Opening Address

Speech to the Third Australia-Japan Conference, Melbourne.

Introduction

Mr Ichiro Aisawa, Senior Vice Minister of Foreign Affairs for Japan, parliamentary colleagues, Leaders of the Japanese and Australian delegations, Mr Kenji Yoshizawa and Mr Hugh Morgan, Ambassadors McLean and Ueda, Distinguished conference participants, ladies and gentlemen.

I am delighted to be here today to open the third Australia-Japan Conference.

Australia and Japan have a vital and growing partnership. Our trade relationship has helped underpin both countries' prosperity for more than three decades, ….…and Japan is likely to remain Australia's largest export market for many years to come.

Japan is an important regional partner on political and security issues. And after years of learning about, and visiting, each other's countries we have strong people to people links. Around 700,000 Japanese people visit Australia each year, and over 300,000 Australians are learning the Japanese language. We have almost 100 sister city relationships.

Australia Japan conferences

But neither side can afford to take the relationship for granted.

This was in the minds of Prime Minister Howard and late Prime Minister Obuchi when they initiated the Australia-Japan conference process. Like many of you I was at the first conference held in Sydney in April 2001. The conference resulted in many new initiatives including the Australia-Japan Trade and Economic Framework and the idea for an Australia-Japan Year of Exchange in 2006.

The second conference-held in Tokyo in November 2002 - has also led to some important new activity in the bilateral relationship. I understand that Mr Morgan and Mr Yoshizawa will be giving a full report on that shortly.

This third Australia-Japan conference is an opportunity for us to take stock of some very significant developments in the bilateral relationship since AJC2……and to discuss ideas for our future work together.

Trade and economic links are still the mainstay of our relationship

As trade minister, I am naturally particularly focused on the trade and economic side of the relationship. Before examining recent trade and economic developments, it would be worth looking at the Australia-Japan trade relationship in its historical context…….since history provides an important reference for us as we think about the future.

Australia-Japan trade ties were normalised nearly 50 years ago by my predecessor "Black Jack" McEwen, with the signing in 1957 of the Australia-Japan Agreement on Commerce. At that time, Japan still faced trade discrimination following the second world war.

With the Commerce Agreement, Australia was the second country after the United States to extend Most Favoured Nation treatment to Japan. Although it is hard to imagine today, this was a groundbreaking document which, at the time, attracted considerable criticism……..but it put us on the path to developing a flourishing trade relationship.

Our trade ties were enhanced further by another of my distinguished National-Country Party predecessors Doug Anthony, when he signed the Nara Treaty in 1976, which recognised our mutual interest in maintaining a stable trade relationship. By this time, Australia had become a stable supplier of key commodities such as coal and iron ore, to Japan's fast-growing economy. To this day, Japan continues to rely on Australia for 58 per cent of its coal needs, and 55 per cent of its iron ore.

In the other direction, Australia was an important market in the early days of Japan's economic expansion, particularly for its motor vehicles……with Australia among the first countries in which Toyota set up overseas manufacturing operations. And today, Australia remains Japan's second-largest market for motor vehicles, after the United States.

Japan is Australia's biggest and most longstanding LNG customer,……..and we look forward to continuing to be a key supplier of LNG to Japan in the years ahead.

Another key Australian export is beef. When US beef was withdrawn from the Japanese market, it caused great disruption in Japan, with many of its 'beef bowl' outlets closing down or forced to substitute other products.

With Australia's status as a BSE-free country, Australian producers were able to respond flexibly and quickly to these circumstances and increased exports to Japan by 40 per cent. At the moment, Australia supplies 91 per cent of Japanese beef imports. This is a good example of Australia's role in offering the Japanese economy security of supply for key commodities throughout the post-war period.

We continue to highlight our credentials as a supplier of safe and high quality beef to Japanese consumers. However, our long term interests in the beef market are best served by the return of normal patterns of trade…….so that Japanese consumers' confidence in beef returns and demand grows.

I understand that Japan and the United States are making progress in their negotiations on the terms under which US beef will return to the Japanese market. Importantly, we sincerely hope that Japan amends its beef snapback legislation, so that when normal patterns of trade resume Australian exporters and Japanese consumers are not faced with the threat of higher tariffs.

However, beef is not our only food export to Japan - Australia also provides high quality wheat, dairy, tuna and other seafood highly sought after by Japanese consumers. I am pleased that we are also increasingly developing links in new areas. Value-added products and services are an increasing feature of our economic relations. And many new Australian companies, particularly small to medium enterprises, are finding markets for their products in Japan for the first time.

Growth in this sector of exports to Japan is a key priority for our government as more Australians take the entrepreneurial step of setting up their own businesses and selling to the world. For example, the Tasmanian Gourmet Sauce company, a small, family company, is now supplying sauces and relishes to Japan as well as other Asian countries.

Interpath, a company set up by a Victorian couple, produces a natural treatment for animal osteo-arthritis called 'Sasha's Blend'. This product has taken the veterinary world by storm and is proving successful in Japan.

Another company, Creative Windoware, has developed innovative software called 'Rocketreader', which teaches speed reading to children and adults alike and is achieving export success in Japan. And these are just a few of the Australian exporters that have recently found new markets for their products and services in Japan.

Austrade assisted 499 Australian businesses to achieve a sale or make an investment in Japan during 2003-04.

Japan is also a key investor in Australia. In 2003, it was the third largest source of foreign investment in Australia, with total investments valued at $45 billion. This investment is concentrated in the real estate, mining, commerce and services sectors. But I would like to note a recent, new project in Adelaide, where Japan's Hirotec has begun building a $100 million car component plant.

Investment in the other direction has been slower, but there are some notable recent examples. Australia's Macquarie Bank and its Japanese partner have acquired a major toll road in Japan. This is the first foreign equity investment in a Japanese toll road And an Australian company has invested in a ski resort development in the popular Niseko area of Japan, catering to Japanese as well as the growing number of Australian skiers visiting Japan. It is my sincere hope that these examples of Australian exports and investments in Japan foreshadow a more diverse trade and investment profile between Australia and Japan in the future.

Governments have a role in supporting business by providing the environment in which trade can flourish. Throughout the post-war period Australia and Japan have made a significant contribution to global prosperity through their support for, and active contribution to, the rules-based multilateral trading system. And today, both countries maintain their reliance on, and commitment to, the WTO.

There is no question that the Doha Round of WTO negotiations provides the best opportunity for achieving far-reaching trade reform, ……. with benefits for global prosperity for years to come. With this end in mind, we urge Japan to exercise leadership in all aspects of the Round, including agriculture. But in parallel with our work through the WTO, both of us have taken steps to strengthen the formal basis of our bilateral trade and economic relationships with each other as well as with third countries.

Building on our 1957 Commerce Agreement and the 1976 Nara treaty, …and taking up the suggestion of the first Australia-Japan conference, …….the Australian and Japanese Prime Ministers signed a Trade and Economic Framework in July 2003. The Framework is designed to reinvigorate the economic and trade relationship.

It contains important commitments - including to work towards comprehensive trade and investment liberalisation between Australia and Japan. It also includes a 'facilitation agenda' aimed at making it easier to do business by improving commercial and policy linkages.

Under the Framework, both sides are conducting a two-year Joint Study into the costs and benefits of trade and investment liberalisation. Work on this study has been accelerated with a view to finalising it in April.

Australia considers the Framework to be a positive contribution to the bilateral economic relationship. Together with the Commerce Agreement and the Nara Treaty, it forms a "tripod" that supports, in a formal way, our overall bilateral trade and economic relationship.

As your presence here today demonstrates, both countries are conscious of the need to ensure we don't take each other for granted,……but constantly examine new ways of moving forward together. This is no less true for trade than for other areas of our relationship.

The trade policy environment in our region has changed rapidly in recent years, with a startling array of free trade agreement negotiations under way. And while pursuit of multilateral trade liberalisation through the WTO remains the highest priority, ……both our governments have also taken up the opportunities provided by FTAs to achieve market access gains with trading partners in a shorter time frame than multilateral rounds.

As we meet now, in early 2005, Australia's FTA partners in the Asia Pacific number four - New Zealand, Singapore, Thailand and the United States. We are negotiating an agreement with ASEAN as a whole, ……we are committed to carrying forward an FTA with the United Arab Emirates,……and we are undertaking FTA studies with Malaysia and China.

Japan, too, is building up a network of FTAs, …concluding agreements with Singapore and Mexico, ……reaching a basic agreement with the Philippines, ……and continuing negotiations with Thailand, Malaysia, the ROK and ASEAN as a whole.

This rapidly evolving regional economic integration is a factor both sides should consider in determining next steps for the bilateral trade relationship. With such a long and strong history between us, it would be unfortunate to see our bilateral ties fall behind our ties with others in the region. I hope that as our trade ties with others strengthen, Australia and Japan work correspondingly at our bilateral relationship: ……to liberalise the trade ties between us so we continue to grow and develop, …….to examine other ways in which we could further deepen our cooperation on trade and economic policy, ……..to facilitate greater integration of our economies, reflecting the deep ties we have developed in so many other areas, and ……..to use a closer trade and economic relationship to bolster our strengthening political and strategic ties.

I believe the best way we can do this is to start now to prepare the foundations for an FTA between Australia and Japan.

You might note that an FTA with Australia would more closely integrate Japan with the fourth largest economy in the East Asia / Oceania region - and an economy that has been growing at among the highest rates in the OECD for over a decade. And let's remember that today 80 per cent of Australian exports to Japan enter duty free and 87 per cent have duties less than ten per cent, so an FTA is not unrealistic, and could bring significant economic benefits. I am encouraged by the support that many senior Japanese business people have shown for an FTA.

I know that many of you here today were involved in the previous Australia Japan conferences, ……where the idea of a Trade and Investment Facilitation Agreement was recommended, …….and where the idea of an FTA was subsequently supported. So I am confident that you will have some good discussions on this issue here today……and hope that we can take this idea forward, with an FTA feasibility study as a logical next step.

Conclusion

There can be no doubt about the strength and depth of Australia-Japan relations. The past fifty years have been extraordinarily productive for the bilateral relationship. But we also have a promising future.

We should nurture our bilateral links, by continually coming up with new areas of mutually beneficial collaboration. I have mainly spoken about the trade and economic relationship today.

I am equally conscious, however, of the great work being done on the cultural, education and scientific side of the relationship.

The Australia Japan Foundation, which is co-hosting this conference with the Department of Foreign Affairs and Trade, is introducing hundreds of thousands of Japanese school students to Australia through its education materials. And the Japan Foundation has worked hard over many years to introduce Australians to Japanese culture, …… and I think can be credited to a significant degree with the high level of awareness and interest in Japan among Australians today.

Our political and security relationship is also becoming closer. Foreign Minister Alexander Downer will discuss this aspect of the relationship when he addresses the conference dinner this evening.

Finally I would like to say that over coming years we will have two wonderful opportunities to strengthen our relationship further. The 2005 World Exposition in Aichi Prefecture will be a major event through which Australia will showcase to Japan and the world its abilities across a range of fields. And Australians travelling to the Expo will be able to see the best Japan has to offer.

The 2006 Year of Exchange, which will mark the 30th anniversary of the Nara Treaty, will provide a year-long focus on bilateral exchange. We hope this will result in new and enduring networks between Australia and Japan.

I wish you well in your deliberations…… and I look forward to hearing thoughts and ideas from you to challenge us for the years ahead.

Thank you