Address by The Hon Tim Fischer MP, Deputy Prime Minister, Leader of the National Party, Minister for Trade, at the Gaiko Forum, Australian National University, Canberra, 21 April 1997

Introduction

It gives me great pleasure to address such a distinguished audience with a keen interest in Japan and Australia. I would like to congratulate the organisers and the Gaiko Forum on putting this important seminar together.

It is particularly appropriate that I address you at this time as Prime Minister Hashimoto will next week be here in Australia.

I would like to begin today by saying that the Australian Government came into office with an unequivocal commitment to strengthening further its relationship with Japan.

The close partnership which has developed over the years between Australia and Japan has been highly beneficial for each of our countries.

Our collaborative efforts to advance our mutual interests in bilateral, regional and multilateral contexts have, over time, developed what was primarily an economic relationship, into something much broader and richer.

Today I will look primarily at the economic side of the equation although Australia-Japan cooperation on security issues is certainly a very important and growing part of the relationship.

Forty Years of Bilateral Economic Cooperation

This year marks the fortieth anniversary of a turning point in our two countries' relations and to mark this anniversary the Japanese Ambassador, His Excellency Mr Satoh, has invited me to climb Mt Fuji. This is an invitation that I will accept with much pleasure and hope to be able to climb this challenging mountain later this year.

My predecessor as National Party Leader and Deputy Prime Minister, Sir John McEwen, together with then Japanese Prime Minister Kishi, established the framework for a burgeoning trading relationship when they signed the Australia-Japan Commerce agreement in Canberra in 1957. This farsighted pact fuelled both countries' post-war economic growth.

And I mean fuel! Australia has supplied the Japanese economy's vital minerals and energy needs since the early 1960s. We now supply over half Japan's coal needs and a large part of its liquified natural gas needs, and this trade looks set to grow even further.

Japan: Our Largest Trading Partner

The crucial importance of Japan to Australia is clear: Japan has been by far our largest trading partner for nearly three decades. Last year, exports to Japan were $A15.5 billion (20 per cent of total exports), while imports were $A10.2 billion (13 per cent of total imports).

Australia is, and will remain, one of Japan's most important and dependable suppliers of energy, raw materials and food. Conversely, access to Japan's growing import market will remain critical for the Australian economy.

I therefore welcome Japan's recent initiatives on import promotion and economic deregulation and particularly Prime Minister Hashimoto's commitment to reform.

New Directions for the Trade and Investment Relationship

As our economic relationship has matured, Japanese companies have begun to recognise the increasing diversity and sophistication of Australian goods and services.

Over 40 per cent of Australian exports to Japan are now made up of processed goods, and manufactured products and services. Some of these goods have been developed specifically for the local market: Australian-made sake is just one striking example.

Similarly, Japanese investment in Australia is now beginning to be targeted more at manufacturing than at real estate, as Japanese business becomes more aware of the sophistication of the contemporary Australian economy.

All is not as rosy as it might be, however. In 1996, Australia's total exports to the world grew by 7.8 per cent, but exports to Japan fell by 6.1 per cent. And this in a year when Japanese imports skyrocketed!

Moreover, Australia, last year, was only the sixth largest supplier of Japanese imports, slipping from its 1994 position as number three.

What then has caused this slowdown? A significant factor is that our exports, despite their changing composition, are still concentrated at the low growth end of Japan's import boom.

The challenge for Australian firms, therefore, is to increase exports in the high-growth areas of the Japanese market.

Potential high growth sectors where Australia excels include: processed foods, housing and construction, transport equipment, such as fast ferries, cars and auto parts, telecommunications and services.

It is worth noting that some Australian businesses have recently begun to see Japan as a difficult East Asian market. Some companies have formed a view that the economic difficulties of the past five years or so, together with market access problems, high market entry and running costs, make Japan too tough a market to tackle.

I do not subscribe to that view.

Japan's recovery now looks sustainable. Recent structural reforms have begun to have an impact, underwriting major import hikes. Partly due to sustained representations by the Government, barriers to market access in key areas for Australian exporters are now less formidable.

Australia cannot afford to ignore the opportunities provided by the world's second largest economy, now growing again at 2-3 per cent.

I am therefore delighted that high-level business exchanges are continuing to take place frequently. Last month the Association of Corporate Executives, the Keizai Doyukai, visited Australia. Later this year, at our Prime Minister's invitation, the Japan Federation of Economic Organisations, the Keidenran, will also visit.

Japan's two peak business associations visiting in the one year provides excellent opportunities for Australian business.

Doubtless they will also return to Japan with a greater understanding of this Government's important microeconomic reforms which are making the Australian economy far more efficient.

A Relationship Becoming Broader and Richer

Prime Minister Hashimoto's visit here next week will contribute further to the close friendship between our two countries - a friendship underlined by the frequency of high -level visits in both directions since the Government's election.

The two Prime Ministers will discuss a partnership which is becoming broader and richer. As Prime Minister Howard said in Japan last year, the relationship now has a "very rich political, cultural, and increasingly personal dimension to it".

An important recent example of our broadening links is the fact that senior officials, including from our respective defence establishments, now meet annually to discuss political and military developments in our region.

Regional Cooperation

Importantly, Australia and Japan share a history of cooperation in the regional context. We have worked together energetically over many years to advance closer regional economic cooperation and trade liberalisation in the Asia-Pacific.

In the process, both countries have played a major role in APEC's development, and in the expansion of its agenda to address the key trade issues facing the region.

This was particularly the case in 1995, during Japan's period as APEC Chair. That year Australia strongly supported many of Japan's APEC objectives, which began the transition from APEC's's agenda-setting phase to implementation of its trade and investment objectives.

The Osaka Action Agenda approved in 1995 during Japan's year in the chair still constitutes the basic framework in which APEC's work on trade liberalisation, trade facilitation and economic and technical cooperation is being put into effect.

It was this framework which underpinned the Individual Action Plans, or IAPs, which all APEC economies put forward in Manila last year.

The 1996 IAPs have set out credible initial maps for APEC's road to trade liberalisation. They reflected the existing momentum of trade liberalisation in the region, but also included new, positive commitments.

In 1997 our priorities in APEC will be four-fold.

The first is to further improve and develop the initial set of IAPs, which requires commitment from member economies and input from the private sector.

The second is to promote further practical outcomes on trade facilitation among member economies of benefit to business, building on promising results achieved in 1996 such as the APEC Business Travel Card.

Third, we are following up APEC Leaders' specific instructions to Ministers in Subic Bay last November, to identify sectors where early voluntary liberalisation would have a positive impact.

And fourth, we will be seeking to build on APEC's economic and technical cooperation agenda by, among other things, giving effect to the priorities endorsed by Leaders and Ministers last year.

Australia and Japan share a strong commitment to "open regionalism" whereby APEC's trade liberalisation initiatives do not disadvantage non-APEC members. This shared commitment will enable the two economies to continue their close cooperation within APEC.

Security Cooperation

Australia and Japan are also both contributing to the development of regional security dialogues in the Asia Pacific. As each country's strong alliance with the United States underpins its security stance in the region, we share similar perspectives on the means of ensuring regional peace and stability.

The ASEAN Regional Forum, or ARF, is the only inclusive, multilateral, region-wide security mechanism. Australia and Japan have worked together closely, since the ARF's inception in 1994, to encourage frank exchanges on developments in both North East and South East Asia.

Australia and Japan's shared security perspectives will enhance the ARF's cooperative confidence building and transparency agenda.

Australia and Japan: Multilateral Cooperation

Australia and Japan's shared commitment to the benefits of trade liberalisation and open regionalism have also been the driving force behind recent close cooperation in multilateral trade forums.

In the past twelve months, in particular, our two countries have worked together well to help achieve positive outcomes for world trade.

A highlight of last December's successful Singapore Ministerial Conference of the WTO was the announcement by twenty eight WTO members that they would conclude an Information Technology Agreement, or ITA. Japan and Australia, together with the US and a number of other APEC economies, worked hard in the lead up to the meeting to achieve this outcome.

Negotiations on the ITA have now been completed. The ITA , with its commitment for zero tariffs on IT products, will have a major impact on industry well into the twenty-first century.

Similarly, our joint efforts were also important in the conclusion on 15 February of an Agreement in the WTO which will liberalise from 1 January 1998 the basic telecommunications market for over 90 percent of world telecoms trade.

We also share a vital interest in seeing China join the WTO. China, likely to be the region's largest market in the foreseeable future, needs to be brought into the multilateral framework of rights and responsibilities which the WTO provides. Japan and Australia can work together positively to ensure that China's membership of the WTO takes place on terms which will advantage all three nations.

Australia looks forward to working closely with Japan on issues affecting the multilateral trading system.

Strengthening linkages between the WTO and APEC will be an increasingly important area of mutual interest.

So will ensuring that regional trade agreements do not conflict with the WTO's further multilateral liberalisation agenda.

Conclusion

I have set out for you today a brief sketch of what is now a very substantial and growing partnership on a range of issues in the Asia-Pacific.

Australia and Japan work closely together in bilateral, regional and multilateral forums to further objectives which are increasingly closely aligned.

Our economic cooperation over forty years has been tremendous. That habit of cooperation is now also informing our relationship in other areas, particularly security.

In the year of the fortieth anniversary of the landmark Australia-Japan Commerce Agreement, I applaud the close connections which have grown up between our countries. I look forward to our developing, in the future, an even closer partnership.