Melbourne, 13 February 2009
Launch of PricewaterhouseCoopers Melbourne Institute AsiaLink Index
INTRODUCTION
Thank you, Sid [Sid Myer, Chairman Asialink] for your introduction and my thanks to Mark Johnson and PricewaterhouseCoopers for hosting us here today.
It’s a pleasure to be here in Melbourne for the launch of the inaugural Asialink Index.
It’s been a tumultuous week. I know some people who wanted to come today but could not make it because they were needed elsewhere in the wake of the devastating bushfires.
In Canberra we are continuing to keep the Parliament sitting to ensure the Government’s $42 billion stimulus package is passed.
This is the type of package the International Monetary Fund has been urging from Governments around the world in response to the Global Financial Crisis.
Domestic responses are part of a global effort to stimulate economic recovery.
As I will explain later trade too is part of that stimulus.
Australia has of course always understood that.
But as the nature of trade changes so too must we adapt.
The index that I am launching today gives a unique insight into our engagement with the region and attempts to measure the extent of that adaptation over almost two decades.
Trade and investment amongst other measures figure in the analysis.
Australia’s engagement with Asia remains a core priority of the current Government.
That prioritisation began in earnest with the previous Labor Government in which I served as a minister.
The Hawke-Keating Government’s vision in both its massive structural reform agenda at home to make us a more competitive and productive nation as well as its efforts to open markets laid much of the basis for the nation’s continuing prosperity.
Our determination to conclude the Uruguay Round and then enhance trade liberalisation through APEC and the Bogor Declaration was one big picture aspect.
Another was our support for China’s accession to the World Trade Organisation.
These steps opened up new opportunities for Australian exporters and also underpinned a broader strategic engagement with the region.
From a trade perspective, it saw a diversification in the direction of our trade and with it bigger volumes.
As the chart shows, there has been a major shift in the direction of Australia’s merchandise exports in the past 25 years.
Labor took a conscious decision to focus much more on our time zone - the fastest growing region in the world.
The current Global Financial Crisis has challenged growth and trade volumes everywhere.
Amongst the gloom, Asia still emerges in positive territory.
The International Monetary Fund has downgraded its growth forecasts.
For example, it is forecasting world growth in 2009 of just 0.5 per cent or “coming to a virtual halt”. Despite this dramatic slump Developing Asia is still expected by the IMF to grow by 5.5 per cent in 2009.
While Asia is not immune to the GFC, and the jury is still out on how quickly it will recover, we know it recovered extremely quickly from the Asian Financial Crisis in 1997 but the developed world was then in positive growth . The Asian economies maintain high levels of savings and Governments are determined to continue on the course of economic growth and development, although the recent dramatic drop in exports in a number of these countries is of concern.
BENEFITS OF ASIAN ENGAGEMENT
What the index I am launching today also shows is the depth of our engagement with the Asian region.
Since 1990 Australia’s engagement with the Rest of the World has increased 3 times.
Our engagement with Asia has increased 4 times.
Australia’s engagement with the Association of South-East Asian Nations, or ASEAN, grew 5 times since 1990.
And our engagement with China increased 16 times.
As the chart shows, the mix has become more diversified.
OUR CONTEMPORARY RELATIONSHIP WITH ASIA
Prior to the GFC we had been witnessing a fundamental change in the nature of trade.
It was no longer just about producing goods and shipping them.
It was also much more about services and investment.
This highlights a new set of trade barriers we must dismantle. The non tariff barriers. Behind the border issues
So, just as we positioned in the 80s to diversify the direction of our trade volumes, the new Labor Government from day one has been positioning to diversify the content of the trade flows.
We have given services and investment flows a much higher profile.
This is evidenced in our approach to the Doha Round and our regional and bilateral negotiations.
THE BLACK SPOT OF INVESTMENT
One of the graphic findings of this Index was that Australia’s investment in Asia has not been strong compared to the rest of the World.
Australian investment in the region was growing in the 1990s but has stalled in recent years.
This is a challenge that we must confront.
By insisting on comprehensive trade negotiations and tackling behind the border issues we are acutely aware of the need to encourage greater investment flows within the region.
TEACHING ASIAN LANGUAGES
I have painted the picture about the role of government in terms of trade policy settings. The other area of interest in this report where government policy also makes a difference is Asian languages. The report notes this could be linked to the lack of investment in Asia.
We understood the importance of this when we were last in Government. As Education Minister I funded Asian languages in schools.
This program was abolished when we lost office and the Howard Government cut the program in its first Budget in 1996. And they never resurrected it.
Labor did so immediately on coming back to office. The truth is there has been a “lost education generation” in this space.
In the 2008 Federal Budget, the Rudd Labor Government committed funding for Asian language classes in schools by $62.4 million over three years.
Funding for Asian language training was a priority under the previous Labor Government. It has now been restored by the Rudd Labor Government.
AANZFTA AND OTHER AGREEMENTS
Much media and public attention has focussed on the consequences for Australia of the economic expansion China has experienced over recent years.
But the Index also shows that our trade with the ASEAN countries, our closest regional grouping, in fact outstrips our trade with China by some $12 billion.
As a group ASEAN is our largest trading partner over $80 billion in two-way trade.
Understanding this we gave immediate priority to concluding with New Zealand the ASEAN FTA. (AANZFTA)
This is the largest FTA Australia has ever negotiated.
It is the most comprehensive ASEAN has ever negotiated it will liberalise trade in the region ahead of the Bogor Declaration.
The agreement will be signed later this month.
But we are doing much more than this in the region.
We have unfrozen negotiations on the Free Trade Agreement with China. We are engaging Japan, India, Malaysia and South Korea as well as India.
We have recently joined a grouping on Asia Pacific nations in the P4 partnership (the Trans Pacific Partnership)
We of course continue to prioritise the conclusion of the Doha Round and we are committed to the multilateral trade principles, not just through Doha, but at the regional and bilateral level as well.
CONCLUSION
Let me just say a final thing about trade and the global financial crisis.
Trade had been impacted heavily by the Global Financial Crisis.
Trade is a victim of the Global Financial Crisis but it has not been a cause of it.
The worrying signs of countries reverting to protectionism in the name of protecting jobs if not halted will worsen the global economic crisis.
Just as important though is that trade must be part of the solution because trade is a stimulus.
As the chart demonstrates since 1950 world trade has grown three times faster than world output.
Trade is a multiplier that can stimulate the world economy.
This is why we have got to conclude Doha. There is no point in solving the Global Financial Crisis, co-ordinating fiscal stimulus packages around the world, unless we are also prepared to enhance it through the multiplier.
We are 80 per cent of the way there with the Doha Round, let’s conclude it.
Doha will become a vital platform upon which the regional and bilateral relationships that I talked of before can be used to build the basis for continuing prosperity or sustained prosperity for the nation.
I have outlined how we want to drive the agenda further in engagement globally, but particularly with Asia.
I welcome the Asialink index it is a valuable tool to plot our progress. The challenge for all of us is to keep the index moving in the right direction.
The Rudd Labor Government will continue to drive that momentum.
[ENDS]
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