The Biennial Sir Alan Westerman Lecture in Australian Trade Policy

Sir Alan Westerman and his times

Ladies and gentlemen, I want to take you back to 1955.

Alan Westerman and his opposite number, Ushiba Nobuhiko, had just started negotiations on the Australia-Japan commerce agreement.

Ushiba sat on his side of the table and read his briefing folder for a lengthy ten minute intervention.

Finally, Westerman said, 'Mr Ushiba, you are wasting our time.'

As you would expect, Ushiba was worried. He may have thought the negotiations were about to collapse. He said, very cautiously, 'What do you mean, wasting our time?'

Westerman replied, 'You have gone through ten pages of arguments about what discriminations we should remove against Japan. What you are saying is that we shouldn't discriminate so much against you.

'So I say you are wasting our time. I am not a clever British negotiator or a polished French negotiator, I am just a simple farm boy and I am telling you that Australia will remove all discrimination. Now let's get on to what you will do, and then let us go and have a game of golf.'

Ushiba didn't just end up with a commerce agreement. He later confessed that he ended up with a much better golf handicap, as well.

Alan Westerman went on to become the chairman of the Commonwealth Tariff Board and the secretary of the Department of Trade and Industry. He was knighted in 1963.

We honour him tonight, as a man who helped shape Australia's approach to the major trade policy challenges of his time.

Sir Alan was a highly effective negotiator, who had a close relationship with two other key figures in Australian trade policy: Sir John McEwen, the Minister for Trade and Industry, and Sir John Crawford, who was the head of his department in the 1950s.

Their partnership was critical in the negotiation of the Australia-Japan treaty, because they knew that McEwen was alone in supporting it.

Australian manufacturers were concerned about competition from what they called 'slave labour.' The labour movement was unanimously against it, and Australians still had fresh memories of the war.

Later in life, McEwen remembered:

At all times, I was careful to describe the treaty as 'my policy', not the government's policy. My friends knew that I was making sure that if I were to fall on this, the government would not have to fall with me. In other words, I was willing to carry the principal responsibility for the treaty on my own. As I remember, no-one else was keen to share the burden of carrying it.

The negotiation of the treaty was Westerman's finest moment. Australia and Japan have both reaped enormous benefits from it, and Japan continues to be our most important export market.

Australia's trade policy today

Today, the Australian Government continues to take inspiration from the open approach that McEwen and Westerman took to these negotiations.

It was an unusual position for McEwen and Westerman to take. They are best known for arguing in favour of tariffs, in a world economy that was far less open than it is today.

The problem with tariffs is that they are fundamentally unfair. They are a transfer from consumers to industries that are often rich and well-connected, because they are the ones who can persuade governments to maintain their tariffs.

Reducing trade barriers makes businesses more productive. Consumers have more choice; they can buy higher quality and more affordable products.

Australia's economic reforms show that there is nothing to fear, and everything to gain, from opening up to the world.

A good example is motor vehicles. Australia's car industry has been transformed from one of the most protected sectors of the economy in the 1950s, to one of our most competitive and successful industries today.

Australia's automotive exports have not shrunk as a result of the cuts to the industry's protection - they have grown dramatically, at more than 10 per cent per year. Our automotive exports are now worth over A$5 billion a year, making them our number one manufactured export in value terms.

If Australia's tariffs were still at their 1988 level, we would be exporting less and car buyers would be worse off. Australians would be paying 30 per cent more for a family car and would have less choice.

Australia's exports as a whole are now at a record high - $176.7 billion in 2005. Twelve of our top twenty goods and services exports reached record levels, including coal, iron ore, natural gas and wine.

Australia's trade policy settings

Our open approach to trade has worked for Australia. We believe it will work for the world. That is why our commitment to the Doha Round is as strong as ever, despite the current suspension of the negotiations.

Freeing up trade through the World Trade Organization remains our highest trade priority.

The WTO is the best forum for reforming the key distortions to trade - particularly in agriculture.

Primary producers in developed countries receive about US$280 billion a year in government support.

An ambitious outcome to the Round would increase Australia's major agricultural exports by 15 per cent and increase the income of Australia's farmers by 8 per cent.

It would lift 32 million people in the developing world out of poverty.

It would benefit consumers in the world's rich, protectionist countries because they would be able to buy cheaper food. They would also pay less tax.

The WTO has recovered from worse setbacks than the current suspension of the Round.

The Seattle meeting in 1999 was a catastrophe. After Cancun, the Round drifted hopelessly, but we regrouped, removed serious impediments to the negotiations and moved on.

Today, the gaps between the major players are not that great. All of the major players have said they are flexible. Moreover, at these times in a negotiation the advantages of a big multilateral round become obvious. An ambitious outcome to the Round would deliver results for everyone.

For Australia, it would have to deliver commercially valuable market access opportunities in agriculture, industrial products and in services.

We should all recognise the tremendous amount of work that has been done to develop and define all the issues at stake. The numbers and choices are now clear. We all know where we need to get to.

In my mind, the question of whether we will or not is one of timing and politics. My ministerial colleagues at the negotiating table are exercising their judgement on the timing, and I urge them to redouble their efforts to shape the politics.

There is a lot already on the table. All of the progress so far is subject to the rule that 'nothing is agreed until everything is agreed' - the principle of the single undertaking. Nonetheless, we have realised Australia's long-standing objective of outlawing the use of agricultural export subsidies.

We have commitments to improve the lot of poor African cotton exporters, and we have commitments to make up to 97 per cent of trade for least developed countries duty and quota free.

Although the latest offers still need to be improved, we have the potential to deliver substantial reductions to agricultural tariffs and farm subsidies, as well as real progress on a wide range of other issues.

It is because so much has been achieved in the negotiations to date that I certainly hope no-one will want to throw this opportunity away.

Today I call on my fellow WTO members, especially those who have worked with me in the G6 forum - the European Union, the United States, Japan, Brazil and India - to show the political will needed to ensure the Doha negotiations are revived.

My sense is that the G6 has a key role to play in bringing the Round to a conclusion and should meet soon to explore the political basis for serious re-engagement.

The Cairns Group ministerial meeting in September is an important early opportunity to reaffirm our determination to complete the Doha Round and to discuss how to revive the negotiations.

Along with the Cairns Group ministers, the head of the WTO, Pascal Lamy, and ministers from the United States have indicated they will attend.

I hope that the presence of so many ministers in Australia will help us to find a way to re-engage on these negotiations.

The Cairns Group is itself a remarkable achievement for Australia's trade diplomacy. This meeting will celebrate the 20th anniversary of the group's founding during the Uruguay Round.

The group has succeeded in putting agriculture at the centre of the trade agenda and keeping it there. Through its technical work in shaping ideas and its political commitment, it remains the most ambitious group in the WTO pushing to reform agriculture.

If we can resume the Doha negotiations and bring the Round to a conclusion, we will make a major contribution to achieving sustainable growth and prosperity in the world.

We will strengthen a multilateral system where disputes are resolved through rules and discussion rather than on the basis of economic power.

Australia's free trade agreements

Meanwhile, Australia will continue to negotiate bilateral and regional free trade agreements that complement the multilateral system, although FTAs cannot deal with the impact of producer subsidies on world markets.

FTAs can often reduce barriers faster than multilateral negotiations. They can also cover important areas beyond the WTO, such as investment, competition policy and regulatory issues.

Today, we face a challenge that is comparable to Westerman's negotiations with Japan; that is, our potential free trade agreement with China.

The Australia-China FTA is an historic opportunity to set the terms of a more diversified trade relationship with China, which is now Australia's second-largest export market.

Our resource exports to China grew by 89 per cent in 2005, with a 129 per cent increase in iron ore exports and a 235 per cent increase in copper ore exports. China is now Australia's third largest agricultural export market and our fourth largest market for manufactured products

The FTA negotiations offer the potential to secure substantial tariff reductions on Australian exports to China. China's tariffs on agricultural products average 15.3 per cent, and a number of our major agricultural exports face tariff rate quotas. China's tariffs on our manufactured goods can be as high as 45 per cent.

The FTA will need to be about more than removing border protection. It will need to promote deep integration by addressing regulatory and other border measures, as well as security of supply.

It will need to be comprehensive, and will need to be completed as a single undertaking.

It will need to be a living agreement that is able to accommodate the significant changes likely to occur in both economies during the next decade and beyond.

An FTA that meets these requirements will create new opportunities for Australian exporters - and consolidate our existing, strong position in the Chinese market.

Beyond China, we are now negotiating FTAs with Malaysia and ASEAN, arguing for FTAs with Japan and Korea, and considering an FTA with the Gulf Cooperation Council. Our agenda reflects the priority we attach to integrating our economy with Asia.

Australia's regional agenda

Beyond our bilateral agenda, we are also pursuing economic integration through the Asia-Pacific Economic Cooperation forum (APEC), which Australia will host next year.

APEC is the region's premier forum for pursuing economic integration. Since well before globalisation became a buzzword, APEC has been pursuing the goals of trade and investment liberalisation, business facilitation and economic and technical cooperation.

The other major regional development of recent times is the East Asia Summit (EAS). Many ideas are now beginning to emerge about how to develop the EAS. The most interesting proposal to date is the idea of an EAS free trade agreement, to cover the sixteen participants in the summit - ASEAN, plus China, Japan and Korea, plus India, Australia and New Zealand.

We will need to think carefully about this proposal and will want to ensure that the focus remains on approaches that are comprehensive and that genuinely free up trade.

Conclusion

Ladies and gentlemen, I am disappointed with the most recent setback to the Doha Round.

But I have not given up hope that we can achieve an outcome to the Round in a reasonable timeframe. We are very close to a breakthrough. Australia and the Cairns Group will continue to press for a deal that opens markets for our farmers. In doing so, we will advance the Doha development agenda and make life better in the developing world.

We will also argue vigorously against a slide back to protectionism. Australia's successful economy shows that economic reform and lowering trade barriers is the key to a richer and more hopeful future.

In conclusion, I ask you to reflect on Alan Westerman's approach to the Australia-Japan commerce agreement - his inspired moment as a free trader. He didn't fight about the restrictions that Australia could remove. He didn't seek extra protection for sensitive tariff lines or demand matching Japanese concessions.

He recognised the economic truth that removing Australia's trade restrictions with Japan would benefit both countries - and benefit Australia the most.

It worked for Australia.

It worked for Japan.

Today, an ambitious approach to freeing up world trade would work for the whole global community.

Thank you.