Former Minister for Trade
Australian Commonwealth Coat of Arms

APEC Ministerial Meeting on Structural Reform, Lunch with Business Delegates

Driving Trade Through Structural Reform

4 August 2008

Salutation

Distinguished Ministers and guests and fellow APEC members; I’d like to welcome you all to my hometown of Melbourne – and would like to acknowledge our host and my Cabinet colleague, Australian Treasurer Wayne Swan.

Introduction

I’m particularly pleased to be able to participate at an APEC meeting just days after the WTO ministerial meeting in Geneva.

It was disappointing that we did not achieve all of our objectives in Geneva. However we did make significant progress across a range of complex issues.

Yes, the Geneva meeting was a lost opportunity – but Doha is definitely not a lost cause. As Pascal Lamy said – “we need to let the dust settle” before deciding the next steps forward.

But what is clear is that we must continue on the path of trade and investment liberalisation using all of the forums available to us. In this regard, we are extremely fortunate to have APEC at our disposal to continue with this task in our region.

Australia’s Twin Pillars Approach to Trade and Economic Reform

Since its formation, APEC has played a critical role in enhancing trade and investment liberalisation in our region.

Despite the set back in Geneva last week, APEC as an institution should not be deterred from its primary goals. Indeed, this conference indicates that APEC’s goals continue to broaden in recognition of the changing nature of international trade and investment.

Structural economic reform is important in its own right for enhancing efficiencies and competition, and driving domestic economic growth and prosperity. However, it also enhances our multilateral trade objectives because it helps to break down the ‘behind the border’ or non-tariff barriers that stymie international trade.

Australia pursues these objectives through the twin pillars approach to trade policy.

  • The first pillar being trade reform at the border via multilateral, regional – such as APEC - and bilateral mechanisms; and
  • The second pillar being the very issues you are discussing at this conference – structural reform and behind the border issues.

Success on the first pillar is important because trade liberalisation drives economic growth.

Nowhere is it more apparent than in the dynamic APEC region that both “at the border” and “behind the border” policies must work together to drive strong regional growth:

  • behind the border polices can play an important role in creating trade and investment opportunities and enhancing the gains from trade and investment – including through reducing costs, lowering risk and improved market entry
  • on the other side of the coin, trade and investment policies can reinforce the aims of behind the border policies through delivering new markets, securing world class technology and promoting the sort of competitiveness necessary for strong economic performance

Success on the first pillar is also important because over the past 50 years world trade has grown three times as fast as world output. However over the past 5 years world trade has grown at only twice the rate of output – despite the rapid economic growth of China and India and the global resource boom.

The conclusion of every world trade round has given the global economy significant stimulus.

The message is clear – if we are to give the global economy a much needed confidence boost at a time of financial instability and considerable uncertainty we need to conclude the Doha Round.

There is however no point in securing greater export market access via Doha, APEC or FTAs if we are not productive and competitive enough to take advantage of that.

Improved domestic economic efficiency including by reduced regulation, enhanced competition, and better public sector and corporate sector governance add to our productive capacity and ability to maximise the gains from trade.

Pressing on with Doha

As I said earlier, I firmly believe it is still possible to conclude the Doha Development Round.

After a week and a half of intensive negotiations with other Ministers in Geneva, we made huge progress. Despite the disappointment that in the end the talks broke down, we should not lose sight of this fact.

We also need to take into account the fact that the talks very much reflected the new dynamic of the emerging global powers – the BRICs – Brazil, India and China. The Uruguay Round agenda was essentially determined by the EU and the US together with the Cairns Group. The emerging global powers are playing a much more active role in the Doha Round, and with significantly more influence than in the past.

Brazil, China and India stand as strong partners to the EU, US and the Cairns Group in setting the agenda for the Doha Round.

We must be able to work together in resolving our differences, build a relationship of trust and mutual understanding, and negotiate outcomes that reflect the needs of the broad WTO membership to help bring this Round to conclusion.

At the beginning of the meeting on 21 July there were around 100 square brackets in the two key draft texts on agriculture and industrial products, including a number of issues that were considered as possible deal breakers. The talks over the past fortnight had secured convergence on the majority of these issues – including on the depth of cuts to and the balance between agricultural and industrial tariffs, on the size of tariff quota expansion, on the depth of subsidy cuts to agriculture, and on the elimination of export subsidies and the Special Safeguard (SSG). Many of these achievements were breakthroughs that had eluded Ministers for years.

They also involved successfully defining what we mean by common but differentiated solutions. We also made great strides on commitments to services liberalisation.

Utilising a new process for negotiations for a request and offer signalling mechanism by those choosing to participate.

Several countries in our region – China, India, Korea, Malaysia, Pakistan, and the Philippines – all signalled likely improvements in areas like financial services, telecommunications, environmental services and mining services as well as in business mobility and foreign equity caps.

Despite the progress the area where we hit a deadlock was the so-called “Special Safeguard Mechanism” for developing countries to deal with import surges, but even here we made some progress. We negotiated successfully with China but could not accommodate the balance with India that would capture special surges only and not normal trade.

The cotton question also remained an unresolved issue.

The break-down was a lost opportunity for Australian industry. And it was an equally large loss for the rest of the WTO membership, particularly developing countries, at a time of uncertainty in the world economy and rising food prices.

These issues remain capable of resolution. Reflection will remind how close we were and what gains remain achievable. But that reflection must also involve consideration of how we move forward.

I propose three steps.

First, we need to lock in what we have achieved, by recording the progress we have made. WTO Director General Pascal Lamy has suggested that the negotiating Chairs will shortly bring forward reports of the progress we achieved over the past fortnight. This is an important move. We need to convert that quickly into revised comprehensive negotiating texts.

Second, we need to resolve the remaining areas of difference. This means tackling a couple of key issues in agriculture – including the Special Safeguard Mechanism, and the treatment of cotton – and to tie down the framework for industrial products. With creative energy this should not be beyond us in the next couple of months. This will obviously require support from the US and EU, but it will also require strong engagement of the BRICs – Brazil, India and China.

And third, we need to look for and seize the next available window of political opportunity to bring Ministers together to endorse the complete package. If we can seize the chance, I am confident that an agreement could still be struck before the end of the year, before the current US Administration leaves office.

We must use the aftermath not to lament but to build support for re-engagement and conclusion. The Prime Minister, myself and other Ministers of the Government will also use every opportunity we have during bilateral visits – starting in Beijing later this week - phone calls and regional meetings to progress and build support for these steps.

It won’t be easy. But the world economy needs a successful outcome and Australia remains committed to fighting for this goal.

APEC’s Structural Economic Reform

It has been said before that if APEC didn’t exist we would have to invent something very much like it. For it draws together key powers in our region; spanning developed and developing economies. From the United States – the world’s richest economy to China - the world’s most populous country to Brunei – one of the world’s smallest.

The Bogor Goals - for free trade and investment among developed economies in APEC by 2010 and by 2020 for developing economies - provide an excellent example of how the international community can work together in the pursuit of ‘common but differentiated’ objectives. APEC is on track to achieve its Bogor Goals.

This common but differentiated approach is not only central to multilateral trade agreements but also to the international community’s response to climate change.

Importantly APEC provides the mechanism for the pursuit of policy at a:

  • Government to Government level;
  • A business to business level; and
  • A Government to business level via ABAC.

It is the Government to business engagement which I consider is critical to APEC’s structure and critical to determining its future direction and capacity to deliver key outcomes. For it is business that should be identifying the behind the border barriers, bringing them to Government’s attention, and demanding that they be tackled in APEC. It is business that confronts on a daily basis impediments to their activities that take so much time to address or resolve. Removal of these impediments will enable the private sector to do what it does best – that is – getting on with business.

Reflecting the importance of business engagement with APEC one of my earliest decisions as Trade Minister was to recommend to the Prime Minister the appointment of two new members to represent Australia on ABAC. I am pleased that the Prime Minister accepted my recommendation so that in addition to Mr Mark Johnson, ABAC 2008 Co-Chair, Australia is now also represented by Mr Lindsay Fox AC, and Mr John W. H. Denton, Partner and CEO of Corrs Chambers Westgarth.

To assist in shaping APEC’s forward agenda, including its relationship with business, I have also begun working closely with this year’s Chair – Peru – along with upcoming Chair’s Singapore, Japan and the United States.

A key part of this forward agenda will be the Leader’s Agenda to Implement Structural Reform (LAISR)[1] you are discussing today.

Regulatory reform, competition policy, public sector governance, corporate governance and strengthening economic legal infrastructure are all critical aspects of the behind the border agenda. They are already part of APEC’s forward program. At issue now is how best to pursue them.

How best can APEC progress these vital aspects of trade and economic reform?

One option I am attracted to is utilising the resources of the APEC Policy Support Unit – to which Australia recently provided $10 million for its establishment – to help economies implement their structural reform agendas to maximise the gains of this reform. I am pleased to highlight the Policy Support Unit’s contribution to this conference: a paper on the links between trade and investment liberalisation and structural economic reform. This is the Unit’s first product and augurs well for its future contribution.

Inevitably structural economic reform will vary from economy to economy and given the breadth of the reform program it can be difficult for economies at different levels of development to tackle them simultaneously.

A properly calibrated work program orchestrated under the framework of APEC would greatly assist in this regard. Here, the work of APEC’s Economic Committee is central, and this conference provides an excellent opportunity to provide further definition and ambition in this area.

Another of APEC’s strengths is its capacity through its Leaders’ Annual Meetings to draw upon the broad cross section of policy interests in the pursuit of structural economic reform. The Leaders’ Agenda to Implement Structural Reform requires input from Ministers responsible for Finance, Trade, Mining, Energy, Telecommunications and Information, Law (Attorney Generals), Education, Tourism and Transport – along with the Leaders themselves.

APEC would be one of the very few regional forums with the institutional capacity to bring this broad cross section of portfolio policy interests together in the pursuit of structural economic reform and we must utilise this asset to the greatest extent possible.

APEC’s pioneering work on trade facilitation – another important area of structural reform - reflects broad Ministerial input into its work program.

In Arequipa in May, APEC Trade Ministers also endorsed a framework for APEC to extend this important facilitation work to investment – reflecting its growing importance in driving international economic growth and trade flows. And this work has fed directly into the Doha Agenda and is progressing well.

In the 1980’s Australia began the process of broad scale economic and trade reform reflecting a whole of government approach to our domestic policy settings. APEC has the capacity to replicate that whole of government approach at the regional level.

Conclusion

The events of the past week and this conference indicate how closely connected trade reform at the border and trade or structural reform behind the border are.

Consistent with the twin pillar approach, there is little point in pursuing new export market access gains for our businesses if our domestic economic policy settings do not allow them to take advantage of that access. Because in the end, our objectives in trade reform and in structural economic reform derive from the same goal – introducing competition into our economies, to build competitiveness and raise living standards.

APEC is ideally placed to pursue these twin pillars simultaneously.

APEC has achieved a great deal on trade liberalisation to date – it has kept the momentum going in our region at critical times and I believe it has the capacity to deliver on that front again at this important point in time. It also has the capacity to deliver on structural reform given its institutional strengths, government to business relationships, and common but differentiated approach.

I encourage you to use this conference to help develop an ambitious forward work agenda for APEC Leaders and Ministers on structural reform. And I will do all I can to pursue that agenda on your behalf.

Thank you

[1] LAISR has five priority areas – regulatory reform, competition policy, public sector governance, corporate governance and strengthening economic and legal infrastructure.

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