The Hon. Warren Truss, MP
The Hon Warren Truss MP
MINISTER FOR TRADE
DEPUTY LEADER OF THE NATIONALS

Speech at the U.S National Center for APEC Annual Luncheon

Thursday, 16 November 2006, Hanoi

APEC: Promises to keep

Introduction

Thank you Nick Reilly [President, GM Asia Pacific, Co-Chair National Center for APEC]

Ladies and Gentlemen:

Twelve years ago, APEC Economic Leaders committed themselves to free and open trade and investment in the Asia Pacific.

That famous declaration in Bogor, Indonesia, was made in a spirit of great hope for the region’s future and it came with a few undertakings that still shape APEC’s trade agenda today.

These included:

So today I would like to speak about these undertakings, or, to borrow from the American poet Robert Frost, the “promises to keep and the miles to go before we sleep.”

APEC’s promise

If there is one big goal driving APEC’s agenda it is the promise of economic prosperity. Asia Pacific economic co-operation is not an end in itself but is aimed at propelling sustained economic growth in the region and in the world.

Every one of APEC’s 21 member economies knows that cutting trade barriers and making it easier to do business helps to realise the promise of prosperity. This is why APEC has been a reliable and influential voice in support of world trade reform. I’ll come back to APEC’s wider role in a moment.

But first I think it’s worth reminding ourselves of APEC’s strengths.

When APEC speaks the world listens. This is because APEC is still the pre-eminent forum representing the world’s most dynamic economic region. These days, there may be numerous economic groupings jostling to have a say in world trade. But APEC’s voice remains distinct.

APEC economies account for 56 per cent of the world’s economic output[1]. APEC is the only forum that brings together the world’s three largest economies—the United States, Japan and China—with some of the world’s fastest growing economies. The growth rate here in Vietnam, for instance, was 8.4 per cent last year.

As Australia’s trade minister, I am happy to say that eight of Australia’s top ten trading partners are APEC economies.

Of course there is little point marvelling at APEC’s strengths without measuring its performance. So it is encouraging to see that by many measures APEC is keeping its promises.

Millions of people in the Asia Pacific are leaving poverty behind. Among APEC’s 2.6 billion population—that’s three and half times the combined US and the European Union population—the share of people in poverty has more than halved since 1988. Men and women are now living longer and more children are finishing school.

Tariff cuts in the APEC region have outpaced those in rest of the world—falling from 16.6 per cent in 1988 to 5.5 per cent in 2004. Investment barriers have fallen. And real incomes per head in APEC have nearly trebled since 1989.

APEC’s advantage

APEC’s track record has been impressive. But APEC members know there is still work to do to extend the promise of prosperity to millions more.

So last year in Busan, Korea, APEC members agreed to an important new Roadmap to guide APEC’s work.

I believe that following through with the entire Busan Roadmap is vital to fulfilling APEC’s promises.

For the sake of being brief today I’d like to focus on some important parts of the Roadmap.

First, is APEC’s support for the multilateral trading system. I believe this is the most effective way to realise the promise of prosperity. 

APEC has been a reliable and influential voice in support of world trade reform. So in that sense, APEC has kept one of its early promises. This valuable high-level advocacy must continue to add to the voices pushing for conclusion of the World Trade Organization’s Doha Round.

Miles to go before we sleep

As I mentioned earlier, we still have miles to go before we sleep. This is because the suspension of WTO Doha talks represents an unfinished journey. In many ways WTO negotiations are a bit like a driving trip. All of us know it has been a long journey along a slow road. Many times we have had to pull over, drink lots of coffee, and talk about the way forward.

I believe it is time to get back on the road. Having come this far only to give up now would waste years of hard work. The end of the journey is well within sight. So with petrol still in the tank we need to get on the road quickly so we can complete the unfinished business of the Doha Round.

I know the APEC business community has also made the point that the Doha Round, like the Rounds that have come before, is a once-in-a-generation opportunity to make progress on trade liberalisation.

If we do not make progress, if we fail to conclude the round in 2007, we stand to lose an already agreed package of reforms. These include elimination of agricultural export subsidies by 2013 and duty free access to developed country markets on products from Least Developed Countries. We also stand to lose faith in the rules-based system that applies equally to all economies big and small.

APEC economies have much to gain from an ambitious outcome to the Doha Round. Many of the gains, especially for developing countries, will come from improved agricultural market access and reductions in farm subsidies. So an agreement on agriculture is the key.

For the Australian Government, the conclusion of the Doha Round remains our top trade priority. I am encouraging the major players to show the leadership we all know they are capable of in order to conclude the Round as soon as possible. The benchmark of the negotiations needs to be the creation of new commercial opportunities for all our exporters.

The United States, the European Union and the big developing countries must match flexibility with political courage.

For progress to be made:

Australia is committed to working with other WTO members, including here at APEC this week in Hanoi. We must do everything we can to secure progress on these issues and resume Doha negotiations as soon as possible.

The second aspect of the Busan Roadmap I’d like to discuss is the promotion of high-quality Regional Trade Agreements and Free Trade Agreements. 

Now, I know that our friends in ABAC have raised concerns about the spread of regional, sub-regional and bilateral trade agreements.

I also appreciate ABAC’s point that there is little uniformity between the various agreements. So you are probably glad to know that the Busan Roadmap includes model measures to improve the quality of trade agreements. That suggests a useful way forward.

But since you have an Australian Trade Minister standing here today you probably want to know about our approach to Free Trade Agreements.

Let me explain: Australia does not negotiate FTAs because they are easy. Rather, we deliberately make things hard for ourselves!

Before we even prepare the jump to an FTA we set a few standards that raise the bar.

For Australia:

Setting these standards may set the bar higher but they make an FTA all the more rewarding once Australia and our trading partner have cleared it.

Over the past three years, Australia has successfully negotiated FTAs with Singapore, Thailand and the United States. We are preparing more FTAs with China, Malaysia and the Gulf Co-operation Council. With New Zealand, we are negotiating an overarching FTA with ASEAN. And we are looking into an FTA with Japan, the Republic of Korea and Chile.

I’d like to offer an example of the merits of our approach using our FTA with the United States, known as AUSFTA. This is a quality agreement and it is comprehensive. It covers everything from agricultural and manufactured goods to financial, investment and business services and more.  It has bolstered Australia’s economic, foreign policy and strategic interests and reinforced Australia’s competitiveness in a key market.

The US is Australia’s single most important economic and strategic partner and our second-largest trading partner in goods and services. AUSFTA represents a long-term commitment to strengthening the trade and investment relationship and advancing the economic integration between two open and sophisticated economies.

AUSFTA has delivered important market access gains for both countries. This will drive economic efficiency. US investors now get preferential access to the Australian market.  US investments of up to $A800 million, and all green-fields investments, are no longer subject to Australian government screening that applies to other foreign investments in Australia of more than $A50 million.

And for Australian companies I have no doubt that competing against US firms will lift standards for both countries. Australian businesses can now compete for access to the A$200 billion US market for federal government procurement. Australian companies have already made a great start; winning around A$95 million in contracts in 2005-06.

I’d like to stress again that everything we do with FTAs is WTO consistent and falls in line with what APEC is doing to make FTAs more coherent.

There’s a third example of APEC’s Busan Roadmap that gets down to some important details: the Busan Business Agenda.

This is one issue where the APEC Business Advisory Council has had a very positive influence. And I’d like to recognise ABACs constructive work again this year in your report to APEC Economic Leaders.

Thanks to the energetic input from APEC’s business community, the Busan Business Agenda calls for further reductions in trade transaction costs by 5 per cent by 2010 and a full business facilitation program.

On so-called “behind the border” issues, APEC members have, for instance, pledged to make new efforts to protect intellectual property, fight corruption and boost investment. Momentum is building from the APEC Leaders Agenda to Implement Structural Reform.

Many of you know how hard it was to discuss some of these issues openly when APEC began in 1989. But they are now a key part of APEC’s agenda because we all know that tackling these complex issues will boost competition, economic growth and prosperity. As trade barriers fall, domestic regulation and structural reform have become more important in driving trade growth in the region.

The progress on these behind the border issues highlights the good habits of co-operation that have developed between APEC members. APEC members are working out ways to resolve complex structural reforms in our neighbourhood. The way we do this is not through the usual give and take of negotiations but through building consensus and co-operation. This is a great example of APEC’s advantage.

We all want to strengthen markets and economies and make our region more resilient against future shocks. This is one area that Australia would like to continue to work on when we host APEC next year. We don’t need to look far for advice. There is a lot of practical experience with reform in our region. And there’s advice, if we want it, from international economic agencies.

Australia’s story

I’d like to finish by telling you a brief story about Australia’s experience with trade and economic reform.

Many economies naturally fear change after opening themselves more to trade and competition. But I can tell you from Australia’s experience that we have had everything to gain from lowering our tariffs and integrating our economy with the region and the world.

We have taken advantage of the destiny of our geography, placed as we are in the world’s most dynamic economic region.  Last year, the economies of North Asia, ASEAN, the US and New Zealand accounted for 65 per cent of our total trade in goods and services.

We cut our tariffs and over 20 years we opened more sectors of our economy to competition. This process was painful. Some jobs were lost but many more jobs were created.

Australia’s economy is now in its fifteenth-straight year of growth. In 2005-06, Australian exporters achieved record sales worth $196 billion.

If we had not opened our markets and if our tariffs remained at their 1988 levels, an Australian consumer would be paying over 30 per cent more for an imported family car. Our Government’s basic message is that trade benefits all Australians.

Both Australia and the US remember our responsibility to assist countries in the region with reform. So we will continue to use our place in the region’s most important economic and trade forums to press the case for reform.

As you know, we host APEC next year and the Australian Government will soon begin outlining our plans to build on the good work achieved during Vietnam’s hosting of APEC this year.

Conclusion

Ladies and Gentlemen:

APEC’s promise of prosperity is more relevant than ever. With World Trade talks suspended there is a serious risk that the benefits of economic growth will apply to only the biggest economies. There is an added risk that some economies could slip back unless reforms are locked in through the WTO.

We still have miles to go before we sleep. That is why APEC’s agenda on trade reform remains so important today. I look forward to continuing to press the case when Australia hosts APEC next year.

Thank you.

[1] International Monetary Fund, World Economic Outlook, September 2006

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