Speech by the Minister for Trade Senator Bob McMullan at the APEC SME Ministerial Meeting, Adelaide, 15 September 1995

Introduction

I know that you have been discussing in detail measures to advance the important interests of SMEs through APEC.

Before addressing the benefits that SMEs can derive from APEC's work, I thought it might be useful to provide an Australian perspective on the state of play in realising the Bogor Leaders' commitment to free trade and investment.

This is not because the prosperity of APEC SMEs hinges on the delivery of the free trade promise

- the momentum for market opening in the region has a strong dynamic of its own and SMEs will benefit from this.

But what the Bogor commitment is about is adding to this momentum, shaping it and sustaining it

- in a way that will generate increased export opportunities and greater job prospects

- particularly for those involved in SMEs in view of the very major contribution they make to our national economies.

The State of Play

If you tried to understand the state of play in implementing the Bogor Declaration by a daily reading of the newspapers, you could be excused for being somewhat confused.

The outlook, according to the media, pitches from profoundly negative to profoundly positive.

It's a bit like following the old cinema serials, very much in the style of "The Perils of Pauline"

- with every episode ending with shock!, horror!, crisis!

- but you tune in for the next episode and things are not so bad.

For example, I woke this morning to see the headline in The Australian - APEC split forces rescue mission

- but much like the script of "The Perils of Pauline" future headlines will show that progress on APEC is back on track.

APEC is not a serial, it is a process.

Headlines like this morning's reflect an inclination to focus narrowly on the daily moves and countermoves of APEC members as they react and counter-react to domestic and regional pressures.

While the issues at the core of these moves and countermoves are not unimportant, by failing to put this activity into a broader perspective a much more far reaching phenomenon is being overlooked

- and that is a commitment by APEC members to carry the organisation forward.

I have said that Australia can only gain from APEC

- it is not a matter of whether we win, but how much we win.

And this is no less true for other APEC members.

We do not have to try to convince each other of this

- we all know it

: and this underpins our commitment to making the organisation work.

Japan's bold leadership of APEC this year is a testament to this, along with the constructive actions of others.

You will be familiar with the framework APEC members are developing this year to implement the Bogor commitment.

Essentially, it is based on an approach to secure our shared goal to accelerate and expand the strong liberalisation trends which already exist in the Asia-Pacific

- while enabling APEC to add value, not merely to act as a cheer squad on the side.

It is not based on formal legalistic approaches to securing liberalisation

- APEC is driven by the political will to make it succeed.

Evidence of this is with the approach centred on development of an Action Agenda to implement the Bogor Declaration.

I do not propose to go into the Action Agenda approach in detail other than to recap on the four major elements, which are:

- guiding principles

- individual action plans

- a program of collective action

- and a process of review, applying particularly to the individual action plans.

The point I wish to underline today is the fact that this approach has taken root among APEC members

- and this achievement should not be underestimated.

Consensus still has to be reached on some of the key details, but a blueprint has been developed.

The Guiding Principles

By the same token, I do not want to convey the picture that APEC's progress will be without difficulty.

Indeed, it would be naive to assume that 18 very diverse economies could agree unanimously and instantaneously on everything.

The two guiding principles which continue to provoke concern among some in APEC remain comprehensiveness and comparability.

That there would be difficulties as we embark on an ambitious trade liberalisation program is not unexpected.

But this should not be a matter for panic or breathless concern

- if we take the 2020 target date for developing countries, we are only three quarters of the way through the first year of a 25 year program

- and regional economies will change dramatically over that time frame

: issues of concern today could be redundant in 10 years time.

We should not overlook the fact, too, that APEC Leaders have shown their preparedness to take courageous decisions to solve difficult questions.

The Principle of Comprehensiveness

What the principle of comprehensiveness means to businesses and workers is that their product will not miss out on the opportunities for increased regional sales because some APEC member has sought to exclude that product from the APEC free trade promise.

That said, Australia understands the adjustment difficulties that APEC economies will have to manage in opening up hitherto highly protected sectors to competitive pressures.

And we have not said that everyone should go through this process immediately.

But a strong statement in support of comprehensiveness is fundamental to achievement of the Bogor Declaration.

I remain confident that we will secure a good result on the principle of comprehensiveness at the Osaka Leaders' meeting

- Australia will be working hard to secure such an outcome.

The Principle of Comparability

The principle of comparability is about the APEC economies embarking on liberalisation programs having confidence that others in APEC are liberalising in a generally proportionate manner

- the comparability principle is designed to strengthen the hand of those seeking reform in each member economy.

As I have mentioned, APEC is not a structured legalistic negotiating forum establishing prescriptive formulae

- therefore, we are not looking for hard edged rules to force APEC economies to progress in precise proportion.

But, on the other hand, a comparability process which is too loose and unstructured will not instil the required confidence.

Rather, we are seeking something in between

- in the form of a process within the Action Agenda to review the adequacy of individual action plans periodically.

SMEs

APEC SMEs are certain to be major beneficiaries from the APEC Action Plan.

SMEs will, I believe, stand to gain disproportionately from the added pressure APEC will bring to bear on the process of trade facilitation and liberalisation, particularly from the facilitation process.

SMEs do not characteristically have the resources at their disposal to get around or over barriers to trade which the facilitation process is designed to remove

- bigger companies often do.

And the creation of new export opportunities for APEC SMEs will lead to expanded job opportunities and greater company prosperity.

Small enterprises have been the major generators of new jobs in the Australian economy since the mid 1980s

- more than 3.5 million Australians were employed by the small business sector in 1993-94, an increase of almost 860,000 since 1985-86

- this represented an annual rate of growth of 3.6 per cent, more than twice as fast as the growth in total employment.

- and the share of total employment accounted for by small business rose from 39 per cent to an estimated 45 per cent

Furthermore, we have found that in Australia small enterprises that export on average pay higher wages per employee than their non-exporting counterparts.

APEC's agenda on SMEs recognises the significant contribution SMEs make to all our economies and is designed to remove impediments to their growth, including in the area of standards and customs

- around 30 per cent of trade-restricting non-tariff measures identified by APEC members relate to standards issues

- and our own consultations with business suggest that differing standards and testing arrangements can add between 5 and 10 per cent to exporters' costs when entering a market for the first time.

Studies carried out by the European Union in the 1980s suggested costs incurred in meeting customs formalities and associated delays amounted to 1.5 per cent to 2 per cent of the average consignment value

- and these costs were, moreover, found to be up to 40†per†cent higher for small and medium sized companies.

Conclusion

APEC members are all under pressure to ensure that their economies are well positioned to benefit from the globalisation of the world economy and regional economic growth

- this imperative will inevitably lead to greater market opening

- practices that are trade liberalising are already being regarded as making good policy sense.

The issue in question, therefore, for all of us, including those involved in SMEs, is not whether we will secure tangible improvements in the trading and investment environment in APEC, but how much value-adding APEC can provide to the liberalisation process

- something which is very much in the hands of us here today.

Thank you.