Paris, 13 May 2004

Australian Business in Europe, France

Introduction

Thank you [MC], distinguished guests, ladies and gentlemen.

I am delighted to be here today to address this Australian Business in Europe (ABIE) breakfast.

ABIE does a fine job promoting closer commercial linkages between Europe and Australia.

And I'm happy to have this opportunity to talk with those at the Paris-end of the Australia-Europe commercial relationship.

From its original base in Britain, ABIE has expanded its presence across Europe.

ABIE France was established in 1988 and has developed an active program of events, a healthy membership, and an ability to attract an impressive range of high quality speakers from Australia and Europe.

Its success stands testament to the breadth and depth of Australia's relationship with France and the EU.

Today, I would like to outline some of the factors behind Australia's strong economic performance, our trade policy agenda, and the challenges and opportunities currently facing the Australia-EU trade and economic relationship.

Australia's economic performance

As many of you would be aware, the European Union, taken as a whole, is Australia's largest trading partner and number one source of foreign investment.

Over 135 companies from the EU have established regional headquarters or centres in Australia.

This is not surprising.

Australia is a great place to do business.

The Government's sound economic management and program of structural reform have made the Australian economy one of the best performing in the developed world.

Australia is enjoying the longest unbroken economic boom since the 1960s - enjoying strong growth and low inflation.

Australia's economic growth has been about half a per cent per annum higher than both the US and the OECD average since 1990.

Our budget for financial year 2004-05 - delivered just two days ago - makes clear that the pattern of strong growth and low inflation is set to continue

• growth is forecast at 3.5 per cent - with inflation at just two per cent.

In addition, unemployment is historically low and interest rates are around their lowest level for 30 years.

The Government has repaid A$70 billion worth of debt since 1996, thereby reducing our national debt-to-GDP ratio to 3 per cent.

The OECD average is almost 50 per cent.

It is a remarkable track record, given we have achieved these outcomes in difficult circumstances

• in 1997 and 1998 we were hit by the Asian financial and economic crisis;
• in 2001 and 2002 we withstood the US recession and a synchronised downturn in the world's major economies;
• while in 2002 and 2003 we endured the impact of SARS, the war in Iraq and the effects of a once-in-a-century drought -which still continues in parts of Eastern Australia.

But our current growth and economic performance is soundly based, and sustainable, because we no longer endure the inefficiencies associated with high tariffs, fixed exchange rates and financial sector over-regulation.

And the Government has undertaken other significant reforms that have fostered dynamism and commercial vigour - we have:

• increased the flexibility of the Australian labour market;
• reformed business taxes and indirect taxes;
• undertaken telecommunications reform; and
• reformed sea freight and Australian ports.

Australia's trade policy priorities - pursuing every opportunity

As a result of this solid economic management and program of reform Australia boasts a very internationally competitive economy.

This has greatly assisted our exporters.

But a competitive economy isn't enough - exporters also need market access.

That is why the Government is pursuing every opportunity - be it at the multilateral level, the regional level or the bilateral level - to improve conditions for Australian exporters in international markets.

Multilateral liberalisation through the WTO remains Australia's top trade priority.

It is here that the greatest gains will be won, not only by Australia and the EU, but by all WTO Members.

The current Doha Round of trade negotiations offers tremendous opportunities for us to address the many inequities that exist in the global trading system and to stimulate economic growth and development.

There are a number of areas in the negotiations where Australia and the EU share common goals.

For example we are both members of the “friends of high ambition” in the industrials negotiations

• where we seek more meaningful access for industrial products, including a commitment by developing countries for greater market access commensurate with their size, level of development and capacity.

We also share very similar views in the services negotiations

• where we believe there are real benefits for all countries, including developing countries, in services liberalisation and in participating actively in the negotiations.

Australia has also welcomed the flexibility shown by the EU in relation to the Singapore issues of investment, competition policy, government procurement, and trade facilitation.

A consensus appears to be emerging amongst the broad WTO Membership on work on trade facilitation

• but I would stress the need for a very clear indication on how the Singapore issues are to be handled, if we are to avoid the issues once again impeding progress in the Round.

An important area of dialogue between Australia and the EU in the Doha Round is, of course, agriculture.

Agriculture is ‘the' make or break issue for the Round.

Without a significant outcome on agriculture the Doha Round will go nowhere.

WTO Members must find a way to achieve the level of ambition that we all agreed to in the Doha mandate, namely:

• substantial improvements in market access for all products;
• elimination of export subsidies; and
• substantial reductions in trade-distorting domestic support.

These outcomes must be achieved for the Round to come to a successful conclusion.

We must take the necessary steps as part of this round to address the imbalances that exist in global agriculture trade caused by the subsidies and policies of the European Union, the United States and Japan in particular.

These policies are limiting market opportunities, not only for efficient agricultural producers such as Australia, but also for developing countries who rely to a very large extent on income from agriculture.

And these countries would be able to develop their potential more fully if world markets were liberalised.

Of course, the interests of the poorest countries are one of the most important factors in the WTO negotiations.

However we should provide them with meaningful, long term, solutions to their development needs, which integrate them more effectively into the global trading system and which encourage sustainable economic growth.

To be successful the Doha Round must provide benefits across the entire WTO Membership.

And real progress on enabling development for the poorest will come not from approaches which entrench inequities and inefficiencies, but through genuine and wide-reaching reform.

The recent resumption of negotiations in Geneva and the commitment to develop a framework on agriculture by the middle of this year are positive signs. I am hopeful that the WTO-related meetings over the next two days here in Paris will bring this goal closer within reach.

In this context I welcome this week's letter from Commissioners Lamy and Fischler to all WTO members as a signal of EU commitment to make progress in the negotiations. I particularly welcome its indication that the EU is now ready to move on elimination of all agricultural export subsidies if an acceptable outcome emerges on other elements of the agriculture negotiations.

Elimination of export subsidies is an essential requirement in our efforts to improve the multilateral trading system, and a long-held goal of the Cairns Group of agricultural fair traders.

The recent move by the EU is welcome but much work still remains to be done to deliver outcomes on agricultural market access and domestic support to ensure that we actually open up new trade flows and we remove the distortions to world markets which flow from trade-distorting domestic subsidies.

I note that the letter from Commissioners Lamy and Fischler also included other proposals by the EU to potentially exempt from any trade reform a wide group of developing countries, going well beyond the Least Developed Countries. There is a careful balance to be struck here about how best to provide flexibility for developing countries and encourage their participation in negotiations, with the need to better integrate them into the global trading system and achieve the genuine and sustainable economic development this would entail.

I am sure that a successful outcome on agriculture is possible, and I look forward to working with my European colleagues to achieve this.

Bilateral trade and FTAs

Australia is constantly working to improve market access for our exporters in bilateral trade negotiations, across the breadth of our trading relationships

• from the Middle East and Europe
• to the Americas and Asia.

Australia will consider free trade agreements (FTAs) where these offer the prospect of delivering significant benefits more quickly than might be possible through WTO negotiations

• provided they can be done in a comprehensive and WTO consistent manner.

As many of you would be aware, we have recently finalised an FTA with the United States - Bob Zoellick and I will sign the agreement next week in Washington.

Australia's FTA with the US is truly a landmark deal.

It will further integrate our economy with the largest, most dynamic and innovative economy in the world.

Economic analysis suggests that a decade after coming into force the FTA will result in an annual boost to the Australian economy of over A$6 billion.

In the past two years, we have also completed FTAs with Singapore and Thailand.

All these FTAs are trade liberalising agreements, providing substantial new market access opportunities for business.

They are win-win agreements.

But Australia is not only focussed on FTAs, but on a range of issues crucial to building substantive economic ties

• we are closely engaging ASEAN to achieve our target of doubling trade and investment by 2010;
• we are building support for the Doha Round through APEC;
• and last year we concluded Trade and Economic Frameworks with two of our most important trading partners, China and Japan
• the Framework with China including a joint study into a possible bilateral FTA.

Relations with Europe

Ladies and gentlemen

As I mentioned earlier, the countries of the EU, as a whole, remain our largest export destination.

A fact we have not forgotten in formulating our trade policy.

The Australian Government will continue to play its part in strengthening what is already a vibrant and mature bilateral relationship with the EU.

And we look forward to the new dimension, and trade and investment opportunities, the EU's 10 new members will bring to Australia's economic relations with the EU.

Australian officials have regular trade discussions with their EU counterparts.

And early next week when Australia and the EU hold Ministerial consultations in Brussels, trade issues will be once again on the agenda.

Trade and economic linkages between Australia and EU member states are strong and growing.

Last year was a tough year for Australian exporters - with drought, a rising Australian dollar, the impact of SARS and a sluggish world economy.

Nevertheless, exports to the EU continued to perform well, as they have done over the past few years - totalling A$21.6 billion.

Primary products such as wool, coal, and iron ore, still make up a large proportion of this trade.

But our exports are also continuing to diversify, as exports of wine, transport equipment, medicines, seafood and education, continue to grow strongly.

Our trade with France is also diversifying, although France still enjoys a healthy trade surplus with Australia of nearly A$3 billion.

Australian wine sales have been increasing - medium to high quality Australian red wine finding particular favour with French consumers.

And I understand it is not just our wines, but also our wine making equipment that is creating waves.

Last year an Australian firm sold an entire winery to a winemaker in the Loire Valley - the winery being custom-designed and built in Australia, and shipped to France.

And Australian firms are doing well in other areas.

Oceanis Australia recently signed an 80 million Euro deal to build the largest aquarium in France and major Australian investors in France include the surf and sportswear companies Billabong and Rip Curl.

On the other hand, there are now more than 250 subsidiaries of French companies in Australia, employing some 70,000 people, with an annual turnover of A$16 billion.

Some of the more important French investments in Australia include:

• the participation of Vivendi in the successful bid for the A$1.5 billion project to manage South Australian Water;
• Transroute's participation in the construction consortium concerning the A$1.5 billion Melbourne City link toll-road;
• the acquisition of a 51 per cent stake in National Mutual by insurer AXA;
• and the purchase of Australian Defence Industries by Thales, as part of a 50-50 joint venture with Australian engineering group, Transfield.

Conclusion

Ladies and gentlemen

Australia will take every opportunity - multilateral, regional and bilateral - to improve market access for our exporters, including those exporting to Europe.

Clearly, the current WTO Round of negotiations offers WTO Members the prospect of the greatest gains

…and therefore WTO Members also have the most to lose, if the Round ends in failure.

I am confident that this will not happen.

But we have a great deal of work in front of us if the current inequities towards agriculture in world trade are to be successfully addressed.

Thank you.