Speech

to the Asia Society

Hanoi, Friday 7 March 2003

APEC and Other Regional Initiatives: Creating Markets for Prosperity

Introduction

It is an honour and a privilege to have another opportunity to speak to the members of the Asia Society.

I had the great pleasure of addressing the Asia Society last October in New York.

The Society has, over the years, developed a well-deserved reputation for advancing thoughtful debate about the countries of this region and the issues that face them.

It's great to be back in Vietnam - and very appropriate that the Asia Society is meeting here in Hanoi.

During my visit here, I will be looking forward to hearing more about Vietnam's bold steps towards a more open and liberalised economy, and our strong and growing relationship.

In our experience, reform and openness can build a resilient and flexible economy that can withstand external shocks.

And in turn, greater openness is the basis for deeper economic integration in the region.

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Ladies and gentlemen

We meet at a time full of uncertainty, shaped by forces such as international terrorism, the spread of weapons of mass destruction, and global economic weakness.

But we can look back over the last year or so, and also find cause to be optimistic about regional prospects - especially in trade and economic terms.

• We are now engaged in a new multilateral round of trade negotiations, launched at Doha late in 2001.
• China, an increasingly important player in the global economy, is now a member of the WTO.
• Last October, we set an ambitious APEC agenda in Los Cabos.
• With a new focus on security and anti-terrorism in the Asian Pacific region - "STARS" initiative
• And we are also seeing various proposals for sub-regional trade initiatives come to fruition.
  • On this last point, I was very pleased to sign our FTA with Singapore recently, and I can report solid progress in our negotiations for an FTA with Thailand.

All these developments are set to contribute greatly to long-term regional prosperity.

But I believe that, given global uncertainties, the Asia-Pacific region, especially here in East Asia, can do more to make itself more resilient to regional and global shocks.

So we must continue to focus our energies on the principles of openness, transparency, economic integration and trade and investment liberalisation in the Asia-Pacific region.

• These principles are the means to sustained economic growth, reduced poverty and improved standards of living.

Regional economies must stay the course of regional integration and economic openness

• So that our common goal - unfettered exchange, greater prosperity and a better quality of life for our people - can be realised.

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Growing regional integration

Ladies and gentlemen

We are entering a new and exciting era in the way we conduct our trade in the Asia-Pacific region, and in how our economies relate to each other.

Throughout the region, countries are embarking on a vast enterprise of bilateral and regional free trade arrangements.

These arrangements - particularly where they are comprehensive in their coverage and where they lead the way to deep integration between economies - support the multilateral trading system.

And we are seeing that greater liberalisation in one area can promote greater liberalisation in others. This is what we call "competitive liberalisation".

Nearly all countries in the region are now using bilateral, regional and multilateral avenues for opening up new markets.

• The ASEAN Free Trade Area and the proposed China-ASEAN FTA are examples.
• These initiatives reflect the fact that nations of the region recognise that free and open trade is the best guarantee for economic prosperity and growth.

As you all know, Australia too is actively engaged in advancing deeper regional economic interaction.

• Twenty years ago this month, Australia and New Zealand signed the Closer Economic Relations Agreement, which to this day remains the most comprehensive FTA in existence.
  • The result, twenty years later, is very deep economic integration between our two countries. Economic activity has grown by 500%
• Now we have established a closer economic partnership with the ten ASEAN countries, this will fast track the integration of the CER and ASEAN economies.
• The very good work APEC has done on trade liberalisation and facilitation will add extra momentum to this new regional arrangement..
• As I mentioned earlier, we have finalised a genuinely liberalising and comprehensive Free Trade Agreement (FTA) with Singapore.
• We are negotiating a comprehensive free trade agreement with Thailand - liberalising not only trade in goods - including agriculture - and services, but also improving the climate for two-way investment.
  • These negotiations, Thailand's first with an OECD country, are scheduled to be completed in mid-2004.
• We are pursuing bilateral trade and economic arrangements with China and Japan - charting a future course for Australia's critically important trade and investment relationships.

Significantly, we begin negotiations in two weeks on an FTA with the United States, one of Australia's most substantial trade and investment partners.

• This will be only the third FTA (after Singapore and Jordan) that the United States has negotiated outside of the Americas. It will be the first FTA the Americas have negotiated with a developed economy since NAFTA
• Clearly, this ranks as a significant step in US relations with the Asia-Pacific region.

Our regional trade initiatives are part of the most ambitious trade agenda Australia has pursued in its history.

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Ladies and gentlemen

Some commentators suggest that these bilateral and sub-regional trade arrangements will undermine the momentum of the multilateral trading system.

• They are wrong, they will add momentum.

Australia's approach to preferential trade arrangements is simple.

• We are open to concluding such arrangements where they can deliver gains that cannot be achieved in a similar timeframe elsewhere, and where they support and complement the multilateral trading system.

I believe that genuinely comprehensive liberalising FTAs in no way detract from multilateral trade negotiations - indeed, bilateral and multilateral trade liberalisation can in fact be mutually reinforcing.

• WTO rules provide a basis for bilateral liberalisation - and FTAs that genuinely liberalise bilateral trade can contribute to broader WTO goals.
  • Indeed, FTAs contribute positively to the multilateral framework of rules in areas such as trade facilitation, while following the letter and the spirit of WTO principles.
• Our regional FTAs are fully consistent with our WTO commitments and do not in any way detract from multilateral liberalisation.
  • Our FTA with Singapore, for example, includes a framework on services that is more liberalising than that in the WTO.
• And as our FTAs are comprehensive and not designed to be exclusive, they complement wider multilateral trade objectives - and even help drive them by raising the bar for WTO negotiations.

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APEC: fostering greater economic integration

Ladies and gentlemen

The region may be experiencing increased activity in bilateral and sub-regional trade and investment initiatives.

But it is APEC that remains the pre-eminent forum to achieve greater regional integration.

• APEC is the only forum that covers both sides of the Pacific Ocean and includes key partners such as the United States, China, Japan, Russia and Indonesia.
  • Importantly, APEC includes pre-eminent developed, as well as leading developing economy members.
  • Vietnam is an active participant, and its offer to host APEC in 2006 has been warmly welcomed by members.
• APEC is the only forum which brings together - every year - leaders from 21 Asia Pacific economies, representing a combined GDP of over US$19.5 trillion, or around 60 per cent of global GDP.
• And APEC remains the only forum for building and sustaining an intellectual and policy commitment to economic integration and openness in the region.

In 1994 APEC leaders agreed on a common vision of free and open trade in the Asia-Pacific region - to eliminate tariffs by 2010 for developed economies, and by 2020 for developing economies.

That vision remains central to APEC - it is the glue that binds our collective efforts.

And it is also within our reach.

. APEC & trade liberalisation .

APEC has never been - nor should it be - a forum for trade negotiations. But it is an extremely important forum for supporting trade liberalisation and regional co-operations.

• And right now has an important leadership task in supporting the Doha Round of global trade negotiations at the WTO.

This year APEC will be a key vehicle for building political support for the Round, particularly in the lead-up to the WTO ministerial meeting in Cancun in September.

• Of course, the roles of APEC and the WTO in securing trade liberalisation are mutually reinforcing, because the Doha Round is critical to helping the region achieve the Bogor Goals.

There is also widespread recognition within APEC that regional trade arrangements, too, can help us work towards our Bogor goals.

• We are exploring what APEC can do to ensure that sub-regional arrangements remain consistent with WTO rules and disciplines.

I was very pleased that, at their meeting last month, APEC officials welcomed Australia's approach to FTAs as entirely supportive of the Doha round, and of APEC's Bogor goals.

I believe APEC economies have made good progress toward our Bogor Goals. Political leadership, peer pressure and transparency - in which Australia has been a leader - have encouraged the lowering of tariffs and other trade barriers.

• APEC average tariffs have declined from 12 per cent to 8 per cent in the last five years.
• Today, over two-thirds of APEC economy imports attract tariffs of 5 per cent or less.

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. APEC and trade facilitation .

Ladies and gentlemen

Facilitating trade - making it easier, and cheaper - goes to the core of APEC's activities.

Reducing business costs through initiatives such as paperless trading, for example, has helped raise our collective aspirations.

• Last year our Leaders agreed to reduce transaction costs by 5 per cent in five years - an initiative which could increase APEC's GDP by an estimated 0.9 per cent or US$154 billion a year.

Australia is leading the push to make trade easier for regional business through business mobility, customs standards, intellectual property rights and electronic certification initiatives.

Australia is also driving APEC's work on corporate governance, strengthening economic legal infrastructure and improving the functioning of markets.

Economic and technical cooperation in APEC will help members to refine their policies and strengthen their systems of governance.

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Of course, some APEC members have shown themselves willing to move faster on trade facilitation and liberalisation than others.

• Australia will work closely with various groups within APEC that are prepared to move quickly on specific initiatives.
• Our "pathfinder" approach, proposed by Australia and endorsed by APEC leaders, is designed to build momentum with APEC.

I hope very much that by "blazing the trail" in this way, those of us who are out in front can raise the determination and drive of the less ambitious.

And through technical assistance, we are also lending a hand to less developed economies so that they can share the benefits.

• Our work here in Vietnam includes assistance on structural reform, legal infrastructure, quarantine issues, and small and medium enterprise development.

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APEC: tackling threats to regional prosperity

Ladies and gentlemen

APEC's goals for regional trade and economic growth cannot be achieved in the absence of a secure environment.

• APEC, as the pre-eminent regional forum for regional economic cooperation, has a powerful mandate for addressing security issues that affect trade and investment.

The strong statements by APEC Leaders in Los Cabos on counter-terrorism showed that APEC can address critical issues of common concern.

This deepening trend towards habits of dialogue between leaders on a broader range of issues that challenge the security and prosperity of the region is very welcome.

Certainly, the threat that terrorism poses to free, open and prosperous economies

has galvanised the regional community into action.

• APEC economies are working together to combat terrorist financing and protect critical information systems.
• We are also working on ways to keep borders open to trade and investment, but closed to terrorists.

The Secure Trade in APEC Region (STAR) initiative to enhance border controls, air and maritime transport security, and to protect people in transit as well as cargo, will do much to protect our regional trade.

Implementing counter-terrorism policies is not cheap. But the cost should be seen as an investment - an investment that will pay dividends in reduced risk premiums, and increased trade efficiencies.

• The events in New York, Washington, Bali and Manila this week, demonstrate that the costs of not addressing terrorism far outweigh the costs required to achieve a safer, more secure region.

Of course, terrorism is not the only trans-national threat the region faces.

Unfortunately there are others - such as people smuggling and piracy.

• APEC is well placed to address these issues. It could, for instance, build on the STAR initiative in areas such as people movement, airport and sea lane security.
• For example, work is well underway for an Advanced Passenger Information system for the region.

Transnational threats give regional countries and regional institutions such as APEC a willingness to do things differently - to cooperate with otherwise unlikely partners, and to be open to new strategies.

This will bring us closer together and increase our stature as a region within the global community.

Conclusion

Ladies and gentlemen

It is an undeniable fact that greater regional cooperation and openness offers significant benefits for all the peoples of the Asia-Pacific region.

APEC, in particular, fosters a sense of community - a community that has a shared interest in economic integration and regional stability and security.

It helps to develop and support the policy framework for what we all do - globally, as a region, and within our region - to advance the cause of our common Bogor vision.

Today, the political importance of such an organisation as APEC has never been more apparent, we cannot let senseless and indiscriminate terrorist attacks, such as that in Bali, set back the progress so painstakingly achieved in the Asia-Pacific over the past 50 years.

We cannot afford to be complacent. Our prosperity relies on us sustaining the momentum for greater integration and openness, based on the free movement of goods, capital and people.

• Now is not the time to recoil back into the isolationist past
• Now is the time to be leaning forward towards greater integration and openness.

In conclusion, people sometimes ask me, what is the relevance today of APEC, given the new multilateral round and the spread of FTAs in the region?

I can answer confidently that APEC has never been more relevant than it is today for the security and prosperity of our region.

Thank you.