Speech
Keynote Address to the Australia Japan Business Cooperation Committee Conference – Tokyo
26 October 2009
Ambassador Murray McLean, Mr Akio Mimura, Sir Rod Eddington, distinguished guests, ladies and gentlemen.
I have enjoyed a long and proud history of association with Japan throughout my political career and I’m both honoured and delighted to be back in Tokyo for this, the 47th Australia Japan Joint Business Conference Dinner.
It turns out there is a neat symmetry to this visit. As some of you may recall, in January 2008 I was the first Minister of the newly elected Australian Labor Government to visit Japan. And with this visit, I’ve become the first Australian Minister to visit Japan since the election of the new Government of Prime Minister Yukio Hatoyama.
The Australia-Japan Relationship
In between these two visits there have been roughly twenty ministerial-level visits, including two by Prime Minister Rudd. This underscores the very high priority the Australian Government accords the Australia-Japan relationship.
It is a relationship of great depth and maturity - both at the government to government level, and the business to business level. As this audience would appreciate, Japan remains Australia's closest partner in Asia.
Ours is a strong and enduring strategic partnership built on trust, integrity and long-standing shared interests.
My visit is part of Australia’s whole-hearted commitment to early and direct engagement with Prime Minister Hatoyama’s government on economic cooperation and trade matters.
One key element of my visit is to take part in the inaugural bilateral trade ministers’ dialogue with my counterpart from the Ministry of Economy, Trade and Industry, Mr Masayuki Naoshima
This new dialogue signals a more structured and strategic ministerial-level discussion of trade policy issues – everything from how to move forward our bilateral FTA negotiations, to how we can work together in the region - including through APEC and the EAS - and how to bring the Doha Round of WTO negotiations to an early conclusion.
The Economic Partnership
But my visit has a broader agenda as well, which is to re-affirm and revitalise the Australia-Japan economic partnership at a time when we have a relatively new Government in Australia and a new Government here in Japan.
This involves encouraging and working with the Australian and Japanese business communities to ensure they make the most of new Government agendas.
For Australian companies, Japan is a large market characterised by high levels of disposable income, companies with a strong global orientation and a business culture that values quality and innovation.
For Japanese companies, Australia is seen as a reliable and trusted trading partner. And trade involves more that the simple exchange of goods – it’s about trade in services and it’s about the two way flow of investment – these are the new drivers of economic growth.
Australia is a valued trading partner on all these levels because we offer a stable financial and regulatory environment, a transparent legal framework, and ready access to a highly skilled, multi-lingual work force.
According to the IMF World Economic Outlook, Australia will be the only advanced economy to record positive growth in 2009. We have weathered the economic crisis better than most and there is no doubt that our stimulus measures have worked.
But Australia’s success is not solely due to the fiscal stimulus. Our current success is built on the foundation of the structural reforms set in place by all Australian governments during the past 25 years.
Australia has benefited from a fundamental understanding that there is no point opening markets to international competition if an economy lacks the competitive edge to succeed. That’s why we have pursued the structural reforms which have increased productivity, enhanced infrastructure and provided a world class regulatory environment.
The Trade Relationship
The latest economic statistics underscore just why our bilateral economic relationship continues to go from strength to strength.
In 2008-09 Australia's merchandise trade with Japan exceeded A$70 billion. In calendar year 2008, total trade in goods and services was valued at $A76 billion, a 39 per cent increase on 2007-08.
Japan has remained Australia’s largest export market for coal, LNG, beef and dairy products. Over 2008-09, notwithstanding the global economic slowdown, Australian merchandise exports to Japan actually rose by more than 50 per cent year-on-year, reaching $52.6 billion.
That was more than the merchandise exports to the United States and China combined, and it ensured that Australia recorded its largest ever bilateral merchandise trade surplus of A$34.7 billion.
The Investment Relationship
Investment is a critical pillar in the relationship, and once again the statistics tell a compelling story.
At the end of 2008, the total stock of Japanese investment in Australia was A$89.5 billion. That made Japan the third largest investor in Australia, behind only the USA and the UK.
The global economic crisis and Japanese recession notwithstanding, Japanese foreign direct investment in Australia grew strongly in 2008, totalling A$36 billion, a 16 per cent increase on 2007.
Japanese investment is diversified across many sectors of the Australian economy and has played a vital role in the development of Australia’s iron ore, LNG and coal sectors, as Japanese companies sought security of supply of energy and other resources.
More recently, Japanese investment has been driven by the need to secure new growth markets, procure innovative technologies and “green” their business activities. We’ve seen Asahi Breweries acquire beverage-maker Schweppes Australia and Kirin Breweries purchase both Dairy Farmers and Lion Nathan.
As an aside, it’s worth noting that Kirin is retaining the marketing power of the Lion Nathan brand. Australia’s dairy and processed food products boast quality, nutrition and safety – we need to market them better and market them together in places like China and Indonesia.
Japanese companies are also getting involved in Australia’s building and construction sector. Both Sumitomo Forestry and the Osaka-based Sekisui House are now active in our residential property market.
We welcome this investment and see great potential for future investment growth. This meeting celebrates the large and mature partnerships between resource and energy producers and buyers on both sides.
However we should not forget the next generation and so I would also urge our Japanese friends here tonight to consider partnerships with emerging Australian producers that would enable them to participate in the further expansion of the resources and energy sector in Australia.
Looking Ahead
Japan has been Australia’s No.1 export market for more than forty years. But we cannot afford to be complacent about the relationship and it cannot be allowed to drift without a clear sense of purpose. Our shared strategic interests demand constant care and renewal.
Our shared challenge is to reaffirm and revitalise the relationship to ensure that we both emerge from the global crisis well-positioned for long term sustainable growth.
The lessons we’ve drawn from Professor Peter Drysdale’s recent report, and from the lessons of leading Australian companies, highlight great untapped potential to intensify our partnerships in a wide range of new areas including infrastructure financing, construction and logistics.
New and Emerging Areas of Cooperation - Services
What then are the key new areas of opportunity for investment and cooperation? I would like to highlight a number of the most promising. Firstly, services.
The services economy is critical and that’s why I was delighted to learn of the Toll Group’s recently announced acquisition of Footwork Express, one of Japan’s largest logistics operators. This is precisely the direction in which Australian companies should be focussed.
Services is more than just a sector in its own right – it’s an enabler and a multiplier of a nation’s comparative advantage.
Australia’s rich endowment of natural resources would count for little if we did not have the services expertise needed to extract full value from our national assets – technical and mining services; legal and financial services; and of course transport, logistics and distribution services.
There is also an aspirational dimension to services. Nations now realise that in order to manage the transition from developing to developed economy status, they must develop the services sector of their economy.
Together, Australia and Japan are well-placed to contribute to the development of the services economy throughout our region.
Services account for 70% of Japan’s economy and are valued at AUD$4.3 trillion, but Australia’s share of that market is just $2.4bn, mainly in tourism and education.
We can and should be doing more. It is telling that of the fifty foreign law firms operating in Japan, not one is Australian – not at least until Blake Dawson opens its Tokyo office in early 2010.
Another area with virtually untapped potential is Australia’s world-class financial services sector – particularly the funds management and insurance sectors. We have one of the world’s largest pools of investment fund assets under management.
Japan’s savings and pension market totals around $10 trillion in cash deposits. The Japanese people need and deserve a better return on their earnings and this demands the sort of safe and reliable funds management services that Australia can provide.
New and Emerging Areas of Cooperation – Clean Energy
Let me move on to renewable and clean energy.
Australia is determined to play its full and fair part on climate change. The Government is committed to positioning Australia as a clean energy hub in the Asia-Pacific and to ensuring that clean energy is a key component of Australia’s economic and environmental future.
Earlier today I participated in the launch of a Clean Energy Report prepared by one of Japan’s leading think tanks, Nomura Research Institute, and commissioned by Austrade.
It highlighted the potential for cooperative approaches to investment in research and development which can encourage technology transfer and the creation of smart, green jobs in both countries.
Given our resources links, Australia and Japan need to work together to be part of the solution to climate change and we will do this through smart solutions such as the Carbon Capture and Storage Institute.
We are already seeing some major investments in the clean energy sector. Marubeni Corporation and Osaka Gas, for example, recently acquired a 100 per cent stake in the Hallet 4 wind farm project in South Australia in conjunction with APA Group, an Australian energy company.
And in what shapes as the largest single private sector investment in Australian history, Inpex continues to progress its proposed LNG processing facility in Darwin, a project worth over $20 billion.
LNG is a great Australian story. We are rapidly emerging as the Saudi Arabia of gas – a global clean energy superpower. For many years into the future, Australia will be delivering clean, low emission energy supplies to our region and beyond.
New and Emerging Areas of Cooperation – PPPs
Public Private Partnerships, or PPPs, is an area in which the Australia Japan Business Cooperation Committee has already invested a great deal of energy.
PPP is an exciting new area in which we can partner to service the infrastructure needs of the region. Australia can not only extract the coal and the iron ore needed to meet the infrastructure needs of the region, together we can offer a total package.
We can build, operate and service the infrastructure. We can deliver the logistics services and the project management skills and training to build capacity in the region.
Working in partnership with Japan in the region means we can help develop vital infrastructure and deliver the management and other soft skills needed to boost efficiency and productivity.
Of course all this will be easier to accomplish if we have in place the right economic framework, and that is why a comprehensive, high-quality bilateral FTA or Economic Partnership Agreement is such a priority for Australia.
An FTA with Japan will help secure and improve Australia’s market access and address discrimination caused by Japan’s other FTAs.
Economic modelling undertaken jointly by the Australian and Japanese governments in 2005 concluded that Australia’s GDP would increase by around $39 billion over 20 years as the result of an FTA with Japan.
Negotiations are progressing steadily in a number of areas, including on services and investment, but continue to be difficult in the area of agriculture.
Australia understands well the sensitivities and complexities of the current Japanese agriculture system.
We think this needs to change over time to reduce the high costs on Japanese consumers and to allow Japan to play its full role in the global trading system
And we will need to be creative in finding solutions which acknowledge Japanese sensitivities but create a win/win situation.
For example, Japan is interested in including provisions in the FTA to promote its security in food and energy and minerals.
Australia is prepared to work with Japan to develop provisions that would address Japan’s concerns provided they do not interfere with the normal working of the market.
And the AJBCC can play an important role in working with both Governments to help progress the FTA - particularly given that Committee members will be major beneficiaries.
We hope that Japan will match this commitment through an agreement that yields substantial improvements in market access for both our countries and ultimately results in free trade.
Ladies and gentlemen, the Australian Government is firmly committed to further strengthening the Australia-Japan relationship.
Given our strong partnership, our common interests, great political will on both sides, and the support we receive from you, the business community, I’m confident that in the years ahead our two countries will be working together to take our relationship to an even higher level.
Australia and Japan share a long, proud and successful trade and economic relationship – let’s revitalise that relationship and move the agenda forward.
Thank you.
ENDS