Speech

13 November 2003

Pursuing Opportunity and Prosperity

Melbourne Institute Economic and Social Outlook Conference

Introduction

Ladies and gentlemen.

It's a great pleasure to be here today. 

The Melbourne Institute has a well-deserved reputation for contributing to the debate in Australia on economic and social issues.  And I am grateful for this opportunity to add the Government's and my own perspectives to that debate.

The title of this conference “Pursuing Opportunity and Prosperity” could just as aptly be applied to the Government's approach to trade policy.  It reflects what, in essence, our trade policy is all about.

Of course, trade policy starts at home.  The Government has set an ambitious but achievable goal to double the number of Australian exporters by 2006 - from 25,000 to 50,000. 

The reasons are pretty obvious:

•   exports generate about 20 per cent of our GDP and are a major factor in us leading the OECD in economic growth
•   they create one in five jobs in Australia overall and one in four jobs in rural and regional Australia
•   and it has been estimated that even a 10 per cent increase in the number of exporters will lead to an additional 70,000 jobs and, of course, a wealthier Australia.

As well as the economic wins, exports generate a range of other benefits for Australia. 

Trade forces Australian companies to be innovative…

....and their exposure to international trends makes their businesses more competitive.

But none of this can be realised if our exporters don't have access to markets overseas.  And it is our effort to create new opportunities for our exporters that I want to discuss today.

I want to talk about how we are pursuing these opportunities through the WTO Doha Round…

....through bilateral Free Trade Agreements (FTAs)…

....and how both of these approaches form part of an integrated, seamless trade policy - the most ambitious pursued by any government in Australia's history.

WTO Round

The WTO Doha round is at the top of our trade policy agenda.  It has been, and will continue to be, our number one priority.

Again, the reasons are obvious enough.

Today the WTO has an almost global membership - some 148 countries, accounting for over 95 per cent of world trade. 

For Australia this means that a further round of multilateral liberalisation offers the best chance to deliver the broadest and deepest market access gains for our exporters.

Consider for a moment the track record of the WTO and its predecessor, the GATT. 

Since 1947 eight rounds of multilateral trade negotiations have seen global industrial tariff levels fall from an average of over 40 per cent to around 4 per cent.

Despite this reduction in barriers to industrial trade, agriculture tariffs remain unacceptably high.

But the WTO, and before it the GATT, have provided the institutional bedrock of rules for the trading system, such as non-discrimination and national treatment, that together with tariff liberalisation have underpinned more than 50 years of global economic growth and prosperity.

And it has helped to ensure that trade has flowed according to global market forces, encouraging countries to do the things they do best - and more profitably - rather than continuing to do things that others can do better.

If you were wondering whether any of this has mattered to Australia, ask our beef producers, whose export growth over the last two decades has been helped by access to the Japanese, Korean and US markets secured through the WTO. 

Or consider how joining the WTO has helped modernise China's economy - now one of the top ten exporters and importers in the world - and a major engine for growth in our region. 

Consider too the potential of a successful Doha round; not just for Australia or developed countries, but for the developing world as well.

As World Bank President, James Wolfensohn noted recently, “a ‘good' Doha agreement could produce up to $520 billion in income gains to the world, with both rich and poor countries gaining substantially. Such an agreement would increase growth in developing countries, and would lift some additional 140 million people out of poverty by 2015.”

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.

All of this makes a successful Doha round a real prize for the global economy.  Of course, achieving it is not easy, especially when you are trying to reconcile the interests of 148 members.

We saw some of the difficulties at Cancun.  And I don't want to dwell on them here. 

Cancun was disappointing, but we can recover from it.  The Uruguay round suffered setbacks at least as serious as Cancun, yet it still succeeded.

The important thing now is not to apportion blame, but to decide how the international community is going to respond. 

In the Uruguay round setbacks like Cancun were met with increased ambition.  And that must be the international community's response today.

It will require commitment and real leadership - especially on the part of the major economic powers, Japan, the EU and the United States, as well as Australia as head of the Cairns Group. 

It will require a major effort in agriculture - the area of the negotiations where the vast majority of members demand real liberalisation and reform.

And we cannot allow ourselves to be distracted by others issues, such as WTO reform - as important as they might be. 

With such a small window of opportunity remaining we have to focus on the main game.  And the main game today is not WTO reform, it is a WTO outcome.

But we don't have to start from scratch.  We shouldn't forget that some progress was made at Cancun.  The Derbez text, with all its imperfections, is still the best starting point for a renewed effort to conclude the round in a way fully consistent with the Doha mandate.

Encouraging work is also being undertaken by WTO Director-General Supachai and General Council Chair Carlos Perez de Castillo to move the work program forward.

We too, as leader of the Cairns Group, have an important responsibility. 

•   We have been actively encouraging all parties, especially the major economies, to re-engage on the basis of the Cancun text and we sought and achieved APEC's endorsement for this approach recently in Bangkok.
•   We are working with our Cairns Group partners to ensure that agriculture remains at the top of the Doha round agenda.  To ensure that this happens we will be holding our annual Cairns Group meeting in February next year - rather than September - in Costa Rica.
•   We are also working with others in Geneva to ensure that the General Council meeting next month agrees on a constructive way forward.

All of this is driven by an understanding that the Doha round remains for Australia the best possible vehicle to sustained economic growth and prosperity.

Deepening economic linkages with Asia

The Doha round is not, however, the end of our approach to trade policy, it's the starting point.

We recognise that, for all the gains that potentially could be had through the Doha round, there are no absolute certainties about what it will deliver, and when.

It would be easy for us to tell Australian exporters, currently locked out of markets, to be patient until January 2005, when the round has - hopefully - been concluded…

....or indeed, to wait the X number of years after that, when the liberalising measures agreed in the round start to take effect.

But this is not in the nature of our Government.  And it is certainly not in my nature as Trade Minister. 

I take my lead in this regard from Australia's legendary Trade Minister, Leader of the Country Party and Deputy Prime Minister,John McEwen. 

McEwen didn't wait until Australia's exports were imperilled by the UK's entry into the European Common Market. 

He understood early on the need to lessen Australia's reliance on trade with the Commonwealth.  And he recognised the new opportunities for Australian exporters in Japan, forging a comprehensive commercial agreement with a country with whom we had recently been at war.

Like McEwen, the Government refuses to simply wait and watch current and future economic opportunities go by.  Like McEwen we recognise that to grasp these opportunities we need to be ambitious, and we need to be pragmatic.

This pragmatism is reflected in our approach to deepening Australia's economic engagement with Asia. 

Earlier this year, we signed an FTA with Singapore.

Last July, in Tokyo, Prime Ministers Howard and Koizumi signed a Trade and Economic Framework which charts a course for the future development of our trade and economic ties with Japan.

At the recent APEC meeting in Bangkok, we finalised the negotiaiton for an Australia-Thailand FTA - making Australia the only developed economy to have Free Trade Agreements with two ASEAN countries.

And the recent visit to Australia by Chinese President Hu Jintao saw our two Governments announce their intention of conducting a joint feasibility study on a free trade agreement between Australia and China. Australia is the only developed economy to have come this far with China.

None of this is coincidental or haphazard.  It is all part of an ambitious and systematic effort to deepen our economic linkages with Asia - especially with those countries that hold the greatest prospects for Australian exporters.

Look at our most recent agreements with Thailand and China.

A comprehensive and genuinely liberalising agreement, the Australia-Thailand FTA will deliver real benefits for Australian exporters in one of the strongest performing economies in South East Asia.

Dairy farmers will see tariffs on butter fat phased from around 30 percent to zero by 2010, and the establishment of an Australia-specific quota on skim milk powder....

....beef producers will see Thai tariffs of 51 percent immediately cut to 40 per cent, then phased down to zero by 2020…

....wheat exporters will see the immediate elimination of tariffs between 12 and 20 percent…

....the auto sector will see the tariff on Australian exports of passenger motor vehicles with engine capacity of 3.0 litres and over immediately cut from 80 per cent to zero.

And with China the economic framework will provide a basis for expanding trade and investment with the world's sixth largest economy, the world's fourth largest merchandise trader and one of the most dynamic markets anywhere. 

Our goal is to build on a trading relationship that is already growing dramatically, on average, by 19 per cent annually since 1997;  and which has already seen some spectacular success, notably the 25 billion dollar LNG contract signed last year.

Yes we could wait until the Doha round delivers further market access opportunities in China, as it may do.  But instead we are choosing to work now on expanding the opportunities for Australian exporters through the Trade and Economic Framework …

.... and by exploring the possibility of a free trade agreement that would serve Australia's interests, and China's interests.

But again, let me emphasise, it's not a question of making a choice between the WTO and FTAs.  These pursuits are not mutually exclusive.

There are a number of things that you can do in FTAs that you can't do in the Doha round.   

For one thing there is scope to address much more deeply specific constraints you face in a particular market in a way that is almost impossible when you are negotiating with 147 other WTO members.

The recognition of professional qualifications, for example, which is critical for professional service exporters, or investment rules and competition policy.

There are however other things that you can do much more effectively through the WTO. 

On agriculture, for example, an FTA will help you to address market access issues.  But it won't get you very far on subsidies - you need the WTO for that.

The point is it's not a zero sum equation.  For Australia both are part and parcel of an integrated trade policy that has as its prime objective the delivery of genuine market-access outcomes for Australian exporters as quickly as possible.

US FTA

This thinking very much underpins our approach to an FTA with the United States.  Indeed our approach here illustrates an important point about the compatibility of FTAs and multilateral negotiations. 

When I meet with US Trade Representative Ambassador Zoellick we don't just talk about the FTA, we talk about the Doha round as well. 

And in talking to the US we are not just talking to anyone; we are talking to a country whose leadership is critical to a successful Doha outcome.

We can achieve this because our trade policy is seamless and complementary.  Our goals in the US FTA are consistent with and complement our goals in the Doha round.

Of course we are not just pursuing an FTA with the US to advance multilateral trade liberalisation - although it is part of our overall rationale.  Nor are we pursuing this agreement for the sake of historic handshakes or landmark signing ceremonies. 

Indeed the signing ceremony I want to attend is not just the one concluding an Australia-US FTA - it is the one signing-off on a major US contract for an Australian exporter that has resulted from the Australia-US FTA.

The Government is pursuing an FTA with the United States because it represents a very big economic prize for our exporters.

The negotiations provide us with an opportunity to significantly improve our market access in the largest market in the world…

....to deepen our already very strong trade and investment relationship…

....and to address some longstanding constraints Australian exporters have faced in the US market. 

In this single negotiation, we will be working to realise gains in a market that represents a third of the global economy.

•   We are working to ensure that our beef exporters no longer face a prohibitive 26.4 per cent tariff in the US market.
•   We are working to cut the 60 per cent tariff that stifles our sugar exports to the US.
•   We are working to ease the burden on our dairy industry of the significant and complex barriers in the US market.
•   We are working to remove the 25 per cent tariff on light commercial vehicles that keeps Aussie utes out of the US.

This is a very difficult negotiation with many sensitive issues. If it were easy, it would have been done before.

In the recent round of negotiations (in Canberra two weeks ago) we made solid progress.   Both sides have worked hard to narrow differences.   And we have cleaned up hundreds of pages of text and have a good sense of possible solutions in most areas.

Indeed I believe that the advances we have made so far are consistent with meeting the end-of-year target for concluding the FTA reaffirmed recently by the Prime Minister and President Bush.

But this is a very complex agreement.  There are still issues that need time and sustained effort.  And we are now in the critical phase when the most difficult issues will require the most difficult decisions. 

Nonetheless, I believe we can build a package that meets our respective national interests.  That both sides see value in and can support. 

And I will be taking that message with me when I visit Washington on November 24 to review with Bob Zoellick where we're at….

....to assess what remains to be done…

....and to determine how best to advance the process toward a successful outcome. 

Conclusion

The business of trade negotiations often seems like endless meetings and the overuse of acronyms and statistics, but let me assure you that the expansion of trade is vital for Australia's national interest.

....vital for economic growth…

....vital for jobs.

This is what drives us to forge these agreements and to pursue trade liberalisation so ambitiously. 

And as I have tried to emphasise today, the choice we face is not between the Doha round and bilateral or regional approaches to liberalisation.  The choice we have to make is between doing the minimum or the maximum for our exporters. 

For me that choice is very clear because it is in the national interest.

Thank you