Speech by the

I am delighted to be here this morning and to have this opportunity to speak with people who do important work to strengthen business and personal links between Australia and Japan.

The main purpose of my visit to Japan, so early in the life of the new Australian Government is to demonstrate, in the clearest possible terms, the Government's commitment to building Australia's relations with Japan and to strengthening Australia's ties throughout Asia.

It is therefore appropriate for me to address this Chamber which is at the forefront of Australian efforts to put that commitment into practice.

Building Australia's relationship with Asia remains the Australian Government's highest foreign policy priority. We in the Australian Government regard Asia as the engine room of the world's economy, and we are unambiguous supporters of businesses looking to trade and invest in Asia. After all, it is Australian businesses trading into Asia, such as those represented here today, that underpin Australia's prosperity into the future.

Japan, in particular, is of vital importance to Australia's future.

For several decades, Japan has been Australia's largest export market, accounting for about a quarter of our total exports. It is our largest, our most important trading partner.

Japan is also an increasingly influential force in global and regional efforts aimed at trade and investment liberalisation. It is a major player in the evolution of a distinctive Asia Pacific voice in international affairs. This has been especially apparent in the development of APEC as the primary vehicle for regional economic cooperation and integration.

Japan is a strong and consistent supporter of Australia's efforts to develop stronger associations throughout East Asia. So, clearly, Australia's relationship with Japan is of fundamental importance to the new Australian Government.

Today I would like to provide you with a brief overview of how the Australian Government will go about strengthening ties with Japan. But first, it is perhaps worth reminding ourselves of Japan's significance to Australia.

The Japan-Australia Relationship

Japan accounts for about a quarter of our total exports. Last year, our exports to Japan were worth over $16 billion.

Japan is Australia's third largest source of foreign investment and it is our largest source of tourists.

Importantly, we are also undergoing a very positive transformation in the composition of our exports to Japan.

Our exports to Japan were once dominated by primary commodities - and for the foreseeable future, these products will continue to be vital to our trade. In recent years, however, Japan has been importing an increasingly diversified and sophisticated range of Australian products.

A decade ago three-quarters of our exports to Japan were still unprocessed products. These now account for less than half our trade; the rest is made up of processed goods and manufactured products. Some of these have been specifically developed for the Japanese market. Sake and Mitsubishi cars are two examples that leap to mind.

But, Australia's trading relationship with Japan should be still more dynamic, more diversified, more sophisticated, and therefore more valuable to Australia.

Seen in the context of the sheer enormity of the Japanese economy, our trading performance with Japan is, I believe, not as strong as it should be. While Japanese import growth was 22 per cent in 1995, Australia's exports to Japan that year grew by only 3.5 per cent. From this perspective, it is clear that there is still much to be done to make the most of the opportunities that Japan has to offer.

A major factor in explaining Australia's flat export performance is that despite the compositional changein our exports, they are still concentrated predominantly at the low growth end of Japan's import boom.

It's also worth noting that for some Australian businesses, Japan has come to be seen as one of the less exciting of the East Asian markets. Some companies have taken a view that Japan's economic difficulties over the past four or five years, together with the country's high market entry and running costs make Japan too tough a market to tackle.

I don't subscribe to that view.

Japan has entered a gradual recovery.

Structural changes are having impact on the Japanese economy, generating that massive import boom I referred to earlier.

As the reform process in Japan gathers pace, greater numbers of Australian small and medium-sized businesses will probably look more closely at the Japanese market. But it is also clear that opportunities abound in Japan right now. And the Australian Government will play an important role in setting a favourable climate for doing business and maximizing the opportunities for business linkages between Australia and Japan.

Strengthening Bilateral Economic Ties

It is, of course, a truism, to say that in the end it is business that will do business. Companies must make their own commercial decisions and seek out market opportunities. Government can, however, be constructive in building partnerships between countries. And there is no more important aspect to the building of partnerships than building prosperity together.

The underlying objectives of the Australian Government's trade policy are to pursue all opportunities for gains in market access and to promote Australia's growth through trade and investment

We are pursuing these goals through five different policy "tracks"

The domestic track of the Australian Government's approach is the foundation. It is centred on boosting the competitiveness and productivity of Australian business.

We will take comprehensive measures to lift our savings rate and inject greater efficiency into our macroeconomic performance.

And we will revitalise and deepen microeconomic reform in key areas such as the labour market, Australian ports, communications, transport and energy.

Policies to enhance our trading competitiveness on the domestic front include: promoting research and development in innovative industries; eliminating excessive business regulations; simplifying tax compliance costs to exporters, particularly fringe benefits tax; and working with State Governments to reform national competition practice.

Secondly, the bilateral track of the Government's approach underpins our commitment to work more closely with business in developing Australia's trading relationships.

Our objective is to achieve better market access and higher market shares for Australia more quickly than may be available through other mechanisms.

In relation to the Australia-Japan relationship, the Australian Government will be focussing on Japan's economic reforms. We will be pursuing with the Japanese authorities the wide range of non-tariff barriers which prevent our trade with Japan from reaching its full potential. And we are concerned to address as a matter of priority Australia's falling market share in products such as beef.

On this point, let me add that the Government is keen to hear from Australian businesses which have faced barriers to their export efforts to Japan. And I would also encourage businesses, and Chambers of Commerce such as yours, to keep an eye open for trade blocks and to alert the Government where they are found so that we may best be of assistance.

We will do everything we can at this important stage of the Japanese reform process to assist Australian businesses.

The multilateral and regional tracks of the Government's trade policy are aimed at liberalising the trade and investment environments in which Australian companies operate.

We will be working energetically to ensure the gains of the Uruguay Round are consolidated. At the inaugural WTO Ministerial meeting in Singapore in December, we will be looking to the formation of an ambitious agenda that is relevant to addressing practical market access issues and that can form a basis for further multilateral trade negotiations by 1999.

On the regional track, APEC offers the best opportunity to move ahead with economic cooperation and trade liberalisation. The business communities of Asia now rightly expect APEC to deliver concrete benefits. And at the Subic Bay APEC Leaders Meeting this November, the Government will be working to put real flesh on the bones of the Bogor Declaration based on meaningful individual country action plans.

Finally, we will be sharpening the focus of both Austrade and my own Department to ensure the export promotion track of the Government's trade policy serves exporting businesses better. We will, for example, be helping Australian industry tap in to opportunities provided by growing Japanese investments in Asia, especially in Indonesia and the Yellow Sea area of China. We will also introduce new initiatives to promote Australia as a quality food producer in addition to being a bulk food supplier.

Conclusion

Improving Australia's trade and investment performance is a core area of concern for the new Australian Government. And the five tracks of trade policy I have outlined today provide the most effective means by which we can achieve our objectives.

They entail new approaches which will enable Australia to take its place alongside the dynamic economies of the East Asia region.

Let me reiterate that, despite the claims of our predecessors, engagement with Asia is this Government's highest foreign policy priority.

The new Government is also strongly committed to nurturing our long standing relationship with Japan.

The key issue that I want to get across to Australian businesses is that opportunities for trade and investment growth are happening now and have never been better. The competition will be hot and there are no easy pickings. But the proof is there that competitive and determined businesses do succeed.

Thank you again for the magnificent work you are doing to improve the trade and investment links between Japan, Australia and New Zealand.

I wish all of you every success in developing your own business enterprises.