Speech
20 February 2004
Speech to the Business Breakfast Roundtable on USFTA
Introduction
Ladies and gentlemen.
I am very pleased to have this opportunity this morning to talk with you about the Free Trade Agreement we have completed with the United States.
It is of enormous satisfaction to me that we were able to finalise negotiations on this truly historic deal over a negotiating period of just 10 months.
Of course, it was an intense negotiation, but one which has produced a result that is unquestionably in the Australian national interest.
Once in force, the Agreement will offer enormous new opportunities in the US market for Australian companies from all sectors of the Australian economy.
The dynamic effects and new opportunities the Agreement will create make this a forward-looking deal
. . . and one which will deliver long-term benefits for generations to come.
For many exporters already in the US market, the deal establishes greater market access and enhanced opportunities.
But, importantly, for future generations, the deal should spur innovation and initiative in others not yet in the US market.
The deal will further integrate the Australian economy with the largest and most dynamic economy in the world.
Let me remind you of just a few facts.
The US economy accounts for about one-third of global GDP and it is an engine for growth in global trade.
. . . many of the top 100 global companies are domiciled in the US
. . . US spending on research and development totalled US$530 billion in 2000.
And the United States is the most sought after destination for foreign students.
Australia is well-placed to take advantage of the opportunities the deal creates from intensified economic integration.
Our own economy continues to be a great success story as we adhere to a credible macroeconomic policy framework and continue implementation of important structural reforms.
Strong productivity growth - one of the best in the industrialised world - has been a hallmark of the Australian economy over the past decade.
Shrewd economic management and reform make us highly competitive internationally.
Indeed, a recent report by the World Bank, Doing Business in 2004, ranked Australia first out of 133 countries for best practice in business regulation.
The Deal
Ladies and gentlemen
The gains flowing from this agreement are extensive.
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.
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.
Almost all of Australia’s non-agricultural goods exports to the United States, worth almost A$6.5 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$495 million in 2003, will be boosted by the immediate elimination of tariffs.
Tariffs on textiles and some footwear will be phased out over a number of years.
Government Procurement
Another great success of the Agreement is in government procurement.
Australia will be guaranteed non-discriminatory access to the US procurement market
This will provide Australian goods and services providers with unprecedented access to a massive market - worth A$200 billion annually at the US 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.
Services
The deal on government procurement provides enormous opportunities for trade in services in what is already by far the largest export market for Australian services - worth $5.2 billion last financial year.
But the deal also contains other major wins for the services sector.
A key outcome on services is a commitment that Australian service suppliers will receive ‘national treatment’, ensuring they will 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.
Importantly, the US has agreed to lock in for Australia’s benefit any subsequent unilateral liberalisation of discriminatory measures.
The FTA also includes ground-breaking provisions on promoting the mutual recognition of professional qualifications, a long-standing objective of Australia’s where progress has been far too slow.
The FTA provides for the establishment of a Working Group with a specific mandate to report within two years on a range of issues relevant to professional services, which in the case of the United States are complicated by the existence of 50 different state-level regimes.
No other country has achieved such a structured, high-profile platform to pursue these mutual recognition issues with the US.
The FTA also includes significant provisions aimed at promoting the integration of our financial services sectors.
A Financial Services Committee will be established to consider specific issues of interest to Australia in regard to cross-border trade in securities.
Australia will be pursuing our interests in reducing regulatory duplication in regard to cross-border access for foreign securities markets and foreign collective investment schemes.
Progress here will assist:
the future growth of the Australian Stock Exchange;
companies listed on the exchange;
Australian investors; and
Australia’s funds management industry.
Of course, the services negotiations also saw the US pursuing a number of issues.
We knew that the US would push 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 outset of negotiations that any outcome in this area must protect Australian culture.
The end result on audiovisual was, in fact, excellent. It:
- preserves all existing local content requirements on free-to-air and Pay TV;
- allows the Government flexibility to significantly increase local content on free-to-air TV if it moves to digital multichannelling,
- allows the Government 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);
- allows the Government to intervene in the future on interactive media platforms to ensure Australian content is 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 services become more important, but to actually increase these amounts.
Intellectual Property
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 a speedy process allowing copyright owners, Internet Service Providers and subscribers to deal with allegedly infringing copyright material on the Internet.
The Pay TV industry will benefit from increased criminal and civil protection against the unlawful decoding of encrypted program carrying satellite signals.
Australia and the United States will also work to minimise 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.
Processed Food and Agriculture
On agriculture, the deal guarantees better access for our farmers:
- duties on 66% of all agricultural tariff lines will be eliminated immediately on implementation
- and a further 9% within four years.
On dairy, the FTA will immediately more than double our access for quota-restrained dairy products. Thereafter the additional preferential quotas will grow at an average of 5% per year forever.
This extra access will allow an additional A$55 million in dairy exports in the first year alone.
For the first time, Australia will have access for some dairy products where Australia has been previously excluded from the US market, such as cheese, butter, milk, cream and ice-cream.
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$340 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.
Australian wine producers will benefit from all tariffs reducing to zero over 11 years, in what is already an almost billion dollar market.
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, with the potential to create 70 new jobs in Port Lincoln alone.
Significantly for our wheat, sugar, rice and barley industries, the government was able in the negotiations to preserve all single-desk marketing arrangements.
Sugar
Ladies and gentlemen.
The advances we have made in the FTA for our farmers and food producers are substantial and will deliver real benefits to Australia.
And, let me assure you, the Government applied great pressure on the US for increased access for Australian sugar.
In the end, we faced the tough decision of whether to walk away from the deal which promised enormous benefits across the entire economy.
And the decision we made was not made lightly.
The WTO
But we should be very 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 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 - it remains our top trade policy priority.
There is no doubt multilateral liberalisation offers the best chance for the broadest and deepest gains for our exporters.
Our pursuit of FTAs where this makes sense in no way diminishes our commitment to the WTO.
Indeed, all we can do bilaterally and regionally to keep market access and market liberalisation moving in the right direction can only add momentum to efforts at the multilateral level
And, ultimately, of course Australia would wish to see the market access and other gains in bilateral FTAs extended to - and bettered in - the multilateral system.
Ladies and gentlemen
We were obviously disappointed by the outcome of last September’s WTO ministerial meeting in Cancún.
However, all WTO Members have now agreed we need to recommit to achieving conclusion of the negotiations, and Australia is working hard to re-energise the round.
A letter from USTR Zoellick to all trade ministers on 11 January this year has signalled, importantly, that the US is still engaged.
I will be discussing strategies to accelerate progress in agriculture - which has been the key sticking point - with other Ministers from Cairns Group countries when we meet in Costa Rica next week.
Conclusion
Ladies and gentlemen
Our FTA with the United States is a once in a life-time deal.
It is a deal that will improve market access for Australian goods and services across the board into the largest and most dynamic economy in the world.
The United States administration will be pushing very hard to get this deal through the Congress this year.
And we will need to work hard to get our own parliamentary processes concluded in parallel with those of the United States so that we can set a date for the FTA to come into force.
What we have is a very good deal which I’m confident will, over the coming years, benefit not only all the businesses represented here today, but all Australians.
Thank you.