Real Export Dollars at the Cash Register

Introduction
In Hawaii, there's a retail chain called Times Super Market. Its seafood manager, Guy Tomita, has just started stocking Australian fish.

Apparently, Australian snapper is selling well. The chain is working on persuading its shoppers to try barramundi and Moreton Bay bugs, with cooking demonstrations and samples in the aisles.

It's a great export success story for our seafood industry. It shows how our agrifood exporters are looking beyond Australia's traditional bulk markets to sell more of our products at premium prices.

It all depends on infrastructure
Our $1.5 billion in seafood exports is just a small part of our total exports of processed and unprocessed food, which amounted to $23 billion in
2005-06.

Those exports all depend on the ability of our transport system to handle Australia's growing volume of freight traffic.

The Bureau of Transport and Regional Economics has famously predicted that the amount of freight moved around Australia will double in the next two decades.

The Government is responding to the challenge by increasing our investment in transport infrastructure and by improving the way it is planned.

Only this week, we released the first integrated strategy for the Sydney to Melbourne transport corridor, in conjunction with the New South Wales, Victorian and ACT governments.

It is the busiest road link between capital cities in Australia, although rail is becoming increasingly competitive.

You would think that someone in the past would have recognised the value of planning the road and rail connections together, along with the ports and airports at each end. After all, there's not much point having a four-lane highway that ends in a bottleneck at the port gates.

The planning didn't happen, though, until we introduced AusLink in 2004. It now involves $15 billion in transport infrastructure funding.

We also have a transport reform agenda that parallels our infrastructure investment programme. The Council of Australian Governments (COAG) agreed on the reform agenda earlier this year.

The reforms range from pricing road and rail infrastructure more efficiently through to reviewing the state regulation of ports. The agenda will also look at developing a more consistent national system of rail access regulation.

Strong economic management
We have been able to invest more in infrastructure because of our strong economic and financial management. In the last ten years, Australia has gone through a remarkable period of economic expansion that has created 1.9 million new jobs. Real wages have increased by 16.8 per cent.

In the 1980s, respected economists used to argue that it was impossible to reduce Australia's unemployment rate below six or seven per cent, because of the structural rigidities in the economy.

Today, the national unemployment rate is 4.8 per cent. The unemployment rate in Western Australia is 2.7 per cent - effectively full employment.

We've achieved these unemployment outcomes by giving Australians more freedom to negotiate workplace agreements that suit their own needs.

Our new WorkChoices legislation has made it even easier for employers and workers to reach their own agreements. It also makes sure that workers can't be exploited, because all agreements have to meet the new Australian Fair Pay and Conditions Standard.

The Labor Party and the labor movement are opposed to our reforms. Their approach would take us back to the days of 10.9 per cent unemployment and high inflation - and the days when our ports were riddled with union lurks and dodges.

Before the Coalition took office, Australia's major ports were only able to handle 16.9 containers per crane per hour. The labor movement said it was impossible to increase the crane rate any further. They said that we would never achieve our target crane rate of 25 container movements per hour.

Today, the average crane rate is 27.2 containers per hour. It's helping to make our export supply chains more efficient and productive - but we still face the problem of selling our agrifood exports at a fair price.

The world's distorted agriculture markets
Agriculture is the most distorted sector of world trade.

On average, agricultural tariffs are more than three times higher than tariffs on non-agricultural goods. For example, the tariff on some beef products in the EU is 85 per cent. The tariff on rice in Japan is over 700 per cent.

What's more, the prices our exporters receive are depressed by the farm support programmes run by some developed countries, including the United States.

Australia's trade policy approach - the WTO and FTAs
To deal with these problems, the Government is pursuing the most ambitious trade policy agenda in Australia's history.

We are seeking to reform the distortions in the world's agricultural markets through the World Trade Organization. We are also targeting specific markets through bilateral and regional trade agreements.

Despite the recent suspension of the Doha Round, getting a comprehensive outcome through these talks is still our number one trade priority. An ambitious outcome to the Round could increase the value of our major agricultural exports by 15 per cent in 2011, compared to their value if the existing trade barriers continue.

I was deeply disappointed that the negotiations broke down last month over agricultural trade.

The Government is doing everything we can to get discussions started again. For Australia, a good outcome in the WTO is still the best way to deal with the market access barriers and subsidies that distort world trade.

In September, I'll be chairing a meeting of the Cairns Group - 18 farm exporting countries that account for more than a quarter of the world's agricultural trade. It will be 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.

The meeting will be in Cairns, and I hope that the presence of so many ministers in Australia will help us to find a way to re-engage on the 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 on shaping ideas and its political commitment, it remains the most ambitious group in the WTO pushing to reform agriculture.

In addition to our multilateral trade efforts, Australia is also looking for outcomes through bilateral and regional deals. These can often get faster commercial results than the multilateral process.

Free trade agreements can go beyond addressing the traditional market access barriers in goods and services. Through our negotiations, we can address non-tariff barriers like government procurement, competition, intellectual property and investment issues.

We can also tackle trade facilitation issues like standards and technical regulations. Some people have claimed that the growing number of FTAs around the world are distracting attention from the need to reach a multilateral agreement. I don't agree. There is a strong argument that high quality FTAs can play a useful role in driving multilateral trade reforms. It's called competitive liberalisation.

For example, Andy Stoler pointed out in the Financial Review recently that the first APEC summit and the North American Free Trade Agreement galvanised the negotiators of the Uruguay Round and helped bring it to a successful conclusion in 1993.

Gains from our existing FTAs
Australia has successfully negotiated FTAs with Singapore, the United States, and Thailand. And of course we have our closer economic relationship (CER) with New Zealand.

The US free trade agreement saw two-thirds of America's tariffs on agricultural products immediately reduced to zero.

We saw lamb exports to the US increase by 19 per cent in 2005. Our dairy exports are continuing to expand, with cheese exports increasing by 103 per cent.

The FTA has also boosted our services exports to the United States. One successful exporter is Vigil Systems, a Brisbane based technology company. The Los Angeles metro is now using its intelligent transport system product to recruit, train, monitor, and manage its professional drivers and vehicle monitors.

The US FTA has also allowed us to integrate more closely with the American financial services sector, and a new visa category, which is just for Australia, enables our qualified professionals to live and work in the United States.

Since we negotiated our FTA with Thailand, we've seen benefits across the board. Most of the tariffs faced by our fruit and vegetable exporters will be phased down to zero over the next four years.

The tariffs on our key steel and copper products were eliminated or halved immediately.

These gains have been reflected in the trade figures. Last year, our exports to Thailand increased by 35 per cent.

Australia's current FTA negotiations
We are currently negotiating FTAs with Malaysia, the ASEAN countries - with New Zealand - and of course with China.

Negotiations with China began more than a year ago. Since Premier Wen Jiabao's visit to Australia in April, we have seen greater engagement by the Chinese.

There will always be critics of trade negotiations from those with vested interests to protect.  In Australia, we tend to think anti-trade vested interests are overseas like the farmers in Europe. But there are some here as well.

Australian farmers tell me all the time about the dislocation caused by industry reform - but they also know that it has made them stronger and better able to compete in the huge international market place.  They have done the hard yards, become the most efficient in the world, and profited as a result.

Judging from recent media commentary, some parts of Australia's manufacturing industry are worried they will be sold out in an FTA.  We will need a negotiating position that encourages China to come forward with a credible market access offer in agriculture, services and manufacturing, yet keeps the integrity of our manufacturing industry programs intact.  The Government will not be agreeing to any commitments or accepting any benefits until the whole deal is finalised.  We won't be telegraphing our position through the media to our negotiating partners.

China's rapid development is one of the most important events of our times.  It is forcing the world to face significant challenges.  In Australia, we are seeing the benefits in the resources sector but we also want to make the most of the opportunities for service providers, farmers and others.

With or without an FTA we will face the challenges of China's boom:

• China is already the world's 2nd largest economy in purchasing power parity and 3rd largest trading nation after the United States and Germany.

• Economic growth in China has averaged 9 and a half per cent over the past two decades and has been the single largest contributor to global growth over the past five years.

• In 2005 China alone accounted for around one quarter of world economic growth.  And the Chinese economy looks set to develop at a rapid pace in the immediate future, having grown at 10.3 per cent in the first quarter of 2006 [year on year]. 

• China now consumes 25 per cent of the world's base metals, and well over 30 per cent of iron ore and coal supplies. 

• 2 billion square metres of building space is constructed in China every year - an amount equivalent to the total in all of Canada. 

• Last year, Chinese enterprises produced 50 per cent of the world's digital cameras, 37 per cent of its computer hard drives and around 25 per cent of its major kitchen appliances.

• ABARE forecasts China's share of world trade will rise to a massive 16 per cent by 2015, up from just 1 per cent in 1988 and 6 per cent in 2004. 

With an FTA we get the chance to make the most of these opportunities.  It's as simple as that.

We are also conducting a feasibility study for an FTA with Japan, looking at closer economic relations with Mexico and considering entering into FTA negotiations with the Gulf Cooperation Council (GCC). Earlier this year, we also signed a Trade and Economic Framework with India.

Supporting our exporters through Austrade
The Government is not only expanding market access for Australian businesses. Through Austrade, we are identifying specific export opportunities and are helping companies win deals.

Austrade has a global network covering more than 140 locations in over 60 countries as well as throughout Australia. Preliminary figures show it helped over 5,000 companies achieve export deals worth over $18 billion in the last 12 months.

To take advantage of opportunities in China, we have expanded our China network with four new regional offices, giving us a presence in 15 locations and what we call trade correspondents in 12 more places. In total, we now have 100 staff in China. In 2005-06 - according to preliminary figures - Austrade helped over 650 Australian businesses conclude deals in China, including over 200 new exporters.

To take advantage of the FTA with the United States, we have appointed 30 new Austrade export facilitators - 23 in the US and 7 in Australia.  We're now represented in 18 American cities - including Honolulu.

Our office there had a crucial role in getting our seafood into Guy Tomita's supermarket chain.

Austrade organised a visit to Australia by Times Super Market in May 2006. The first shipment of seafood was overseen by the Austrade district manager, Mark Berwick.

Austrade sponsored a major Australian gourmet food and beverage event in Honolulu, called From the Vineyard to the Sea -- Down Under. Some of Hawaii's best chefs prepared Australian seafood dishes for a thousand guests.

Guy Tomita's cooking demonstrations are a world away from the details of high level trade negotiations. However, his retail sales are the crucial last link in the long chain of transactions that lead back to a fishing boat off the Australian coast.

The Government will continue working to secure better market access for our exporters. We must continue our domestic reform agenda to maintain the competitiveness of the Australian economy. This is a core responsibility of the Australian and state governments.