Speech

Bangkok, Wednesday 4 June 2003

New Directions in Australia-Thailand Trade and Investment 

(Check against delivery)

Introduction

Distinguished guests, ladies and gentlemen.

It is a great pleasure to be here with you today.  I would particularly like to acknowledge the presence of (acknowledgements to be confirmed) ….

Let me take this opportunity to congratulate the Australia-Thailand Chamber of Commerce for the fine work it has been doing to promote deeper trade and investment linkages between our two countries.

I want to acknowledge in particular the valuable contributions made by Graham Storah, Jason Ellis and Annie Weber and other Chamber members in support of the negotiations for a bilateral Closer Economic Relations Free Trade Agreement (CER-FTA). 

I will speak in detail about the free trade negotiations shortly.  But before I do that, I’d like to say a few words on the meeting of trade ministers from all APEC economies held earlier this week in Khon Kaen.

APEC Trade Ministers meeting

At the outset I want to say publicly that Australia warmly welcomes Thailand’s energetic and positive role as chair of APEC this year. 

The region faces a range of challenges and opportunities, both economic and security-related, and many of these can be tackled effectively through collective action among the APEC economies.

There has been historically strong cooperation between our countries in APEC and bilaterally.  We are ready to support Thailand and to work closely together to advance our shared agenda for APEC and the region.

Those shared goals were very much front and centre in Khon Kaen and I am pleased that the meeting produced a number of outcomes that will advance the prosperity and security of the countries of the region.

The quality of the outcomes owes much to the skilled chairmanship of my Thai colleague, Commerce Minister Adisai. 

The most important outcome was agreement by ministers to send a strong and collective message on the critical importance they attach to injecting renewed impetus to the Doha round of WTO negotiations.

A successful outcome to the Doha round remains of fundamental importance to our two countries and to the future trade and economic growth prospects of all APEC economies.

At the core of the Doha round agenda is agriculture, an issue that is central to both Australia and Thailand and the other members of the Cairns Group of agricultural fair trading nations. 

We have made it clear that without action from the major trading powers to tackle fundamental agricultural trade reforms, the Doha round will not succeed. 

Excellent state of the relationship

Let me now turn to bilateral trade matters, which is the key focus of my visit to Thailand.

Australia’s relations with Thailand are long-standing, close and diverse.  Indeed, Thailand is one of our closest and most important partners in the Asia Pacific region.

Our joint peacekeeping contribution in East Timor, for example, has facilitated closer cooperation between our defence forces at a time of increasingly complex security challenges, especially from terrorism. 

We are also partners in finding ways to combat the many transnational crimes that blight our world today, notably people smuggling.

I should also point out that the bilateral Prisoner Transfer Treaty which entered into force last year was the first ever such prisoner transfer treaty signed by Australia –reflecting the importance Australia attaches to its relationship with Thailand.  

Our cooperation on this broad range of issues is underpinned by increasing people-to-people links, of which this Chamber obviously forms an important part. 

In an important milestone, Australia has become the preferred destination of Thais wanting to study overseas. 

The growing number of Thai alumni from Australian universities has been a vital factor in fostering closer cooperation and understanding between our two countries.

The Australian Government also places a very high value on the close and mutually beneficial trade and economic relationship between our two countries.

I have already mentioned the sound cooperation between Australia and Thailand on APEC and on WTO issues, including through the Cairns Group.

Bilateral merchandise trade flows are strong, with Thailand enjoying a healthy surplus worth A$630 million.  Two-way merchandise trade was valued at A$5.65 billion in 2002, a 13.6 increase over the previous year. 

Indeed Australia is an important market for Thai exports in many sectors, including agricultural products and vehicles. 

Australia is also an important supplier of a range of products to Thailand.  That includes a number of natural fibres and metals and minerals that are key inputs to exports by Thailand’s manufacturing sector.

Australia has great confidence in the growth potential of the Thai economy. 

Its performance in recent times has been very strong and the focus of the Thai government on increasing the overall competitiveness of the economy is a welcome step that promises sustained growth into the medium and longer term.

Given these growth prospects and the policy settings in both countries, there is clearly scope for a major expansion of our commercial linkages that would deliver real benefits for business and consumers in both countries.

The two governments have recognised this opportunity and have taken action to translate that potential into a reality.

The decision in May 2002 by Prime Ministers Thaksin and Howard to negotiate a free trade agreement promises real benefits for our two countries.

Australia’s approach to FTAs

Australia’s economic performance over the last few years has been robust: we have continued to enjoy one of the highest growth rates among OECD countries.

The Government has pursued policies that have been aimed at strengthening the economy, including by increasing its exposure to international market forces.

This, in turn, has led Australian businesses in many sectors to expand their international activities, through exports and investments.

The Government welcomes and supports these efforts because they are essential for Australia to reach its economic potential. 

And we have put in place a range of policies and practices to encourage this internationalisation of the Australian corporate sector.

One of those policy instruments is bilateral free trade agreements. 

The Australian Government has a pragmatic approach to free trade agreements.  We are open to such deals if we consider they will deliver high quality trade-liberalising results and do so more quickly than is possible in the WTO system.

We do not see such agreements as somehow detracting from the WTO negotiations.  In fact, we see free trade agreements as supplementing and strengthening the WTO regime by engendering a climate of ‘competitive liberalisation’.  That point was reaffirmed at the recent APEC policy dialogue which noted the positive impact of free trade agreements both for the economies involved and the multilateral process of trade liberalisation.

From Australia’s perspective, there are several key criteria that such free trade agreements needs to meet if they are to contribute positively to the global trade reform effort.

First, they must free virtually all two-way trade in goods as soon as possible.

Second, they must eliminate to the maximum extent feasible barriers to expansion of trade in services.

Third, they must establish a transparent and predictable environment for investment.

And fourth, they must establish a legally-binding framework for resolving differences and allowing the overall trade and economic relationship to develop into new areas.

Similarly, a bilateral FTA must be in keeping with the trade and investment liberalisation principles –the Bogor goals –of APEC. 

Australia believes that adhering to these criteria will ensure that free trade agreements maximise the benefits to the countries concerned as well as the wider international trading regime.

These have been the guiding principles that we followed in the FTA we concluded earlier this year with Singapore and they underpin the approach we are taking in our current FTA negotiations with both Thailand and the United States.

The CER-FTA negotiations

Ladies and gentlemen, I am pleased to report that negotiations on the CER-FTA

are moving forward in a purposeful way and that there is a genuine cooperative spirit between the two negotiating teams. 

We welcome this and we look forward to that leading to a successful outcome.

Together with my Thai colleague Dr Adisai, I have been following closely the negotiating process.  Following a successful meeting in Khon Kaen earlier this week, Prime Minister Thaksin and I agreed to aim to conclude negotiations by the APEC Leaders meeting in October this year.

Having said that, I want to emphasise that our aim is a high quality outcome that will advance the interests of our two countries.  Neither Australia nor Thailand wants to accelerate the negotiating process at the expense of a quality agreement.

In support of that goal, Australia has tabled a generous and ambitious initial offer to Thailand to eliminate tariffs on goods. 

This offer reflects our view that the benefits of the agreement will be greatest if tariffs are removed as quickly as possible and across a wide range of sectors.

Our offer is comprehensive in that it covers the entire tariff and no products are excluded.  I do not intend to go into the detail of the offer, but I would like to highlight three aspects of it:

• it would eliminate 90% of tariff lines from entry into force, which equates to 91% of the value of Australia’s imports from Thailand;
• it covers 94% of Thailand’s specific requests for tariff elimination, and
• the immediate tariff elimination package represents 83% of tariff revenue foregone on Thai imports into Australia.

Our offer is of course conditional and we have urged Thailand to match our ambitions for this agreement by tabling a far-reaching offer.

Expanding services trade and investment is also a key target for the CER-FTA negotiations.

Thailand has many more restrictions than Australia on services trade.

We appreciate that some of these restrictions are part of legitimate national policy objectives, and we do not argue with the right of Thailand to determine its own regulatory framework for services.

At the same time, the efficiency of the services sector for advanced industrialised countries such as my own is linked directly to the competitiveness of the entire economy.

We would, therefore, argue that there is considerable scope for Thailand under the CER-FTA to improve the global competitiveness of its services sector.

We have requested that Thailand eliminate or phase out a range of impediments to better integrate services production and supply in both countries.

Free investment flows are critical for trade in goods and services and the international flow of expertise and technology.

As part of the FTA negotiations we are negotiating provisions on investment promotion and protection, but this by itself will not be enough to bring about a substantial increase in investment flows.

Thailand maintains some significant investment restrictions especially in the services sector, including caps on foreign equity and divestment requirements.

Thailand also gives favourable treatment to the United States in the investment area through the Treaty of Amity and Economic Relations.

Australiawould expect that, as a result of the conclusion of an FTA with Thailand, it would receive treatment that is at least as favourable as that currently enjoyed by the United States –if not better.

Australia recognises Thailand’s developing country status, and that this is Thailand’s first FTA negotiation with a developed country.

From our own experience of trade liberalisation, we understand that allowance needs to be made for industries to adjust.

But we need to keep this in perspective.  Neither of us is the other’s largest trading partner.  Nor are our two economies super-competitive in every aspect of production.  In fact, our economies mostly complement each other.

Undoubtedly in some areas there will be a need for adjustment.  But this should be seen not as a threat but as an opportunity to achieve greater competitiveness.

It is also worth repeating that the negotiating process itself is the place in which to tackle specific problems and to develop solutions that take account of particular concerns. 

Australia has, for example, supported a number of capacity-building projects in the CER-FTA context that are designed to deal with such concerns.  These are in fact an integral part of the negotiating process.

Indeed, a great virtue of bilateral FTAs is that they can be tailored to the specific needs of the countries involved. 

In the CER-FTA negotiations, Australia has already signalled that we are willing to consider phased tariff eliminations in a limited number of cases where the argument for doing so is clear and where it would assist adjustment.

Australian producers, too, will need to come to terms with the new arrangements under the CER-FTA.

Some Thai industries have argued that Thai’s willingness to eliminate tariffs on goods should be made dependent on Australia’s willingness to make substantial modifications to our quarantine regime.

We are fully aware of Thailand’s concerns, but we believe that this argument does not stand up to close scrutiny.

It does not make much sense to deprive other sectors of the economy of the benefits they could obtain under the FTA.

Second, Australia’s quarantine system is science-based as required by the WTO rules.  And these do not allow us to adopt preferential arrangements for any trading partner.  To try to do so would only lead to immediate challenges by others.

We can improve dialogue and cooperation in this area, and we are ready to examine ideas Thailand may wish to propose in support of these aims. 

I will not pretend that solutions to these difficulties in this area are easily available.  And I accept that some sectors of the Thai economy will continue to argue strongly for a result on quarantine favourable to their interests.

But equally I would urge them to look at the prospective benefits of the FTA in their totality.

I am convinced that we will find a way to deal sensibly with these and other issues because I knowthat both sides are committed to a high quality result.

Conclusion

Ladies and gentlemen

May I conclude by expressing once again my optimism about the future of the relationship between Thailand and Australia.

I believe that Thailand and Australia have much to offer each other, and that an ambitious and comprehensive CER-FTA will strengthen our economies and benefit the region as a whole. 

It will open up new trade and investment opportunities for our companies in many areas.

It will make both of our economies more competitive and enhance our trade-liberalising credentials, strengthening our long term economic growth prospects.

It will benefit the region as a whole and serve to encourage others to work toward the APEC goals of free trade.

And it will contribute in a concrete way to global trade liberalisation and the successful conclusion of the Doha round of WTO negotiations.

The Australian Government is working with the Thai Government, business and interested groups to seize this historic opportunity to move relations between our two countries to a new level. 

We encourage business interests in both countries to continue to communicate their views to governments to ensure the negotiations deliver the best possible outcome.

Thank you