Speech
27 May 2004
Speech to the Australian Institute of International Affairs 80th Anniversary
2004 Charteris Lecture
Australian Trade: 80 Years of Growth – Within the Region and Beyond
Introduction
Thank you Greg Sheridan, Your Excellency Governor Bashir, distinguished guests, ladies and gentlemen.
I am delighted to be here today to address the AIIA NSW Branch on the occasion of your 80th anniversary and to deliver the 2004 Charteris Lecture.
Obviously the world has changed an almost inconceivable amount in the 80 years since the NSW Branch of the Institute was established.
John Legge’s history of the AIIA gives us a good insight into the prevailing Australian public attitudes towards international affairs in the period in which the Institute was formed.
Legge writes that “the perspective within which Australian thinking about Australia’s place in the world was done was, broadly speaking, an imperial perspective” (Legge, 1999:1).
These days having such a perspective is almost impossible to imagine.
While times have changed, I’m pleased to say that the role of the AIIA has remained one where the Institute continues at the forefront of stimulating interest in, and understanding of, international affairs in the broader community.
AIIA NSW: an 80 year contribution
As many of you would be aware, the AIIA had its genesis in the Australian branches of the British Institute of International Affairs
- Australian branches of the Institute were formed in Sydney, Melbourne and Brisbane in the 1920’s
- before coming together in 1933 to establish the AIIA.
Professor AH Charteris, to whom we pay tribute this evening was of course responsible for founding the NSW Branch of the Institute in 1924.
Professor Charteris was a well known expert in International Law and represented the University of Sydney at a number of international law conferences overseas.
And like many AIIA Presidents, including [Geoff], he was also active in international relations more broadly, being President of the NSW Branch of the League of Nations.
And, interestingly, I note another area of commonality with [Geoff], Professor Charteris having also worked in the intelligence field – in his case during the First World War.
In addition to his extensive professional qualifications, Professor Charteris, had another very useful quality for those dealing with international issues – a delight in humour, publishing a book on Scottish humour in 1932.
- we face many serious and difficult global issues today, but I can tell you from personal experience, that trade negotiations are often a long, hard slog – and that a sense of humour can be an essential survival tool.
When launching the AIIA’s Australian Journal of International Affairs in 2001, my Ministerial colleague, Mr Downer, noted that the Institute has always displayed a capacity to remain relevant to the national foreign policy agenda.
And we can see the foresight of the Institute on trade matters as far back as 1935, when members of the NSW Branch of the Institute prepared a series of discussion papers examining the prospects of increasing Australia’s trade with East Asia.
According to John Legge, the prevailing opinion of the drafters was that:
‘provided political factors did not intervene, it would appear inevitable that Australia’s trade with the Far East should expand as the latter’s population grows and her industries develop’ (Legge, 1999: 63).
In the longer term, how right this turned out to be.
Trade and the Region
Ladies and gentlemen
The Australia’s trade has certainly changed in the past 80 years.
In 1924 Australia’s top five export markets were, in order, the United Kingdom, France, Japan, the United States and Belgium.
Not surprisingly, exports to Britain and its possessions accounted for over 50 per cent of our total goods exports – with France and the US together accounting for another 18 per cent.
East Asia accounted for just 15 per cent of all Australian exports.
Today, the figures are far different.
Our top five merchandise export markets are now Japan, the United States, China, New Zealand and the Republic of Korea.
The UK, Taiwan, Singapore, India and Hong Kong make up the top ten (2003 CY data).
Today it is East Asia, which accounts for over 50 per cent of our goods exports.
There have been major changes – political and economic - across the region and around the globe over the past 80 years.
These events, achievements, disputes and tragedies are too numerous to mention.
But they have all contributed to where we find ourselves today in the region…
…and to how our trade and investment relationships have changed and evolved.
We have seen enormous gains in development, and in economic growth and sophistication in the region – all of which has fed the expanded trade relationships regionally and globally.
Indeed, a recent World Bank study of 72 developing countries worldwide found that since 1980, those countries that had increased their ratio of trade to GDP had grown at almost four times the rate of those who did not.
Over time, market economics and democratic processes have been embraced by many countries in the region – though more fulsomely by some than by others
- of course, some continue to hold out on both, to the suffering of their societies.
The share in these development gains in our own region has not been even.
Indeed economic development has not gone unchallenged region-wide, as we were reminded starkly during the Asian financial crisis.
This crisis reconfirmed the crucial role that good governance plays in sustainable economic development
- reconfirming also that trade and investment need stability, transparency and a reliable legal environment in order to flourish and contribute to longer-term economic growth across the region.
Today governance reform remains an important goal for many regional countries in their efforts to achieve their national aims of greater prosperity.
Australia encourages and supports economic and governance reforms as necessary to a more stable, secure and prosperous future for the region.
Despite more recent challenges of SARS and ongoing security uncertainty, current prospects for economic growth in the region are good.
Indeed, East Asia’s growth forecasts are consistently higher than for other regions.
Within East Asia, no one can doubt the growing economic importance of China.
Over the past decade, China has developed as a major economic power in the region…
…and, with a stronger US economy, is increasingly acting as an engine of growth for the region
China’s growth is expected to continue to be strong, even with government efforts to ensure growth is sustainable and does not undermine economic stability
- the IMF still expects China to grow by 8.5 per cent in 2004
India is also one of the world’s fastest growing economies and – if ongoing reform and restructuring efforts continue, as we expect they will - presents great long-term trade potential.
India’s economy grew by around 8 per cent in 2003-04 - and India’s high-income consumer class is expanding steadily.
Japan is also showing increased signs of strengthening, with the IMF forecasting growth of 3.4 per cent in 2004 compared with 2.7 per cent in 2003.
And there are some very good growth prospects among Southeast Asian economies – Thailand is expected to grow by 7 per cent in 2004, Malaysia by 5.7 per cent and Singapore by 4.2 per cent.
WTO: Prosperity for all
Ladies and gentlemen
I shall return to some detail on our contemporary economic relationships in a moment.
Before doing so, I wish to reflect a little more on another development of enormous significance to international trade which has also taken place well within the past 80 years.
That is, the development of a rules-based international trading system – what we know today as the World Trade Organisation.
History tells us that the Bretton Woods conference acknowledged the importance of an international trade organisation in the immediate post-World War Two period…
…but no such institution was established.
Subsequently, preparations for an international trade organisation were discussed at length under UN auspices…
…but though much talked of, the “ITO” never came into being.
Instead, the General Agreement on Tariffs and Trade – a series of separate agreements - evolved and took on an unintended but historically crucial institutional form.
Through successive rounds of negotiations under the GATT we have seen a complex system of international rules emerge to govern how countries and political entities interact in the global trading arena…
…from the early round focused principally on tariffs…
…to later rounds which brought non-tariff elements…
…and most recently the Uruguay Round, which was historic in its breadth and, importantly, brought agricultural trade firmly into negotiations.
As observers of Australian trade policy matters well know, fundamental agricultural trade reform is an essential aim of our efforts to improve the multilateral trading system…
…and a long-held goal of the Cairns Group of agricultural fair traders - of which we are a founding member.
But it was only ten years ago through the Marakesh Declaration that a fully fledged World Trade Organisation was established.
The Declaration itself clearly sets out just how far we had come since the earliest days of the GATT.
It establishes along side the GATT a multilateral framework of disciplines for trade in services…
…trade related intellectual property rights…
…as well as the “reinforced” multilateral trade provisions in agriculture and in textiles and clothing.
Negotiating rounds past - and present – have always been hard fought, never easy
- and the results have not always been as ambitious as we would have liked.
Uruguay, though historic, was still less than a perfect outcome.
But what we have achieved together through the GATT and now the WTO has been vital to the growth in world trade.
Indeed these disciplines and the trade liberalisation they facilitate are of enormous importance to the global economy.
According to the WTO, world growth in 2000 – that is, after the implementation of the Uruguay Round - was 22 times the level recorded in 1950…
…with merchandise exports growing by an average of 6 per cent per year over the same period (source: www.wto.org).
And for Australia, ABARE estimated that the gains in the Uruguay Round on agriculture alone would lead to an increased in annual agricultural production of $1.1 billion
- and an increase in agricultural trade of $950 million per year.
Ladies and gentlemen
There were 23 founding members of the GATT in 1947, including Australia.
Today’s WTO has 148 members.
This steady move towards universality will ensure that the benefits of negotiations can be enjoyed by more and more communities, societies and nations as we move forward with successive rounds.
There is no question that for all WTO members – founding and longstanding members such as Australia, and newer members such as China - that the greatest gains are to be had through the multilateral trading system.
Making early gains bilaterally
There are some commentators who think it is a misplaced priority for Australia to be actively pursuing and concluding bilateral free trade agreements at the same time as we are pushing for an ambitious and substantive outcome in the Doha Round.
But there is nothing inconsistent about this approach.
Indeed, they are part of an integrated strategy of the government to pursue opportunities at all levels of international trade.
And the WTO rules provide for comprehensive FTAs – such as those Australia pursues.
It is no secret that these are not easy times for negotiation at the international level – and I shall return later to my impressions of where we are today with the Doha Round.
But first I want to emphasise that, given the complexities of the multilateral environment, it should be no surprise that we legitimately pursue our national interests through FTAs, in parallel with the Doha Round.
Indeed, I am sometimes a little perplexed that some people are surprised at this…
…surprised that responsible, open trading nations like Australia - strong and efficient - would want to deliver outcomes for industry in time frames which are significantly shorter than the multilateral system can deliver…
…and what’s more, to do so in the company of other ambitious economic partners wishing to negotiate comprehensive, liberalising agreements to enable their economies to keep moving ahead.
In my view our approach is simply a matter of good policy.
Importantly, FTAs can be innovative and help set a more ambitious agenda at the multilateral level by raising the profile of issues and measures that may not have been dealt with multilaterally.
We saw this with services trade in the original US Canada Free Trade Agreement.
And the Australia New Zealand Closer Economic Relations Trade Agreement, now 20 years old, represents one of the earliest and most comprehensive Free Trade Agreements between developed countries.
CER has also spawned a range of other agreements, such as mutual recognition of standards and qualifications, which have further integrated our two economies.
These are just a few of the good reasons that the government is taking every opportunity to pursue FTAs where it makes sense to do so – with important economic partners in the Asia Pacific and beyond.
Ladies and gentlemen
I was in Washington last week to sign the final text of the Australia US free trade agreement and, as I said in my remarks then, it was a very proud day for Australia – and for me as trade minister.
Why? Because we have secured a landmark deal with a major trading partner and our closest ally.
It will further integrate our economy with the largest, most dynamic and innovative economy in the world.
Economic analysis suggests the FTA will result in an annual boost to the Australian economy of over A$6 billion a decade after coming into force.
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.
And to help the business take advantage of what these FTAs and China’s WTO accession have to offer, the Government’s recent budget has allocated A$19.6 million to assist.
Australia is not only focussed on FTAs, but also on a range of other measures crucial to building substantive economic ties bilaterally and across our region.
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.
As you would be aware, the Framework with China includes a joint study into a possible bilateral FTA, to be completed by October 2005.
China’s opening to the world and its emergence as a major growing industrial power is one of the most significant and positive global development in recent decades.
Australia is well placed to assist China in this economic growth now and into the future.
During my recent visit to China I was pleased with the level of interest and engagement on the issue of closer cooperation and initiatives to build on our already substantial bilateral ties
- a decade ago, China took just 4 per cent of Australia’s exports – now it takes over 8 per cent.
I was particularly pleased that my Chinese colleagues were ready to bring forward the deadline for completion of the FTA feasibility study
- this should see the original completion date of October 2005 brought forward to the first quarter of 2005.
I should also like to add that those interested in submitting views to the China Study Taskforce in DFAT are encouraged to do so
- I am sure that many amongst you this evening would have insightful views to offer.
Through this and other measures, the government continues to devote considerable resources and effort into developing Australia’s trade and economic relationship with the countries of North Asia.
But our efforts are not just about trade negotiations, agreements, shipping orders or freight schedules.
A case in point is Australia’s participation in World Expo 2005 in Japan.
This is major event, expected to attract more than 15 million visitors.
Australia’s participation not only reflects the importance of our relationship with Japan – our biggest export market for goods…
…but will allow us to showcase our economic success, our innovation and technology, and our abilities in a wide range of fields…
…and will provide a great opportunity to influence the perceptions of millions of Japanese people – and others from neighbouring countries – about contemporary Australian society, lifestyle and culture.
The benefits to Australia over the long run are considerable.
Ladies and gentlemen
I have been speaking about the extent to which our trading relationships with the Asia Pacific region have grown and diversified.
This is the case beyond the Asia Pacific as well.
As you may know, the European Union 15 taken as a whole was our largest trading partner
- and needless to say, the EU 25 members remains firmly in this position, with trade now worth around $A61 billion.
I have just returned from Europe where I had very good meetings with EU counterparts and others – all as part of our ongoing strong relationship with the EU as we work together to resolve problematic trade policy questions through the WTO
- the EU is now ready to move on agricultural export subsidies, but there are still considerable differences on agricultural market access
We also are working to advance our interests with the Middle East where we have important agricultural trading interests.
We are talking to the United Arab Emirate about a possible FTA.
While in Europe recently my Egyptian counterpart Dr Boutros-Ghali agreed that our two countries will negotiate a trade and investment framework agreement.
And just a week ago Mr Downer and I announced that Australia will open a diplomatic mission in Libya.
The mission, to be headed by an Australian Trade Commissioner, will ensure a visible and positive Australian trade profile in Tripoli.
Outlook: The Road Ahead
Ladies and gentlemen
Where does all this leave us today?
Well, we will keep looking for opportunities to further enhance the trade and economic outlook for Australia, its community and business people
- and, as Institute members pointed out so many years ago, a number of these opportunities will lie in our own region.
And we are - and will remain - firmly focused on the Doha Round.
Agriculture remains ‘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.
I welcome the recent letter from Commissioners Lamy and Fischler to all WTO members, in particular its indication that the EU is now ready to move.
My recent discussions in Europe and the US over the past weeks have confirmed WTO members are committed to working towards a framework package in July that will guide the next phase of the Doha negotiations.
But these discussions also confirmed that much work also remains to be done to deliver an outcome on agricultural market access that would actually result in improved trade flows.
Poor policies of a few are limiting market opportunities for many - not only for efficient agricultural producers such as Australia, but also for developing countries that rely to a very large extent on income from agriculture.
As I suggested earlier, in order to be successful the Doha Round must provide benefits across the entire WTO membership.
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.
But time is against us and we must now pick up the pace.
Australia for its part is at the ready.
Conclusion
Ladies and gentlemen
It has been a great pleasure to be able to share with you this evening some historical perspectives on Australian trade policy…
…and some comments on contemporary challenges and opportunities.
It is my view that these kinds of events and discussions remain among the most important and challenging tasks for government…
…the task of explaining to Australian business and broader community what we are looking to achieve through our ambitious trade policy
- the greater trade and export opportunities, higher growth prospects and more –and better - jobs.
And involving the business and broader communities in the process - through consultation, outreach, programs to assist them take advantage of new opportunities…
…as we have done and are doing on a daily basis through the work of DFAT and Austrade.
AIIA will continue to play an enormously important role in providing a forum for the exchange of ideas on our international relations – whether trade-related issues, or foreign or security policy.
We are fortunate to have such a well-established Institute in Australia – with active state and territory chapters nation-wide.
Once again, thank you for the invitation to give the Charteris lecture on this 80th Anniversary of the NSW Branch.
And if I be so bold, best wishes to the NSW Branch as it looks towards its centenary celebrations and beyond.
Thank you