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16 July 2009
Trade and Investment: Future Partnership
German-Australia Chamber of Commerce and Industry
It's my great pleasure to be home here in Melbourne and to have this opportunity to meet you all in such an informal environment.
Particular thanks to Lindsay Fox for the invitation and for hosting this lunch.
I would like to express appreciation for the enormous contribution your companies have made in building the strong commercial and investment relationship we have today.
I'd also like to take this opportunity to personally thank Markus Gilbert and the German Australian Chamber of Commerce, for the more than A$1.3 million contributed to the Victorian Bushfire Appeal.
The support we had from community groups such as yours was tremendous, and I thank you. Your actions reinforced to me the close relationship between Australia and Germany.
While our countries may be far from each other geographically we share many interests, and many concerns.
Our common interests provide enormous opportunities for us to work together in addressing 21st century challenges, including on world trade and on climate change.
This was underscored during last week's visit by Mr Rudd to Germany and in his discussions with Chancellor Merkel.
Our leaders agreed to work together more closely on a range of global challenges, including the global financial crisis, security and the threat of climate change.
This builds on the EU-Australia Partnership Framework, which was launched in Paris last October. The Partnership Framework is a practical, outcomes oriented document that can be reviewed and regularly updated. In fact we will review progress at the Australia-EU Ministerial Troika Consultations in October, which will, I expect, highlight an impressive list of achievements but also 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.
I recently made my third visit to Brussels where EC Trade Commissioner Ashton, and I held the first ministerial component of the Australia-EC Trade Policy Dialogue. I'm delighted to say that Australia's partnership with the EU has never been stronger than it is today.
In Paris, I hosted 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.
I'll come back to the opportunities clean technology presents shortly, but I also want to outline the strengths of our economic relationship with Germany and the opportunites for our future trade and investment partnership.
The Economic Relationship
I would like to begin by looking at our economic relationship.
During these difficult economic times it is particularly important that we work together through our partnership to develop an effective, coordinated response to the global economic crisis.
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 between Australia and Germany.
Germany is Australia's 10th largest trading partner.
We have a two-way trade in goods and services that totalled more than $15.6 billion in 2008.
Germany is our 6th largest source of foreign direct investment, and our 5th largest destination for Australian foreign direct investment.
The value of German direct investment has grown 79 per cent since 2003 and now totals $A13.7 billion.
Australia's direct investment in Germany amounts to A$8 billion.
The 330 subsidiaries and 470 branch offices of German companies active in Australia span a broad range of industries, including automotive, telecommunications, infrastructure, biotechnology and financial services.
But we can do more. One key opportunity lies in clean and renewable energy.
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.
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 Europe 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.
In Germany last week, Prime Minister Rudd and Chancellor Merkel agreed to closer collaboration on renewable energy, including solar research.
They welcomed the intention of the Australian Solar Institute and the Fraunhofer Institute for Solar Energy Systems to collaborate on solar energy research.
Thanks to its innovation, drive and commitment to renewable energy, Germany has built a successful solar industry and is at the leading edge in terms of clean technology.
And Prime Minister Rudd strongly supports Germany's proposal for a Charter of Sustainable Economic Activity.
The prospect of a carbon constrained world is spurring the rapid growth of the global clean technology sector. This sector offers substantial opportunities to create new industries and new jobs.
During 2007 and 2008, 441 renewables deals were announced globally with a reported value totalling US$70.3 billion. (The PWC Global Renewables Deals Annual Review, 2008.)
Germany is at the heart of this action, as the biggest source country for Foreign Direct Investment into clean energy by the number of projects, and the second largest by spending. (Source: Financial Times FDI Intelligence report - supplied by Austrade)
Under the Rudd Government, Australia too has made a strong commitment to the environment and announced a number of initiatives to stimulate the growth of the clean technology sector in Australia.
The Global Carbon Capture and Storage Institute we announced in April is an important part of this strategy.
At last week's Major Economies Meeting in L'Aquila, Italy, Prime Minister Rudd and US President Barack Obama announced that this centre would be the focus of a new global partnership to drive the development of clean energy technologies.
The partnership aims to double the amount of investment in research and development needed to make new technologies viable.
Germany is a founding member and one of the 23 governments backing the institute.
We know that there are a number of German companies working on clean coal technology, and we hope they will join the 100 or so businesses that are supporting the institute.
We very much see it as offering an interface where German and Australian technology providers can collaborate to develop new solutions to reduce carbon emissions from fossil fuels.
As another part of this strategy I announced a $14.9 million package to fund the Government's Clean Energy Trade and Investment Strategy.
This aims to attract investment in Australia's clean energy sector and to assist Australian clean energy companies to access international markets.
One of the most recent European firms to leverage opportunities in Australia in this sector is German global investment company Direct Invest.
The Direct Invest project - which I announced last month with Queensland Premier Anna Bligh - is a perfect example of the kind of investment that Australia wants more of.
The Direct Invest project involves a commitment to develop a mine in the Surat Basin area and to invest up to $1.5 billion over the next five years in clean coal technology projects, including coal to liquid, gas to liquid, and carbon capture and storage.
This investment by Direct Invest, which was facilitated through Austrade, highlights the clear synergies between Germany's desire to invest in clean energy and Australia's comparative advantage in value adding, research and energy conversion.
Australia has strong technology solutions to offer the world.
There is great potential for our business communities to partner to accelerate the deployment of these technologies, including jointly into third markets such as China, using Australia's strong trade links there.
We know how to do business with Asia. Chinese dialects, for example, are the second most widely spoken language, after English.
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 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.
Strengthening the trade and investment relationship
German companies have been strong investors in automotive manufacturing in Australia over the past 30 years.
It is an industry that is facing a range of challenges, not least of which is the global economic crisis and the fall in demand for new cars. But the industry is also seeking to address the challenges created by climate change, as consumers line up to drive greener, cleaner cars.
The Australian Government has created a range of initiatives to help the industry meet these challenges.
The $1.3 billion Green Car Innovation Program is designed to help the industry deliver new generation technology, components and vehicles.
We hope Germany - a great leader in automotive design and manufacturing - will take up the opportunity to use the Green Car Innovation Program to introduce, test, commercialise and refine technologies in Australia that can be deployed both domestically and more widely.
The Government would also welcome German participation in other initiatives such as the Cooperative Research Centres in the automotive and advanced manufacturing sectors, as a way to build on existing investment in Australia and to leverage off the innovation and creativity in our engineering and manufacturing industries.
Clean energy and the automotive industry are just two of our priorities sectors.
New opportunities also exist in biotech, ICT and in infrastructure projects. Australia is keen to encourage investment in all of these areas.
Australian companies are taking up opportunities in these areas in Germany.
Despite the economic downturn, CSL Behring - wholly owned by Australia's CSL - will this month open a new blood plasma facility in Marburg, Germany. The facility represents a A$55 million upgrading of CSL's German operations.
Almost a third of CSL's 6000 strong workforce is based in Germany.
I know the German Australia Chamber of Commerce has helped smooth the way for Australian company Plantic Technologies to set up its new bioplastics factory in Jena.
Plantic Technologies has established a new thermoforming operation which will improve its competitiveness and response to customers.
The second phase of this €8.3 million manufacturing expansion will be installing rigid sheet production.
This will eliminate sea-freight and streamline the supply chain, ultimately lowering Plantic Technologies' supply costs.
Extruded Plantic materials will be used not only by Plantic's own thermoforming business, but also by third parties.
We are also delighted to see a growing recognition by German business of the benefits of Australia as the headquarters for regional operations. Lufthansa and Volkswagen have both located regional operations here in Australia.
The Australian Economy
Australia has much to offer.
We're in difficult times but Australia has, so far, weathered the global financial crisis better than most.
Australia is the fastest growing major economy in the OECD.
In the March quarter our economy grew a modest 0.4 per cent, while most advanced economies shrunk.
At 4.9 per cent of GDP, we have a lower budget deficit than any of the major advanced economies.
We have the second lowest unemployment of any of the major advanced economies, at 5.8 per cent.
So far, we are one of the few countries in the OECD to have avoided falling into technical recession. (The others are Greece, Norway and Poland.)
These trends give us grounds for cautious optimism, though we are not out of the woods yet.
We've worked hard, and continue to work, hard on competitiveness issues.
Australia is ranked the third most cost-competitive country for business operations in the major industrialised world.
Our competitiveness is borne out of long term structural reform that we commenced in the 1980s. 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.
Beyond our competitiveness and our geography, the other cushion from the worst effects of the global recession has been the Government's stimulus package.
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.
The investments we make today in strengthening our economies and our businesses will position us to capitalise on the recovery that will inevitably come. Now is the very time we need to search out opportunities and seize new markets.
There can be no doubt that keeping trade flows open is essential to ending this global economic crisis.
Protectionism, which we've seen signs of, including in Europe, will only prolong this crisis.
This is also why we also need to forge ahead and bring the World Trade Organization's Doha Round to a successful conclusion.
Concluding this round would be the best possible insurance against protectionism.
It will set the rules for global trade in agricultural access, product markets and manufactured goods, services and other areas.
A successful completion of the round, which both the Australian and German Governments are committed to, would play a key role in restoring confidence to the world economy.
Conclusion
In conclusion, the relationship between Australia and Germany is an advanced, collaborative relationship.
But there is still plenty of potential, particularly in the areas of clean technologies and advanced manufacturing.
As business leaders invested in the Australia-Germany relationship, I urge you to look anew at the opportunities here in Australia.
I ask you to convey the message about Australia's strengths back to your headquarters so we can achieve even more together in the future.
Thank you for the opportunity to speak to you today.
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