Australia and Germany

Speech by the Minister for Trade Senator Bob McMullan at the Australia-German Association 'Partnership 2000' Trade and Investment Conference, Melbourne, 6 October 1995.

Introduction

I am delighted to welcome to Australia as a guest of the Australian Government, the German Minister for Post and Telecommunications, Dr Boetsch. I am also pleased to welcome the distinguished group of business leaders that has travelled from Germany to take part in this land mark conference

It is particularly pleasing to be able to welcome you to Australia at the time of the fifth anniversary of Germany's national day, celebrating the reunification of Germany on 3 October.

I would like especially to acknowledge the presence of the German Ambassador to Australia, Dr Klaus Zeller and Australia's Ambassador to Germany, Mr Max Hughes, as well as that of Dr Eckhard Rohkamm, the President of the Deutsche Australische Gesellschaft (D.A.G.), and Mr Charles Trethowan, Chair of the D.A.G.' s counterpart organisation in Australia, the Australian-German Association (AGA) .

The D.A.G. and the AGA have worked tirelessly to ensure the success of this conference, and they have, I think, provided an excellent forum for a serious discussion of the ways in which German and Australian business can do more together.

Finally, I would also like to thank Ambassador John Button and all members of the Conference Steering and Management Committees for their efforts in bringing together this event.

The AGA 'Partnership 2000' Trade and Investment Conference

Ladies and Gentlemen

This "Partnership 2000" conference is a key element in our efforts to develop a more dynamic bilateral relationship between Australia and Germany. We in Australia could not be more serious about the priority we place on this task. Already this year we have seen a range of major initiatives to strengthen the relationship: The meeting between Chancellor Kohl and Prime Minister Keating earlier this year was by any measure an outstanding one. Both leaders exchanged strong and clear visions of the role our country's have in the rapidly changing world order and both were able to outline very impressive report cards of achievements we have both made to date.

In the case of Germany, the vision and achievement is manifest in German reunification - an event which was met with sheer exhilaration throughout the world - and in Germany's leadership in the ongoing development of a stronger, more unified Europe.

In the space of a decade, we have seen in Europe the establishment of a framework for the creation of a single market, the European Economic Area, encompassing 18 countries and over 370 million people; the signing of the historic Maastricht Treaty on European Union; the enlargement of the European Union to embrace 15 countries and the opening of the door for EU membership to extend to up to 27 countries; and substantial progress in redefining the security architecture of Europe. In the sweep of history, these are extraordinary developments and have probably not been given their full due by the Australian media.

In the case of Australia, we have seen over the same period a fundamental shift from a country whose economy was largely protected and introverted to one that is now among the most open in the world, and one that is reaping the benefit of our strategic position and our comparative advantages in the East Asian hemisphere, the fastest growing region in the world.

We have also seen Australia playing a leadership role in the development of a new sense of regional identity through the Asia Pacific Economic Cooperation (APEC) initiative and, in the area of regional security, through the ASEAN Regional Forum.

Australia's place in Asia was of particular interest to Chancellor Kohl who has himself identified the area as the region of the 21st century and who has in the last two years put in place a strategy to promote Germany's interests in the area, and I will return to this issue shortly.

But it is also notable that during their discussions both Chancellor Kohl and the Prime Minister underlined the prime importance of a strong multilateral system to underpin world trade. Both Germany and Australia have global trade and investment interests. In the case of Australia, if trade and investment levels are combined, the European Union is, for example, our most important economic partner. Both our countries have been strong supporters of free trade and played key roles in the Uruguay Round of Multilateral Trade Negotiations - Australia, through our leadership role in the Cairns Group and our chairmanship of the negotiating group on trade in services.

It is critically important to both our countries that we maintain the momentum for further trade liberalisation. We in Australia look to Germany, as one of the world's major trading nations, to continue to show leadership within the European Union and globally on these issues, including as we prepare for the inaugural WTO Ministerial Conference to be held in Singapore at the end of the year.

Ladies and Gentlemen

A key outcome of the Prime Minister's discussions with Chancellor Kohl was recognition that the bilateral relationship between Australia and Germany falls well short of its full potential and that there is a need to rectify this situation. Both leaders agreed that a joint review of the trade and investment relationship should be conducted and they identified this Conference as an opportunity to begin the process of building a new relationship which more fully reflects the opportunies available to both our countries. A large part of that review has now been completed , and we hope to conclude it in the next few weeks, having taken into account the outcomes of this Conference.

Your own discussions and contributions to the review will be greatly assisted by the AGA' s report into the bilateral trade and investment relationship prepared by Dr David Charles of the Allen Consulting Group, entitled Bridging Continents. I don't propose to steal Dr Charles's thunder by talking about the report in too much detail - he will present it to you later in the morning. But I can say that his comprehensive report confirms the view reached by the Prime Minister and the Chancellor that the bilateral relationship has not reached its full potential. It identifies a number of key areas where further cooperative enterprise would be especially profitable and provides a very good starting point for us to develop an action program to intensify our commercial relationship.

But let me be clear. The economic relationship between Australia and Germany is not an insubstantial one. Two way trade is running at around $6 billion, with Germany being Australia's 15th largest export market and our 3rd largest source of imports, and Germany is the 9th largest investor in Australia.

There are undoubtedly areas where both Governments would like to see changes in the policies of the other. Australia would definitely be prepared to sell a great deal more clean coal, and a great deal more low priced, high quality agricultural products to Germany if we were not prevented by trade barriers and subsidies.

But the more fundamental issue is whether the trade and economic relationship between Australia and Germany reflects the opportunities which have arisen from the many changes which have taken place in both our economies and the very significant regional and international developments which are influencing the shape of both our futures.

I hope that Dr Boetsch and the German business leaders who have come to Australia for this conference will be able to see first hand just how much Australia's economy has changed over the last decade, and will take home with you the clear message that Australia wants - and is ready - to do a great deal more business with Germany..

The Australian Economy

If you need proof of the success of the changes that have been made to the Australian economy then you need only look at the performance of the Australian economy. We are one of the fastest growing economies in the OECD, with GDP growth averaging 4 per cent over the last 4 years. Our underlying inflation rate has been held below 2.5 per cent for the last three years - below the average of the OECD and most importantly, below the average of our major trading partners. Business investment in equipment is growing strongly, recording an increase of 22 per cent in 1994. Business profits have recorded substantial growth, with profit share now running at nearly 30 per cent. Employment is also growing strongly with some 500,000 new jobs created in the past two years, and industrial unrest is at its lowest level in 50 years.

This strong performance has been made possible by the extent of economic reform in Australia over the past ten years, including: But we know that the reform agenda cannot end there. It must - and will - continue if we are to achieve even greater improvements in labour and capital productivity, and it must extend to every corner of the economy, including the non-traded goods area and infrastructure development.

To this end, the Federal and State governments agreed earlier this year to implement a National Competition Policy reform package to ensure the whole economy benefits from full and fair competition, including the opening up of monopolies in electricity, gas, water, rail and ports to competition.

According to recent estimates, this new phase of microeconomic reform in Australia has the potential to increase the size of the Australian economy by 5.5 per cent per year.

Reforms in the telecommunications sector provide a particularly good example of the depth and breadth of economic change in Australia. We see parallels in our experience with the reforms that Dr Boetsch is now implementing in Germany - by 1998 Germany too will have competition in the sphere of basic telecommunications as part of a comprehensive restructuring of the German telecommunications market, just as German firms have profited from the opening-up of Australia's telecommunications markets, so we look forward to Australian involvement in the opportunities offered by liberalisation in Germany.

Ladies and Gentlemen

The continued growth Australia has experienced over the last 16 quarters also reflects our success in restructuring and diversifying Australia's economic base exports as a share of GDP have increased from 16 per cent at the end of the 1980s to over 19 per cent today - and the profile of Australian exports has shifted decisively. We remain one of the world's most efficient suppliers of agricultural and mineral commodities, but increasingly we are seeing elaborately transformed manufactures and services exports making a greater contribution to our export effort, with services and manufactured exports now accounting for around half of all exports.

This has also been accompanied by the increasing integration of the Australian economy with those of our Asian neighbours, with East Asia now taking around 60 per cent of our exports and the trend likely to continue further.

Australia and Asia

The dynamism of the East Asian hemisphere has provided important opportunities for us in the process of transforming Australia's economy and its business culture over the last decade, and it is entirely appropriate that the German Government and German business is giving increased attention to the opportunities for trade and investment in this region.

The massive new markets being created in the region mean that an enormous amount of business is opening up, and will continue to open up.

I know that Ambassador Zeller has played a central role in the formulation of Germany's new strategic approach to our region, and I'm gratified that the importance of German businesses developing trade and investment links with Australia is covered in the 'Concept on Asia' paper.

The Asia-Pacific Committee (APA) for German business has also been active, especially in developing German business awareness of the possibilities for profitable commercial activity in this part of the world and in implementing the Government's strategy for enhancing links throughout the region. These efforts have not gone unnoticed in Australia and I would like to see strong links developed between the Australian Government and business and the APA.

Australia and Germany - commercial partnership

There are, of course, a significant number of German companies that have already recognised the importance of economic developments both in Australia and the Asia-Pacific region. companies such as Thyssen, Daimler-Benz, Hochtief and Lurgi are creating networks of partnerships throughout the region to take advantage of potential synergies.

These companies know that Australia is globally competitive in a whole range of industries, and the notion of Australia as a base for operations in Asia is now an important element in these companies' existing and planned strategies.

German companies - like those in the US and other parts of Europe - are increasingly recognising that Australia provides a highly competitive and attractive base for doing business in the region.

The Australian economy is third biggest in Asia after Japan and China, and we offer an excellent skills base, a more than competitive office market, low cost, high quality telecommunications, excellent support services, a favourable time zone, economic and political stablility, and a first rate living environmnet for international managers.

The bottom line is that Australia offers a more highly competitive and efficient cost structure than just about any other major regional centre. There are presently 160 international firms with regional headquarters or a major regional function in Australia, with many of these having been established in the last few years.

In addition to those German companies I mentioned earlier, the Australian subsidiaries of companies such as Bilfinger and Berger, VDO, Hoechst, Siemens and Hella are now playing a significant regional role in their parent companies' global operations, and there are many others well-positioned to expand operations in the region. I hope they will take up the challenge.

There are many more ways that Australians and Germans can work together, such as the enormous potential for German companies to enter into joint ventures with Australia in Asia, and here the opportunities for cooperation between the small and medium sized companies in Australia and Germany - are particularly bright.

My colleague Senator Cook, Minister for Industry, Science and Technology, has recently released a new investment promotion publication titled 'Australia, Your Strategic Investment Location" which has been prepared with the assistance of the European Commission. This publication contains considerable data comparing the cost of operations in Australia with that of other nations, and copies are available from the D.I.S.T. table located in the foyer of this conference.

On the other side of the ledger, Australian investment overseas has been growing rapidly over the past ten years from 14 per cent of GDP in 1983 to 31 per cent in 1994 - higher in proportion to the size of our economy than Germany and most other OECD countries, including the United States and Japan.

Germany is now of particular interest to Australian investors and the Australian business presence there is now much more identifiable in a wide range of fields. Examples include: As David Charles's report makes clear, there is considerable scope for Australian companies to increase investment in Germany in the coming years.

Germany provides an excellent platform for accessing markets in Central and Eastern Europe, and Australians now understand to a far greater extent what is involved in operating a business in Germany.

Conclusion

Ladies and Gentlemen

The Australia-Germany relationship is solid and based on many shared economic, social and political interests, and there has been strong growth in two-way investment and commercial partnerships have over the last decade.

But German investment in Australia still falls well short of that of other major economic powers including the US, the UK, the Netherlands, and there are many more opportunities for Australian and German companies to work together to capture the opportunities open to us all in the East Asian region and in Europe.

This conference will, I hope, provide a spur to the development of a new generation of cooperative enterprise between Australia and Germany. The Australian Government is committed to playing a full part in this process and to ensuring that German business is aware of Australia's expertise and the advantages to be gained from greater linkages with Australian business.

We intend to use the review of the bilateral relationship commissioned by Prime Minister and Chancellor Kohl as an important means to achieve these outcomes. In the end of course there is only so much that Governments can do - businesses must make their own commercial decisions.

But I hope that the report and discussions at this conference will encourage you to explore more deeply the potential for significantly strengthening trade and investment links between Germany and Australia.