Speech
at the launch of the report China Embraces the World Market
Melbourne, 26 November 2002
China in the World Trade Organization: What it Means for Australia
Introduction
It gives me great pleasure to welcome you here to launch my department's
new report, China Embraces the World Market.
I congratulate Dr Frances Perkins and her team in the Department
of Foreign Affairs and Trade's Economic Analytical Unit on producing
another high quality report.
I want to thank Macquarie Bank, TradeData International, AusAID and
Austrade for their valuable sponsorship for this report.
And I particularly want to thank BHP Billiton for their generous
long term corporate sponsorship of EAU research.
Today's launch provides a good opportunity to highlight the implications
of China's historic WTO entry for Australian business.
China and the WTO
China's accession to the WTO is one of the most important and encouraging
developments for the multilateral trading system in many years.
Bringing China, the world's sixth largest trading economy -- and
Australia's third largest trading partner -- into the global rules
based trading system is a major event for the WTO, China and Australia.
Discussions at the WTO mini-ministerial meeting I hosted in Sydney
two weeks ago again highlighted the importance of fair global trading
rules to developing countries.
Without this system, developing countries could not be guaranteed
access to export markets - access they need to lift their people out
of poverty.
And without this system, developed countries also could not continue
to expand employment and meet their populations' aspirations for higher
living standards.
Our meeting in Sydney also confirmed the importance of improving
access for developing country products, particularly agriculture,
for the success of the Doha Round of global trade negotiations.
WTO accession brings China - a major developing country - to the
negotiating table on major trade issues for the first time.
With China now the world's ninth biggest agricultural exporter, we
look forward to working closely with China to secure fairer access
to global agricultural markets, so vital to helping poor countries
develop.
China's Long Reform March
China's entry to the WTO consolidates and extends the reform programme
China began almost a quarter of a century ago.
Continual -- though sometimes gradual - market-oriented reform has
delivered China extraordinary economic growth, and rapid improvements
in living standards.
Indeed, since 1980, the number people in China living below the internationally
recognised poverty line of US$1 per day has fallen from 600 million
to about 200 million.
China's population now has a GDP per capita of US$970, and its economy
is already the sixth biggest in the world.
On current growth rates, China is expected to pass the UK and France
to become the world's fourth biggest economy in 2007 - just five years
away.
WTO entry will accelerate and consolidate China's embrace of the
world market, and hence its growth prospects.
China has reduced its average tariffs from over 40 per cent, in the
early 1990s, to 12 per cent after WTO entry in early 2002. Average
tariffs should be about 10 per cent by 2005.
China also is removing and relaxing many non-tariff barriers, particularly
on agricultural trade, and relaxing investment barriers in the services
sector, including on finance, transport and distribution, as well
as telecommunications and professional services.
WTO Will Help Reshape China
While China's WTO trade and investment reforms are very important
for China and its trading partners, its WTO entry package involves
much more.
China also committed to deepening and accelerating reforms in a range
of other areas which are crucial to modernising China's economy, its
key institutions and its business environment.
These include reforms to the legal system, bureaucracy, banking system,
financial markets, state owned enterprises, foreign exchange regime
and in corporate governance.
Hence, WTO entry is adding critical momentum to China's efforts to
build a resilient market based economy, and to overcome its major
economic, social and business challenges.
As a result, China is anticipated to achieve at least 7 per cent
real growth this decade, positioning itself to become a middle income,
and eventually developed economy, in coming decades.
China and Australia
China's emergence as a major regional and world economy and trading
power has significant implications for Australia.
Already we have benefited from over two decades of market reforms
and growth in China.
Our exports increasingly fuel China's robust industrial expansion.
China already is our second largest customer, after Japan, for mineral
and energy commodities, such as iron ore and alumina. China is the
largest purchaser of Australian wool, malting barley and copper ores.
And, of course, our recent deal to supply LNG to China is an enormous
development for both countries.
But China's importance to Australia goes beyond commodity exports.
Recent figures show China is now Australia's top source of overseas
students, and the-fifth largest source of tourists visiting Australia,
with both growing very rapidly.
These developments promise tremendous long term benefits from people
to people contacts and China's economic development as well as immediate
economic gains for Australia.
As China embarks on accelerated WTO related trade and investment
reforms, Australian exporters should find many new opportunities.
The EAU report analyses these in some detail - I'll focus on just
a few areas of major interest.
Of course, of importance to Australia, in agriculture China
is reducing import barriers and reforming grain policies. Chinese
farmers are being encouraged to shift out of broad acre crops into
higher return, labour intensive agriculture such as horticulture and
smaller livestock.
Increasingly these policies should expand export opportunities for
efficient broad acre crop and cattle producers like Australia -- excellent
news for Australian wheat, barley, sugar, oilseed and beef farmers.
WTO related restructuring also should boost demand for Australian
goods, services and technologies to lift farm productivity.
Australian firms already supply breeding stock and technology, and
environmental solutions to Chinese farmers; these opportunities can
only grow as Chinese agriculture becomes more market oriented.
Opportunities in the minerals and energy sector also look
extremely promising. Demand for Australian minerals and energy will
continue to expand very rapidly in coming decades as Chinese industries
and utilities expand their output to build China's infrastructure,
construct its cities and supply local and export markets.
And WTO entry will enhance efforts to make China's mineral industries
more efficient, creating demand for Australian high quality technologies
and services.
WTO entry also should generate major opportunities for Australia's
services sector as China frees its services trade and investment.
Already, Australian firms in education, telecommunications, financial
services, architecture and design, tourism and environmental services
are expanding their operations in China.
China's further opening of these sectors in the years ahead should
provide excellent opportunities for well prepared Australian services
businesses.
While investment is relatively small, it is growing rapidly,
with many Australian companies now investing in China, particularly
in high value manufacturing operations and services provision.
In the next five years, promised mining industry reforms also may
open China's mining sector to international investment, prompting
much larger Australian investment flows.
Australia also is a very important destination for Chinese outward
investment. Most of this investment secures Chinese resource supplies,
such as iron ore, aluminium and most recently, liquefied natural gas
from the North-West Shelf.
Australia welcomes Chinese investment, which creates jobs and increases
Australia's exports.
Looking ahead, WTO entry and other reforms are making the Chinese
business environment more certain and predictable.
New, better enforced laws and stronger institutions should reduce
the costs of trading and investing in China, benefiting Australian
business.
The Australian and Chinese Governments are working closely to strengthen
this vital commercial partnership.
In May, the Prime Minister and Chinese Premier Zhu launched work
on a new bilateral Framework Agreement, from which we want to maximise
the benefits -- to Australia - of China implementing its WTO commitments.
I see the Framework as having several elements:
- first, measures to promote business cooperation in sectors with
high growth prospects;
- second, principles and obligations that will promote trade and
investment liberalisation and facilitation, and;
- third, stronger Ministerial and senior-level dialogue on global
trade issues.
The two sides have started work on the Framework Agreement, defining
the scope of negotiations, and I hope they can be completed in the
latter half of 2003.
Change Will be Gradual
Ladies and gentlemen, despite the generally optimistic outlook on
China, I will end on a note of caution.
China remains one of our most vital and rapidly expanding markets.
China's reform process, entry into the WTO and economic growth prospects
together promise excellent opportunities for Australian businesses
trading and investing in China.
We need to remember, however, that improvements to the often challenging
business environment in China will be gradual.
Many WTO related reforms are yet to be implemented - and China's
size, complexity and development level will make that process administratively
and socially very difficult.
We should also not forget that China will remain a highly competitive
market, with strong local and international firms jockeying for market
share.
China will remain a challenging market in which to do business, and
Australian businesses must be strongly committed, and have a well
prepared business plan, in order to succeed.
Today's EAU report is an important contribution to Australia's understanding
of China and the changes underway there, providing a valuable resource
for business and government alike.
I reiterate my congratulations to the authors and sponsors. And
I commend the report to you.
Local Date:
Tuesday, 02-Dec-2008 14:36:02 EST
