National Press Club, Canberra, Wednesday 13 April 2005

Trade – Securing Our Future

INTRODUCTION

Excellencies, members of the National Press Club, Members of my trade policy advisory council, distinguished guests, ladies and gentlemen,

I’m pleased to be here to present my 6^th Statement.

As Minister for Trade I have focussed on one key objective:

Creating trade opportunities to secure prosperity for Australia!

Hence the theme of this years Trade Statement “Trade – Securing Our Future”.

In my sixth year as Trade Minister, I recently reflected on my first Trade Statement back in 2000.

In it I said “we must work hard and creatively to increase market access for our exporters” and I detailed our new policy of maintaining the World Trade Organization  as our number one priority while exploring the feasibility of free trade agreements.

When I made those comments in April of 2000, I was fresh from the fiery introduction into international trade diplomacy provided by the Seattle WTO Ministerial Meeting ….Battle in Seattle

an experience which strengthened my determination to fight for a fairer go for Australian exporters through all available means.

A determination which is undiminished.

We have tirelessly and creatively pursued solutions and policy innovations.

We have continued to takea leadership role in the Doha Round in the WTO.

While achieving bilateral trade liberalisation through comprehensive free trade agreements (FTAs)

Our trade policy initiatives have also been matched in our trade advocacy and export promotion work .

REFLECTING ON 2004

Ladies and gentlemen,

In terms of Australia’s trade performance in 2004 I have been particularly pleased with the turnaround in exports which reached $152.5 billion, one of the highest levels on record.

• Rural exports rebounded by 20 per cent to $27 billion as agricultural production improved. I note however that the drought continues in many regions of Australia.
• Resources exports grew by 13 percent to $39.6 billion – the second highest level on record.
• Our service industries continued to perform well

Notwithstanding our excellent export performance, a robust domestic economy has underpinned an 8 per cent growth in imports.

In the last twelve months our petroleum trade deficit has more than doubled and is currently sitting at $A5.3 billion.

This highlights the need for Australia to seriously consider alternative and sustainable energy sources such as ethanol.

Ladies and Gentlemen,

In 2004 Australia played a major role in getting the Doha Round back on track – with an Agricultural Framework Package agreed in July.

As part of this we were able to secure an historic commitment from the big subsidisers, Europe and the United States to abolish agricultural export subsidies.

This could be worth $600 million a year to Australian dairy farmers alone.

On the bilateral front - 

The official signing of the Australia-United States Free Trade Agreement in May last year has presented a unique opportunity for Australia’s exporters to expand into the most dynamic economy in the developed world.

The historic agreement, which took affect from the first of January 2005 provides much improved access to the world’s largest market which will potentially generate $6 billion per annum for our economy and create 30,000 jobs for Australian workers while bringing benefits to many sectors.

Our comprehensive FTA with Thailand is also creating jobs and business opportunities, immediately removing over half of Thailand’s 5000 tariffs, with 95 per cent of all current trade between Australia and Thailand to be completely tariff-free by 2010.

In addition:

• We are conducting negotiations with the ten ASEAN members and New Zealand on a comprehensive FTA to be fully implemented within a decade.
• We are undertaking FTA negotiations with the United Arab Emirates to advance an already strongly growing trade and economic relationship. This will serve as a valuable gateway to the wider Middle Eastern region.
• We are about to embark on FTA negotiations with Malaysia – our ninth-largest trading partner. Australia’s economy is expected to reap $1.9 billion from a free trade agreement with Malaysia.

THE POLICY FRAMEWORK

Ladies and Gentlemen,

Australian jobs, economic growth and living standards are all closely linked to trade.

A successful trade agenda is a crucial means by which we help secure prosperity for Australia …

with trade helping to drive creativity, productivity and economic growth …

One in five Australian jobs are directly or indirectly connected to exports, this is even higher in regional Australia where around one quarter of jobs are export related.

In fact, one of my early initiatives as Minister was to engage my Department to study the importance of trade for regional Australia.

The report found that over half of Australia’s exports come from regional Australia and that this accounts for more than a quarter of all their income.

More recently, research by the Australian Farm Institute confirmed this important relationship, finding that farming supports about 12 per cent of Australia’s Gross domestic Product and provides 1.6 million jobs.

Ladies and Gentlemen,

To make the most of opportunities in the global market, exporters need a strong domestic economy.

Our government has taken a number of hard decisions that have benefited our exporters.

Let’s not forget that our tax reform package and the introduction of the GST we removed $3.5 billion worth of tax burden off the back of our exports.

A move incidentally, that was opposed by Labor every inch of the way.

We want to see even more reform that will pave the way for additional employment and productivity improvements and we will get that opportunity in July of this year.

It is worth remembering that not only has the Coalition Government helped to create 1.5 million jobs since it came to office but real wages in that time have risen by 14.1 per cent.

Compare this to Labor. Their thirteen years of office saw real wages rise by only 1.2 per cent.

Interest rates were also significantly higher under Labor and we have kept the budget in surplus thus keeping downward pressure on interest rates.

For 16 consecutive quarters we have seen positive growth – with annual GDP growth averaging 3.7 per cent over the last decade.

Inflation of less than 3 per cent and the broader economic climate has helped create over a quarter of a million new jobs in 2004 alone – reducing unemployment to its lowest level in 28 years.

This sound economic management since 1996 has seen total exports rise by over $50 billion.

Export growth has continued in 2005 with recent trade figures showing a 14 per cent increase in exports over the 12 months to February this year.

I am confident that Australia will achieve its highest export figure on record this financial year.

This despite exports being tempered by capacity constraints in the resources sector.

Australia is in the middle of one of the biggest resource booms in the last 100 years, yet bottlenecks are restricting our export potential.

The States need to act now on what is fast becoming a national embarrassment.

Getting the demand and supply equation just right is absolutely critical and is one of the key reform challenges of the next decade.

THE YEAR AHEAD - 2005

Ladies and Gentlemen,

We have delivered significant export opportunities – with more to come – as part of a comprehensive trade agenda.

This begins with the World Trade Organization.

We are more determined than ever to continue our fight for global trade liberalisation so that we can open the world’s doors for Australia’s exporters.

So let the collective WTO membership be on notice.

2005 is the time to demonstrate commitment to genuine and ambitious reform of the global trading system.

It is only the WTO that can bring 148 countries together to the negotiating table.

It is only the WTO dispute settlement system that will allow Australia to continue to fight unfair and illegal international trading practices.

Therefore an ambitious outcome to the current round of global trade talks remains our number one priority.

Indeed we are pressing hard with fellow Cairns Group members, a coalition of agricultural fair traders who represent nearly 25 per cent of the world’s farm production, to tackle the blockers on agriculture – and we are making progress.

At the Cairns Group meeting I recently chaired in Colombia we effectively marked a line in the sand in relation to agricultural trade liberalisation.

We reinforced our view that export subsidies must be phased out over three years once we reach agreement and the Doha Round is finalised.

We agreed that market access must be significantly improved to provide new trade opportunities for all products

And that the major agricultural subsidisers must reduce their current levels of domestic support as quickly as possible.

Those that will benefit most from a successful outcome will be developing countries, potentially lifting 140 million people out of poverty by 2015.

There is still much to do before the Hong Kong Ministerial meeting in December. Australia remains heavily engaged and we are committed to achieving a successful outcome not just in agriculture but across the board.

And we have shown that progress is possible when key players are willing and engaged.

In fact, I welcome comments today by the current British Government that they will seek to take a more active role in the phasing out of agricultural subsidies and increase the pressure for reform on their EU colleagues.

Ladies and Gentlemen,

Because we know the multilateral process is time consuming and consensus driven, we have also focused our efforts on opening markets for our exporters by pursuing comprehensive Free Trade Agreements.

And for as long as we continue to achieve commercially valuable results quicker than through the WTO, I will continue to pursue this policy.

It is in Australia’s national interest and I will not be distracted from that course.

We made this commitment to the Australian people during the 2004 election campaign where we undertook to strategically pursue free trade agreements  with China, ASEAN, Malaysia and the United Arab Emirates.

But comprehensive FTAs are not just about gaining new and better access, they are about consolidating Australia’s position in our major markets.

If we don’t take up these opportunities our major competitors will take our place.

For example,

• China is engaged in FTA negotiations with ten other countries.
• The United States has completed eleven FTAs.
• Japan is negotiating with ASEAN and four other countries in the region.
• And ASEAN itself is negotiating FTAs with China and India as well as with us.

In its 13 years in office the Labor Party did not have the courage or foresight to embark on a single free trade agreement negotiation – not one!

Make no mistake! The global trading environment has never been more dynamic and challenging but we are answering that challenge.

Australia’s future prosperity depends on it!

One of the most significant challenges is Australia’s trading relationship with China.

Let me make some observations and provide some context relating to Australia’s current and future relationship with China. 

Ladies and Gentlemen,

China’s emergence as a global industrial power is one of the most significant developments of the past 25 years.

Last year China’s GDP grew by a staggering 9.5 per cent and is expected to average 7 to 8 per cent growth per annum over coming years.

China’s share of world trade has risen from 1 per cent in 1988 to 6 per cent in 2004.

 ABARE forecasts China’s share of world trade will rise to a massive   16 per cent by 2015.

From Australia’s perspective trade with China has quadrupled over the last decade

Our exports to China grew a staggering 21 per cent in 2004 to almost $11 billion.

Clearly the stand out performer in our exports to China in 2004 was the resources sector with a massive 41 per cent increase in iron ore exports rising to $2.45 billion in just 12 months.

Indeed, China overtook Japan as our largest iron ore market last year in its quest to fuel and sustain its economic development.

Recently there has been a lot of media commentary about China’s concern over high iron ore prices.

I discussed this issue with China's Commerce Minister, Bo Xilai, and the Chairman of China's National Development and Reform Commission, Mr Ma Kai, earlier this month in Beijing

My message to them was this…

The price of iron ore is determined by global market forces over which the Australian Government has no influence.

Let’s remember that for two decades, Australian iron ore suppliers have delivered Chinese companies a price that is significantly below the global benchmark.

Ladies and Gentlemen,

The China FTA Feasibility Study was completed, as agreed, by the end of March.

Cabinet has now considered the Study, including whether to treat China as an equal trading partner. 

As you know, the Prime Minister will visit Beijing to meet Premier Wen Jiabao and President Hu Jintao next week.

While the Australian Government is strongly committed to developing a deeper economic partnership with China, there are some who believe that the challenge is just too hard.

So do we walk away from the table or do we take up the challenge and in doing so accept the risks.

But I believe fortune favours the brave. 

My view is that no matter how significant the challenges are we must pursue this opportunity to consolidate and improve our position in the Chinese market.

Engaging more closely with China will enable Australia to set the terms for future trade and tackle some of the current trade impediments, like the numerous “behind the border” issues that act as serious barriers to our exporters and service providers.

After reviewing the feasibility study and having travelled to China regularly over the past six years gaining a greater understanding of their potential, I believe the time is right to move into FTA negotiations with China.

Australia must be at the front of the queue.

But a word of warning, any negotiation with China will be both difficult and challenging.

Regardless of the outcome of any negotiation our robust and healthy relationship will continue to grow.

Ladies and Gentleman

Moving to Australia’s largest export market - Japan.

At the recent Australia-Japan Conference, we proposed that Australia and Japan undertake an FTA feasibility study, as a next step in strengthening our trade and economic relationship. 

I am pleased that the idea of continuing to examine what might be possible appears to be growing in business circles in Japan.

Australia’s strong economic relationship with Japan is highlighted by the large number of businesses showcasing their product at the Australian Pavilion at the Aichi World Expo which I will be visiting next week.

And the Prime Minister will also discuss the bilateral economic relationship, including the next steps in advancing the idea of an FTA Feasibility Study, when he meets Japanese Prime Minister Koizumi in Japan next week. 

Ladies and Gentlemen,

The Australian Government is committed to ensuring trade policy wins become trade dollars

As I said earlier, I am all about securing the future for all Australians.

It is about how we can provide an environment conducive to Australian businesses  – the corporations, the investors and the exporters – who are competing in the international market place.

We have worked hard to ensure Austrade – the Australian Trade Commission – remains relevant and responsive to the needs of Australian exporters.

With the global reach provided by professional and experienced staff, including representatives in capital cities and regional Australia and more than 100 offices around the world, Austrade is well equipped to assist Australian businesses.

During the election campaign we undertook to build on this solid foundation by announcing a number of new initiatives.

These included:

• Engaging 30 new export facilitators to maximise Australia’s export opportunities in the United States.
• Investing an additional $30 million over three years to the already $150 million Export Market Development Grant scheme.
• The creation of 8 Export Hubs in regional Australia.
• And establishment of an FTA Advisory Panel to develop new ideas and identify market opportunities created through Australia’s free trade agreements

Good progress has already been made in implementing all of these initiatives.

CONCLUSION

Ladies and gentlemen in conclusion

Continuing strong global economic growth of around 3 per cent will enhance our export performance in 2005.

China, ASEAN and the United States in particular are set to remain as key drivers of the world economy.

Our key resource exports are forecast to increase by 22% as new projects come on stream.

Our services exports, education and tourism in particular, remain on track to reach record highs in 2005.

I’m confident that we are very well positioned to see these forecasts come to fruition in 2005.

But the global market is a rapidly moving and competitive place, which does not tolerate complacency.

We have not embarked on our ambitious trade agenda for its own sake …

but because of the outcomes that trade liberalisation will bring to Australia.

Delivering real benefits to farmers, businesses, and working families…

and helping secure prosperity for urban and regional Australia.

Trade is also about utilising our strengths of today while developing our industries of tomorrow.

It is about turning trade policy wins into real gains for business.

It is about securing our future – the future of Australia and all Australians.

Thank you.