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Monday, 29 November 2004
Page: 114

Senator FERRIS (9:13 PM) —In speaking today on the address-in-reply, what better topic to choose than Australia's trade history and its outlook for the future, in particular the opportunities which are going to arise in South Australia as a result of the free trade agreement? Senator Conroy and I were privileged to work together on the Senate committee inquiry which investigated this issue.

During the last 12 months we have seen an ongoing debate in this parliament and around Australia about trade and trade issues, in particular free trade agreements. Since the Howard government's successful negotiations with the Singapore and Thai governments and with the Bush administration in the United States, Australia's relationship with its trading partners has received an increased focus among the broader Australian population. This will no doubt be heightened again with the Prime Minister this week attending the ASEAN conference in Laos. I ask senators to recall the comments made by our Governor-General when he opened the 41st parliament just two weeks ago. He said:

The government is committed to the multilateral trading system and driving forward the Doha Round of trade negotiations, which promises enormous gains for Australia.

At the same time, the government will continue to pursue other opportunities for trade liberalisation, including through free trade agreements.

The Governor-General went on to say:

The government will also continue to consider possible FTAs with China, Malaysia and ASEAN, the latter in conjunction with New Zealand.

I was very happy to be part of the Senate Select Committee on the Free Trade Agreement between Australia and the United States of America, and in light of the announcement by the Minister for Trade, Mark Vaile, in Santiago I look forward to seeing the economic benefits of the agreement for all Australians when it comes into force on 1 January next year. It is worth remembering that from that date 97 per cent of Australia's exports to the United States will be immediately free of all tariffs. Analysis suggests that the Australian economy will see an annual boost to GDP of $6 billion a decade after the free trade agreement comes into force on 1 January. I will be very pleased to visit some of the exporters who wrote submissions to the committee and to talk to them first hand about the beneficial impact of the free trade agreement.

In my own state of South Australia the free trade agreement will have significant benefits for the economy. The US is South Australia's largest two-way trading partner and its largest destination for exports. These exports include wine, motor vehicles and agricultural exports such as tuna from Port Lincoln. All of them will see benefits from 1 January 2005. Senator Conroy and I were very pleased to receive submissions to the committee from each of those manufacturers in South Australia—the car industry, the wine industry and the seafood industry—all of whom saw great benefits in the free trade agreement with the United States.

In 2003 South Australian exports to the United States were worth $1.2 billion. Based on the size of our economy, South Australia is expected to benefit by approximately $400 million each year through the implementation of the United States free trade agreement. This is very important to all South Australians because recent trade statistics have highlighted some issues in the South Australian economy. In 2001-02, under the former state Liberal government, South Australia's exports had grown to $9.1 billion, an increase of 233 per cent over the 1993-94 level of $3.9 billion when the Liberal government first came to office. Statistics from May 2004, however, show that, under the current Rann Labor government's management of the state economy, exports from South Australia have fallen by 13 per cent to $7.6 billion. It is very obvious that the current South Australian state government needs all the help it can get, and the free trade agreement with the United States will deliver that.

There have been a number of recent announcements regarding the agreement which will be good news for all primary producers in Australia. I was interested to read in the recent announcement that 50 Australian companies would share in the export dairy quota available under the agreement of 27,000 tonnes of milk products in the first year. Dairy Australia has said that farmers with 200 milking cows will see a rise in income of between $2,000 and $3,000 as a result of the agreement with the United States. When asked about the impact of the free trade agreement on the dairy industry during our committee hearings the Deputy Chair of the Australian Dairy Industry Council, Mr Paul Kerr, said:

The value of dairy exports to the United States in year 1 is estimated to grow by at least $50 million to $60 million. The five per cent growth in access each year means that access will double in about 16 years.

Another industry which is looking to build on its already strong export record to the United States is the beef industry. Exports of chilled table beef, a higher value export than hamburger beef—`ground beef' as it is called in the United States—reached 27,000 tonnes in 2003, up from 6,700 tonnes in 2000. That is a significant rise in just two years. It is anticipated that these exports could rise to 40,000 tonnes over the next few years. According to David Palmer of Meat and Livestock Australia, Australia is in a `fantastic position' in terms of beef opportunities in the US in the medium to longer term, particularly because Australia's US quota increases to 450,000 tonnes over the next 18 years under the free trade agreement.

Similarly to the US free trade agreement, the Thai agreement will bring large financial benefits to Australian exporters. In 2003-04, Thailand was Australia's 12th largest trading partner with two-way trade worth $6.1 billion. However, when the agreement comes into force more than $700 million worth of current Australian exports to Thailand will obtain immediate tariff cuts. The savings on Thai customs duties are expected to be about $100 million in the first year alone. The agreement will eliminate more than half of Thailand's 5,000 tariffs. This equates to nearly 80 per cent of Australia's exports—a very significant policy change. The Thai free trade agreement will ensure new or improved export opportunities for many Australian exports, including grains, horticulture, meat, dairy, processed food, seafood and, very importantly in South Australia, wine.

There have been major benefits for different industries as a result of the Singapore-Australia Free Trade Agreement. Since the agreement came into force, Austrade has helped more than 160 companies—many of them new exporters—to enter the Singapore market with deals worth more than $120 million. Singapore is a transportation and financial hub in the region. It is our largest trade and investment partner in ASEAN. It is our eighth largest merchandise market and our fifth largest services export market. Given that Singapore's economy is growing strongly again, with GDP growth in excess of five per cent expected this year, this represents an incredible opportunity for Australian exporters. The free trade agreement came into force in 2003, providing improved access to the Singapore market for a great number of existing Australian exporters, particularly those supplying financial, legal, educational and professional services. As Australia looks forward to the benefits of the agreements, it has also signed up to, and it looks to benefit from, other agreements with countries such as China and Malaysia.

It is very important to look back on how far we have moved on the issue of free trade. It is hard to believe that it is more than 20 years since Australia and New Zealand signed the CER agreement, the Closer Economic Relations agreement. This agreement represented one of the earliest free trade agreements between countries. As I recall it, at the time there was a great deal of trepidation in New Zealand that Australia would swamp New Zealand with imports. However, quite the reverse has occurred; the opportunities in Australia for New Zealand products have been enormous. How many times do we go into supermarkets and find New Zealand dairy products, such as New Zealand cheese, on the shelves? It is very obvious that New Zealand has benefited enormously from its Closer Economic Relations agreement with Australia. Interestingly enough, in 1983, when the CER was signed, Australia's merchandise exports to New Zealand stood at $1.2 billion, but by 2003 this figure had risen to $8.1 billion. Service exports also doubled over that period. Today our trade with New Zealand remains very strong. As our nearest neighbour, it remains our fifth biggest export destination.

In 1987, when Australia was facing an economically flat world and domestic policies which inhibited the possibilities for growth, Dr Andrew Stoeckel produced a report for the National Farmers Federation entitled The game plan: successful strategies for Australian trade. This was one of the first studies that Dr Stoeckel did following his very successful time as the director of the Bureau of Agricultural Economics. I happen to still have a copy of that book. It is interesting to look back on it—it was so long ago, in 1987. He explored in that publication the future of the Australian export economy and the possibility of trade reforms both within Australia and around the world. Although the book was written 17 years ago, the core arguments contained in the report remain, and the issues surrounding Australia's trade activity continue. One of the questions posed by Dr Stoeckel in the report was whether a liberal world trading order was a real possibility or just pie-in-the-sky thinking. Looking at what was written then, it is hard to believe how far we have moved on this issue. Yes, some of the countries he referred to may have disappeared, and the Uruguay Round of talks have been replaced with the Doha negotiations, but the strategies and outcomes which were sought at the time are now government policy.

A liberalised global trade agenda benefits all Australians, and most sections of the Australian community agree with the policy. In fact, Senator Conroy and I were able to listen to Dr Stoeckel's view of the free trade agreement during the select committee hearings. As usual, he had a very positive view of the benefits for Australia, which were subsequently reinforced in economic studies provided to the committee. In 1996 Australia's exports were worth $99 billion. In 2003 that figure had grown to $141 billion. This is despite international crises, such as SARS, which affected Australia's exports into Asia. This year, the World Trade Organisation has forecast that world trade will grow by eight per cent in real terms. It is important to note that some of the strongest growth worldwide will be seen in our region.

Other statistics that highlight the benefits of better access to global markets include the view, which is well accepted now, that at least one in five Australian jobs is generated by exports. In regional and rural Australia that figure rises to one in four jobs. This equates to 1.8 million jobs around Australia. Only four per cent of Australian businesses export, but those businesses that do export provide almost 20 per cent of Australian jobs. Exports generate about 20 per cent of Australia's GDP. Our exports to many of our closest economic neighbours continue to grow dramatically. Australia's two-way merchandise trade with APEC was worth $168.4 billion in 2003-04. This accounts for 70 per cent of Australia's merchandise trade with the world. There is great capacity for future growth with APEC countries, which we all look forward to. These countries have some of the best economic growth rates in both the developed and the developing world.

In relation to China, with whom we are currently talking to begin negotiations for a free trade agreement, our merchandise exports in 2003-04 increased by 12 per cent under our current arrangements. Exports increased by eight per cent to Vietnam and four per cent to Malaysia. In addition to the merchandise exports, service exports from Australia also continue to grow. Service exports to the very important APEC region have grown by an average of six per cent each year since 1992-93. In 2003 they were worth $19.9 billion. In addition to the bilateral free trade agreements undertaken with countries such as the United States, China, Thailand and Malaysia, the Prime Minister and the trade minister must be commended on their work in reshaping global trade networks.

With the 21 APEC nations currently accounting for approximately 60 per cent of global trade, APEC has consistently been at the forefront of the push to free up trade. The endorsement by APEC ministers in Santiago a few days ago of the agreements of the World Trade Organisation to abolish all agricultural export subsidies is a welcome start in pressuring the rest of the world to move on this issue. It is great news for our primary producers. Ongoing bilateral free trade negotiations are giving Australian companies access to some of the fastest growing and most lucrative economies in the world. With 1.3 billion people, China has the seventh largest economy and it is the world's fastest growing economy. Currently it is Australia's second largest export market and third largest source of imports. What a great base to build on for our agreement. China has an annual growth of 8.2 per cent and the Chinese economy is expected to be the size of Germany's by 2010 and of Japan's by 2030. A decade ago, China took approximately four per cent of Australia's exports; today that figure has risen to over eight per cent. Two-way trade with China has now topped $23 billion, a remarkable achievement.

In the past week there has been more good export news out of China, with the Australian Wheat Board Ltd announcing the sale of 1.5 million tonnes of milling grade wheat, worth between $300 million and $400 million, to the Chinese. China has taken 2½ million tonnes of Australian wheat from the AWB in the last 12 months—again a very significant sale. Importantly for Australia, China is the world's largest consumer of wheat, equating to one-sixth of global consumption. In addition to the wheat deal, Elders has recently announced that China has taken 87 per cent more wool than for the same period last year without the disruption of SARS. China is now buying 46 per cent of all Australian wool exports. Again, it is a very significant trading partner. A free trade agreement with China would open the door for many more export sectors, from our primary produce and minerals and energy to horticulture, fresh food and vegetables, which is a wonderful opportunity. The deal with the Chinese government on the North West Shelf venture to supply three million tonnes of LNG worth between $700 million and $1 billion each year for 25 years is another example of our opportunities with China. Trade, as Andy Stoeckel said so long ago, is the only way for Australian industry to go. We have benefited enormously from the government's policies on trade, and we will continue to do so.