Introduction
Dennis Davis, Chairman of the ANZCCJ, Ambassador McCarthy, members
of the Australian business community in Tokyo.
It is a great pleasure to be with you today to talk about Australia
- about our economic and trade performance - and about our relevance
to Japan.
Our trade performance
2001 was a great year for Australia, despite the economic downturn
in most of the world.
The value of Australia's exports of goods and services increased
by 8 per cent to $154 billion in 2001. This figure a represents
a whopping 54 per cent increase on the value of our exports in 1996.
Exports to all major trading partners grew strongly, to China by
26 percent, to Europe by 18 per cent, and to the United States by
8 per cent. Merchandise exports to Japan also grew by 8 per cent.
In fact, so strong was our performance that we achieved a trade
surplus of $2.7 billion last year - the first calendar year surplus
since 1996.
Our success is all the more impressive because of the global slowdown. The US economy grew an estimated 1 percent in 2001, while Japan's
economy contracted 0.4 percent. The picture elsewhere in East Asia
was similar. And in Europe, growth was weak, with Germany's economy
estimated last year to have grown only 0.5 percent.
Economic management and reform - foundations for success
I have great confidence in our continued ability to perform above
expectations.
Certainly a competitive Australian dollar has helped underpin robust
growth in exports. And, yes, strong prices for our commodities
have helped.
But just as importantly, our trading success is because of our
strong and competitive economy. Our strengths abroad are because
of our success at home.
We've completely revamped an outdated and plainly unfair tax system. We've reformed the labour market and industrial relations. We have
lifted productivity to international standards. And we've restrained
government spending and retired public sector debt. In fact we've
paid off almost $60 billion of debt - we now have one of the lowest
debt to GDP ratios in the OECD.
In 2001 the Australian economy grew 4.1 percent in seasonally adjusted
terms, with an exceptional 1.3 percent growth in the fourth quarter. This compares with an average 0.9 per cent growth in OECD countries.
Australia is now ranked 5th in the World Economic Forum
Growth Competitiveness index. Trade accounts for 44 percent of
our economy, up from 34 percent a decade ago. 1 in 5 Australian
jobs are linked directly to exports - in regional Australia the
ratio is 1 in 4 jobs.
The good news in our economy is underpinned by the growth in household
consumption, business and dwelling investment, and continuing low
rates of inflation.
We aim to use these negotiations to put trade in agriculture on
the same basis as trade in other goods. We want to address the
disruptive legacy of protectionism that has corrupted the world
market for agriculture to the detriment of Australia's agriculture
industries for generations. We are committed to this objective,
we have strong support for it from our Cairns Group partners, and
we have the force of right on our side.
Of course, the Doha Round won't just address agriculture. We want
significant gains for our vibrant and growing services export sector. We want to build on previous gains in manufacturing and other industrial
sectors. And we want to ensure that negotiations on the trade and
the environment and so-called geographical indications do not undercut
our interests. I have no intention of our producers not being
allowed to call their olives "kalamata", or their cheese "parmesan".
Our core focus will remain access to markets for Australian exporters.
Of course, we are not relying solely on the WTO in our trade policy. We are also pursuing regional and bilateral strategies.
In APEC, Australia continues to launch efforts, such as the successful
'pathfinder' initiatives from the Shanghai Leaders Meeting, to accelerate
moves towards meeting the Bogor goals.
We are this year concluding a Closer Economic Partnership between
CER and ASEAN. A major advance in our relations with the region,
this agreement will better structure our efforts to promoting trade,
investment and regional economic integration.
I am confident we will conclude a Free Trade Agreement with Singapore
in the next few months. We are looking for a first class agreement
- a model for other possible FTAs in the region, including our prospective
negotiation with Thailand.
And an FTA with the United States would have considerable benefits
for Australia - removing trade barriers, attracting new investment,
forging commercial links, and minimising any competitive disadvantage
we face as a result of US agreements with other countries.
Economic relations with Japan
Perhaps most importantly, during this visit I shall be pursuing
the concept of a bilateral trade and economic agreement with Japan. Such an agreement would be an excellent way to increase bilateral
economic integration and cooperation. It could free up the cross-border
movement of business resources such as people, goods and services,
capital and information and could focus on coverage of new sectors
and areas of growth.
An agreement would be complementary to initiatives under the WTO. It would have a strong demonstrative effect in updating perceptions
in the commercial relationship and highlighting new opportunities
from the changing structure of both our economies.
The business communities in Australia and in Japan are also looking
at ways to strengthen the bilateral relationship.
In Japan, Mr Murofushi, Chairman of Itochu Corporation, is leading
a working group under the Japan-Australia Business Cooperation Committee.
Mr Murofushi is expected to make public very shortly the recommendations
of his group.
In Australia, Mr Hugh Morgan has just announced the findings of
a study commissioned by the Australia-Japan Business Cooperation
Committee. That study strongly supports a comprehensive trade and
economic agreement with Japan covering goods and services trade
between the two countries and also recommends including other measures
to deepen integration of the two economies.
I will be meeting Mr Murofushi and his group later today to discuss
the important work of the Japanese Business Group. I understand
the Japanese group also supports the development of a new economic
partnership between Japan and Australia.
Let me tell you why I think a bilateral trade and economic agreement
with Japan is an important goal for Australia.
Our performance, our competitiveness, and our activism on trade
and investment liberalisation, is recognised around the world, including
here in Japan.
Australia's trade relationship with Japan is of fundamental importance.
Japan has long been our largest export destination - for over 30
years, in fact.
In 2000, Australia's total exports to Japan were valued at over
A$25 billion, a rise of 28 per cent over year earlier figures -
due mostly to higher commodity demand and prices and a lower-valued
Australian dollar. Total imports from Japan were valued at
A$17.3 billion.
Japan is a key source of foreign investment for us, aside from
its role as a major source of manufactured inputs. As of 30 June
1999 (the latest data), Japan was the third largest source of foreign
investment in Australia. Japanese foreign direct investment
(FDI) was valued at A$15.3 billion. In return, Australians invested
some A$268 million in FDI in Japan.
In short, Japan's importance to Australia as an economic partner
is unlikely to change in the foreseeable future.
That importance can be seen in our merchandise exports - 20 percent
of which go to Japan. Our trade is heavily concentrated on five
products - coal, liquified natural gas, iron ore, beef and aluminium
- which in themselves account for more than half our total merchandise
exports.
Japan is our largest market for all five products. 46 per cent
of our coal exports, 44 per cent of our iron ore exports, 43 per
cent of our beef exports and 38 per cent of our aluminium exports
go to Japan.
So it is hard to overstate just how important Japan is for Australia.
While our exports to Japan have historically been commodities-based,
however, there is now greater diversity than ever before.
Growth in the export of manufactures, especially elaborately transformed
manufactures, is increasing. ETM exports to Japan grew 24
per cent in 2000, totalling $944 million. Australian technology
exports have been successful in niche markets such as software development.
And with increased domestic deregulation in Japan, more opportunities
are emerging for Australian exporters. Wine, cheese, fruit
and vegetables exports have grown considerably.
Trade in services dominated by tourism
Japan is now Australia's second largest market for services exports.
In 2000, our services exports to Japan were valued at $3.6 billion.
Tourism accounts for the bulk of this (around 60 per cent), as
Japan remains the second largest source of overseas visitors to
Australia (behind New Zealand). The number of Japanese visitors
increased to 720,500 for the year to December 2000, recovering slightly
(by 2 per cent) from 1999 due to a favourable exchange rate, the
Sydney Olympic Games and a more optimistic outlook for the Japanese
domestic economy.
Japanese analysts also report that despite the continued uncertainty
over a recovery in the Japanese economy, Japanese tourists are travelling
abroad in greater numbers. Total international visitors from
Japan and Asia to Australia is forecast to rise from 1.9 million
in 1999 to 5.5 million in 2010.
Education exports are a major part of our services trade.
In 1999 some 2 per cent of Australia's total overseas university
student population came from Japan, numbering 1,659 students.
This figure is expected to have increased in 2000. Education
services to Japan remain a priority of the government.
Japan an important source of foreign direct investment
Japan remains a very important investment partner for Australia. The total stock of Japanese investment in Australia was A$49 billion,
as at 30 June 2000, making Japan the third largest investor in Australia. Japanese investments are concentrated in real estate, mining, commerce
and the services sector.
By comparison, Australian investment in Japan is small - around
A$15 billion. Even so, Japan is the fourth most important
destination for Australian outward investment. The bulk of
this investment represents capitalisation of banks and financial
institutions, and the establishment of regional offices by Australian
exporters.
The breadth and depth of our economic relations and the sheer importance
of Japan to Australia - as well as our strategic role in the Japanese
economy - lies at the heart of my visit to Japan.
While trade and investment figures make clear the importance of
Australia's relationship with Japan, it only takes a quick look
at bilateral trends to show that more can be done to help the relationship
to reach its full potential. Our bilateral trade and investment
trends patterns do not reflect those seen in economic relations
with other industrialised economies.
Australia's exports to Japan in growth areas, such as services
and highly developed manufacturers are still dwarfed by those to
economies such as the United States and European Union. Similarly,
bilateral investment flows are far smaller than those with comparable
economies.
These are the reasons why we see so much potential for a trade
and economic agreement to focus on the future growth sectors in
our trade, exploit the complementarities between our businesses,
and reduce the impediments to growth in our singularly successful
trade relationship.
Our trading futures
Trade has always been good for Australia - as it has for Japan. It is a prime source of our standards of living. Australia has
long relied on overseas markets buying our commodities. And we
now produce a huge range of world-class goods and services.
I look forward to a future for Australians that continues to deliver
higher standards of living - better jobs, more prosperous communities,
more secure families. I am confident that our relations with Japan
will play an important part in that. And I am pleased that all
of you here today are playing such an important part too.
Thank you.
