23 June 2009
Australia and Europe: Partners in Progress
23 June 2009, European Policy Centre, Brussels
Introduction
Dr Missiroli, Distinguished Guests, Ladies and Gentlemen.
It is an honour to be here at one of Europe's premier think tanks, the European Policy Centre.
I would like to thank the Centre's distinguished Director of Studies, Dr Antonio Missiroli, for his generous introduction.
Dr Missiroli, who visited Australia in April, deserves a great deal of credit for making today's event possible.
This is actually my third visit to Brussels as Trade Minister.
I was the first Minister of the Rudd Labor Government to visit this historic city after the 2007 Australian Federal election, and I am delighted to be back.
Australia and the EU
The Australia-Europe relationship has gained considerable momentum since Australia's Prime Minister Kevin Rudd visited Brussels in April 2008 - when he too addressed the European Policy Centre. Mr Rudd spoke then of the 'intrinsic importance' of trade and investment between Europe and Australia.
During that visit, Mr Rudd and EC President Barroso made a political commitment to invigorating our relationship.
As a result of their commitment, we have seen improved atmospherics and a new sense of dynamism and purpose in our cooperation.
We have finalised a comprehensive Partnership Framework, a milestone which I will talk about in a moment, and we have achieved concrete results on a number of other initiatives.
All of that progress is most welcome, because at a political level, we can honestly say that Australia's partnership with the EU has never been stronger than it is today.
My main message today is that it is in both of our interests - now more than ever during these particularly challenging economic times - to keep that momentum going, and to make the most of our partnership.
We need to build on our common interests, and show political leadership in addressing 21st century challenges, including on world trade and climate change.
Yesterday I had discussions with EC Trade Commissioner Ashton, and I will have further talks with her today when we open our Trade Policy Dialogue - the first time that we have a ministerial component.
I also had discussions last night with Belgium's Deputy Prime Minister and Foreign and Trade Minister Karel De Gucht, who recently visited Australia, and business representatives from Europe and Australia.
And on Friday, in Paris, I will host a roundtable, between European and Australian firms, in order to encourage a better understanding of what Europe and Australia can offer each other in terms of clean-energy and co-operation on the environment.
The challenge is there for us, together, to lead the way on renewable and clean energies, to find alternative sources for our growing energy needs and achieve true energy security.
The Economic Relationship
I would like to begin by looking at our economic relationship.
In my view, tremendous potential exists to take it to a new level by expanding the diversity and the volume of our trade and investment links.
The EU, as a bloc, is already Australia's largest trading and investment partner.
Two-way trade reached $91.3 billion in 2008, accounting for over 16 per cent of Australia's total trade. The balance of trade is weighted heavily in the EU's favour.
The EU is our third largest export market, after Japan and China, with coal, minerals, wine and gold our major merchandise exports and travel services, transportation and business services our major services exports.
Australia imports from the EU a range of manufactured goods, including motor vehicles, medicaments, gold, aircraft and parts and engineering equipment.
Two-way investment is also significant.
The EU is the largest source of foreign investment in Australia, totaling A$133 billion of combined foreign direct investment at the end of 2008, and is one of the largest destinations for Australian foreign investment, with A$43 billion in direct investment in the EU at the end of 2008.
Australian companies are making a name for themselves in Europe in sectors such as environmentally friendly technologies, energy, logistics, and medical equipment and technologies.
According to EC delegation estimates, some 2,300 EU companies do business in Australia. They have a total turnover of about $180 billion, directly employ 400,000 Australians and - through flow-on effects - support an additional 775,000 Australian jobs.
Europe can look to Australia also as a stable and reliable long-term supplier of Europe's energy needs, including clean energy, where Australia possesses some impressive strengths.
One of the most recent European firms to leverage opportunities in Australia in this sector is German global investment company Direct Invest.
Direct Invest's project - which I, together with Queensland Premier Anna Bligh, announced on 11 June - involves a commitment to develop a mine in the Surat Basin area and to invest in up to $1.5 billion over the next five years in clean coal technology projects, including coal to liquid (CTL), gas-to-liquid (GTL), as well as carbon capture and storage.
This investment by Direct Invest, which was facilitated by Austrade, highlights the significant potential in more sustainable energy conversion. It underscores Australia's comparative advantage, not just in commodities but value-adding and energy conversion.
The Australian Economy
As Trade Minister, I can tell you that Australia is keen to encourage more European investment in areas such as biotech, ICT, financial services, infrastructure projects and clean and renewable energy, to name but a few.
Australia is ranked the third most cost-competitive country for business operations in the major industrialised world.
Our business friendly political, legal and regulatory environment makes Australia a safe investment destination.
Our education and research institutions are world class - the EU by the way is Australia's largest scientific partner.
We have a hard working, highly skilled and culturally diverse workforce.
And like Europe, Australia is closely integrated with the world economy.
Australia knows how to do business with Asia. Chinese dialects, for example, are the second most widely spoken language after English.
At present most of our top 10 trading partners are in recession. India and China are the stand-out exceptions, but their growth is still slower than in recent years.
Yet the Australian economy, virtually alone among the advanced economies of the world, grew in the first quarter of 2009, a modest 0.4 of a per cent. Most OECD countries - and all of those in Europe bar Poland - were showing negative growth in that same quarter.
Our retail sales are up. Housing finance and building approvals are rising. Business investment in the first quarter showed some growth. And consumer confidence seems to be rebounding. Unemployment in Australia has risen, but not as dramatically as in Europe or the United States. And while export values have decreased, volumes of net exports have increased.
These trends give us grounds for cautious optimism, though we know we are not out of the woods yet.
The Australian economy has been better cushioned than most countries against the global downturn because of our geography - Asia has been for some time at the centre of our export strategy. We are ideally positioned to take advantage of the dynamism and growth of the Asia-Pacific region, and that is one of the keys to the resilience of the Australian economy during this global economic downturn.
The other is competitiveness borne out of long term structural reform that we commenced in the 1980s. The Government has also successfully introduced stimulus packages that have supported economic growth, buoyed business confidence and kept workers employed.
Australia's trade policy is based on the twin pillars of improving export market access at the border - through multilateral, regional and bilateral mechanisms - and domestic structural reform behind the border to improve out international competitiveness.
Our domestic stimulus strategy in response to the global financial crisis not only encourages consumption, but through major government expenditure programs we are also investing in the key drivers of economic growth - skills, innovation, and infrastructure.
And despite all that, the Australian Government's net debt as a percentage of GDP will remain manageable.
The Broader Relationship
I would now like to talk about the ways in which we are taking forward our shared interests at a political level. There are many reasons why the relationship must and will grow.
Since 2008, we have seen a marked stepping up of high-level visits and exchanges between Australia and the EU on economic matters - including the Trade Policy Dialogue, which takes place later today and which for the first time will include a Ministerial-level component.
The European Minister Commissioner for Fisheries and Maritime Affairs, Mr Borg, and the European Commissioner for Energy, Mr Piebalgs, were in Australia recently for talks.
I was pleased to have the opportunity to meet both of them.
Belgian Deputy Prime Minister De Gucht, whom I mentioned earlier, also recently visited Australia accompanied by a business delegation, as did Italian Under-Secretary for Trade, Mr Urso.
Those and other visits have reinforced our economic synergies, as well as the goodwill, that now exists on both sides. We do have our differences on some issues - that is natural and we need to be frank about those. We must strive for better access beyond the traditional prism of differences over agricultural market access. And I don't need to rehearse for this audience Australia's concerns about the Common Agricultural Policy (CAP).
The Agricultural Trade and Marketing Experts' Group, which deals with marketing of agricultural commodities, is also important from a trade perspective. It meets next on 8 July, in Canberra.
We also have differences on fisheries - but I believe there is scope there to build on our complementary interests in order to overcome our differences.
The sustainability of fish products is obviously a major concern here in Europe.
Australia's seafood industry - in particular the aquaculture sector - is a world leader in environmentally sustainable practices.
Among the fish species Australia commercially produces are yellowtail kingfish and mulloway.
These fish are farmed commercially in an environmentally sustainable manner, in South Australia, to the highest standards. That is, they have closed the life cycle and so there is a sustainable supply going forward.
In this case, we are asking the EU to consider reducing the tariffs applying to these Australian farmed fish - this would not displace EU's domestic fish products and it would actually serve a broader ecological purpose by helping reduce pressure on depleted wild fish stocks, increasing their ability to recover. In fact, European industry wants these fish.
This issue just highlights the fact that our interests are more convergent that many people appreciate, and through a bit of creative diplomacy, we can identify solutions to problems that in the past may have seemed intractable.
That brings me to the EU-Australia Partnership Framework, which was launched in Paris last October.
The Framework gives concrete expression to the commitment Prime Minister Rudd and EC President Barroso to forge a new and broad-based relationship.
It does so in five broad areas that highlight the diversity of our common interests:
- foreign policy and global security
- the multilateral trading system and bilateral trade and investment relationships
- cooperation in the Asia-Pacific, where the EU - the world's largest provider of international development assistance - is playing an increasingly important role
- increasing cooperation on energy issues and climate change
- research, science, education and innovation.
What is so important about the Partnership Framework is that it is a practical, outcomes oriented document that can be reviewed and regularly updated.
It sets out immediate, medium and long-term objectives, each with multiple activities to promote close cooperation and policy coordination.
We will review progress against those objectives at the Australia-EU Ministerial Troika Consultations in October.
What that review will highlight, I am confident, is an impressive list of achievements.
- It will show how Australia and Europe have worked together to develop effective responses to the global economic crisis
oincluding close cooperation in the G20 on fiscal stimulus, regulatory reform, IFI reform and resourcing, and protectionism - It will document our joint efforts to conclude the Doha Round
- It will underscore our close consultations on challenges to global security, such as the need for better coordination of our efforts in Afghanistan
- It will applaud the new Australia-EC Wine Agreement, the EC's decision to become a founding member of the Global Carbon Capture and Storage Institute, and recent progress in negotiating a Comprehensive Air Transport Agreement.
But what the review will also highlight, I expect, is how much work there is left to do - and how much Australia and the EU need to cooperate - in tackling the complex global challenges that affect our long-term strategic interests.
The World Economy
The current global economic situation, for example, makes strengthening our partnership more important and more urgent.
The world economy is suffering its most severe downturn since the 1930s. It is expected to contract by 1.3 per cent in 2009.
World trade volumes this year are expected to drop even more sharply, with predictions ranging between 9 per cent (WTO) on the low side and 13 per cent (OECD) on the high.
Trade, as I've often said, is a multiplier for the global economy, given world trade since 1950 has grown three times faster than world output.
Unfortunately, we are now seeing that multiplier working in reverse.
Trade will be part of the solution when the recovery comes, and that just underscores the importance of having the right trade policies in place.
Keeping markets open will open up new opportunities for exporters and spur growth.
Protectionism, which we've seen signs of, including here in Europe, will only prolong this crisis.
Doha Round
That is why Australia and the EU attach such importance to reaching a comprehensive agreement in the Doha Round as soon as possible.
We must keep trade open and flowing if the global economy is to recover quickly.
Concluding the round would boost global confidence and help rekindle economic growth.
Australia and the EU share a similarly high level of ambition on the services market access negotiations, and we need to work closely to ensure services are a part of a balanced Doha outcome.
We need to capitalise on the fact that the global economic crisis has given the Round new profile and impetus.
At last April's Summit in London, G20 Leaders recognised the importance and urgency of concluding the round.
Their mandate has energised governments and trade ministers, including members of the Cairns Group, who met earlier this month for a ministerial meeting in Bali, along with USTR Kirk, Indian Commerce Minister Sharma, WTO Director General Lamy and EU Ambassador to the WTO Guth.
That Bali Ministerial proved a valuable opportunity for the Cairns Group to push forward our Doha Round agenda and take a strong position against trade protectionism, including EU and US dairy subsidies.
At a time of depressed world dairy prices, those subsidies will further weaken the global market and slow the recovery in international prices even more.
We need the European Union and the United States to take a leadership role in demonstrating a commitment to bringing the Doha round to a conclusion.
I will continue to work with my ministerial colleagues - including Commissioner Ashton - to help resolve the outstanding issues and finish the Doha Round negotiations.
Later this week, for example, I will be hosting an informal gathering of trade ministers in the margins of the OECD ministerial council meeting in Paris to try to re-ignite serious negotiations, and in doing so, boost confidence in the global economy.
Climate Change
I would now like to turn to climate change, which is, in the Government's view, "one of the greatest moral and economic challenges of our time."
Importantly, both Australia and the EU have announced ambitious targets to reduce global emissions, which is helping to provide momentum to the international negotiations in the lead-up to Copenhagen.
- Australia has announced that it will reduce its greenhouse gas emissions by 25 per cent on 2000 levels by 2020 if there is a global agreement sufficient to stablise greenhouse gases at 450 parts per million carbon dioxide-equivalent or lower.
- The EU has committed collectively to reduce emissions by 20 per cent on 1990 levels by 2020, and to increase this to 30 per cent in the case of a successful global deal.
It is in every country's national interest to see an ambitious global agreement on climate change. Our goal is to develop an effective market-based mechanism that rewards climate friendly initiatives, and creates incentives for the private sector to make the transition to a low-carbon emission economy. Assistance, particularly to export-exposed industry, is critical.
I believe there is a growing complementary of views between Australia and the EU on climate change, and that we should be working more closely on this challenge.
We have much to offer each other and much at stake.
We must get this right. We must give business certainty and capitalise on the opportunities for both Europe and Australia, in terms of creating green collar jobs.
A key point is that it is in our interests to ensure that trade measures employed to address climate change are consistent with the principles of maintaining an open and transparent, rules-based international trading system.
Conclusion
Australia and Europe are like-minded on most political, economic and strategic issues and we enjoy a profound commonality of values. Trade and capital flows are vital to securing our economic futures.
European companies increasingly recognise what the Australian economy has to offer in terms of our connections to Asian markets, the health of our economy, skills of our workforce and the calibre of our financial, legal and regulatory systems.
We want to encourage more European businesses to look at Australia as a base for their operations in the Asia-Pacific region.
Australian companies are embracing the market opportunities that Europe's market offers, just as the Australian Government is embracing new opportunities for closer cooperation and constructive dialogue with Europe at a political level.
Based on our shared interests, Australia and the EU now have an opportunity to show work more closely together on the challenges of our times, including climate change and the Doha Round.
Our Partnership Framework marks a significant new chapter in our relationship, providing a durable blueprint for an ambitious agenda. But the challenge is there for us to seize this opportunity.
Australia is fully committed to devoting the creativity and energy necessary to take that agenda forward.
Thank you.
[ends]
Media Inquiries: Departmental Media Liaison 02 6261 1555