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
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: Wednesday, 12-Mar-2014 07:45:30 EST