Speech
Port Macquarie, Wednesday 12 November 2003
To the Local Government Community Services Association NSW State Conference
Making Globalisation Work For Development
(check against delivery)
Ladies and gentlemen
I’m very pleased to have this opportunity to speak to you today.
I want to begin by congratulating the NSW Local Government Community Services Association for organising this conference on community development, globalisation and the market economy - issues that concern all levels of government.
In my remarks today, I want to focus on the way globalisation and free trade have raised living standards in Australia –including in regional Australia -and helped reduce poverty around the world.
I also want to highlight how Australia is helping to spread the benefits of globalisation to developing countries.
What has globalisation meant for Australia?
Australia has never been better integrated into global markets than over recent years.
In 1990 our real GDP per capita was ranked a rather mediocre 15th, and our Human Development index rankings slipped to the same extent, to 14th.
But in abandoning protectionist policies and introducing a range of other economic reforms, we have put Australia on the way back to the top.
Building on the reforms of the past two decades, the Coalition Government has overhauled Australia’s economy.
We have restructured the taxation system removing $3.5 billion in tax each year from exporters, stripped away red tape regulation of business, reformed labour and capital markets and introduced privatisation into the transport and telecommunications sectors.
We have dramatically reduced the public debt burden, delivering the benefit of lower interest rates, record low unemployment and more competitive exchange rates.
These reforms have encouraged firms to adopt new technologies, increase training and seek new export markets.
Our economy is now deeply enmeshed in the international flow of trade, finance and people.
But what has globalisation meant for regular Australians?
Plenty. Most Australians are now better off than they otherwise would have been, because as Australian industry has become more competitive, jobs and pay have increased.
From 1985 to 2002, freer trade and investment and other economic reforms helped raise Australian’s real income per person by over 55 per cent from $23,000 to $36,000.
And as tariffs have come down, Australians have been able to afford more consumer goods, including major items like cars.
At the same time, because the Australian Government has invested in education and a strong safety net, inequality in Australia has remained roughly steady since the 1980s.
By 2002, Australia boasted the 4th highest real GDP per person among the world’s major industrialised economies. And in 2001 Australia had the 4th highest Human Development ranking in the world.
Local Government and local communities have been a big part of that success story.
Indeed local enterprise, innovation, skills, investment and employment are the drivers of national prosperity.
Small communities in regional Australia generate over half of Australia’s exports.
Of course agriculture and mining play an important role. But there are also many manufacturers and service providers successfully exporting from regional centres –thanks to globalisation.
In turn trade has benefited local communities by generating jobs, income and infrastructure. In fact exports provide around a quarter of regional Australia’s income and 1 in 4 jobs.
Let me give you a couple of examples in NSW. Blueberry Farms of Australia, based in Corindi, exports blueberries to many countries in the northern hemisphere when their blueberries are out of season.
With more than 2000 full-time and casual staff, they are the region’s largest employer, contributing approximately $6 million to the local economy annually.
Precision Parts, an automotive engine parts manufacturer based in Wagga Wagga, injects over $2 million a year in wages into the local economy.
The company’s annual exports are close to $5 million and they have invested several million dollars in regional capital and infrastructure investment.
So Australia –and regional Australia –have clearly gained from open markets and increased trade and investment.
Globalisation: good for the world’s poor
But is globalisation good for the world’s poor?
Undoubtedly. Perhaps I could quote the Secretary-General of the United Nations, Kofi Annan: “No single change could make a greater contribution to eliminating poverty than fully opening up the markets of prosperous countries to the goods produced by poor ones."
The record shows that trade and investment are the best poverty “busters”around.
A recent World Bank study of 72 developing countries found that, in the 1990s, globalising economies, or ones that increased their ratio of trade to GDP, grew over four times faster than non-globalisers.
The World Bank, also found that, between 1993 and 1998, the number of people in absolute poverty in globalising developing economies declined by 14 percent. That amounts to about 107 million people no longer living in poverty.
By contrast, the same World Bank study found poverty in the less globalised developing economies rose by 4 per cent between 1993 and 1998.
That’s 17 million more people living in poverty in these economies.
Between 1980 and 1998, the net effect of these diverging trends was a reduction in global poverty of around 200 million people.
Our regional neighbours have been some of the big winners from globalisation.
From the 1960s on, most East Asian economies became increasingly export-oriented and globalised, lowering their tariffs and expanding their trade. They also provided their populations with education and infrastructure and generally sound governance.
As a result, per capita income grew strongly in most East Asian economies over the last 20 years.
In the 1990s, with the exception of Japan, East Asia grew by between 6 and 8 per cent per annum, and the share of regional populations living in poverty fell rapidly.
By contrast, the numbers living in poverty in inward-looking and poorly governed regions like Africa increased.
Of course, openness to trade must also come with the right economic environment so that countries can gain from globalisation’s opportunities and respond to its challenges.
Governments must ensure domestic goods, labour and financial markets work and legal systems and infrastructure function efficiently. They must operate stable macroeconomic policies to keep inflation low and employment full.
And they must ensure their populations have access to good quality education and health care and adequate social safety nets.
Failures in some or all of these areas are the reasons some countries are not gaining from globalisation.
Australia’s role in spreading the gains from globalisation
So what is Australia doing to help developing countries prosper from globalisation? We are doing a lot.
Australia is at the forefront of global efforts to reform those aspects of the global trade regime which make it hard for developing countries to export their way to prosperity.
Australia is one of only three developed countries amongst the 17 members of the Cairns group of agricultural exporting countries. The Cairns Group aims to eliminate the large subsidies and tariffs that other developed regions –including Europe and the United States –use to compete unfairly with the farmers of poor countries.
For example, the US Agriculture Department estimates high agricultural trade barriers and subsidies worth around US$1 billion a day cut prices for all agricultural output worldwide by a massive 12 per cent each year.
Hence, these agricultural support policies reduce the value of agricultural output in low and middle-income East Asian and Pacific economies by over US$37 billion each year - or about 5 times the US$7.7 billion these economies receive in aid annually.
The World Bank estimates developing countries would gain about US$100 billion a year if trade barriers against developing country exports were removed.
This far exceeds the US$57 billion developing countries get each year in aid.
The current Doha Round of WTO trade negotiations presents a major opportunity for developing countries to secure better trading conditions, and fairer trade rules, that will help underpin development.
In fact it is deliberately designed to give developing countries a better deal in world trade –that’s why it is called the Doha Development Agenda.
Australia is working hard in the Doha Round to reduce global trade barriers, particularly for agriculture, where many developing countries are most efficient.
We were instrumental in the launch of the round in 2001 and have continued to show leadership in advancing negotiations, particularly as chair of the Cairns Group.
So it’s no surprise that we were disappointed by the outcome of the Cancún ministerial meeting.
But while Cancún was a set-back it is one we can –and must - recover from.
At the conclusion of the Cancún meeting, WTO Director-General Supachai observed that if the Round fails, the losers will be the poor of the world.
All Members have agreed we need to recommit to achieving conclusion of the negotiations. Australia is working to revitalise the round by encouraging others to build on the valuable work we did in the lead-up to and during Cancún.
All in all, I remain optimistic about the capacity of the multilateral trading system to deliver consistent and fair rules, and a level playing field, for developing and developed countries alike.
What else is Australia doing to help developing countries benefit from globalisation?
We are helping to develop their economies and build stronger institutions so they can manage the economic and social impacts of a more interdependent world.
Indeed, 21 per cent, or $370 million of our development assistance expenditure is directed toward governance programs.
On the trade front we are leading by example. For over 25 years, Australia has provided generous market access for the world's poorest countries.
We have now removed the remaining barriers on their goods, which can only help them increase their exports and living standards. Since July this year, imports from all least developed countries are able to enter Australia tariff and quota free.
Australia’s initiative is comprehensive and unqualified. It does not exclude sensitive sectors or provide phasing-in arrangements for items such as agricultural products, which are often missing from some of the other packages provided to the least developed countries.
We are also funding projects so countries can identify economic opportunities and participate more effectively in international trade and investment organisations.
More specifically, Australia is providing technical assistance to help developing countries participate in the WTO trade negotiations.
We hope that these initiatives will help developing countries become more familiar with the rules of the trading game and thus ensure that they are able to reap the benefits.
Conclusion
Ladies and gentlemen
Globalisation brings with it considerable opportunities to increase the prosperity of all nations, to raise living standards and lift millions out of poverty.
It is true that there are adjustment costs associated with globalisation. But with the right policies these can be managed.
The Government is making globalisation work for Australia and its local communities. Importantly, it is sustaining the momentum for trade and investment liberalisation and domestic economic reform.
The Government is also helping developing countries seize globalisation’s opportunities, not least through our trade policy.
Our strong commitment to a fairer and more balanced global trade regime is the biggest contribution we can make to the two billion people estimated to be living in poverty.
Thank you.