Australian Minister for Trade and Deputy Leader of the National Party, Mark Vaile
to the New South Wales Farmers Association
Sydney, 25 July 2001
(Check against delivery)
Globalisation - Opportunities and Threats
Thank you, Mal Peters; State and Federal Parliamentary colleagues, ladies and gentlemen.
Globalisation is an important subject for people in rural Australia, and it is right and proper that the NSW Farmers encourages debate on globalisation.
Like most things in life, globalisation involves both opportunities and threats.
I want to say something about both, and also look at how I'm dealing with these issues as Minister for Trade.
In particular, I want to focus on dispelling some of the myths about globalisation and Australia's trade achievements that sometimes get a hearing in the broader community.
Why trade matters
A lot of people still think that trade doesn't matter. They're wrong.
Today, exports and imports of goods and services account for around 40% of our economy, up from about 30% a decade ago. One in five Australian jobs are directly linked to exports. In rural Australia, this ratio is more like one in four.
The fundamental dependence of Australian agriculture on global markets is even starker when you remember that
- 98% of all Australian produced wool is ultimately exported
- 95% of all cotton
- 76% of all wheat
- 76% of all sugar
- 63% of all beef, and
- 54% of all dairy production.
Rural New South Wales depends heavily on exports. Ricegrowers Co-operative Ltd employs 1250 people in the five processing facilities it operates in the Riverina-Murray region, in addition to the 2500 families involved in rice production there. Overall, the Co-operative exports 85% of its rice produce to over 40 countries.
The Dairy Farmers branch in Tamworth employs 120 people and exports over 20% of its product of ice cream and yoghurt. South Pacific Seeds, which employs 35 people in Griffith, grows seeds for export to markets around the world, and export sales from its Australia-wide operations are worth $12 million annually. Austwood, with a mill employing over 50 people at Gunnedah, producing cypress timber from renewable native forests, exports 30% of its product to Japan and is pursuing opportunities in other potential export markets.
I could go on with many more examples. But the point is that the future prosperity of Australian farming is inextricably linked to trade. Your farms, your incomes and your futures depend on it.
Launching the Exploding the Myths booklet
I've heard a lot of myths and falsehoods when globalisation and trade are being discussed. And I'm not prepared to let them stand unchallenged. So, I'm particularly pleased today to launch a new pocket-sized booklet, prepared by my Department, addressing the main criticisms that are sometimes heard about trade liberalisation and investment policy. It's called Exploding the Myths: Facts About Trade and International Investment.
While the benefits of trade and investment can be shared by all, there can be difficulties that need to be managed as well. The whole process is about changing with the times, learning new skills and being more creative.
One significant challenge in this process of change is working out which information can be relied upon and which cannot - what you might call sorting out the myth from the reality.
The Exploding the Myths booklet helps that sorting out process by debunking a few of the common myths and offering some facts about Australia's experience of globalisation and its trade achievements. It's been produced in a straightforward, plain English style. The booklet will help us to project into the broader community a reliable and positive message about trade.
Myth 1. Tariffs protect local jobs.
- Tariffs are a tax.
- One sector of the economy is protected while the rest pay for this protection.
- For example, between 1974 and 1984 the level of protection in the TCF industry increased by 12% a year, but employment in the industry fell by 3% a year.
It used to be thought that high levels of protection were the way to build up our national economy.
In fact, it was Australia's farmers and miners who, in the sixties, first understood that high protection was hurting Australia. They saw that high tariffs imposed huge costs on industry, and that our exporting industries - agriculture and mining - were handicapped by these policies. They knew that having highly protected industries simply added to their costs - and left us with an uncompetitive, low growth economy.
Myth 2. Australia has reduced its tariffs but other countries have not.
The playing field is not level, but Australia is not alone in reducing its tariffs. Most countries have lowered their tariffs over the last twenty years. However, I point out the notable exception to progress in tariff reductions, which is agricultural products, especially in the EU and the US.
Myth 3. Imports are bad for the economy.
A very large number of farm inputs are imported or partially imported. These include farm machinery, tractors, pumps, cars, utilities, fertiliser, the list goes on.
Myth 4. Trade liberalisation has destroyed manufacturing in Australia.
This myth is just plain rubbish. In Australia's case, the lowering of our tariffs has been accompanied by a boom in manufacturing, especially with an export focus.
Myth 5. Australia gets nothing from membership of the WTO
The WTO provides a set of rules and a tribunal to resolve disputes.
Before the WTO, the US could put an unfair tariff on our lamb, the Chinese could change wool quotas at the drop of a hat, and the Koreans could lock out our beef.
The WTO has allowed Australia to fight the Goliath of US bullying on lamb.
The WTO has freed up our beef exports into Korea. The list goes on.
The WTO is at the core of the global trading system, as it provides a strong, rules-based trading system that gives nations confidence in each other and in the global market place. In the WTO, the rule of law replaces the law of the jungle. This benefits everyone, but particularly small economies such as Australia.
WTO minimum access commitments have opened previously impervious markets to exports from our farmers. For example, Australia now exports to the lucrative Japanese and Korean rice markets - something that was unthinkable five years ago.
The WTO also provides a very important system for settling trade disputes. If countries break the rules, Australia uses this mechanism aggressively to deliver commercial benefits for Australian exporters. Our successful challenges to Korean government restrictions on beef imports and to new US tariffs on lamb are recent examples of how we can use the system to protect the interests of Australian farmers.
Myth 6. The WTO threatens Australia's quarantine arrangements.
Australia's reputation as a clean and green producer is the envy of many other nations around the world. We maintain this status by our quarantine arrangements. These arrangements are based on sound science and are completely consistent with Trade Rules. Our quarantine arrangements will not be compromised.
Myth 7. Foreigners can take-over whatever they want.
Australia has always used international investment to help develop the nation's great resources. Foreign investment has an important role in further developing our resources, and it is for this reason that we have a Foreign Investment Review Board (FIRB). The FIRB screens all large foreign investment proposals as to whether they pass a national interest test. The most recent was the interest by Shell in Woodside Petroleum and the North West Self project.
Myth 8. Foreigners already control half the country.
The following chart puts into context the extent of foreign ownership of Australian assets. (Graph on Australian Assets, FDI and Net FDI)
Myth 9. Foreign investment is a threat to Australian jobs.
Myth 10. Globalisation will harm us.
Globalisation can't be stopped or turned off. And no one would want to be denied the benefits of global information flows, or the best medical technology the world has to offer. But it's surprising how many people accept that these aspects of globalisation can be good but believe trade liberalisation - which helps make it all possible - is bad.
New threats and new opportunities
In the past few years, domestic concerns in many countries about the effects of globalisation, foreign ownership, the environment, and labour standards, have put governments under pressure to become even more protectionist. In 1999, these issues were a key reason why the WTO's Seattle meeting failed to launch a new round of global trade negotiations.
This has hurt Australia. Research shows that a new round focused on market access gains in agriculture, services and industrials would bring major benefits to Australia, potentially adding more than US$5 billion to our economy. The longer it takes to launch and conclude a new round, the longer Australian farmers and others will have to wait for the major economic gains involved.
That is why I'm pressing so hard for the successful launch of a new round of world trade negotiations at the WTO Ministerial Meeting in Doha in November. Achieving this is the Government's number one trade policy priority.
What we want from a new round is a better trading environment - one that is more open, transparent and certain. This will be a major boost to Australia's exporters, especially our farmers. That is what our Government's trade policies are all about - and we are pursuing this goal, relentlessly and comprehensively, at every opportunity.
To sum up
Globalisation is not something being imposed on people by governments. It's happening because people want the things globalisation delivers.
Trade is a fundamental part of globalisation, and vital for Australia's future prosperity. Australian farmers - including in rural New South Wales - are highly dependent on trade, and stand at the forefront of those who are leading, and benefiting from, globalisation.
World agriculture markets are still highly distorted and discriminate against competitive Australian producers. In other words, they are not yet globalised enough.
Ongoing, world trade reform is the only answer, and the Government is committed to achieving it.
Our Coalition government
The Government's vision is to be able to increase our investment in the infrastructure of Australia for the future.
The National Party vision, and absolute commitment to you, is to ensure that country Australia gets its fair share of the benefits of growth and reforms.
We continue to be the bridge across the divide.
We came to government because you wanted us to fix Labor's mess
- High Debt - $96-billion
- High Interest Rates - 18%
- High Inflation - 5%
- High Unemployment - 11½%.
Our record - economic management, taxation reform, industrial relations.all helping improve you do business
- Cut interest rates - 6.5%
- Cut inflation to between 1% and 2%
- Cut personal income taxes by $12-billion - 80% of Australians on top rate of 30% or less.
- Cut unemployment to under 7%
- We have also been able to deliver a long standing NP Policy in abolishing the indexation of fuel excise for ever
- Cut debt by $60-billion halving interest bill to $4-billion - Which allows us to invest with cash. NOT BORROWINGS.
We can now invest in the future without borrowing
- Physical Infrastructure - Roads to Recovery,
- Environmental Infrastructure - $1.5-billion plus $1-billion in the Budget for NHT. Water.
- Intellectual Infrastructure - $2.9-billion in the Innovation Statement
The alternate government
The alternate Labor government is about widening the divide, not bridging it.
The alternate government is about bowing to the Unions and special interests.
The alternate government doesn't think you are overtaxed.
Over that last five years, our government has done a lot to improve the environment in which you do business and the Coalition believes, that as money becomes available and after we have paid for essential government services, that more money should go back to you. At the end of the day, it is your money any way.
It is five years since our Coalition government came to office. We have come a long way and achieved a lot in five years, and with your support later this year we plan to achieve a lot more.
The choice is clear Howard/Anderson or Beazley and Crean.
Local Date: Tuesday, 07-Jan-2014 10:02:45 EST