Speech

1 March 2004, Canberra

Speech to a APEC Study Centre & AUSTA Conference 'How the deal was done'

Introduction

Ladies and gentlemen.

Thank you for the invitation to be here tonight to speak to you about our free trade agreement with the United States.

The timing of this conference is highly appropriate.

I am very pleased to talk to the topic of 'How the deal was done'.

Make no mistake, this FTA negotiation was tough.

But even through the final phases in Washington, our vision remained clear:

• we wanted to achieve a free trade agreement with the US which would deliver substantial benefits to Australian exporters across all sectors.

And we did it - in less than a year.

Ladies and gentlemen.

The FTA with the US is an historic deal…

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

It is a deal I am very proud of as Trade Minister.

Once in force, the Agreement will offer enormous new opportunities in the US market for Australian companies from all sectors of the Australian economy - whether they are currently exporting to the US or not.

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

…an economy that alone accounts for about one-third of global GDP

…and is an engine for growth in global trade.

It is a forward-looking deal, which will deliver long-term benefits for generations to come.

Improving trading conditions, not only in traditional areas, such as agriculture and industrials…

…but also, importantly, in the areas of services, government procurement, telecommunications, competition policy, investment and intellectual property.

Importantly, the deal has been welcomed by the majority of peak business bodies and a range of sectoral associations, including:

• the Australian Chamber of Commerce and Industry, the Business Council of Australia, the Minerals Council of Australia, Horticulture Australia, The Australian Sea Food Industry Council and others.

Origins of the FTA

The window of opportunity to negotiate this agreement was defined to a significant extent by the US election cycle.

After the US Presidential election in November 2000 the Government decided to intensify its discussions with the US on the possibility of concluding a free trade agreement.

The decision was part of the Government's policy of concluding FTAs where these offer the prospect of delivering significant benefits to Australian exporters more quickly than might be possible through WTO negotiations

• achieving better market access conditions for Australian goods and services into the world's largest and most dynamic economy certainly made policy sense.

But it also matched with our abiding interest in maintaining momentum in global trade reform following the failure of the Seattle WTO meeting in December 1999.

Of course, a number of other factors came into consideration, including:

• the incoming Bush Administration's stated commitment to trade liberalisation;
• the 50th anniversary of the ANZUS alliance raising Australia's profile with US policymakers; and
• the general upsurge of interest in concluding FTAs - several proposals for FTAs between the US and others had already been mooted.

The findings of the two studies commissioned by the Government - released in June and August 2001 - confirmed initial indications that an FTA with the US offered important potential benefits to Australia…

…and would complement our overall trade policy, including in relation to the WTO and in East Asia.

There was considerable industry and business support.

Including a statement urging the two Governments to pursue an FTA signed by the majority of Australia's peak business groups

• along with organisations representing sectors such as mining, food, horticulture, banking, insurance, tourism, shipbuilding, pharmaceuticals, horticulture, textiles and fashion, and Internet and environment industries.

On the basis of this support, and in consultation with industry and trade policy advisory bodies - including the APEC Study Centre - the Government considered that it should continue to pursue discussions with the US on a possible FTA.

And in this context, I would like to acknowledge the important role the Australia United States Free Trade Agreement Business Group - shepherded so ably by Alan Oxley - made to generating enthusiasm and support for the FTA in Australia.

Also the Group was effective in coordinating and liaising with the Washington-based Industry Coalition which worked closely with Ambassador Michael Thawley and the Australian Embassy to build support for the deal in the US.

During his visit to Washington in September 2001, the Prime Minister reached agreement with President Bush that US Trade Representative Bob Zoellick and I should consider how to advance the FTA proposal.

Following work by our respective trade officials - and the US Congress's granting of Trade Promotion Authority to the President - our two Governments announced in November 2002 their intentions to enter into formal FTA negotiations.

Those negotiations began in Canberra in March last year. The two subsequent negotiating rounds were held in Hawaii. In October, negotiators returned to Canberra for another round of talks which set the scene for the two decisive negotiating sessions in Washington in December and January.

The marathon final session in Washington was one of the most challenging, exciting and gruelling experiences in my professional career.

After two weeks, two hotels and not a lot of sleep the AUSFTA was concluded, just a year after the negotiations began.

The story of the negotiations

An appreciation of 'how the deal was done' requires an understanding of the objectives - and constraints - of both sides going into the negotiations.

US objectives for the FTA were clear.

The granting of Trade Promotion Authority in August 2002 gave the US Administration guidance on the sorts of issues that would need to be covered in deals the Congress would consider acceptable.

While a letter from the USTR Zoellick to Congress late in 2002 identified a series of objectives for the FTA.

From the TPA guidelines and the letter to Congress, it was clear that agriculture would be a sensitive import issue for the US, but they would also be pushing for specific commitments such as:

• an end to Australia's single desk trading arrangements on wheat, barley, rice and sugar;
• tougher enforcement of Australia's intellectual property laws;
• modification of the National Interest provisions of the Foreign Investment Review Board;
• removal of certain quarantine restrictions; and
• improved access to free-to-air TV broadcasting for US programs.

None of these objectives was a surprise to those of us who have been dealing with the US on trade policy.

Let me turn to Australia's objectives.

The key general Australian objective for the FTA was that it should reduce restrictions on the ability of the two countries to do business with each other.

More specifically we sought, among other objectives, to:

• eliminate tariffs and other barriers to trade between Australia and the United States on the broadest possible basis
• reduce impediments for Australian services suppliers
• expand access for Australian goods and services to US government procurement tenders.

In addition, Australia aimed to ensure that the outcomes of the FTA negotiations would complement and reinforce our objectives in the Doha WTO negotiations and APEC forums.

And set a high, WTO consistent, standard for other FTAs in the region.

The Government was also determined that the outcomes from the FTA not impair Australia's ability to meet fundamental policy objectives in areas such as health care, education, investment, consumer protection, cultural policy, quarantine and environmental policy.

In coming to these objectives we consulted widely with stakeholders - including State and Territory Governments, industry organisations, companies, and NGOs and the public - to ensure our objectives reflected the range of interests engaged by the FTA. In fact, the consultative process was unprecedented in terms of the trade portfolio.

In the end some of the US and Australian objectives were well matched, but significant differences did exist.

This made for intense negotiations at times.

Where the US pushed into areas we considered sensitive - we pushed back with an objective of our own - such as on foreign investment and audio-visual.

Where we pressed the US hard, for example on agriculture, the US pushed back with their own agricultural objectives on single desks and quarantine.

This was the pattern of negotiations.

But after five rounds of intense negotiations and thousands of hours of discussions, at all hours of the day and night…

…the deal was struck.

Benefits of the agreement

We were successful in securing many benefits for Australia:

• 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 - including on utes and auto parts.
• on Government procurement, for the first time, Australian companies will be competing on level terms for US Government tenders - a market worth A$200 billion annually at the US Federal level.
• Australian service suppliers will now receive 'national treatment' and not be discriminated against in the US market - with limited exceptions.
• investment between the two countries will also receive a boost under the FTA.
• and Australian farmers will benefit - duties on 66% of agriculture tariff lines will be eliminated immediately on implementation (and a further 9% within four years)
• The Australian cattle industry will be able to sell an additional A$3 billion worth of beef into the US market over the next 18 years and will have effective free trade after that
• Australia's diary producers will more than double their access into the lucrative US market upfront and will be able to sell an additional A$1.6 billion worth of product in the first 20 years of the FTA
• Australia's horticulture industry also receive some real benefits from the deal including for citrus, peanuts, avocadoes, macadamias and others
• Importantly though in achieving these outcomes:
• we successfully defended our interests in a number of crucial areas including the Pharmaceutical Benefits Scheme, foreign investment and local content in Australian audio-visual and broadcasting services.
• And Australia's quarantine and food safety regimes - with their rigorous scientific underpinnings - are not affected by the Agreement.
• Significantly for our wheat, sugar, rice and barley industries, we also preserved all of our single-desk marketing arrangements.
  • We have emphasised to the United States that we would discuss their concerns about our State Trading Enterprises BUT only in the context where all agricultural support and protection was on the negotiating table
  • We have also said quite clearly that without a very substantial reduction in subsidies and protection in the WTO negotiations, Australia will not be willing to consider any additional disciplines on the AWB Ltd or any other State Trading Enterprise

Broader trade policy considerations

Ladies and gentlemen.

The advances we have made in the FTA are substantial and will deliver real benefits to Australia.

The FTA is only the third FTA between developed economies.

This meant an unusually wide and complex negotiating agenda across some 17 working groups, 23 chapters of text, and over 18,000 US and Australian tariff lines.

And, let me assure you, the Government applied great pressure on the US for increased access for Australian sugar.

But in the end, we could not walk away from a deal which promised enormous benefits across the entire economy.

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.

And our pursuit of FTAs in no way diminishes our commitment to the WTO.

In fact, we were careful to ensure that the FTA met the highest standards for WTO-consistency, with over 95% of tariffs reducing to zero within ten years.

Following the disappointing outcome of last September's WTO ministerial meeting in Canc