Speech

Canberra, 26 March 2003

Annual Statement by the Minister for Trade & Deputy Leader of the National Party The Hon Mark Vaile MP to the National Press Club

Trade 2003

Excellencies,

Board members of the National Press Club,

Members of my Trade Policy Advisory Council,

Exporters and Potential Exporters,

Iraq

Ladies and gentlemen

Today the military conflict in Iraq goes on.

Our troops - as true professionals - are performing magnificently and all Australians are proud of their efforts.

As any prudent government would, we are looking beyond the conflict.

We are looking to a peaceful Iraq where we can help the Iraqi people rebuild their institutions, their infrastructure and their economy.

We are already helping to meet humanitarian needs in Iraq.

We will supply 100,000 tonnes of Australian wheat as urgent food aid for the Iraqi people.

The wheat is on board ships in the Gulf, within three days of Iraq.

For over fifty years Australian wheat growers have reliably provided the Iraqi people with high quality wheat.

The Government is committed to do all it can to see that this relationship continues.

We are also looking to Iraq's other future needs, and are deeply engaged with the US, UK and United Nations on post-conflict reconstruction.

In short, ladies and gentlemen, we intend contributing in a very real way to recovery, growth and stability - in Iraq, and throughout the Middle East region.

Introduction

Ladies and gentlemen

Liberalising trade and investment is not an end in itself, but a means to an end - that is, the prosperity of our communities and families, and the security of our jobs and our businesses.

In pursuing that end, our government has adopted a strategy of competitive liberalisation - a strategy thatreflects the most ambitious trade agenda in Australia's history.

It is a strategy of maximising our trade opportunities with individual countries, in our wider region, and globally.

It is a strategy that demonstrates that what we do, bilaterally and regionally, can complement and stimulate the multilateral trading system, and the current Doha Round of global trade negotiations.

And it is a strategy that ensures, in these difficult and uncertain times, that our exporters achieve greater access to overseas markets as quickly, as broadly and as deeply as possible.

The publication you have before you today - Trade 2003 - marks a fresh approach to our annual report card on trade.

The statement is not intended to cover everything we do. Instead, it focuses on key messages and outcomes for Australia's trade - the big picture, in an accessible format, on-line and updated as we achieve our trade policy goals.

Australia's trade policy achievements

In the past twelve months, the coalition government has delivered on its promises.

We have concluded a Free Trade Agreement with Singapore. We have begun negotiating Free Trade Agreements with the United States and Thailand. We have advanced our trade and economic relationships with China and Japan.

We have signed a Closer Economic Partnership agreement, along-side New Zealand, with the ten ASEAN member countries. We have re-invigorated the APEC agenda on issues affecting the continued prosperity of the Asia-Pacific region.

We have ensured, as Chair of the Cairns Group, that it has become - along side the United States and European Union - the third force in the Doha Round of global trade negotiations.

In short, 2002 was a big year of trade policy achievement: achievement that underlines the effectiveness of our strategy of competitive liberalisation, and achievement that demonstrates that we are engaged with Asia, with Europe, with the United States, with the Middle East, and with other regions.

An FTA with the United States

Ladies and gentlemen

Last week we got off to a very good start in our negotiations for a Free Trade Agreement with the United States - the most significant bilateral trade negotiation in Australia's history.

This FTA offers an historic opportunity for Australia to become even more deeply integrated with the world's largest economy.

It is also an opportunity to reduce the risk that Australian exporters will lose access to the US market as a result of preferential trade arrangements the Americans are already negotiating with other countries - such as the Free Trade Area of the Americas, which includes some of our major Latin American competitors in agricultural products.

For Australia, a good agreement will be one which is both deep and wide. It will be an agreement where Australia gains real market access, across all sectors, including - and especially - in agriculture.

It will be an agreement where Australia does not sacrifice important, public policies in health, welfare, utilities and culture.

It will be an agreement which provides a real benchmark for the negotiations in the WTO, and for other trade agreements.

Last week we held our first formal round of negotiations. 15 negotiating groups met throughout the week on areas ranging from agriculture to intellectual property.

More discussions will take place on financial services, telecommunications and government procurement over the next few weeks, in preparation for the next full round of negotiations in May.

Much of this early effort, of course, has been devoted to the scope of an Agreement. This first round of talks allowed us to explore the key elements to be covered in the FTA.

We were also able to exchange a lot of information - and from our point of view, explaining to the Americans exactly how various aspects of our economic and trade policies and programs operate.

Already, for example, the Americans have indicated - very clearly - that they will not be going after our Pharmaceutical Benefits Scheme.

Of course, no one is pretending that we won't face questions from the Americans about sensitive sectors of our economy - just as they will face questions from us.

But we have no intention of entering into any agreement that would undermine the national interest, or our ability to deliver core public policies and programs.

We are now both ambitious - very ambitious - about completing the agreement in 2004.

The Doha Round

Ladies and gentlemen

Next Monday marks the first, truly substantive deadline for the 145 WTO member countries in the Doha Round of global trade negotiations.

We are due to submit initial negotiating offers on services, and we are due to agree the so-called modalities - or negotiating guidelines - on agriculture.

On services, I am pleased to report encouraging progress in the negotiations, and to announce two new initiatives by the government.

In response to considerable community interest, the Government will make public Australia's initial offer, at the same time it is lodged in Geneva early next week.

This initiative reinforces the Government's commitment to an open and transparent services negotiation. It builds on the information already available to the public, and on the extensive consultations my Department has held.

On previous occasions, I have underlined our Government's commitment to upholding Australia's sovereign right to regulate and fund public services.

Australia will not be making any offers in the GATS negotiations in the areas of public health, public education, or the ownership of water.

I expect that by next week we will have received offers on services from our major trading partners. These will set benchmarks for liberalisation in services as a key part of the Doha Round.

The offer we make on services next week will reflect the reform we have undertaken in our services sector. It will reaffirm our commitment to progress across all parts of the Doha negotiating agenda.

Unfortunately, I cannot report any movement on agriculture.

Once again, protectionist forces are blocking progress. They refuse to engage seriously on the latest compromise efforts to break the deadlock on modalities.

They are also calling into question the mandate agreed by all member countries on agriculture at the launch of the Doha Round, only sixteen months ago.

That mandate requires that the Round improves substantially market access, reduces substantially trade-distorting domestic support; and reduces - with a view to phasing out - export subsidies.

In short, the protectionists don't understand - or, more likely, are refusing to acknowledge - two basic factors.

The first is that all multilateral trade rounds have been premised on the notion of a "single undertaking". In other words, nothing is agreed until everything is agreed.

The second is the new power and influence of developing countries in the WTO, with their very real and direct interest in access for their products to rich country markets.

Both these factors point to an inescapable negotiating and political reality, about which we need to be very clear. Without progress on agriculture, there will be no progress on the Round.

This is not a threat, or an attempt to hold the Doha Round hostage to farming interests - it is simply a statement of fact.

We will not have it said, or argued, that we are holding up the Round. It is the protectionist forces in the agriculture negotiations that are risking outcomes across all sectors of the negotiations.

The stakes are very high. No one wants to see the breakdown of negotiations, which would stall the multilateral trading system and give rise to protectionism - especially in these uncertain times.

Notwithstanding the current difficulties, I remain optimistic about the Doha Round. We will continue to advocate the advantage of ambitious and far-reaching reform in the multilateral trading system.

Australia's trade performance

Ladies and gentlemen

Over the past five years, Australia's export growth has averaged almost 8 percent, well above the world average of less than 3 percent. We are reaching more markets, and expanding the range and sophistication of the goods and services that we supply to the world.

Yes, it's been a tough year for Australian exporters - but this has been due to weakened demand in key markets for our goods and services, and exacerbated - particularly for farmers - by the prolonged drought.

Our biggest economic partner, the United States, grew an estimated 2.4 per cent in 2002, but business profits and investment remain weak.

Our biggest overall trading partner, the European Union, grew just 1 percent last year, and weakness in Germany will remain a drag on recovery.

Our biggest export market, Japan, declined 0.3 percent in 2002, with ongoing deflation, low consumer confidence, high levels of non-performing bank loans and weak business profits.

Despite all these pressures, our export volumes are only down 0.1 percent. And the value of our exports, while down 2.3 percent, is still near record levels - at $151 billion.

There has been some comment in the media about our current account deficit.

This is a result of the continued strength of the Australian economy - an economy described as "exceptional" by the 2003 OECD annual report, and as "astonishing" by The Economist two weeks ago.

Our capital imports have been strong - this is business investing in the future, making us more productive and competitive.

Our interest payments - unlike the Hawke-Keating years - are a result of increased private borrowings, not public borrowings.

Australia, for the first time in 17 years, has a triple A credit rating with both Standard & Poors, and with Moody's, that allows our private sector to borrow - and invest - more cheaply.

Australia's economic data remain incredibly strong - unemployment at 6.1 percent, inflation at 3 percent, home loan interest rates at 6.5 percent, and government debt reduced by over $60 billion, to $34 billion.

This compares to unemployment of over 10 percent, interest rates double what they are today, and commonwealth government debt a staggering $96 billion under the Keating government.

The weak economic conditions of some of our key trading partners, and geo-political uncertainties, along with the effects of the drought, will continue to effect our export performance.

But the continued success of our trade policy efforts is backed by one of the best performing economies in the OECD. And we are still growing and diversifying both the direction, and the spread, of our exports.

The Middle East, for example, remains our fastest growing regional market, with exports last year valued at over $7 billion.

My visits leading business delegations to countries such as Iran, the United Arab Emirates and Libya in the past year have yielded substantial commercial contracts for Australian firms.

Export successes

Ladies and gentlemen

My announcement during the 2001 election campaign, that we would double the number of exporters by 2006, is bearing fruit, both in metropolitan and regional Australia.

Australian wine, cars and tourism are well publicised export success stories.

The booming automotive industry exported more than $4.8 billion worth of products - 30 per cent of local production, last year.

Australian wine exports continued their boom in 2002, growing a further 21 percent in value, to a total of $2.3 billion.

Tourism exports, despite the uncertainties of the past eighteen months, have enjoyed growth of 19 percent, from $13.7 billion to $16.3 billion, over the past five years.

But there are many other successes we don't hear about. Note Printing Australia has won additional contracts for its unique polymer bank notes - and now exports its products to the central banks of 13 countries.

Australian ICT companies are enjoying great success in European markets, delivering products such as public transport ticketing systems. Gippsland Aeronautics has sold aircraft to Southern Africa, Indonesia and Belize.

These companies, and the entrepreneurs running them, are the unsung heroes of Australia's continued economic success. They are delivering the prosperity and quality of life our families and communities enjoy today.

Last year we committed $21.5 million to expand the TradeStart program to help small and medium enterprises looking to enter overseas markets for the first time.

A great example of a small company that had thought exporting was too hard is a Victorian wholesaler of gourmet food products, Carman's Muesli.

Now, with help from Austrade's New Exporter Development Program, the company is not just seeling domestically, but is supplying several supermarket chains in Asia.

This is an example of the practical ways in which we are working to double the number of exporters in Australia.

In 2000-01, the base year of the doubling target, the Australian Bureau of Statistics estimated there were approximately 25,000 exporting firms in Australia. That number increased last financial year by almost 6,500 firms, or over 25 percent.

While it's still early days, through our TradeStart network and other programs, we're beginning to realise our goal of 50,000 exporters by 2006 - and creating potential export revenue in excess of $40 billion in the Australian economy.

Conclusion

Ladies and Gentlemen,

Last year, when I delivered the 2002 Trade Statement, I said the world had changed - politically, strategically, and economically.

I highlighted the continued good performance of the Australian economy, and in particular Australian exports, despite global uncertainty.

I foreshadowed a year of activism in Australia's trade policy in order to help ensure the continued success of our exporters.

Today, I can report to you that 2002 was a landmark year in developing the most ambitious trade agenda in Australia's history.

Our strategy of competitive liberalisation - and our achievements over the past year - mean that our primary producers, manufacturers and service providers are getting the most out of global trading opportunities.

In doing so, they are helping ensure that our economic prosperity and security - envied the world over - are maintained and enhanced.

As we look forward, we have to be mindful of continued uncertainty in the global economy - and the challenges to global security.

Ladies and gentlemen

Our challenge, as a nation, is to remain as efficient and as competitive as possible, and to take advantage of all opportunities for better access to overseas markets.

Ladies and gentlemen

Our challenge, as a nation, is to maintain the momentum of competitive liberalisation, to ensure better market access globally, in the region, and with our individual trading partners.

May I commend Trade 2003 to you.

Thank you.