Maximising APECs Contribution To Australian Business

Speech by the Acting Prime Minister and Minister for Trade The Hon Tim Fischer MP to the APEC Business Forum

Hilton Hotel, Sydney, 15 July 1999

(Check Against Delivery)

Forum Chairman, Geoff Allen; fellow speakers; Business Forum participants; ladies and gentlemen.

I am delighted to be hosting this fourth APEC Business Forum - one of my last major functions as Australia's Minister for Trade.

I have valued these opportunities to discuss issues directly with the Australian business community and to hear your views. Such dialogue is particularly important as we fine-tune APEC's work program and feed your input into the September APEC meetings in New Zealand.

It is worth recalling at the outset the scale of what we are talking about. APEC's 21 economies comprise a huge regional market with around 2.4 billion people, a combined GNP of US$17 trillion and around 45 per cent of world trade - including over 73 per cent of Australia's merchandise exports and 66 per cent of
our services exports.

Today I want to focus on:

• APEC's achievements over the past decade and the resulting benefits for Australian business;
• its place in the Government's trade policy; and
• the role of business in ensuring that APEC continues to address your priorities.

Launching Investment Report

But before taking up these issues, I want to make some remarks on the continued need to explain the benefits of open markets to the wider community. As Trade Minister, I have put a lot of emphasis on developing arguments and commissioning materials to communicate the case for freer trade and investment in plain-speaking, non-technical terms. At the APEC Trade Ministers' Meeting in Auckland last month, Australia sponsored a highly successful seminar on just this theme.

Today, I am pleased to continue this tradition and to release a new report by the Department of Foreign Affairs and Trade on Foreign Direct Investment: the Benefits for Australia. The report sets out in straight forward terms why Australia must continue to be open to overseas investors wanting to play an active part in Australia's economic future, and why it is important that. Australian businesses continue to seek opportunities overseas. Foreign direct investment provides more than finance for development. It provides jobs - over half a million Australians work in firms with majority foreign ownership, and many more work in firms and communities that rely on foreign owned companies as customers and suppliers.

Foreign direct investment promotes exports - around one quarter of our exports are from firms with substantial foreign ownership - expands our technological know-how and gets Australian businesses into the international marketplace. The Government recognises some Australians are concerned about foreign ownership of Australian assets. It continues to have the power to block proposals that it decides are not in the national interest.

As I have said many times, there is no such thing as a level playing field. But equally, there is no economic progress or security in a return to Fortress Australia.

APEC After 10 Years

Turning more directly to APEC, as well as dealing with the here and now, todays forum provides an opportunity to take stock of APEC's first decade. Since 1989, it has evolved from an informal grouping of countries to being the principal forum for economic cooperation in the Asia Pacific region.
By bringing together most of our near neighbours and major trading partners, APEC represents a priceless diplomatic asset for Australia; one that forms an integral part of our economic, trade and foreign policy. It has been a strong force for further economic integration and cooperation and for promoting
strategic stability in our region. Of course, APEC continues to have its critics - those who question what it is about, what it has achieved, and its future.

Some commentators maintain that APEC is little more than a 'talk fest' and that the organisation is on the wane.

I think that such assessments are fundamentally wrong.

My time as Australia's second longest serving Trade Minister has highlighted two aspects of APEC's role which underscore its contribution to our economic interests. The first is direct and tangible; the second is more indirect and subtle.

Firstly, APEC has recorded some impressive achievements relevant to the business bottom-line through:

• improved market access via lower trade barriers;
• greater transparency of trade and investment regimes; and
• lower business costs.

APEC Leaders last year renewed their commitment to the Bogor goal of free and open trade and investment in the Asia-Pacific region by 2010 for developed economies, and 2020 for developing ones. In the context of the worst regional economic crisis in fifty years, this should not be underestimated.

Significant progress has been made towards trade and investment liberalisation, despite some uneven outcomes across sectors and economies. Since 1988, average tariff levels have fallen by 59 per cent in Korea, 57 per cent in China and the Philippines, and 43 per cent in Malaysia. And more big cuts in average tariffs are in prospect next year:

• China down from 36 percent in 1995 to around 10 percent;
• The Philippines' from 15.5 to 7 percent; and
• Chile from 11 to 6 percent.

The Individual Action Plans have also recorded substantial deregulation of APEC economies, particularly in the financial, telecommunications and transport sectors. APEC has helped promote market opening and reform in the regulatory culture of many of our major trading partners. In so doing, it has provided
Australian companies with a wide range of commercial opportunities - opportunities that many of you have been quick to seize.

The second (often overlooked) dimension is the degree to which APEC has reinforced personal contact, mutual trust and information exchange. Without these linkages, I would argue, the economic crisis could have been much worse. The fact that Peter Costello's first overseas trip as Treasurer was to the APEC Finance Ministers' meeting in Japan in March 1996 illustrates this aspect. APEC ensured that when the Asia crisis hit we had a regional forum for exchanging views on
financial developments beyond the annual (Atlantic-centric) IMF meetings.

To this audlence, I would also, argue that APECs business facilitation record is another 'good news' story that continues to deliver benefits but needs to be better understood in the business community. APEC economies are simplifying and harmonising customs procedures with the objective of achieving 'paperless trading'
for trade in goods in the region.

The potential savings are enormous when you consider that, on average, one intemational transaction involves around 30 different parties, 40 documents and 200 pieces of data. In the area of standards, APEC members have committed to align domestic standards with international standards by 2005 in a number of sectors - from electrical appliances to food labelling; from machinery to rubber gloves and condoms. APEC has streamlined visa and entry processing to facilitate
short-term travel by business people around the region. Six APEC economies now participate in the APEC Business Travel card - an Australian initiative - which offers visa-free travel and quicker airport processing.

Such facilitation measures reduce the costs to business of conducting cross-border trade. When you consider the cost of administration is up to 10 per cent of the value of traded goods, the potential savings for business are huge. The Australian Government is committed to doing whatever it can to achieve those savings for business.

APEC's work on economic governance also deserves particular mention. One of the clear lessons from the Asian crisis is the importance of good institutions and practices: that is, a solid central bank, vigilant corporate authorities, high prudential standards, workable bankruptcy and insolvency laws and the like.

Decisive action was needed to improve the quality of institutions and practices in many Asian economies to stimulate economic recovery. Australia has taken a lead role in this area by putting forward a number of measures, including the Prime Ministers $50 million Economic and Financial Management Initiative, to help APEC members strengthen their economic and financial management. Australia's credentials in this work are, of course, firmly based on the underlying strength of our own economy and institutions. Australia is among the fastest growing economies in the world, with low inflation and interest rates, a budget in healthy surplus
and unemployment at a nine-year low.

Of course, I do not deny that APEC has had its setbacks. And every year it faces new challenges. This year we have set as a major goal of APEC the building of
momentum for a new set of WTO negotiations. I am pleased to report that Trade Ministers strongly committed themselves to this objective at the APEC Meeting I attended in Auckland in late June. We secured agreement that new negotiations should cover the full range of sectors - agriculture, services and (importantly) industrial goods. Looking ahead, Australia will continue to play a special role in shaping APEC's agenda.

The Australian Cabinet has accepted the invitation from Brunei to host the June 2000 Trade Ministers' Meeting In Darwin. This demonstrates yet again our willingness to take the lead in APEC; in this case in the vital early phase of any Millennium trade round. The opportunity is there at the start of the new
century for you to make APEC deliver for your business.

An increasing Role for Business

Only business fully understands the costs and obstacles involved in doing business in the Asia-Pacific region. The challenge for business is to take advantage of the fact that APEC is a flexible instrument whose structure and work program evolves to meet changing circumstances. The APEC Business Advisory Council (ABAC) has a key role in advising APEC Leaders on issues of interest to business. I welcome ABAC's contribution and am pleased that our three Australian ABAC members - Malcolm Kinnaird, Michael Crouch and David Murray - are wth us today.

I know that Mark Valle, my successor as Trade Minister, is determined to ensure that APEC is responsive to business needs and priorities. But we need your help to identify where APEC can do more to assist your business.

As part of that effort, the Department of Foreign Affairs and Trade is conducting a survey of business views on trade facilitation. The survey has been distributed here today, so that you can help us understand your concerns better. I hope that you will take a moment to complete the survey this aftemoon. This information will be used to ensure that APEC's trade facilitation work program is sharply focused on what is important to your business.

Conclusion

I want to leave two key messages to you from today's Business Forum: that APEC's work makes a real contribution to Australian business, and that business needs to be active in shaping APECs agenda and work program. We all need to be realistic in our expectations. The impact of the Asian crisis on regional economies, the reality of a new WTO negotiating round, and other global developments have created a new set of circumstances and challenges for APEC.

Nonetheless, I believe APEC has a continuing vital role in ensuring that:

• regional economies and markets stay open;
• the inevitable protectionist pressures which arise from time to time are resisted;
• the costs of doing business are reduced; and
• regional economies' economic and financial management capabilities are strengthened.

The Government has a clear focus on these challenges, but meeting them will require constructive input from the Australian business community. I urge you to put forward your views on how APEC can be more relevant to your business. I also want to assure you that the results of our discussions today will be conveyed to Mark Vaile and to the Prime Minister's office.

Finally, I wish you all well for the future. It has been a privilege to work with you as Australia's Minister for Trade.