Australia and the Region: The Challenge of Economic Reform and Liberalisation

Speech by the Australian Deputy Prime Minister and Minister for Trade, The Hon Tim Fischer to the APEC Business Forum Dinner, Sydney, 1 May 1998.

Introduction

Members of the APEC Advisory Council, participants in the APEC Business Forum, distinguished guests, ladies and gentlemen.

I am delighted to be here this evening. I want to extend a special welcome to those who are visiting Australia from overseas. I hope you have a chance to see more of Sydney - particularly the marvellous harbour - and are not tethered completely to the formal APEC-related proceedings, as important as they are.

Earlier today, I had the opportunity to talk about APEC 's agenda in the year ahead, and the key contribution made by the APEC Business Advisory Council. But I think it was a politician who said that dinner speeches should be `much more like dessert than the main course' - sweet and light to the ear, not heavy and sleep-inducing to the brain. So I promise not to over-burden your digestive processes with too many lengthy thoughts this evening.

The Asia Pacific Outlook : Economic Reform and Liberalisation

Often those who gaze into the global crystal ball expect more of what has happened in the past, rather than new directions and major reversals.

In this respect I am reminded of the Western Union Company in the United States, that decided last century not to buy all the rights to Alexander Bell's strange new invention - the telephone - for a mere USD 100,000. That decision gave new meaning to short-sightedness in business planning !

In today's environment of globalisation and rapid technological change, the greatest security we have comes from excellence, innovation and adaptability. As a result, more than ever, governments are being measured by their ability to deliver to their citizens more jobs, better standards of living, and a stable political and economic environment.

For Australia, our success or failure in this globalising world is still closely linked to the future of the Asia Pacific.

Regardless of shorter-term growth prospects, it is important to remember that the East Asian market is 18 times larger than the Australian market, and imports around US$1.4 trillion worth of merchandise each year.

As you know, parts of the Asia Pacific have experienced significant financial instability in recent months. The region's institutions and governments have been tested thoroughly by the experience. But I believe that the region is holding up well so far under this pressure.

One reason for this is that the economic strengths which made East Asia highly attractive to global investors over the last two decades have not vanished - high savings rates, an increasingly skilled and educated workforce and substantial infrastructure are still part and parcel of the economic framework.

Nonetheless, we need to recognise that financial instability and volatile currency movements in parts of Asia can be expected to continue - at least to some extent - until markets are confident that governments in the affected Asian economies are implementing effective reforms.

That is why Australia is convinced that the key to renewed prosperity in the region is to `stay the course' on economic reform and trade liberalisation. And Australia is far from alone in that conviction.

At the landmark Cairns Group meeting of agricultural trading nations here in Sydney last month, for example, Thailand provided language to include in the final communique. It emphasised that liberal and open world markets would help the recovery of affected countries. This was a heartening message given the potential that exists for inward, protectionist responses to the current situation in Asia

Australia is responding to the region's `SOS call' by demonstrating what Prime Minister John Howard has termed `regional mateship'. Over the past few months, Australia has been proud to be a resource for the region to draw on.

Australia and Japan are the only two countries to have contributed to all three IMF packages - for Thailand, Korea and Indonesia. It is a contribution that is in Australia's clear national interest, but also something we want to do as an `all-weather friend' to the region.

The Impact on Australia

Of course, Australia itself cannot hope to escape entirely unscathed. The economic and financial instability affecting key Asian markets will undoubtedly affect Australian export growth to these areas.

However, the figures to date do leave me cautiously optimistic. In the eight months to February 1998, Australia's exports were up 12 percent over this time last year. Eight months into the year and we are $8 billion ahead in exports.

But the full impact is unlikely to be felt before the second half of 1998, reflecting the lag between orders and delivery, and the fact that much of our commodities trade operates under long-term contractual arrangements.

However, it is worth pointing out that opportunities do exist for Australian exporters and that our exporters are doing an excellent job in challenging times.

For example, although Japan is facing its own economic challenges, Japan's imports from Australia increased by 14 percent in 1997 - almost double the rate of increase of Japan's imports from the world. And in December 1997, Japan's imports from Australia increased by 21 percent.

And where are these success stories coming from? Seafood exports to Japan were up 26 percent, machinery up 17 percent, cheese up 31 percent, and boats up 164 percent.

Our exporters are also doing well with growing demand from the large United States and European Union markets, in which we are now more competitive.

In the eight months to February 1998, our exports to the USA were up 34 percent (over $1 billion) compared to the same period last year, exports to Italy up by 45 percent, Spain up by 61 percent and Pakistan by 89 percent.

This, together with our strong domestic economy, should help offset the impact on Australia of slower exports in some parts of Asia.

To minimise any negative impact, the Government - in close consultation with the private sector - is refining our trade strategies in Asia and beyond.

We are ensuring the availability of appropriate levels of trade credit and insurance, through the short-term National Interest insurance cover for exports to Korea and Indonesia. We are providing information and identifying opportunities through Austrade's Asia Crisis Centre and Internet site, with alerts and advice updated weekly.

One major event on the immediate horizon is the Australia Summit, which will be held in Melbourne in June this year. The Summit will bring together leading business and government figures from Australia, the Asian region, Europe, the US and Latin America. The aim of the Summit will be to discuss Asia's `Regional Renewal' and the challenges and opportunities facing business over the coming years.

Putting Australia's Domestic House in Order

I want to emphasise that Australia is able to help the region weather the current crisis only because the Government took the necessary steps to put our domestic economic house in order. We have fire-proofed the Australian economy against the worst of the region's ravages. Australia is helping the region from a position of strength, and this national strength is widely recognised throughout the world economy.

The Government is maintaining the momentum of economic reform in Australia. We have the lowest interest rates in Australia since the 1960s and we are pushing aside inflexible and inefficient work and business practices, reforming the labour market, reducing the burden of regulation and paperwork for business, and improving efficiency in infrastructure services. We are committed to reforming Australia's taxation system. And we want to see Australia become, after Tokyo, the second great financial centre of the Asia Pacific region.

Significantly, Australia has already moved up from 18th to 15th in the annual world competitiveness ranking released last week by the International Institute for Management Development in Switzerland.

The Survey's top four countries in world competitiveness - the United States, Singapore, Hong Kong and the Netherlands - all have one characteristic in common : they boast efficient, dynamic and world-class waterfronts.

There is one clear conclusion to be drawn - Australia will not compete effectively in the 21st century if it has a 19th century waterfront. Australia's future prosperity - our vital national interests - hinge on our ability to trade with the world. And our ability to trade with the world hinges on effective waterfront reform.

The Importance of Continuing Liberalisation

Finally, in the current regional and global climate, we must be alert to any resurgence of protectionist sentiment. Free and open markets are good - not just for Australian exporters and Australian jobs, but for the economic health of the region and the world. Trade liberalisation is a 'win-win' situation.

At the multilateral level, I will be attending the World Trade Organisation Ministerial Conference in mid-May in Geneva.

In addition to implementing existing commitments to free up trade in many sectors such as agriculture, countries are now beginning to consider whether we should start a new, comprehensive round of multilateral trade negotiations - a millenium round - which Australia strongly supports.

Regional arrangements such as APEC, which seek to free up trade on a non-discriminatory basis, can act as a catalyst and building block for global trade liberalisation. We had a very good discussion earlier this afternoon about what APEC is doing to contribute to regional economic growth and welfare.

Conclusion

As a closing thought, I want to underline the high value that Australia places on the work of the APEC Business Advisory Council, and the contribution that our own business community can make through the APEC Business Forum.

The experience, knowledge and insight that you bring is only growing in importance as APEC helps economies in the region come to grips with the new challenges I have been speaking about this evening. Without the hard work and dedication of ABAC, and the ongoing contribution of the wider Australian business community, APEC would be a much poorer and less relevant organisation.

APEC still has much to achieve in the future, and Australia will remain strongly committed to helping make the APEC trade liberalisation vision a practical reality in the new millennium.