Deputy Prime Minister and Minister For Trade, The Hon. Tim Fischer, MP


Introduction

I am very pleased to be able to participate in this conference on the outlook for the Asia Pacific region. And I congratulate the Asia Pacific Economics Group on the quality of Asia Pacific Profiles 1996.

Conferences like this - and authoritative surveys like Asia Pacific Profiles - make an essential contribution to discussion of a fundamentally important national issue. That issue is the economic transformation of the Asia Pacific economy, and its effects on Australia.

How effectively Australia responds to what is no less than an historic change in international affairs will influence our incomes and jobs into the next century. One fact makes that clear: nearly four out of every five of Australia's merchandise export dollars now come from the Asia Pacific region.

And our fastest-growing export markets are in Asia. 62 per cent of our exports went to Asian markets in 1995, up from 50 per cent just ten years before.

So it is important to promote broad community understanding of the tide of change that is affecting all Australians. High-quality analysis of Asia Pacific trends is no longer just a matter for government and academics. It is vital to our future as a nation.

Information is the key to business success: it helps you to make the right choices and it reduces the costs of market entry. Monitoring the Asia Pacific economies contributes directly to Australian business performance, and hence to the prosperity of all Australians.

Monitoring the Asia Pacific economies is important, too, in government decision-making. As our economy opens up in a globalising world, the old divide between domestic and external policies is steadily breaking down. Any policy that affects business costs - for example labour market reform or competition policy - affects Australia's ability to compete in world markets.

It follows that Asia Pacific Profiles, by providing reliable and comprehensive information on the Asian economies, helps both business and government make the key decisions of the day.

Asia's economic importance to Australia

A moment ago I cited some figures that demonstrate the growing importance of Australian trade with Asia and the Asia Pacific.

So for both Australian governments and Australian business, understanding the Asian region and where it is heading is of vital importance.

When discussing long term Asian growth prospects, it is difficult to avoid the recent controversy inspired by Paul Krugman on the contribution of productivity to growth in East Asia.

Regardless of how right or wrong you think Krugman is, the debate has forced us to look hard at our assumptions.

It is easy to fall into the trap of assuming that Asian growth is an historical imperative which cannot be derailed. That kind of thinking neglects two obvious points.

In the first place, Asia is a diverse region where economic performance has varied widely - for example the Philippines, India and Vietnam are only now emerging as dynamic economies.

And second, history shows us that even the most dynamic economies in the region have had their short-run economic crises. It is worth remembering that in the early 1980s Korea had debt of Latin American proportions, while Singapore went through a severe recession in the mid-1980s.

So nothing should be taken for granted. Nevertheless, I am optimistic about the potential for Asian economies to maintain rapid growth. And I am glad to see that Asia-Pacific Profiles takes a similar view.

There is a great underlying strength in the region's economies. It stems from high saving and investment rates, macroeconomic responsibility, ability to attract foreign capital inflow, commitment to the market system, and continuing reform and liberalisation. Those characteristics are backed by heavy investment in relevant technology and education.

A key factor in regional economic growth has been trade policies which have delivered relatively open economies and export-led growth. There is a consensus that trade and investment liberalisation is a win-win policy for the continuation of regional growth.

Policy challenges

However there are a number of key policy challenges which have the potential to dampen the region's prospects if they are not faced firmly.

The first is maintaining the momentum for domestic economic reform and international trade liberalisation. A key element must be winding back restrictions on trade and investment flows. I will come back to this later in relation to APEC and the World Trade Organization.

The second key challenge is improving the skills base and productivity of the work force. I am pleased to see that this is also a focal point of Asia Pacific Profiles. Skills and ideas are one of the greatest resources of the East Asian economies. They can only become more important as regional economies climb the value-added ladder to higher incomes.

The third challenge is upgrading physical infrastructure. This is an important pre-condition for improving competitiveness and expanding supply.

The fourth key challenge has to do with managing domestic demand. At present, strong demand in some economies has resulted in high inflation rates and rising current account deficits. I see little prospect now of serious current account difficulties. But future market sentiment could possibly reduce the ability of these economies to respond flexibly to external shocks, and it may affect their attractiveness as investment destinations.

Australian Policy

What does all this mean for Australia and for Government policy? As part of the Asia Pacific economy, Australia must be able to compete in the region. And it must be able to respond to both economic opportunities and negative economic impacts as they arise.

Domestically, the Government is committed to restoring sensible macroeconomic settings.

Returning the budget deficit to surplus will reduce pressure on the current account deficit and foreign debt levels. That will open the way over time to higher growth, and it will make Australia less vulnerable to interest rate or terms of trade shocks.

The Government is also revitalising microeconomic reform. As the saying goes, "Trade policy begins at home". Reforms to transport, the waterfront, telecommunications, competition policies and to labour markets are designed to improve our ability to compete flexibly in fast-changing overseas markets.

The Government's trade policies must complement domestic reforms.

At the bilateral level, our trade policies are about improving market access for our exports and increasing foreign demand for Australian goods and services.

At the regional level, our trade policies must help shape the Asia Pacific trade and investment environment, by working through APEC to advance regional liberalisation and by strengthening economic integration in the region.

All this takes place within the framework of multilateral trade rules presided over by the World Trade Organization.

APEC

The task for APEC in 1996 will be to put flesh on the bones of the Bogor Declaration and the Osaka Action Agenda, based on comprehensive Individual Action Plans (or IAPs) from all APEC members.

The challenge is to deliver concrete outcomes for the business community, particularly by pushing regional trade liberalisation further and faster. But we will be doing this in difficult circumstances this year. Some key economies are facing elections and we are all learning how to handle the IAP process, which is a very new approach to regional trade liberalisation.

Australia tabled its own IAP at the APEC Senior Officials Meeting in Cebu last week. It is a progressive one.

It addresses the main liberalisation issues of tariffs, non-tariff barriers, investment and services. It also addresses important trade facilitation issues like standards, customs procedures, intellectual property rights, the movement of business personnel, and deregulation.

I am encouraged by the fact that all APEC members tabled draft plans along with us last week. And we will be working over the year to lift the level of ambition involved in them.

In assessing plans by other economies, we will naturally be giving priority to the areas that matter most to Australian business. They include the liberalisation of minerals, agriculture, and services trade; the reduction of high tariffs on industrial products; and progress on harmonisation or mutual recognition of standards.

We will be doing this in close consultation with business. Indeed, my Department and I have already been discussing with business not only Australia's own plan, but Australian priorities in other APEC economies. This will continue in the lead-up to the Ministerial and Leaders meetings to be held in the Philippines in November.

A New WTO Round

The APEC meetings will also be looking at how APEC can best contribute to the inaugural Ministerial Meeting of the World Trade Organization to be hosted by Singapore in December.

We will be working to ensure that the inaugural WTO Ministerial meeting in Singapore in December is a success. At that meeting, Australia will be working for agreement on an ambitious agenda for further work. The agenda must meet two key tests. It must be relevant to practical market access issues. And it must be able to form the basis for another round of multilateral trade negotiations by 1999.

Our aim for the WTO is that it should pursue free trade at least as ambitiously as regional agreements like APEC. That idea is gaining ground among key players, and it should be a major theme for the Singapore meeting.

Conclusion

I want to conclude with this observation. That whether you are in government and working towards the WTO Ministerial meeting, or in business and working to crack an overseas market, high-quality information is a vital resource.

Asia Pacific Profiles 1996 and this conference will help Australian decision-makers get it right.

I wish you well in your discussions.