Speech

Canberra, 12 February 2004

Speech to the Australian Services Roundtable at the National Press Club

Introduction

Ladies and gentlemen.

It is a great pleasure to be here today, at the media launch of the Australian Services Roundtable.

It is very important for the Government to have an industry body with which to consult on services issues, in addition to being able to talk with individual firms.

The Australian Services Roundtable, while being launched today, was founded in mid 2002, and I want to welcome the opportunity it presents of an effective voice for the services sector.

There is no question that services trade will be crucial to the future of our economy, as it will be to the global economy.

As you would be aware, I have recently returned from free trade agreement negotiations in Washington.

I know many of you in the room have a keen interest in the free trade agreement we have just concluded with the US.

I would be pleased to make some comments on the Agreement.

US FTA

The FTA between Australia and the United States is an historic deal . . .

. . . and one that is unquestionably in the Australian national interest.

The agreement offers enormous new opportunities in the US market for Australian companies from all sectors of the Australian economy.

It will further integrate the Australian economy with the largest and most dynamic economy in the world . . .

. . . delivering long-term benefits for generations to come.

This is a forward looking agreement, concluded in a complex environment.

It recognises that Australia’s economic partnership with the United States is built on a sound history in partnership

• it is an agreement about Australia’s future, not about Australia’s past.

The list of benefits flowing from the Agreement is impressive.

And we successfully defended our interests in a number of crucial areas

• including PBS, single desk, foreign investment and local content in Australian broadcasting and audiovisual services.

Ladies and gentlemen

The Agreement improves trading conditions across the board.

Not only in traditional areas, such as agriculture and industrials, but also, importantly, in the areas of services, government procurement, e-commerce, telecommunications, competition policy, investment and intellectual property.

Services

The sector of greatest interest to those of you gathered here today is, of course, services.

As many of you would be aware the United States is by far the largest export market for Australian services – worth $5.2 billion last financial year.

The most important single outcome on services is that we received commitments that Australian service suppliers would receive ‘national treatment’ and would not be discriminated against in the US market. 

We have achieved commitments in this area which go significantly beyond what the US has given on a most favoured nation basis in the WTO, including in areas such as education services.

In a range of areas, the FTA allows both countries to maintain a limited set of existing measures which are discriminatory.

However, the FTA’s services provisions include what is known as a ‘ratchet mechanism’.

This means that for these existing discriminatory measures, any unilateral liberalisation will be immediately bound in the FTA, and cannot subsequently be wound back.

In particular, this ratchet mechanism will apply to measures at the State level in the US, where most services regulation is to be found.

In short, this will mean that subsequent liberalisation of discriminatory measures will be immediately locked in place by the FTA.

The FTA includes ground-breaking provisions on promoting the mutual recognition of professional qualifications.

As trade restrictive measures are removed, limitations on such recognition can be a restraint on trade in services.

Promoting mutual recognition has been a long-standing objective, and progress has been far too slow.

In regard to the US, it is complicated by the existence of 50 States, each with their own, often distinct, sometimes contradictory, approaches to the registration of professionals and the recognition of their qualifications.

The FTA provides for the establishment of a Working Party with a specific mandate to look at ways to promote mutual recognition and other issues relevant to professional services.

It must report to the Parties, with recommendations, within two years of the Agreement’s entry into force.

No other country has achieved such a structured, high-profile platform to pursue these mutual recognition issues with the US.

Another key outcome for Australia is in the financial services area.

Here again, the FTA includes ground-breaking provisions aimed at promoting the integration of our financial services sectors.

There is agreement to establish a Financial Services Committee under the FTA, and that this Committee will consider specific issues of interest to Australia in regard to cross-border trade in securities.

In particular, Australia will be pursuing through the Committee our interests in reducing regulatory duplication in regard to cross-border access for foreign securities markets and foreign collective investment schemes.

These are issues of great relevance to:

• the future growth of the Australian Stock Exchange;
• companies listed on the exchange that wish to improve their access to funds;
• Australian investors wanting to diversify their investment options; and
• Australia’s funds management industry.

If we are successful in promoting greater regulatory cooperation with the US on these cross-border securities issues, then the potential benefits to the Australian economy over the long run will be very significant.

Of course, the services negotiations also saw the US pursuing us on a number of issues, particularly audiovisual.

We knew that the US would be pushing us very strongly in relation to the audiovisual sector, as this is an industry of great economic importance and political clout in the US.

The Australian Government, however, made it clear from the beginning of the negotiations that the outcome in this area could not be allowed to compromise our cultural policy objectives.

The end result on audiovisual was, in fact, an excellent outcome.  It:

• preserves all existing local content requirements on free-to-air and Pay TV;
• allows the Government flexibility to not only maintain the existing amount of local content on free-to-air TV when it moves to digital multichannelling, but to actually increase this amount significantly;
• gives the Government the right to increase the existing 10% expenditure quota on drama channels on Pay TV up to 20% if necessary, and to introduce similar expenditure quotas of up to 10% on four additional program formats (the arts, children’s programming, documentaries, and educational programming);
• includes provisions allowing the Government to intervene in the future on interactive media platforms, if Australian content is not readily available on those platforms.

The bottom line is these commitments give Australia sufficient flexibility to not only maintain the current amounts of local content available to Australian audiences as new media platforms become more important, but to actually increase these amounts.

Given these unprecedented provisions, there can be no question that Australian voices will continue to be readily available to Australian audiences, and that we will continue to have a vibrant Australian production industry.

This is an historic achievement from this FTA.

Manufacturing

The outcome for manufactured goods is excellent – and one I am particularly proud of.

In short, it delivers a great deal for Australian manufacturers.

Over 97 percent of Australia’s exports to the United States, worth A$5.8 billion last year, will be duty free from day one of the Agreement.

The 25 percent tariff on light commercial vehicles that previously kept the Australian ute out of the US market will be removed immediately.

And our auto parts exports, worth A$310 million in 2002, will be boosted by the immediate elimination of tariffs.

Tariffs on textiles and some footwear will also be phased out.

Ladies and gentlemen

Another great success of the Agreement is in government procurement.

Australia will be guaranteed non-discriminatory access to the US procurement market

• a market worth A$200 billion annually at the Federal level - of which over 40% comprises the procurement of services
• with the prospect that the coverage of the Agreement will be extended to State-level procurement. 

Australia will become a “designated” country for the purposes of US Federal procurement and Australia will have waiver from the Buy America Act. 

For the first time, Australian companies will be competing on level terms with suppliers from other developed countries for US Government tenders.

Information Technology (IT) procurement at the Federal level in the US amounts to about A$60 billion in recent years – with opportunities in hardware, software and professional services.

I’m not underestimating the upfront investment required to win contracts in this market.

That is the challenge for Australian business.

But what we have done through the FTA is to remove the barriers to access so that bids from Australian firms will be considered on equal terms with the other major contenders.

The Agreement also includes wins on the intellectual property front.

Closer harmonisation of intellectual property laws with the largest intellectual property market in the world, will benefit:

• Australian exporters to the United States by creating a more familiar and certain legal environment for the export of value-added goods to the US
• Australian innovators by assisting them to attract investment from the United States because of greater familiarity with our legal system.

Australian copyright industries (including publishing, filmmaking and music) are among the fastest growing in Australia.

These industries will benefit from stronger protection for copyright owners:

• including an increased term of protection for copyright material protecting Australia’s writers, filmmakers and other creative content providers
• and an expeditious process that allows for copyright owners, Internet Service Providers and subscribers to deal with allegedly infringing copyright material on the Internet.

While the Pay TV industry will benefit from increased criminal and civil protection against the unlawful decoding of encrypted program carrying satellite signals.

And under the Agreement, Australia and the United States will also work to further reduce differences in laws and practices relating to patents, trademarks and designs, to further assist our rights holders to protect their intellectual property in the United States market.

Agriculture

On agriculture, the deal guarantees better access for our farmers.

Indeed, the FTA will give Australian agriculture a significant boost into the US market

• 66% of all agricultural tariffs will be eliminated immediately on implementation
• and a further 9% within four years.

On dairy, our quota access immediately increases nearly threefold in volume, with ongoing growth in the quota at an average 5 per cent per year.

This increase is across the board for all categories of dairy products, and will be worth A$55 million in additional exports in the first year.

The Agreement grants access for some dairy products where Australia has been previously excluded from the US market, such as cheese, butter, milk, cream and ice-cream products.

On beef, the Agreement provides greater access for Australia’s number one export to the United States.

In-quota tariffs will be eliminated immediately, over-quota duties will be phased out from years 9 to 18 of the Agreement and Australia will gain an 18.5 per cent increase in quota volumes over 18 years.

The deal is worth $3 billion to the Australian beef industry over the 18 year period.

The bulk of our lamb and sheep meat exports – already valued at over A$200 million a year – will benefit from immediate tariff-free access, clearing the way for continued success in our biggest and fastest growing market.

On horticulture, Australia will get immediate zero tariff treatment for products such as oranges, mandarins, strawberries, tomatoes, cut flowers, olives and fresh macadamias.

Our food processors will also gain.

For example, Australian wine producers will have the benefit, in what is already an almost billion dollar market, of all tariffs reducing to zero over 11 years.

And immediate removal of a 35 per cent tariff on canned tuna is likely to be worth up to $20 million in the first year for Australian producers

Some suggestions are that it will immediately create 70 new jobs in Port Lincoln.

Ladies and gentlemen.

The advances we have made for our farmers and food producers are substantial and will deliver real benefits to Australia.

But they were also very hard fought.

As many of you will appreciate it took long and difficult negotiations to get as much as we did.

Going further than this will require use of the full range of trade policy approaches – bilateral, regional and multilateral.

And of course it has always been clear that we will not get reform of the very large US domestic subsidies for agriculture without a large, multilateral trade round.

We should be wary of assessments of the outcomes of this FTA which ignore the reality of the current very difficult international environment for agricultural trade reform.

Our FTA negotiation confirms the wisdom of our approach.

We seek access gains where we can, but securing big reform by the big subsidisers requires a global round.

The US clearly will not make major cuts to its subsidies or completely liberalise its markets without the benefit of similar action by the other big subsidised and closed markets – particularly the European Union and Japan.

This is why Australia remains fully committed to the Doha round of trade negotiations, and indeed to the multilateral system.

Our pursuit of FTAs where this makes sense in no way diminishes our commitment to the WTO.

The WTO Doha Round remains our top trade policy priority.

Multilateral liberalisation offers the best chance for the broadest and deepest gains for our exporters.

Ultimately, of course, Australia wants to see liberalisation gains in bilateral FTAs extended to, or bettered in, the multilateral system.

That is, ultimately we aim for convergence of these bilateral initiatives and the multilateral system to create more open global markets.

WTO negotiations

So it’s no surprise that we were obviously disappointed by the outcome of last September’s WTO ministerial meeting in Cancún.

But while Cancún was a stumble, it is one we are recovering from.

All WTO Members have agreed we need to recommit to achieving conclusion of the negotiations, and Australia is working hard to re-energise the round.

We have been active in key capitals in all regions and at the WTO in Geneva exploring options for getting the process moving forward.

A letter from USTR Zoellick to all trade ministers on 11 January has signalled that the US is still engaged, despite it being a Presidential election year, and committed to ensuring that this year is not lost.

And with the re-launch of the Doha negotiating groups expected at this week's General Council meeting in Geneva (11,12 Feb), we will be putting renewed effort into completing the Round on schedule.

In addition, I will be discussing strategies to accelerate progress in agriculture – which has been the sticking point – with other Ministers from Cairns Group countries when we meet in Costa Rica later this month.

Back to services . . .

As this audience knows, services are a critical part of the Doha negotiations for Australia.

After all, the sector accounts for two-thirds of our national output and employs four out of every five workers.

Services have become our fastest growing export sector – worth A$31 billion last year – over one-fifth of total Australian exports.

And as the Productivity Commission has estimated, Australia could gain up to $US2 billion a year from global services trade liberalisation.

In the services negotiations there are currently 40 offers on the table from WTO Members, accounting for 90 per cent of the world services trade.

But these initial offers are modest and we are working hard on improving them, particularly from key markets such as the US, EC, China, India and the ASEANs . . .

. . . and particularly in areas such as improving entry and stay conditions, investment, and joint venture requirements.

We are also seeking commitments to ensure that regulatory environments are transparent - especially in the areas of licensing, qualification recognition and the bidding processes for contracts.

So let me assure you liberalisation of the global trade in services is a key objective for the Government and one we are negotiating hard on.

Australian Services Roundtable Launch

During the WTO services negotiations, the Government has consulted some 164 industry associations and companies – including the Australian Services Roundtable.

The importance of consultation with industry in putting together Australia’s positions for trade negotiations can not be overstated.

That is why I am delighted today to officially launch the Australian Services Roundtable.

Australia needs a strong and globally competitive services sector and a strong representative coalition of services industries.

The diversity of the services sectors is such that this is not an easy exercise.

Conclusion

Ladies and gentlemen.

Our FTA with the United States is a once in a life-time deal.

It improves market access for Australian goods and services across the board into the largest and most dynamic economy in the world.

The FTA also illustrates that the Government is committed to delivering the best outcome for Australian exporters - including in the services sector.

The Government looks forward to working with the Australian Services Roundtable towards achieving this goal.

The Government worked very hard on consultations with industry, State and Territory Governments and other stakeholders throughout the FTA negotiations.

We are committed to continuing this transparent process and are looking to have the text of the FTA available to the public as soon as possible.

Such a rapid release is unprecedented for such a complex and detailed treaty document.

Thank you.