Speech by the

Introduction

It's a pleasure to be talking to you today about the Coalition Government's directions in trade policy, for two reasons.

First, I am among fellow enthusiasts. You have no stronger supporter than me in your commitment to strengthening Australia's trade and investment links with East Asia.

Second, my participation in this Forum brings together two fundamental Coalition commitments - both set out in our trade policy document "Meeting the Challenges".

They are commitments to consult fully with business and, secondly, to promote Australia's networks into the region as an economic bridge for the benefit of all Australians.

Now that we are in government, it is very satisfying to put principle into practice. So I want to underline that I am here to listen as well as talk, and I look forward to your comments.

What I want to talk about today is the importance of East Asia for Australia's economic future, the Government's approach to trade policy, and my visit later this month to China and Hong Kong.

The Importance of East Asia to Australia.

The growing importance of East Asia to our future prosperity is well known, but I want to take a bit of time to lay out just how vital the dramatic changes in Asia are to us. Because they are changes that deeply affect the jobs and living standards of future generations of Australians.

Two out of three of Australia's merchandise export dollars come from East Asia. If you add in the rest of APEC, it goes up to four out of five dollars.

But the story doesn't end with exports. More than one in three of our imports come from East Asia.

And Australia's income depends more and more on trade. Ten years ago, trade amounted to less than a third of GDP. Now it's nearly half.

In the future Australia will become increasingly integrated with East Asia.

Our composition of trade is changing. It has shifted from mining and agriculture, though they will remain important, towards manufacturing and services. Manufactures now account for over 30 per cent of exports and they are growing at 14 per cent a year. Services will soon reach one quarter of total exports.

Region-wide, this integration is reflected in the pattern of investment flows: the Bureau of Industry Economics estimates that over half of Australia's foreign direct investment stock abroad is invested in East Asia, and East Asians have about the same share of foreign investment in Australia.

Those policies include hard-earned international competitiveness, high savings, and a willingness to invest heavily in technology and education. Plentiful, competitively-priced labour has been important, too, allied with the discipline of the market and responsible macroeconomic policies.

A key source of growth has been the willingness of APEC economies to open to the outside world through economic reform and deregulation. China, Japan, Indonesia, Thailand, the Philippines, Malaysia and others have announced significant market opening measures in recent years.

But East Asia still has high average levels of protection by world standards. For instance, nearly 80 per cent of services markets are subject to substantial barriers, and core non-tariff barriers affect 13 per cent of product lines - especially agriculture.

The Australian Government will therefore be working hard to encourage further reform.

Because if governments collectively pursue current policies, the APEC economies could account for two-thirds of world output by the time the Bogor commitments of free trade and investment by 2020 have flowed through.

The opportunities for Australian business will be immense.

Australian Business Successes

And Australian businesses are already seizing those opportunities.

In Malaysia, for example, Australian companies have a major presence in Kuala Lumpur's transport infrastructure. Evans Deakin is supplying carriages for the new light rail system, while Transfield is laying the tracks.

When you arrive at the new KL airport next year, Chadwicks roofing systems will keep the rain off you.

Australian services companies are getting into the region just as actively. The ANZ for example is the biggest foreign bank in Vietnam.

And investment is growing fast, generating growth and strengthening the base for trade. In WA, China led the way with the Channar iron ore mine.

And the joint venture between Kingstream and the Taipei-based An Feng company, to build a steel mill near Geraldton, shows the additional potential to be found downstream.

WA is also prominent in outwards investment, for example through Vietnam Industrial Investment Limited's joint-venture steel mill in Haiphong.

Looking ahead, many of the opportunities will lie in helping East Asian economies address the challenges of growth: by building infrastructure; developing capital markets and management skills; by supplying education and training; and reducing environmental problems.

East Asia's challenges are Australia's opportunities.

Ultimately, it is for the private sector to make the most of those opportunities. But Government sets the policy framework and supports business efforts. That brings me to my second major topic, the Government's approach to trade policy.

The Government's Approach to Trade Policy - the Domestic Dimension

The Australian Government will be pursuing an aggressive trade strategy, with domestic and overseas dimensions.

At home, the Government's goal is to boost Australia's productivity so as to make our exports more competitive and to contribute to higher living standards.

To achieve that goal, we will return to responsible macroeconomic policies and reinvigorate microeconomic reform.

On the macroeconomic side, there is no alternative to getting the budget back into surplus by cutting expenditure. If we don't get the fiscal framework right, interest rates and your cost of capital will stay higher than most of our competitors.

While we may be cutting back some areas of short-term funding, we intend to return to you a much longer term gain: the capacity to achieve dynamic growth, improve exports, expand investment, and create jobs.

The microeconomic side, too, is about productivity growth over the long term. The Government is committed to establishing a more flexible labour market. We will also improve efficiency in infrastructure services like the waterfront, aviation, communications and energy.

And we will reduce the burden of regulation and paperwork on business. The Government is about reducing business costs, about helping business, not hindering it.

The national competition policy reforms agreed by Australian Governments in April 1995 will support the microeconomic reform strategy.

We are already pursuing a full agenda on competition policy, including the Wallis inquiry into financial regulation, reviews by all governments of regulatory impediments, and a stocktake of microeconomic reform by the Productivity Commission.

The Government's Approach to Trade Policy - the Overseas Dimension

The overseas dimension of trade policy integrates multilateral, regional and bilateral approaches, each of which reinforces the others.

Multilateral approaches offer the largest gains but are generally the slowest.

The Uruguay Round, for instance, will be worth about $5 billion to Australia in better market access. The WTO system also provides stability by establishing a framework of rules that set the reference points for work at the regional and bilateral level.

In the next few months the Government will be working to ensure the best possible outcome at the first WTO Ministerial meeting, to be held in Singapore this December.

Australia's goals are to prevent any backsliding on Uruguay Round commitments, particularly in agriculture; to push on with further negotiations mandated by the Round; and to create momentum for new multilateral liberalisation across the board.

The Singapore meeting needs to set up the work program for another comprehensive round of WTO negotiations by 1999.

Our regional approach focuses on APEC, and aims to provide leadership and a demonstration effect for the multilateral system. In a world where regionalism is a growing trend, the WTO needs to become at least as ambitious as the major regional agreements if it is to stay relevant to international trade and business.

Within APEC itself, this year is one of hard work. At the Subic Bay APEC Leaders Meeting this November, Australia will be working with regional partners to put flesh on the bones of the Bogor commitment.

The basic tool here is the individual action plan (or IAP) in which every APEC member sets down how it is going to meet its Bogor commitments. The IAP process will be a rolling one, with the 1996 plans being updated in 1997 and so on.

Draft IAPs for 1997 were considered at a meeting of Trade Ministers in July. The draft plans were a mixed bag. Some were excellent, but overall more needs to be done to lift their level of ambition by the time they are considered by APEC Leaders at Subic Bay.

I can assure you that the Government will give priority to the areas that matter most to Australian business on the APEC agenda. So we will be focusing on liberalising minerals, agriculture and services trade; on reducing high tariffs on industrial products; and on harmonisation or mutual recognition of standards.

APEC is also working to reduce the delays and costs of customs procedures and business travel. I hope many of you will be able to benefit from Australia's proposal for an APEC Business Travel card, which is designed to streamline airport procedures in all participating APEC economies.

This Government is also taking a more energetic and systematic approach to bilateral trade opportunities than our predecessors.

We will be targeting markets where we can obtain commercial benefits more quickly than we can get them through multilateral or regional forums.

That is why my overseas visits since coming into office have already covered some of the most dynamic markets in East Asia.

So the emphasis is "Asia First", but I want to assure you that it is not "Asia Only". My visits in June to the United States and South America demonstrate that the Government will be maximising opportunities wherever they occur.

We have selected the seven feature markets at the National Trade and Investment Outlook Conference (or NTIOC) on that principle. Five of them are East Asian - China, Indonesia, Korea, Malaysia and Thailand. The others are Argentina and South Africa.

NTIOC, as many of you will know, is a very effective way to find new business and build networks. Held in Melbourne in early December, I commend it to you.

The Government will be taking two key initiatives to strengthen our bilateral strategy: the Market Development Task Force and the annual Trade Outcomes and Objectives Statement.

The Task Force will more effectively integrate work on the Government's market access and trade promotion efforts. It will be chaired by the Secretary of my Department and will bring together Austrade, as well as other relevant agencies.

The Task Force will review key markets every six months or so, and establish a rolling program of objectives and priorities that will allow bilateral opportunities to be better exploited. East Asian markets will be among the first priorities.

The Task Force's work will feed directly into the Trade Outcomes and Objectives Statement, a public document which I will table annually in Parliament, beginning early next year. The Statement will set down performance indicators by which the Government can benchmark and adjust our trade efforts.

It will also include a review of domestic competitiveness and its impact on trade performance. This will ensure that when I report on trade policy and performance, the Government is conscious of domestic issues.

Too often in the past, seemingly domestic policies were looked at without taking into account their impact on business and trade competitiveness. And to make sure the Statement is fully relevant to business needs, we will be seeking private sector views as we draw it up.

Visit to China

All these policy lines will come into play during my forthcoming visit to China, beginning three weeks from now when I arrive on the inaugural Qantas flight to Shanghai. After Shanghai, I will be going on to Beijing, Tianjin, Dalian and Guangzhou.

At the bilateral level, I will be aiming to establish relationships with senior Chinese leaders and to move forward on bilateral market access issues.

The main access concerns will be to achieve greater transparency and certainty in China's purchasing of our wool and other agricultural products, and to improve access for Australian banks, law firms and insurance companies.

To help me do that, I will be accompanied by a group of Australian business people in the services field.

At the same time, I will be looking to persuade the Chinese Government to improve its offers in negotiations for accession to the WTO and to improve its individual action plan in APEC.

Australia strongly supports China's early entry into the WTO. China is an increasingly important trading country, and its economic reforms are paving the way for China to assume the obligations of WTO membership, as well as to enjoy the rights of a member.

Australia appreciates, of course, that the adjustments necessary in China's trading regime are often not easy. And Australia is sensitive to the pace and process of China's economic reforms.

We see China's membership being on the basis of two things: increased market access for both goods and services, and a commitment to WTO rules.

A number of issues still need to be settled. China's offers on wool, wheat, barley, sugar, cotton and rice do not yet guarantee existing trade, let alone provide for growth. China's WTO market access schedule needs to include formalised commitments that provide security for trade to expand.

There are also important interests in services trade, other agricultural products and some industrial products that need improved offers.

Australia recognises that China's economic structure may call for innovative solutions in some areas, but a minimum and certain level of commitment from China is necessary for accession.

China's participation in the WTO would send a strong signal about its interest in engaging closely with the rest of the world and with our region.

In the APEC context, China submitted a revised draft individual action plan in July which reflected the liberalisation steps it needs to take to accede to the WTO.

I will be encouraging China and other APEC members to continue looking at areas in which our plans can be improved ahead of the November APEC Ministerial Meeting. Specifically, I will be encouraging China to include market access issues of interest to Australia in its IAP.

Conclusion

Looking back over what I have said, there are two key points I want to leave you with this evening: integration and targeting.

Integration in two senses: the fact that Australia's future lies in economic integration with Asia, and the fact that domestic and overseas policy must be integrated effectively if we are to make Australia fully competitive.

And targeting in the sense that effective policy depends on picking the right policy tool for the right market objective at the right time.

Managing integration and targeting will be challenging and I believe the new Government has made a worthwhile start in our first five months.

As we build on that start, we will have firmly in mind that it is the business community that does the real work of winning the export contracts and making investments succeed.

It is organisations like your Chamber that are closest to the cutting edge. That is why the Coalition put such weight on its commitment to consult fully with business. And that is why I am so keen to strengthen my own dialogue with business people.

With your help, and the help of the business community in general, I look forward to building on that start and to seeing Australia take its place among the dynamic economies of its region.