Speech at the Launch of ‘European Australian Business’ 2008 Edition

Launch of ‘European Australian Business’, 2008 Edition

Canberra, 5 May 2008

The publication we’re launching today aims to increase awareness in Europe of the many business and investment opportunities in Australia.

I want in the next few minutes to do awareness-building too. I want to build awareness about how Australia’s new Government is reshaping our relationship with the European Union and its member nations.

Introduction: a fresh start

Ladies and gentlemen, there’s something I’d like to state very clearly at the outset. 

This Government has put Australian relations with Europe on a new footing. Within just one month of being sworn in, I visited the EU for detailed discussions to build and strengthen our bilateral relationship. And since that time I have been in constant contact with my EU counterpart, Trade Commissioner Peter Mandelson, as we work towards what I hope will be a successful outcome to the WTO Doha round of trade negotiations. My aim is simple: a constructive working relationship that reflects so many of our shared values and aspirations.

Any Australian minister has choices in their dealings with Europe. If your ambition in government is merely to score points with Australian voters, particularly those in rural areas, you can return from a quick European tour, call a press conference and decry the inefficiencies of the Common Agricultural Policy. The journalists will laugh at your stories and write you up as a brave Australian truth-telling politician.

The Rudd Government has larger ambitions than that. We want to embrace the opportunities of Europe. Our disagreements over agriculture need to be addressed but they should not define our relationship. And as I personally discovered when I visited Brussels in late January, this constructive approach is welcome in European capitals.  That’s because there are so many potential areas of cooperation between Australia, the EU and its member states. If we keep that in mind – if we keep in mind the need for a constructive conversation, then in that positive context, we can continue to air our differences.

So, following on from the Prime Minister’s recent discussions in Brussels, we are very much looking forward to a visit by European Commission President José Manuel Barroso as soon as this can be arranged. It will be the first visit to Australia by a Commission President since 1982. I think that visit would be the ideal opportunity to launch the new Australia – EU Partnership Framework, which will provide a stronger foundation for policy cooperation across the board.

I am hopeful the new Framework will lead to growth in bilateral trade and investment, including better opportunities for our service providers, and increased cooperation on a broader agenda, one that includes energy, climate change, education and innovation. We look for your input to make it as ambitious and substantive a document as possible.

Europe and Australia: solid foundations

There is - and I need hardly tell an audience like you - a profound commonality of values between Australia and the countries of Europe, from which about 90 per cent of us in Australia claim descent. Our shared cultural and intellectual heritage is reflected in our commitment to democratic, liberal societies and open market economies. It’s this bedrock of shared principle that gives us hope for common approaches to tackling the complex challenges we all face.

I find it very encouraging to see the range of sectors in which Australian companies are operating in European markets. They include Babcock and Brown’s energy investment in Germany. They include the Macquarie Airports’ operations in Belgium and Denmark. And they include Cochlear’s hearing implants facilities in Greece and Belgium.

By the same token, it’s encouraging to see companies like Thales strengthening our defence sector. And wine giants like Moet Hennessy and Pernod Ricard contributing to the vitality of our wine industry.

Ladies and gentlemen, you and your countries’ businesses know that Australia is an excellent place to do business. In fact, the World Bank ranks us in the top 10 countries globally for ease of doing business. Our deregulated finance sector and compulsory superannuation system has given us the world’s fourth-largest pool of funds under management.

Many of Europe’s largest financial services companies are active in our banking sector: I’m thinking of household names like AXA, which has taken a majority holding in National Mutual.

But we do not want to rest on our laurels. I believe there is a great need to expand the diversity and the volume of our trade and investment links with the EU’s member states.

There is considerable scope to exploit the potential of our cultural ties to Europe more fully. 

Some opportunities

Currently, we host about 34,000 European students in Australia. Educational exchange could expand further, particularly with respect to the fields of Asian studies.

Our connections and proximity to Asian markets are also a vital asset to European business. And it’s not just in the minerals sector: it’s in education, financial and technical services; it’s in infrastructure.

On the subject of closer networks between Australia and Europe, I am pleased to note that last week, in Brussels, we signed our bilateral Horizontal Air Services Agreement, to bring Australia's existing air services agreements with member states into line with current EU legislation.

I very much look forward to the day we can start negotiations on a Comprehensive Air Services Agreement with the European Community. By overcoming restrictions in existing bilateral aviation agreements, we could boost tourism between Australia and Europe and encourage direct exploration of our cultural links. It’s welcome news that the mandate for the European Commission to begin negotiations on this agreement may be approved by EU Ministers in June. I hope EU member states will lend their support to the idea; and I know that my ministerial colleague Anthony Albanese raised this issue with EU Heads of Mission earlier today. 

A significant relationship

If asked who Australia’s largest trade partner is, most people would look to Asia – China or Japan – or even the US. The truth is, as a bloc, the EU is Australia’s largest trading partner. It accounts for some 17 per cent of Australia’s total trade.  In 2006-07, two-way trade was worth $75 billion. 

Our combined services trade was worth $18.2 billion, reflecting the fact that services make up a greater proportion of Australian-EU overall trade than they do in other regional relationships. Our services exports to the EU are growing – including in education, business-related travel, recreational travel and computer and information services.  So, too, are our imports of European services.

The EU as a region is also our biggest foreign investor. European direct investment totalled $107 billion at the end of 2006 – about $33 billion more than the United States’ stock of investments.  Those funds are overwhelmingly sourced from the United Kingdom, The Netherlands, France and Germany. There are approximately 2,300 EU companies with a presence in Australia.

In turn, the EU area is the second-largest destination for Australia’s overseas direct investment abroad, which in 2006 totalled $74 billion.  Most of this investment is in the United Kingdom, The Netherlands and Germany.

Changing nature of trade

This epitomises the changing nature of trade. It is not just about goods, but capital flows. As a recent survey by the Export Finance Insurance Corporation showed, capital flows are changing the way we look at trade.

Sales by overseas branches, subsidiaries and joint ventures of Australian companies have passed the value of Australian-owned goods and services exports. Many of these branches are in Europe. So, by repositioning themselves in the global supply chain, companies are not only increasing market share but are generating a stream of revenue separate to that derived from traditional Australia-based exports.

Reform behind the border

This change in the nature of trade is one of the forces driving us to pay increasing attention to economic reform. We are committed to investing in the drivers of economic growth: in Australia’s critical infrastructure, in education and training, in innovation, in deregulation and better workplace arrangements. We’re pursuing this domestic agenda as a pillar of our trade policy.

We’ve commissioned leading businessperson David Mortimer to look at these issues in his review of our export-specific economic policies and programs. I hope many of you have taken the opportunity to contribute.

Beyond domestic reforms, our trade policy has another pillar: reform at the border – reform of our trading relationships with other nations.

Reform at the border

As you all know, we continue to regard a successful conclusion to the Doha round as our highest trade negotiations priority. Doha is the keystone of this pillar of our policy. I’m very pleased to note that the EU shares our ambitions for Doha in significant areas, as the Prime Minister discovered in Brussels.

Whatever our continuing differences over agriculture - and I don’t mean to overlook the significant ongoing reform of the Common Agricultural Policy – we all acknowledge the potential gains from further global trade liberalisation, including with respect to services.

We are working very closely with the EU to promote a strong outcome from the WTO services negotiations – and as part of this Australia has requested commercially meaningful improvements in the EU services market, in a range of areas, such as in environmental services.

Importantly, we share a common commitment to drive the Doha Round towards a successful conclusion this year. I have been working very closely with my colleague Peter Mandelson to this end in recent weeks. 

We cannot pass up the historic opportunity to conclude the Round, to provide a serious boost to world trade at a time of some economic uncertainty and of high world food prices. Nor can we pass up the opportunity to strengthen the multilateral trading system, a system in which Australia and the EU have invested considerably.

I am convinced that a successful outcome to the Doha Round is a key part of the solution to the current world food crisis. Some have suggested that subsidising and protecting local production is the answer. The reality, though, is that attempts at self-sufficiency and a retreat into protectionism would only make things worse.

At this time, more than ever, open markets are the key. It is only through opening up opportunities to produce and export food, by allowing freer movement of food, that we can ensure food security internationally.

We are now nearly ready to enter into the critical Ministerial-level negotiations on Doha. We’ve made some good progress recently in laying out the basis for Ministerial involvement.  We now have in place the main elements of:

• a framework for dealing with “Sensitive Products”[1]
• a framework for reducing domestic support in agriculture and
• a framework for dealing with industrial goods tariffs
• a framework – through the signalling exercise – for improving services market access.

But we don’t yet have a detailed framework on “Special Products”[2] – so that Ministers can engage on this issue.  It is incumbent on us all, including key players like India, China and Brazil, to exercise leadership in this area.

The EU also has important interests in this debate.

Like Australia, these WTO Members are calling for a strong outcome on domestic support, but none of us are likely to be able to achieve this without real progress first on Special Products.  The negotiating linkage is clear: just as it has been in the discussions between agriculture and progress on industrial goods.

Progress is needed urgently if we’re to secure the all-important breakthrough we need to the Round in the coming weeks.

Beyond Doha: climate change

Looking beyond Doha, another area of increasing convergence is in our approach to the pressing challenge of climate change. We both recognise that trade and environment policies need to be mutually supportive in order to achieve the goal of sustainable development.  

The Labor Government’s new approach to this issue – symbolised by our early ratification of Kyoto, and by our commitment to emissions and renewable energy targets – opens up the way for a significant and productive dialogue on environmental and energy issues.

Last month we also joined the EU-initiated International Carbon Action Partnership (ICAP) and look forward to using this forum to share best practice in emissions trading. Of course, our response to climate change is not just an environmental imperative, but a major economic opportunity to develop and transfer environmental technology, goods and services. I believe that, if we adopt a trade liberalising response to climate change, we will unlock the potential for significant new flows of investment and innovation.

Like Australia, the EU is committed to a 20 per cent renewable energy target by 2020. For all of us, that means potentially more exports of green technology and services, and collaboration on energy security.

It means more companies like Australia’s Oceanlinx, developing alternative energy generating capacity in the UK. It means research in clean coal technology and carbon capture and storage. 

I’d like to stress that this should be a win-win scenario, in which all sides benefit.

Conclusion

Ladies and gentlemen, world trade is growing three times faster than world output. We all need to be aware of that fact.

Trade is vital to securing our economic future, and to promoting our broader interests, including closer cooperation between Australia and Europe.

As I’ve argued today, our trade policy must promote a more liberal trade culture. It must also recognise the highly beneficial role of capital flows. And it must make the most of the opportunities presented by our shared approach to the challenge of climate change.

I welcome the role of Stroudgate’s ‘European Australian Business’ in highlighting to its readership - in print as well as online - the significant investment potential of the Australian market. 

Let me leave you with this undertaking. 

We are committed to bringing a new sense of purpose and energy to the task of rebuilding relations between the EU and Australia generally, and to boosting trade and investment flows specifically. You’ll find us energetic, optimistic, and practical: we want to cooperate. And you’ll find this is a very good place to invest.

Thank you.

Media contact: Mr Crean's Office (02) 6277 7420 - Departmental (02) 6261 1555