Speech

Australian Minister for Trade, Mark Vaile

2 February 2000

Australia: Getting the Economic and Trade Policy Framework Right

Speech by Minister for Trade, the Hon Mark Vaile MP, delivered at a luncheon hosted by the Committee for Economic Development of Australia (CEDA) in Brisbane

Introduction

Thanks for your welcome. It's always great to be in Brisbane, notwithstanding the time difference, and to have this opportunity to address you.

The Committee for Economic Development of Australia (CEDA) has a fine reputation of contributing to debate on important issues in our nation's public life. Obviously the state of our economy and our trade objectives are central issues of importance to CEDA.

The Australian Economy

Put simply, the Australian economy is in very good shape. Indeed, given the recession in Japan and the financial crisis in East Asia that slowed global activity in 1998 and 1999, Australia's recent performance has been extremely impressive:

• The latest figures put aggregate growth at 4.5%, which compares very favourably with any other industrialised economy in the world at this moment.
• Inflation remains at its lowest level since the 1960s. This fact provides savers and investors with the confidence to take long term positions and is essential for sustained growth.
• Employment is trending upwards and unemployment is at its lowest level in a decade.
• Despite this morning's half a per cent rise by the RBA, interest rates remain near historically low levels. They underpin robust consumer and business confidence and are driving broad-based growth in domestic demand.
• Productivity growth now averages 1.8%, compared with less than 1% in the 1980s.
• We've put the Federal budget into very healthy surplus, and have been able to commence the task of reducing federal government debt.
• On the latest figures, the balance of trade in goods and services for 1999 was a deficit of $16.2 Billion. Total exports of goods and services were unchanged at $114.2 Billion. Exports of goods were down 2% on 1998, but rural goods were 1% higher. Exports of services were 6% higher in 1999 compared with 1998. Total imports of goods and services were 4% higher in 1999.
• The Government expects an improvement in the terms of trade and 5% growth in export volumes for 1999/2000.
• The new Business Tax System will provide a substantial boost to Australia's exports. Under the new tax system exports are GST free, and the current tax impost on exports will be lifted, cutting costs to all exporters by more than $3.5 billion a year.

There have been some wild claims made about the GST. Much the same as when decimal currency was introduced and then metrics, the GST is being blamed for everything. Let me assure you that like daylight saving, the GST won't fade your curtains.

Peter Beattie has been trying to work up a GST scare campaign in the run up to this Saturday. Peter knows the GST won't fade your curtains.

And Peter, you should be honest with your electorate and tell them that you, along with all the other Premiers signed-off on the GST agreement with Canberra.

You've accepted it. You've signed off on it. Here's a copy of the agreement with your signature on it.

At least Bob McMullan, the Shadow Industry Minister has had the honesty to admit that the GST will be good for exports.

And I'll just make this other point before leaving State political issues. Employment and jobs growth was a major issue in the last State election here. Well there's one way to ensure more employment and that is to export more.

The new tax system will remove tax imposts on exporters that currently cost $3.5 billion a year. What better way for a government to encourage exports and jobs growth?

Australia's outstanding performance and good prospects did not simply fall out of the sky. They are the result of critical reforms put in place by the Federal Government to produce a more efficient and internationally competitive economy.

Let me stress that the Federal Government is not alone in putting forward this view. In its recent Economic Survey of Australia, the OECD said: ``The resilience of the (Australian) economy in weathering the Asian downturn is largely the result of a judicious mix of sound macroeconomic and structural policies, which brought inflation down to a very low level, strengthened government finances and generated an acceleration in productivity growth".

Our Government has not taken the easy path. We have taken the right path, and the results can be seen in the economic record. The Government's fiscal consolidation, labour market and tax reforms have created a better business and investment environment and a more productive economy.

As we produce our goods and services more efficiently, we can expect to be more successful in exporting them to overseas markets. Australian representations, including through the Market Development Taskforce, contributed to improvements in access for Australian exports to a number of markets last year including sugar exports to the Philippines - that are of particular interest to Queensland.

Similarly, through the Export Finance and Insurance Corporation (EFIC), the Federal Government has assisted exporters to hold on to existing markets, against stiff and sometimes unfair international competition, as well as break into new markets.

EFIC maintained insurance cover for Papua New Guinea throughout a difficult period last year allowing Australian exports, particularly food exports to continue uninterrupted.

EFIC medium-term finance is helping our exporters around the World.

Beyond Seattle

As you all know, Australia was committed to launching a new market access-focused round of multilateral trade negotiations in Seattle late last year. As disappointing as the outcome was, rumours of the death of the WTO are greatly exaggerated.

There were a number of factors contributing to the outcome in Seattle, not least an unwieldy agenda created by excessive ambition by some WTO Members in a number of non-trade areas. It is important that we do not overstate the extent of the problems that occurred in the lead up to, and during, Seattle. Failure was due more to organisational difficulties and lack of political will than any institutional weakness of the WTO.

Some have suggested that the WTO processes lack transparency or that developing countries do not have an adequate voice. Certainly with 135 Members and with another 32 in the process of accession negotiations, it is important that all WTO Members feel a sense of ownership of the WTO and close involvement in its processes.

As we look to the future of the WTO, we must not, as the saying goes, throw the baby out with the bath water.

The challenge ahead for the WTO is one of substance - not process. Most developing country concerns can best be addressed by making real progress in multilateral trade liberalisation in areas of key interest to them, such as agriculture.

The Federal Government, of course, recognises the importance of a balance between development, trade and the environment. It also supports the adherence to, and pursuit of, core labour standards. But it considers that organisations such as the International Labour Organisation (ILO) are best placed to ensure that internationally recognised core labour standards are upheld.

We strongly believe that the WTO should not become overburdened with non-trade issues. It must be allowed to maintain its integrity - with its effective rules-based system - by focusing on its core business of building consensus in favour of trading rules and greater stability in our trading system. It must also work to lower market access barriers and reduce trade-distorting subsidies. This is very much in Australia's national interest.

We were able to make Australia's voice heard on key issues like agriculture and services in Seattle. That was due in no small part to the efforts of the Australian team, including a strong industry contingent, in building coalitions with other countries, notably in the Cairns Group.

Business has underlined its support for the Government's commitment to keeping markets open. We will stay on that road to increase exports and create growth so that all Australians can continue to share in the benefits of boosting our trade performance.

But business leaders - as well as government - have a responsibility to explain the advantages of open markets to the broader community.

The benefits of open markets and trade must be articulated and understood to avoid some of the misguided views that have been given some prominence in domestic political circles in recent times.

Trade must not be made a scapegoat for domestic political concerns.

Trade liberalisation has underpinned Australia's economic growth and living standards over the last fifty years. One in five Australian jobs depends on exports, and as we open more markets we can expect even greater employment opportunities.

This is why Australia must continue to support the WTO in its delivery of a system that increases predictability, stability and transparency for international commerce. To that end, Australia will support the WTO Director-General in his efforts to launch a new round of multilateral trade negotiations.

Australia will also be actively promoting its interests in the negotiations on agriculture and services that are due to commence shortly.

In agriculture, we will continue our efforts in close cooperation with our Cairns Group colleagues, to see that unfair and trade-distorting agricultural export subsidies are eliminated and that substantial and progressive reductions in domestic support are achieved.

Many developing countries supported Australia, and the Cairns Group, in the pursuit of these goals at Seattle.

The agenda for the mandated services negotiations has not been controversial.

We can expect to make good progress on market access in sectors such as finance, telecommunications, professional services and electronic commerce.

We would, of course, like to see these negotiations brought into a broader new round as soon as possible so that we can maximise benefits for all.

The momentum of the trade game must be maintained to ensure that the gains of recent years are built upon.

Regional developments

Developments in Seattle naturally turn our thinking to how we can get back on track towards a new WTO round, as well as achieve improved market access for Australian goods and services at the regional level.

Along with our regional colleauges, we are now looking to APEC to take a lead in rebuilding momentum for a new round. This will be a critical task for the meeting of APEC Trade Ministers that we will host in Darwin in June. That meeting will consider possible ways where APEC might help on the issues on which Seattle foundered.

APEC's contribution last year underlined its strength in drawing together developed and developing country perspectives. The Leader's meeting in Brunei in November will provide another good opportunity to make a difference.

As our region's economic recovery gets further under way, we'll also be making the most of APEC's advantage to build consensus on other key economic issues and to promote constructive work in support of more open and resilient markets.

The climate in APEC for agreement on work programs and on the focus for the next few years is good.

In particular, improving the focus and business relevance of APEC's work is a high priority. I'm pleased to say that Australia is at the forefront of practical business facilitation initiatives.

We'll also be strengthening our relations with our ASEAN neighbours. I agreed with my ASEAN and New Zealand colleagues last October to set up a high level Task Force to examine the feasibility of establishing an AFTA-CER free trade area by 2010.

I am very pleased that the former Deputy Prime Minister and Trade Minister, Tim Fischer, has agreed to be Australia's representative on the Task Force which will meet for the first time in Jakarta next week (7-8 February). As a long-serving Trade Minister, Tim brings a wealth of experience to the job.

The Government's decision to explore a free trade area with AFTA gives us an opportunity to look at ways to enhance access to ASEAN markets for Australian goods, services and investment. It will also build on the good work already done on trade liberalisation and facilitation, both in APEC and within the regular AFTA-CER framework.

Conclusion

Australia's future depends upon open markets and free trade.

The recent experience of our pig industry is a good illustration. The industry has faced competition from imports in recent years, particularly from Canada. Some in the industry claimed that they could not survive this competition without protection.

But the industry has not only survived, it has grown. Pigmeat exports last year were nearly double those of the year before.

This fantastic result was achieved because the industry responded to a competitive challenge. Protectionist barriers were not raised - industry worked with the Federal Government instead. It banged on doors overseas, and those doors were opened.

By any reasonable standard, the Government can be pleased with its economic achievements. Responsible budgetary policies are reaping positive rewards for Australia. We have worked hard and effectively to get the policy framework right so that all businesses - including exporters - flourish and prosperity continues to be enjoyed by the Australian people.

But we are not resting on our laurels. Much work remains to be done to ensure that Australia's strong economic performance is maintained in the future. The Federal Government will, for example, continue reform in the areas of taxation and corporate law.

We will continue to work at the trade policy initiatives I have outlined. And I can assure you that I will be working hard to make my own strong contribution as Trade Minister.

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