Speech
to the Grain Growers Association
Dubbo, 25 February 2003
Grain Growers Association
Ladies and Gentlemen
It's always a pleasure to be in Dubbo. And it's an honour to have been invited to speak at your dinner.
Grain growers are arguably the backbone of Australian agriculture - and are the lifeblood of many rural communities and regional centres such as Dubbo.
Grains, in particular wheat, are also at the heart of Australia's international trade.
Exports of wheat were valued at $4.5 billion in 2001/2002, or 4 percent of total Australian exports.
This represented an increase of 21 percent over the previous year. In fact, over the previous decade, wheat exports grew an average 11 percent.
Drought
Of course, the short term outlook for the industry has been affected significantly by the drought.
The latest figures from ABARE show that winter grain production was just 15.4 million tonnes, down 61 percent from last year, and the lowest since 1994-95.
ABARE has now forecast that the summer crop will be down some 62 percent, to the lowest level in 20 years.
The value of last year's grain harvest was a record $9.9 billion: this year it is expected to be around $5 billion.
In fact, the drought is expected to wipe 80 percent off last year's net value of farm production - some $10 billion - to around $2.2 billion.
Nationally, the impact of the drought is likely to take upwards of three quarters of one percent off our GDP growth this year.
The coalition government recognises the impacts of the drought. We have committed $900 million in drought relief over the next two years, and more than 4,500 farm families are receiving federal drought aid.
Domestic change
The grains industry along with other agricultural industries and non-agricultural industries have gone through a lot of change in recent years.
In essence, we have seen the restructuring of grains industry - in storage and handling, in transport and distribution, and in marketing.
Statutory arrangements - especially at the state level - have been freed up.
Now we are seeing second phase consolidation - principally through rationalisation, and mergers and acquisitions.
The current proposal to merge GrainCo and GrainCorp, and the sales of Freight Corp and National Rail to Toll Patrick is all part of this ongoing change in the industry.
These are very important changes for rural Australia - and especially for regional centres such as Dubbo.
I know that for many in the industry this has been tough , and I am well aware of the differences of opinion in the grains industry about the directions it should take.
But change also brings opportunity, and no-one can deny the new investment and competitiveness that has emerged in recent years.
International Change
That same theme of change - of uncertainty and opportunity - applies to our international agricultural trading outlook.
First of all, we are faced with an uncertain international security situation, particularly with respect to Iraq, which has been a significant customer for our wheat.
Second, is a more difficult trading environment for Australian exporters - caused by both the drought and significantly weakened global demand, especially in some of our key markets.
Third, we are part way through a new round of global trade negotiations at the World Trade Organisation, with agriculture the central and arguably most difficult and contentious area.
Fourth, we are embarking on a range of bilateral and regional initiatives, to complement our efforts in the multilateral negotiations, and ensure even greater diversity and depth in our export products and markets.
And finally - we are faced with a number of challenges to our quarantine regime.
In short, we are going to have to be dynamic, flexible and sure-footed in ensuring that trade in Australian agricultural products - including our grains trade - continues to grow in global agricultural markets.
Iraq
There has been a lot of uncertainty created by Iraq's threat last June to reduce wheat imports from Australia, and then the alleged offer of new contracts, publicised over the weekend.
Attempts by the Iraqi regime to manipulate public opinion in Australia - in this way, should be seen for what it is.
I'd like to put the debate over our wheat trade with Iraq into perspective.
Australia has been a reliable and long-standing supplier of quality wheat to Iraq, including in times of political difference and actual military hostilities.
We recognise the need to ensure a reliable food supply to the Iraqi people, notwithstanding our differences with Saddam's regime.
We were disappointed by the Iraqi threats last year to reduce their wheat imports from Australia.
The Iraqi Government has announced it will resume normal trade with AWB; I am waiting to hear just what is meant by this.
If this results in further contracts then that is a good thing for AWB and wheat growers.
But whatever they do, either doubling or halving wheat sales or both - they will not change the policy of Australia towards the Iraqi Government.
The facts are these.
- Iraq had a bumper wheat harvest in 2001, estimated by the UN at around 2.1 million tonnes - compared to 600,000 tonnes of wheat in 2000, thus they could probably get away with buying less wheat than usual.
- AWB Ltd signed a new contract for wheat last June, under the UN's Oil-for-Food program.
- And, in December, AWB Ltd announced that it had secured further contracts.
Our wheat trade with Iraq - given the current circumstance of global political tensions and a difficult production and trading environment for grain growers - continues.
AWB Ltd has a number of shipments in the UN Oil for Food pipeline - and the Government will be working to make sure our wheat trade continues no matter what happens in Iraq.
The trading environment
Ladies and gentlemen
Drought, weak global demand and considerable international economic uncertainty has made Australia's trading environment a particularly tough one in recent months.
We have seen recent volatility in our monthly trade figures. But criticism of our performance ignores the reality that gains should be measured in years, not months.
In spite of a difficult trading environment, total Australian exports in December 2002 were two per cent higher than a year earlier.
Our exports to East Asia have increased 46 per cent since we came to office, and now account for around 53 per cent of the total value of Australia's merchandise exports.
Over the last ten years, Australia's export growth has averaged almost 8 per cent a year, compared with world export growth of about 5.5 per cent.
Our exports have become more diverse - our top 20 export products include commodities, manufactures and services.
Our markets have become more diverse - India is our fastest-growing major Asian market, for example, and the Middle East is our fastest growing regional market.
We continue to open new markets for Australian wheat in the Middle East.
Last July, after my visit to Libya, we secured a 50,000 tonne order. And AWB Ltd has won a similar contract to supply wheat to Jordan.
We are also working with industry to strengthen existing markets like Iran, which has confirmed a 530,000 tonne order, with great potential for more trade.
Much of our success reflects the ability of our exporters to adapt to highly competitive and demanding global trading markets.
They have been ably supported by the strong business environment created by the Liberal-National Coalition Government.
Stable monetary and prudent fiscal policies, lower barriers to trade, greater incentives to invest, and sound micro-economic reform have ensured that industry can capitalise on its export strengths.
Our trading partners now have great confidence in the strength and sophistication of Australia's economy and export sector.
That confidence is founded on the competitiveness and reliability of our exporters and the quality of our products.
It applies especially to our rural exports and in particular our grains.
The WTO negotiations
The challenge for us now, of course, is to ensure the continued success of our agricultural exports in global markets.
Agriculture remains front and centre in our trade priorities.
Agriculture contributes vitally to Australia's export performance - accounting for one in every four dollars earned from exports.
Agricultural markets are perhaps the most corrupted of all international markets.
As chair of the Cairns Group Australia leads the debate as we fight for agricultural trade reform.
The main game for agriculture trade liberalisation is the Doha Round of multilateral trade negotiations, kicked off at the WTO ministerial meeting in Qatar in December 2001.
We have made it very clear that without progress in the Round on agriculture, there can be no progress in other areas such as services and manufactured goods.
Why? Because neither Australia or the Cairns Group and the Developing Countries or indeed the USA are prepared to agree to anything else until agriculture is dealt with as was mandated in Doha.
Developing countries now make up more than 100 out of the 145 WTO members. They are overwhelmingly agricultural economies.
They are no longer prepared to keep opening their markets to developed countries for industrialised products and services until the developed countries give them fair access for their agricultural products.
The Doha mandate is clear and unambiguous on agriculture:
- improve market access for agricultural products;
- substantially reduce domestic support; and
- reduce - with a view to phasing out - all forms of export subsidies.
We have continued to state - there will be no Doha Round outcome without an outcome on agriculture. And everybody who is directly involved knows it.
That is why, right now, the negotiations on agriculture have reached a critical stage.
Two weeks ago I travelled to Tokyo to attend a WTO mini-ministerial meeting.
That meeting followed the first mini-ministerial meeting, which I hosted in Sydney last November.
The Tokyo meeting coincided with the release of a proposal for agriculture released by the Chair of the Doha agriculture committee, Stuart Harbinson.
Mr Harbinson drafted the proposal in an attempt to break the log jam between the major players on agriculture - by 31 March all parties are supposed to agree on the targets and objectives for the negotiations.
Harbinson proposed tariff cuts, expanded tariff quotas, the elimination of export subsidies, limits to export credits and cuts in domestic support.
But none of the proposals go far or fast enough.
There would still be high levels of protection, with - in some cases - tariffs of several hundred percent on some products in which we specialise, and tariff quota volumes for products such as beef and dairy in our key markets largely unchanged.
The proposals on domestic support would still leave huge entitlements that would do little to lessen the ongoing distortions in global markets created by such subsidies.
Harbinson's proposal tries to build a bridge between the genuine reform proposals put forward by Australia and the Cairns Group and the status quo or "no reform" positions of Japan and the European Union.
So it is compromised because, in part, it reflects the overly negative stance of players such as Japan and the EU.
Harbinson's text also proposes that single desk export arrangements be removed. Clearly, this is not acceptable to Australia.
Our single desk arrangements - including on wheat, sugar and rice - do not distort world trade. And they benefit Australian farmers.
We will continue to defend the single desk in trade negotiations.
So while much progress has been made in advancing the mandate we won at Doha, the road ahead will be long and difficult.
We have to be prepared for a drawn out battle to raise the ambitions of the EU and Japan, in particular, so that agriculture does not become the cause of failure in the Doha Round.
And we will be working very hard - including as Chair of the Cairns Group - to ensure that our own interests are defended vigorously.
Competitive liberalisation
Ladies and gentlemen
Three weeks ago I launched - together with Alexander Downer - the Coalition Government's new White Paper on Foreign Affairs and Trade, Advancing the National Interest.
Advancing the National Interest articulates our trade policy of competitive liberalisation - of getting the most out of opportunities, wherever they occur and in the fastest possible timeframes, in a manner that complements our efforts in the WTO.
You'll remember the so-called Bogor goals agreed by APEC members in 1994. There, APEC economies committed to free trade and investment - by 2010 for developed economies, and by 2020 for developing economies.
They have made significant progress - APEC's average tariff fell from 12 per cent to 8 per cent in between 1995 and 2000. And APEC has made great strides in areas such as trade facilitation and corporate governance.
I want APEC to develop as the over-arching framework for economic openness in the Asia-Pacific region - a benchmark-setting body for sub-regional and bilateral initiatives that encourage greater trade and investment, consistent with the rules and disciplines of the WTO.
Last week, I signed one such initiative - the Singapore-Australia Free Trade Agreement - the first FTA Australia has concluded since the CER with New Zealand in 1983.
And we are now negotiating FTAs with the United States and Thailand, and trade and economic agreements with Japan, China and Korea.
. the United States FTA .
Ladies and gentlemen
Our proposal for a Free Trade Agreement with the United States has drawn some flak - including from the rural sector.
I think, however, that it would be irresponsible not to negotiate a Free Trade Agreement with the world's dominant economy.
First, there is the potential for market access gains to the world's biggest economy.
We have never said that the FTA will be easy to negotiate. Quite the contrary. But we already are an open market for agricultural products - unlike the United States.
This FTA offers us the opportunity to protect and improve market access for our agricultural products to the US market.
Second, we won't preserve the status quo in international markets by not negotiating an FTA with the United States.
Indeed, if we do nothing, things will probably get worse for us.
The US Administration has said, for example, that negotiating the Free Trade of the Americas Agreement - which will undoubtedly include agriculture - is a high priority.
Our South American friends would get preferred and improved access to the US market - at our cost.
Third, the argument that we can't walk and chew gum at the same time - that pursuing an FTA with the United States means that we have lost sight of our interests in the Doha multilateral negotiations - is nonsense.
Our commitment to the multilateral trading system is not diminished by our negotiations with the United States.
A strong framework of multilateral rules governing international trade is essential for Australia - and for the cause of global economic openness.
We have been working hard to lodge serious proposals in the various sectors of the Doha Round negotiations - doing all the technical work..
And we have tried to inject maximum political momentum - such as when I hosted the mini-ministerial meeting in Sydney last November.
Fourth, we can't discount the possibility that the WTO round will not deliver a result - in agriculture, or in any other sector for that matter.
The WTO now has 145 members, and an ever more complex agenda - we need to keep pushing for greater market access in every possible forum.
A danger from behind
Ladies and gentlemen
There is a danger of new barriers to trade if the European Union, with others, is allowed to introduce issues like animal welfare and food safety into trade negotiations.
We not prepared to allow others to impose their standards - appropriate conditions for battery hens, or the maintenance of "cultural landscapes" - on the rest of the world.
I am not suggesting that we should prevent countries from determining standards of product safety, or restricting imports on legitimate grounds.
But we must guard against the deliberate undermining of international rules as a disguised form of trade protectionism, in whatever forum.
Conclusion
Ladies and gentlemen
Strong economic foundations and a strong trade outlook will be the key factors in delivering Australia's future export growth - especially in agriculture and, particularly, in grains.
More rain is essential, hopefully it will continue, so that the grains sector will recover and grow, providing security and prosperity for your families and communities.
Your industry has been through a tough time in recent years, we will continue to work with you to face the challenges of the future.
Thank you for having me tonight, we wish you all the best for the future.