13 August 2004

India: the next economic giant

Speech at the Launch of the Lowy Institute report, Sydney

Introduction

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

I am very pleased to address you at the launch this morning of the Lowy Institute's first publication, India: the Next Economic Giant.

India's economy

It's no secret that for much of India's post-colonial history, its economy performed below potential.

But the situation has turned around over the past decade or so.

Since 1991, a succession of governments has taken India down the path of economic reform.

And they have achieved remarkable results.

For example, economic reforms have opened up India to foreign trade.

And India has benefited enormously.

Lower tariffs have exposed Indian companies to international competition.

They have helped lower the cost of industrial inputs.

They have given Indian consumers access to a wider range of goods and services - and at competitive prices.

And I'm happy to say that this has created an irresistible momentum for further change in India.

India's economy is now one of the world's fastest-growing.

India's challenge is to sustain that growth - indeed to lift it to even higher levels.

This will require, in particular, a renewed commitment to reform.

And I am confident India will rise to the challenge.

Bilateral trade and investment

Ladies and gentlemen,

Like India's economy before 1991, Australia's economic engagement with India has not always measured up to expectations.

But this too has changed.

When India started its economic reforms, it was Australia's 24 th largest trading partner.

In 2003, India moved to 15 th position and entered our top-ten export markets - in 9 th place.

It is now our 7 th largest export market.

In fact, Australian merchandise exports to India have increased over 400 per cent in the past decade.

Commodities such as gold, coal, copper and wool still dominate.

But as economic growth raises the standard of living in India, Indian consumers are increasingly demanding quality products from Australia.

For example, fresh fruit and vegetables in the off-season.

India's growing prosperity is also attracting a surge of Australian services exports.

Australia is the third-largest supplier of education services to the Indian market.

Over 13,000 Indians trained and received education in Australia last year - a 32 per cent increase on 2002.

And this year, we expect these numbers to grow further still.

India's vibrant film and television industries are using Australian locations - and post-production expertise - just as Hollywood has done.

Not only is this good for the local film industry, but it will boost tourism from India - already an important growth area in the relationship.

One area that has been lagging is investment, which has not kept pace with the boom in trade.

It is, however, on the rise - the latest statistics indicating that Australia now has around $1 billion in approved foreign direct investment in India - up from just $100 million in the early 1990s.

And Indian companies are looking increasingly at Australia for strategic investments.

The Future

Australia's economic partnership with India is prospering and expanding.

And the prognosis is, to say the least, very favourable.

But as a country highly reliant on trade to maintain jobs and our standards of living, we cannot afford to rest on our laurels

• and the Government is working hard to maintain and increase Australia's export drive

• both here and abroad.

At home, the Government remains focussed on creating the right conditions for business to compete and flourish.

Through sound economic management and continued structural reform.

While a broad, the Government is pursuing every opportunity - be it at the multilateral level, the regional level or the bilateral level - to improve conditions for Australian trade in global markets.

It is a pragmatic approach and it is an approach that is working.

In the past few years we have signed Free Trade Agreements with Singapore, Thailand and, of course, with the United States.

And t he trade agenda is also moving ahead with other regional countries.

With China we are undertaking a joint FTA feasibility study…

…we and Malaysia are undertaking parallel scoping studies on the possible benefits of an FTA…

…and we are considering, along with New Zealand, the possibility of negotiating an FTA with ASEAN.

Last year, we also concluded a Trade and Economic Framework with Japan. While lifting the intensity of the bilateral relationship, the TEF has at its core a study on how to further liberalise trade between us.

India too has every possibility of becoming a major market for Australia.

It is clearly in Australia's interests to strengthen the framework for our future bilateral commercial engagement with this emerging economic power.

Indeed, India meets many of the economic criteria that Australia considers when looking at increased engagement with our trading partners.

In coming months, I shall be exploring the most effective ways to build further strength into our trade and investment relationship with India.

While India's sensitivities on agriculture are likely to make a possible FTA a longer term prospect, as with Japan there are a number of intermediate steps that could serve to put the bilateral trade relationship on a higher path.

The potential benefits to Australia are great.

Australia has the resources, the technology and the services to partner India's continued economic expansion.

And judging by our current export growth, India already recognises this complementarity.

Australia is a significant supplier of energy to the Indian economy.

And India is going to need increasing amounts of energy to maintain its high-growth trajectory.

I foresee Australia playing an important long-term role here - including as a future supplier of clean LNG to the Indian market.

WTO

Australia's economic partnership with India also extends to the multilateral sphere.

Both countries are firmly committed to making the multilateral trading system fairer.

We are also members of the group of Five Interested Parties that played a key role during the recent negotiations in Geneva to finalise a Framework Package.

I worked closely and constructively with my Indian counterpart, Minister Nath, on that occasion.

And I would like to take this opportunity to express my appreciation to Minister Nath for the vital role he played in ensuring consensus was reached on a framework package.

Minister Nath is the fourth Indian Minister I have worked with during my five years as Trade Minister and they have all made an outstanding contribution to advancing the global trade liberalisation agenda.

The Framework Package is an important milestone for the Doha Round, putting us back on track for achieving an ambitious outcome.

For Australia, a successful outcome in the Round remains our top trade priority.

The Framework Package opens the way for negotiation of new market opportunities in industrial products and services, and for new arrangements to facilitate business procedures.

On agriculture, the framework breaks new ground by committing WTO Members to eliminate export subsidies, which have had a tremendously damaging impact on farm exports.

Agreement has also been reached on establishing new disciplines to remove unfair, subsidised competition through government-supported export credit programs and to set up new arrangements to manage food aid.

These reforms have the potential to bring significant benefits to both Australia and India, and indeed to all WTO Members - developed and developing countries alike.

But we still have a long way to go, and I look forward to continuing a constructive engagement with India in the time ahead.

Conclusion

Ladies and gentlemen,

I am keen to see Australia's place in the Indian market grow as India's economy expands.

For the Government, this means strengthening the bilateral economic framework with India…

…to maximise access for Australian business to the increasing benefits the Indian market has to offer.

We are also strongly committed to working constructively with WTO Members, and particularly with India among other major players, to ensure that the negotiations deliver an ambitious outcome for all.

I congratulate the Lowy Institute for its timely production of India: the Next Economic Giant.

This is another fine example of the excellent work the Lowy Institute is doing to inform the debate on international policy in Australia.

I commend the publication to you.

Thank you.