost, artificially protected industries have inadequate incentives to innovate and effectively compete on world markets

. we, like our Chinese partners, want to maximise our mutual benefits over the long term.

I urge all Chinese and Australian participants in the activities surrounding this "Wool Australia" mission to reflect on these issues and work together towards developing what can only be a major force in the world textile trade.