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APEC CEO Summit 2001, Shangri-la Hotel, Shanghai: keynote address.

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20 OCTOBER 2001




Thank you Mr Jiang for your kind introduction, distinguished guests, ladies and gentlemen. It is a great honour to be here in Shanghai in China, in one of the fastest developing parts of one of the fastest developing countries in the world. It is fitting that the APEC Leaders’ and other meetings are taking place in this city. Australia and China are different in many ways, but we are both experiencing strong growth: China is the fastest developing country in the region; Australia the fastest developed economy.

I am delighted to have the opportunity to speak to you today and later to take your questions. APEC’s main goal is to further the economic integration of the economies of the Asia Pacific region, to the benefit our businesses and our communities. So the input of business is crucial for governments. We need business to tell us what it needs.

The threat of terrorism

I want first of all to talk about the terrible events of September 11. The terrorist attacks in the United States have forced us all to re-think what more we, as a community of Asia-Pacific economies, must do.

Not only what we must do to eradicate the scourge of international terrorism that threatens the peace, prosperity and security of all people, of all faiths, of every nation, but what we must do to ensure that terrorist acts do not distract us from persevering with the economic integration and reforms needed for prosperity among our peoples.

APEC’s response to terrorism is squarely on the agenda for this meeting of leaders. This is as it should be: the attacks on the United States were an attack on all civilised countries, a monstrous abuse of economic and political openness and a threat to the well-being of us all

I want to congratulate President Jiang Zemin for responding quickly and positively to proposals by myself and other leaders that we discuss these issues.

It is essential that the international community provide all possible assistance and support to eliminate the threat of terrorism. Peoples around the world must work together to stare down and confront the evil that revealed itself with such deadly precision on 11 September.

I am confident that the international action now underway under the leadership of the United States is carefully targeted. It is designed to respond in a powerful but effective way against those who visited terror so indiscriminately and brutally on the people of New York and the people of Washington.

Australia has been steadfast over the years in working with other countries against international terrorism. We are now coordinating closely with the United States and


other countries in response to this most recent outrage. We have invoked the ANZUS alliance with the United States, just as NATO invoked Article V of the Atlantic Treaty. We have taken the entirely proper but grave step of making available for military action Australian special forces troops, military aircraft and naval vessels as part of the US-led international military operations. The magnitude and unpredictability of the threat that we all face from terrorism is ample justification for Australia to take the grave step of risking the lives of its young men and women in possible military action.

APEC response to terrorism

Military action alone will not be enough to rid us of this scourge. The fact is that, while globalisation in the form of the growing openness and interconnection between economies has brought great benefits, it has also created opportunities for small, evil groups to operate outside civilised and democratic norms. These people have sought to pervert the most hopeful development in the history of mankind for lifting the bulk of humanity out of poverty and hopelessness.

It is thus essential to strengthen international cooperation at all levels in order to allow the further development of economic integration and the openness and prosperity of our economies. The meeting of leaders hosted by China is a major opportunity to act decisively to do this.

We must stop the flow of funds to terrorists by accelerating and deepening the work of APEC finance ministers on combating financial crimes.

We must strengthen air and maritime security - APEC transport ministers should examine airport, aircraft and port security at their next meeting and ensure that all APEC economies strive to implement effective standards of security that do not unduly hinder the legitimate movement of people.

We must strengthen APEC cooperation to protect critical sectors such as energy and telecommunications.

We must achieve better enforcement of laws in areas such as customs and people movement while minimising the impact on legitimate business.

These are tasks of no small magnitude. They will require the cooperation of APEC economies, working together to make our region safe for the exchange across borders of people, goods, ideas and investment and the prosperity that this exchange brings to our peoples.

APEC gets on with business in uncertain times

The attacks on the United States have accentuated a global economic downturn that was already underway. Most perniciously, it has struck at confidence just at a time when confidence was needed for many faltering economies to return to strong growth.

The impact of the global downturn will also be felt in Australia, for many years now one of the strongest growing of the developed economies. Even in the midst of the


downturn the Australian economy will achieve good results, but growth will be slower than might otherwise have been the case.

These uncertain times underscore the importance of APEC and the need for us to get on with the business of APEC.

APEC has made a vital contribution over the past decade by creating a more certain and open environment for trade and investment. APEC economies have more than doubled their exports, created 195 million new jobs and generated nearly 70 per cent of global growth. Tariff and non-tariff barriers have been substantially reduced. APEC's average tariff levels declined by one third over the last five years, from 12% in 1995 to 8% in 2000.

It is essential that APEC economies continue to sustain trade and investment liberalisation. Now is not the time to adopt protectionist measures. Governments and businesses must support the expeditious conclusion of a new WTO round which I hope will be launched next month.

APEC leaders can give strong and valuable support for the launch and quick conclusion of a new round. The need for further global trade liberalisation continues to be great and self-evident: protection in rich countries costs developing countries more than US$100 billion each year - twice the total value of aid flows to those countries from the countries that block their exports of agriculture and textiles and other goods. OECD subsidies and other farm support last year were a staggering US$327 billion - equivalent to the entire GDP of Sub-Saharan Africa.

Practical business facilitation is another area where APEC has achieved much and can set itself ambitious goals. APEC has already simplified regulatory and administrative arrangements and reduced costs for business. There is considerable potential for further cost savings of up to 15 per cent for some goods in some economies. Savings could be worth around US$60 billion for APEC economies. Trade facilitation is a key area where APEC can work for business. I am pleased that APEC leaders will be highlighting trade facilitation as a focus for APEC’s work in coming years. We should be able to commit ourselves to reducing the transaction costs of trade that are a burden on consumers and businesses alike.

Economic and technical cooperation in APEC is helping member economies to refine policies and strengthen systems of governance to manage better in a globalised world. As leaders, we must deliver the domestic structural and institutional reforms needed to ensure growth. We must encourage investor confidence by getting on with economic and technical cooperation to ensure strong institutions, sound corporate governance and financial regulation and microeconomic reform.

APEC has done well in its first ten years, but it needs to move ahead in its next decade. It will no longer be enough simply to call for the attainment of the goal of free trade and investment by 2010 for developed economies and 2020 for developing economies. A way to achieve this is necessary. So I am pleased that at this APEC leaders meeting we will be endorsing in the Shanghai Accord a strategic, forward agenda for the coming years. This will include the new Pathfinder mechanism, a practical way of moving forward by which APEC economies that are able and ready


to move more quickly on specific initiatives will do so, with other APEC members joining when they are ready to participate. APEC should thus be able to move at a faster pace.

Maximising the advantages of globalisation

We must not allow ourselves to be deterred from welcoming and managing the benefits that our communities can gain from global economic integration. It is appropriate that a focus of this CEO summit is globalisation and its challenges.

It is ironic that the very economic globalisation that has delivered genuine economic and social progress has been attacked by some as a cause of poverty and inequality.

The truth is otherwise. Since economic globalisation accelerated in the second half of the 20th century, income growth and poverty reduction have been unprecedented. According to the World Bank, the proportion of the world’s population living in poverty has been steadily declining and in recent years the absolute number has started to fall. The very poorest group of countries now represents less than 8 per cent of the world’s population compared with just over 45 per cent in 1970. Income inequality fell 10 per cent between 1965 and 1997 across the world as a whole, and by 23 per cent among APEC economies.

Most of this progress has taken place in newly globalising developing countries accounting for around 3 billion people. During the 1990s their growth in gross domestic product per person was 5 per cent a year, compared with 2 per cent for rich countries.

It is crucial we do not loose sight of the tremendous gains made by globalising developing countries. The message is straightforward: participation in the global economy, with the right economic and social policies, allows countries to lift people out of poverty.

APEC was itself conceived in the realisation that cooperation to further market integration is beneficial.

It is right that governments and citizens be concerned about the adjustment challenges that integration into the global economy brings. The financial crisis and the global economic slowdown have underlined that those challenges are real and difficult. But we cannot allow them to weigh more in the balance of policy consideration than the enormous overall benefits of economic globalisation.

Australian reform experience

One of the reasons that Australia has taken a leading role in APEC work to explain the benefits and challenges of globalisation has been our own experience of sweeping microeconomic reform and managing a long and major process of adjustment in our own economy.

Australia is achieving good economic results even in the midst of a global downturn. Economic growth averaged 4 per cent annually over the last 5 years - 3.6 per cent


through the 1990s compared to 3.2 per cent in the United States. 3 per cent growth has been forecast through year to June quarter 2002.

The latest Economist poll predicts Australia’s economic growth will be the second fastest in 2001 and the fastest in 2002 among industrialised nations.

Australia would not have been in such a strong position had we not taken the hard decisions in getting macro and micro-economic policies right.

The Government’s domestic reforms have made Australia an internationally competitive exporter and world-class place to invest, as recognised in the latest authoritative survey of global competitiveness by the World Economic Forum, in which Australia moved from 11th to 5th place in the list of the world’s most competitive economies.

Tax reform - a subject close to my heart - has reduced the tax burden on business significantly, giving Australia a 21st century tax system.

Labour reform over the past 5 years has lifted labour productivity 2.6 percent annually, consistently well ahead of US and OECD averages. Waterfront reform has delivered record crane rates and a guarantee that business can get export orders out of the country on time.

The government has made a strategic commitment to ensuring Australia’s research and innovation capacities remain at the forefront of international standards, providing substantial support to foster public and private sector research including through generous R&D tax concessions.

Business support for APEC

It is essential as I said at the start to have the advice of business. The practical recommendations from the APEC Business Advisory Council have guided APEC work. I am delighted that ABAC will hold its second meeting of 2002 in Sydney on May 13-15.

I want in particular to express my pleasure with the work of the APEC Automotive Dialogue chaired by Ian Grigg. It is generating very sensible recommendations which I hope APEC ministers will consider. I have similar hopes for the chemicals dialogue launched this year.


Shanghai, the venue of the APEC Leaders’ meeting, shows us what is at stake in our work in APEC. By embracing the global economy, pursuing openness and reform, China as a whole and Shanghai in particular have lifted enormous numbers of people out of lives of poverty. Nowhere provides more effective testimony than Shanghai to the power of global economic integration allied with a stable economic framework to provide better and healthier lives for millions.


China’s further integration into the global economy, particularly by its membership of the World Trade Organisation, will open more opportunities for its own people, for its trading partners and for the global trading system as well. Australia, as a significant strategic partner in China’s economic development, looks forward to working with China in the future.

APEC was founded in the belief that further economic integration and openness would be in the interests of our peoples. The vicissitudes of recent years, principally the financial crisis and the blow dealt by it to millions in our region, have only underlined the need to work together to open our economies to each other. The current economic slowdown will, sadly, set back the regional recovery that was underway. The terrorist attacks and the diminished confidence flowing from them are another blow.

We must not be deterred from building a better life for our peoples. Together with the fight - military, diplomatic and economic - against the evil of terrorism, we must strive to allow our peoples to exchange goods, ideas, capital and skills with each other. We must support strongly a new round of trade negotiations. We must develop ways for APEC to move forward to achieve its goals of free trade and investment. We must manage as effectively as we can the benefits and the challenges of globalisation.