Speech to The Conservative Breakfast Club
Australia’s successful trade policy
13 August 2007, Brisbane
Introduction
Good morning Ladies and Gentlemen.
Let me say how pleased I am to be here to address the Conservative Breakfast Club in Brisbane. I follow in the steps of a distinguished line of speakers from the Government who have spoken at this forum about the major issues facing Australia.
Today, I’d like to speak about why trade matters to Australia’s prosperity. It’s an important subject for all Australians.
I know that as a policy issue, trade rarely makes the front pages and very rarely does the good news about our exports to China, for example, be a topic for breakfast television or turn into a political advertisement on YouTube!
Nevertheless, trade is a vital part of the Australian economy. Some governments tried to control the commanding heights of an economy through high taxes, heavy regulation and price controls. Others built high tariff walls to protect industry. These ideas are an empty cupboard and the results in practice were woeful.
For example, in former communist East Germany, people had to wait years between placing an order for a car and receiving it. And the kind of car they’d eventually get was most likely the Trabant, a two-door, two-cylinder car that produced smoky, polluted exhaust and clocked zero to 100 in 21 seconds.
Today, we have the stark contrast between the open, market-based economy of South Korea and the single party, command economy of North Korea, which is failing to even feed its population.
My point is: we can only secure prosperity by promoting open markets and fighting closed economy ideas like protectionism.
This ambition underpins the Coalition’s successful trade policy.
This success is highlighted in three dimensions I want to discuss this morning: our record trade performance shows we’re delivering prosperity; we’re seeking new opportunities with trading partners; and we’re arguing the case for the benefits of trade and economic reform.
Record trade performance
Last week, we received some new data about Australia’s trade performance during the 2006-07 financial year. Let me say, it was a very positive result. Our exports topped around $216 billion - that’s a new record. To put this figure another way, that’s income to Australia worth 10 times our defence force spending and four-and-a-half times our total health spending.[1]
Besides rural exports held back by the ongoing effects of the worst drought in our recent memory, the figures show that exports of manufactures were up. Exports of resources were up and exports of services were up, and all are at record highs.
Unanticipated strong demand for commodities, however, has seen some sectors, particularly coal, experience difficulties in expanding production and supply chain infrastructure to meet demand. The response has been heavy investment in new capacity. Industry has invested $55 billion in the resources sector over five years.
Last year, Queensland exported an extraordinary $14 billion worth of coal, which is more than half the national total. So you can see how much we rely upon the industry. Its importance to the nation cannot be understated. We will rely upon coal for decades if not centuries to come.
It is also important to understand how critical our coal is to those export markets. Countries like China need our cleaner coal to continue making economic progress, which is so important to our own economy.
The Australian Government knows how important the coal industry is and continues to support it. We are investing $15 billion in infrastructure in AusLink and a further $22.3 billion through Auslink II. The Government-owned Australian Rail and Track Corporation (ARTC) is investing in railways to coal ports.
Coal is part of the backbone of our economy and we don’t want to break it.
What’s remarkable about these export successes in areas like caol is that we achieved this strong performance even though our dollar has risen dramatically during the year.
Now, there are a few factors behind this strong export performance.
One is that the economies of our developed world markets in Japan, the United States and the European Union, which continue to account for the largest share of our exports, have been growing and are expected to grow at a healthy rate.
Another is that Australia is well positioned to respond to Asia’s remarkable economic growth and we’re out there selling Australia aggressively. In the past year, my overseas visits have included China, India and several countries in the South East Asia and the Gulf region. I have taken Australian business delegations with me on many of these visits. When you see what’s happening in these places, especially in the fast-growing economies of China and India, it’s easy to see why there is so much optimism about their growth and the growth of our exports. These economies need the things we produce.
That’s why our merchandise exports to China were up 26 per cent in 2006-07 and our exports to India were up 37 per cent. India is now our fourth-largest merchandise market; and it’s our fastest-growing major export market.
A third factor behind our strong trade performance comes from the fact that we have built an internationally-competitive domestic economy through a series of major economic reforms.
The Coalition’s trade policy and our prudent economic management have created the right climate for Australian exporters to make the most of rapidly-growing opportunities in the global economy. Their outlook is positive; nearly seven out of 10 Australian exporters expect their orders to increase in the year ahead.[2]
Seeking new opportunities
This brings me to the second point to support my argument that we have a successful trade policy. A key element of our trade policy involves seeking new opportunities with our trading partners. While our exporters can be market ready and while we can produce the kinds of goods that the rest of the world needs, these are little benefit if our trading partners impose barriers on our goods and services.
That is why we are pressing hard for an ambitious, liberalising outcome in the Doha Round of World Trade Organization talks and it is why we have a very active Free Trade Agreement agenda.
Let me talk first about our FTAs.
Australia was among the first countries in the world to use bilateral trade agreements to free-up trade in an ambitious way. We started with New Zealand back in 1983. That was a model agreement. We have gone on to conclude FTAs with the United States, Singapore and Thailand.
Just this week, officials in my Department are holding FTA talks with Japan and Chile. Last week, it was with the Gulf Cooperation Council and with ASEAN, alongside New Zealand. Of course, we are negotiating with China and Malaysia too.
Work has started on a joint non-government FTA study with the Republic of Korea. There will be a joint feasibility study into the merits of an FTA between Australia and Indonesia. That study should be completed by the middle of next year.
So to take stock of our FTA agenda, we have four FTAs concluded; six with negotiations underway and two others where we are scoping the possibilities. The FTAs we have concluded, and those that we are pursuing, cover more than 60 per cent of Australia’s total trade and seven of our top 10 export markets.
The case for pursuing FTAs rests on a few key principles.
Our FTAs promote stronger trade and commercial ties between us and our trading partners. They also open up opportunities for Australian exporters and investors to expand their business into key markets.
FTAs can speed-up trade liberalisation by delivering gains faster than through multilateral or regional processes. It’s certainly my view and that of the Australian Government’s that FTAs that are comprehensive in their scope and coverage can complement and add momentum to our wider multilateral trade objectives.
Our bottom line in trade talks at the World Trade Organization is to create real commercial opportunities for Australian agriculture, industrials and services exporters. That’s what we want from the Doha Round. It is useless to get impressive headline reductions in trade barriers if they offer nothing in terms of creating real opportunities for our exporters.
At the moment, the Round is finely balanced. The process is now focused in Geneva where the Chairs of the negotiating groups on Agriculture and Non-Agricultural Market Access or NAMA released draft negotiating texts last month.
Australia does not agree with everything in these texts but we do welcome them as an important step toward moving the Round forward. Indeed, they capture much of the progress made this year, including ideas put forward by Australia and the Cairns Group of agriculture exporting nations which I chair.
WTO Members will look at the texts in more detail later this month before intensive negotiations pick up again in early September.
This is complicated work; one of the reasons it is difficult is the sheer effort involved in getting a consensus among the 151 WTO Members, many of which are at different stages of economic development and each Member has different priorities and different sensitivities.
We’re pressing ahead, nevertheless, because an outcome is so important. A successful, ambitious outcome in the Doha Round is the equivalent of negotiating an FTA with the entire world in a single undertaking.
In today’s interdependent world, exports and jobs in one economy depend on the success of many other economies.
Australia may be an island in the eyes of a geographer but as part of the world economy, we are borderless. By opening our borders to trade, Australian consumers and businesses get more choice of the best that the world has to offer, often at lower prices.
One in five Australian jobs depends on exports – it’s one in four in regional and rural Australia. Imports also create jobs by providing low-cost inputs to manufacturing, mining, farming and services and as goods move from port to shop.
By keeping our markets open and by convincing others in both developed and developing countries to resist protectionism and lower trade barriers, we generate prosperity that benefits all.
This helps to narrow the gap between rich and poor. Indeed, as the noted Kenyan economist James Shikwati has argued, the poor, especially in African countries, need more trade than aid.
This is a reminder to Trade Ministers around the world that the aim of the Doha Round is to create a world trading system that benefits all participants.
That means reducing tariff and non-tariff barriers on goods and services, as well as reducing agricultural subsidies.
Pressing the case for reform
Ladies and Gentlemen, the last point I want to make this morning is that the Coalition’s trade policy is successful because it presses the case for wider trade and economic reform; which is the key to long-term prosperity to Australia and for our trading partners.
Australia is a respected player in world trade. We have established our credentials as a free trader by bringing down our trade barriers and building an efficient, market-based economy. Our own domestic reforms have resulted in a much stronger and resilient Australian economy. It’s a message I often convey when I meet my counterparts around the world.
And Australia presses the case for reform in several other ways.
Through APEC, which we’re hosting this year, we have worked to encourage regional economies to continue to pursue trade and investment liberalisation; to undertake structural reform; to reduce behind-the-border barriers, and to understand the real costs of protectionism. APEC Leaders have committed to pursuing economic reforms in areas that cover competition policy, regulatory reform, public sector and corporate governance, and strengthening economic and legal infrastructure.
If countries get these settings right, I have no doubt that this will help them secure their long-term prosperity. I’m sure you’ll hear more about this when the Leaders meet in Sydney in a few weeks time.
Another example is in the WTO, where we strongly supported the creation of what’s called the Trade Policy Review Mechanism. This throws a spotlight on WTO members’ trade and economic policies on a regular basis and allows other WTO Members to ask critical questions and raise concerns. This Mechanism gives us an opportunity to offer our analysis of the economic impact of other Member’s trade policies.
We have also supported reform by asking the World Bank and the OECD to carry out work to assess the benefits of domestic economic reform, and to work with countries to help them improve their economic performance.
And finally, in our aid program, key goals include promoting rational economic planning and helping to build capacity and strengthen governance in developing countries.
So I hope you’ll agree that Australia’s trade policy is active, ambitious and, most importantly, successful.
If you have any questions, I’m more than happy to answer them for you.
Ends