Australian Minister for Trade, Mark Vaile
Australian Institute of International Affairs - Conference on Regional Economic Cooperation
Perspectives on the regional and global economic agenda
Canberra, 19 June 2001
(Check against delivery)
It is a great pleasure to be here to lead off the speakers today. This is an important conference on a matter of perennial importance to Australia's trade policy agenda, so I am looking forward to a useful exchange of views on this subject.
I've been asked to give you some perspectives on the regional and global economic agenda. I want to discuss developments on the three levels at which Australia is actively pursuing its trade agenda. First, in our efforts to promote a new round at the WTO. Second, in the practical efforts we are making at APEC. And third, in the work we are doing on free trade agreements and other forms of bilateral economic cooperation. But before I do so, I want to set the scene for these actions by examining the global economic outlook that faces Australia.
The global economic downturn
By any measure 2000 was a good year for the global economy. Treasury estimates put growth at 4.8 per cent for the year, the highest rate of growth for over a decade and well above the long-term average of around 3.5 per cent.
But this masks the fact that the world economy, led by the United States, began to slow in the second half of last year. The downturn has continued into this year and has led analysts to revise global growth projections to 3¼ per cent for 2001.
The most important factor driving the global economic slowdown has been the retreat of the US economy, which is expected to slow from 5 per cent growth in 2000 to just 1.5 per cent in 2001. And economic recovery in Japan, the world's second largest economy, is clearly faltering, with forecast growth of only ¾ of a per cent this year. Evidence has emerged to suggest the EU has not escaped the slowdown, but the downturn in EU growth is likely to be less severe than for other regions.
Going against this trend has been China, which has sustained strong growth. Credit must be given to China's leadership for management of their gradual transition to a market based economy. With WTO accession looking imminent, China's outlook is bright.
Elsewhere in East Asia, the global economic slowdown is having a significant impact.
Most East Asian economies rebounded strongly from the economic crisis that engulfed the region in 1997-98. But we are now seeing slowing demand in East Asia's three major markets - the United States, Japan and Europe. Growth forecasts for the region have been reduced significantly in recent months.
I don't think another crisis is likely - not least because of the reforms made since 1997-98 - but the next few years will be difficult. Growth for the East Asian region, excluding Japan, reached 7.4 per cent in 2000, but is now forecast to be 5¾ per cent in 2001 - largely due to China's sustained strength. This environment makes the pursuit of reform more difficult, but also much more necessary.
While strong global growth in 1999 and 2000 helped the region export its way out of the economic crisis, we're not likely to see such favourable conditions for the next couple of years. Sustainable growth over the long term will depend on the ability of individual economies to stick with domestic economic reform and maintain a sound and consistent macroeconomic policy framework.
Australia has done much to help regional economies address these reform challenges. AusAID, for example, runs a major program to promote improved governance practices in the region, and Australia has been active through APEC in promoting trade and investment liberalisation and facilitation initiatives.
Regional economies, faced with a more challenging global economic environment, must not shy away from ongoing reform. Experience shows that economies that have been pro-active in embracing reforms to promote competitiveness have been best placed to withstand external shocks - with Australia the prime example in that regard.
A new WTO round - a top priority
Recognising the need to pursue growth and reform in the face of these challenges, the launch of a new WTO round in Qatar in November remains the Government's highest trade priority.
Australia is a strong supporter of a strengthened WTO system. We are not a member of any major regional trading bloc, and our trade and investment interests are diverse, so we have an enormous stake in seeing the WTO function effectively. At the end of the day, the WTO is the principal trade policy mechanism for the delivery of sound global trading conditions, and that is why we strongly support a new round.
But there is no magic formula for launching a new round. It takes hard work in the face of the increasingly complex set of issues facing the WTO. The organisation now has 141 members, fully four fifths from developing countries, and expanded membership has made consensus on key issues more difficult to achieve. The old GATT club, where many issues were resolved behind closed doors by a limited number of players, is a thing of the past.
We must, therefore, build coalitions if a new round launch has any chance of success. That is why we are doing everything to mobilise support, not only in the big economies in Europe, North America and Japan, but among all WTO members.
Our Government has pursued a new round at every opportunity since agreement failed in Seattle in November 1999. We have participated actively in all relevant international meetings, including key forums such as the OECD, UNCTAD, APEC and the Cairns Group. In Geneva, Australia is regarded as one of the most active advocates of further trade reform and has been active in the preparatory process for the Qatar meeting.
I am in constant contact with all the major players, including at the recent OECD Ministerial meeting and the APEC Trade Ministers meeting in Shanghai earlier this month. I speak regularly to EC Trade Commissioner Pascal Lamy, United States Special Trade Representative Bob Zoellick, WTO Director-General Mike Moore, and important developing country trade ministers in Africa, Asia and Latin America.
Domestically, issues such as Australia's relationship with the WTO, prospects for a new round, trade liberalisation and globalisation have continued to feature in the public debate.
Our Government believes that the views of Australians should be reflected in the approach we take to the WTO. To that end, I announced last week the establishment of a WTO Advisory Group to encourage consultation on WTO issues and Australia's negotiating positions and proposals. My Department is also conducting a wide round of consultations with industry and community NGOs and members of the public. All Australians must have access to information on the WTO and have an opportunity to make their views known.
APEC - cornerstone of regional trade
I turn now to APEC, which continues to play a core role in our Asia-Pacific engagement and regional trade policy.
To those who persist in questioning its value, I need only point out that in 2000 nearly three-quarters of Australian merchandise exports - some A$82 billion - went to other APEC economies, a 29 per cent increase over the previous year. Over the past decade APEC economies generated nearly 70 per cent of global growth, considerably outperforming the rest of the world. In addition, the GNP of lower income APEC economies increased by 74 per cent.
APEC economies have also been making progress on tariff reductions, with a decline in average tariff levels of one third over the last five years. And more than two-thirds of goods imported by APEC economies now enter at very low tariff levels (typically around 0-5 per cent). Of course, more needs to be done, but a start has been made.
In fact, over the last five years the world has moved on from an exclusive focus on trade liberalisation at the border - and APEC has been moving with it. We've focussed closely on strengthening markets and competition policy, on steps to encourage development of the new economy, and on responding to the opportunities of globalisation.
APEC must now be placed squarely in the vanguard of organisations addressing globalisation in a positive way. While trade liberalisation has historically spurred successive waves of globalisation, it is no longer alone in shaping global economic relations. International capital and foreign exchange markets now have lives independent of their origin in supporting trade, and information and communication technology has revolutionised the transfer of knowledge. APEC has been working in all these areas.
Trade liberalisation provides a key opportunity to improve standards of living in the region. Over APEC's first decade, some 165 million people escaped poverty and 195 million new jobs were created.
But to ensure continued prosperity there must be parallel improvements in economic and corporate governance, human and technical capacity building, infrastructure and IT development.
I am, therefore, hoping that we can gain support for a forward agenda for APEC that focuses on 4 themes:
- First, strong trading relationships
- Fundamental to this is support for a rules-based multilateral trading environment. Individual Action Plans (APEC's liberalisation scorecards) will continue to evolve, highlight the opening of our economies, and apply peer pressure to do more. APEC will also progress trade facilitation and ensure that regional trade agreements develop in a way that promotes trade liberalisation.
- Second, strong economies and governance
- Post-Asian crisis, APEC has developed a broad body of work in addressing economic governance, supplemented by efforts to encourage the 'new economy'. Strong, stable economies are prerequisites for healthy trading relationships and attracting investment.
- Third, strong markets
- Markets that encourage competition and innovation, are subject to the rule of law and have rigorous corporate governance regimes, also attract international capital and entrepreneurs, and drive trade and development.
- Fourth, strong communities
- Capable people and healthy communities are also crucial to APEC, which is exploring the importance of human capacity building. Activity encouraging small and medium enterprises, education and training, and developing social safety nets are all part of achieving APEC goals.
Together, these themes encapsulate APEC governments' responses to the challenges of globalisation. The Bogor Goal will remain central to APEC, but is increasingly in need of support by other complementary commitments. The pay-off will be a focused, pro-globalisation agenda for APEC.
Our work on free trade agreements
Australia is actively pursuing a number of bilateral free trade agreements. We believe these are building blocks to the multilateral system. Our political opponents continually talk down the value of bilateral FTAs, but we are not prepared to be left flat footed if the multilateral round doesn't move ahead.
Australia's interest in FTAs is entirely consistent with our integrated bilateral, regional and multilateral trade policy approach. Considering FTAs does not diminish our support for the WTO and a new trade round in any way. FTAs that are comprehensive in scope and coverage can be complementary and provide momentum to our wider multilateral trade objectives.
Our Government's trade policy is pragmatic and results-focussed. We are open to concluding free trade agreements if they offer the prospect of delivering substantial gains to Australia that could not be achieved in a similar timeframe elsewhere.
A possible FTA with the United States
Our exploration with the Bush Administration of a possible FTA - about which I will be speaking in more detail at the APEC Studies Centre Conference on Thursday - is a case in point.
I have been talking with USTR Bob Zoellick about a possible FTA because we see better market opportunities for Australia in the world's largest and most dynamic economy. An FTA would help build an even closer economic relationship, including through improved market access.
We are, however, still at the early stages of discussion. I have been encouraged by the Administration's interest in discussing this issue with us, but we recognise that they have a number of other trade issues to deal with as well. Not the least of these is preparations for Qatar where Australia and the US share a similar interest in the launch of a new WTO round at the earliest opportunity. I have welcomed US agreement that any FTA would need to be comprehensive in scope, including in areas like agriculture. This is vital if an FTA is to be used as a building block for WTO negotiations and further global integration.
Links with Asia
Contrary to some suggestions, Australia's global economic links are not a zero-sum game. The notion that strengthening trade ties with the US means stepping away from Asia is, quite simply, rubbish. Trade relations with Asia will remain a key government priority - as shown by several initiatives we are pursuing alongside discussions with the US about a possible FTA.
We are already negotiating an FTA with Singapore, in which we will be looking at making inroads in major services sectors in Singapore and exploring cooperation in newer areas, like e-commerce, competition policy and intellectual property. I am looking forward to speaking today with my Singapore counterpart, George Yeo, to build on the progress we have already made.
We are also exploring an FTA with Thailand. I have been actively engaged with my Thai counterpart in exploring the idea of a joint scoping study on ways to maximise the economic and trade benefits of an FTA.
Elsewhere, together with New Zealand we have been negotiating a Pacific Regional Trade Agreement (PARTA) with Forum Island countries, which offers them the opportunity of greater integration with the global economy, and ensures our exporters will be treated equally with competitors from outside the region.
A free trade agreement may not always be the most appropriate or best option to maximise bilateral trade and economic prospects. In pursuing strengthened economic partnerships with our most important North Asian trading partners, Japan and Korea, we opted for full-scale studies into facilitating trade and investment, covering old and new economy issues. As a result of the Strengthening Economic Relations report on Japan, we are now discussing a Trade and Investment Facilitation Agreement (TIFA) to update the bilateral trading framework and address the problems and barriers identified by Australian and Japanese businesses. The Korean studies are due to be finalised in September.
We are continuing to build an AFTA-CER Closer Economic Partnership or CEP. The CEP in its broadest sense has been agreed at officials' level and the details are being worked through. The first meeting to do that is being held in Bangkok today. I will be pressing ahead on the CEP when I meet ASEAN counterparts in September.
We are also actively supporting China's accession to the WTO.
Australia is pursuing its trade interests in the best ways available to it.
In the first instance, this means vigorously working to build support for a new round of multilateral trade negotiations. Secondly, it means standing by our commitment to advancing APEC's goals. Thirdly, it signifies contemplating and entering into bilateral and regional strategic partnerships, which may be in the form of FTAs or other mutual agreements, where such arrangements maximise trade and economic opportunities.
I strongly believe that the raft of proposals for FTAs and regional trade agreements circulating at the moment should not be seen as a threat. We should instead regard them as an opportunity to maintain the impetus of global trade reform and bolster the value of open markets.
I reject the notion that any advance on one aspect of our trade policy agenda means falling behind somewhere else. It is not simply a question of whether Australia can walk and chew gum at the same time - of course we can. But in the trade game, Australia must do both - and do a hundred other things as well.
Our Government's philosophy is simple: exploit every avenue, negotiate at every level, and participate in every forum to keep Australia's exports growing. In today's environment, to do anything less is to sell Australia short. Our exporters - indeed, every Australian - deserve more.
Local Date: Tuesday, 11-Mar-2014 06:42:01 EST