“Trade at the centre of the global recovery”
Speech to the Foreign Correspondents’ Association
Sydney, 16 February 2010
Thank you Urs for that kind introduction and I appreciate the opportunity to speak to the Foreign Correspondents Association today.
I have very fond memories of our most recent meeting, organised by April Pressler, in Canberra last year. As I recall, a group of you sang me a rousing version of “Happy Birthday” before grilling me about global trade issues.
But seriously, I’m delighted to be here in Sydney addressing foreign correspondents from all over the world.
It is the nature of my portfolio that I spend much of my time speaking to foreign journalists overseas. Today it is good to see international media gathered here in Australia.
2010 – AN IMPORTANT YEAR
2010 is going to be a really big year on the trade front and I welcome the chance to look at what this year might deliver for the portfolio.
First, the G20 leaders last year instructed Trade Minsters to conclude the Doha Round in 2010. The pressure is on to meet the deadline.
Second, this year the world is emerging from the worst recession in more than 75 years. Trade is ongoing stimulus for the economy.
Trade is an economic stimulus and the beauty of trade is that it does not hit the Budget bottomline.
The shift in the economic outlook and the new focus on trade was brought home to me two-and-half weeks ago when I was representing the Australian Government at World Economic Forum in Davos, Switzerland.
At Davos this year there was distinct change in mood compared with 2009.
Last year, an air of despair and pessimism hung over Davos with the focus on surviving the Global Financial Crisis.
This year the focus in Davos was on the future, sustainable growth and particularly jobs.
Another key difference this year at the World Economic Forum was the incredible interest in Australia.
People kept asking me why it was that Australia was the only one of the world’s 33 advanced economies to grow in 2009 during the worst global recession since the Great Depression. They wanted to know how Australia had dodged the recession bullet.
With international media networks, such as the BBC, there was an automatic assumption that Australia’s was relying on the continuing growth of China.
I explained that although Australian was hit by the downturn, our economic resilience came down to three main factors.
First, the Government took quick and decisive action to stimulate the economy.
Second, the Australian economy has performed strongly because the former Labor Governments of Bob Hawke and Paul Keating undertook a series of wide-ranging and necessary structural reforms in the 1980s and early 1990s.
For example, the dollar was floated in 1983 and this saw the exchange rate to fall to US63 cents following the collapse of Lehman Brothers, cushioning the impact of large falls in commodity prices.
Third, Australia survived the Global Financial Crisis better than any other advanced economy because we are plugged into Asia – the fastest growing region in the world at the same time while continuing to make the most of our traditional trading relationships.
As a key supplier of energy and raw materials to Asia, Australia has benefited from growth in the region. In 2009, a year in which world trade volumes fell by more than 10 per cent, Australia’s export volumes increased – making us the only country in the OECD to export more goods and services than in 2008.
Of course, China has played an ongoing important role in this, but it is not just China.
Our two-way trade with the ASEAN region is equal to our trade with China.
Merchandise exports to India increased by 7 per cent last year and there is ongoing strength in our trade relationships with Japan and Korea.
DOHA ROUND PROSPECTS
At the conclusion of the World Economic Forum, there was annual informal meeting of Trade Ministers.
The Doha Round was of the focus of attention and the Director-General of World Trade Organization Pascal Lamy played a key role in a very productive meeting.
Last week I had the opportunity again to catch up with Pascal Lamy in Canberra and to follow up some of the discussions on Doha.
At Parliament House, we held a joint press conference and the main news story was captured by Reuters with the headline: “WTO’s Lamy says Doha deal still possible in 2010”.
To be more specific, Pascal Lamy said the Round could be concluded this year because at a technical level it is 80 per cent completed.
The real question which Pasal Lamy highlighted was question of political will. Political will to conclude Doha is needed from all countries and there is a timetable laid out. There will be a stocktake of progress in March, plus three major opportunities for engagement by trade minsters before the meeting of G 20 leaders in June in Toronto, Canada.
The economic stimulus benefits of concluding the Doha Round would be unparalleled, particularly in the current economic climate.
A report by the US-based Peterson Institute estimated that the annual boost to the world GDP from a Doha outcome could be between US$300 billion and US$700 billion.
Doha would significantly boost the development of the world’s poorer countries – through tariff reductions and opening of advanced country export markets, particularly in agriculture.
Doha also offers enormous potential gains to the Australian workers and Australian businesses.
For Australian farmers, Doha would deliver reductions of between 70-80% in domestic support subsidies for major subsidisers such as the European Union, Japan and the US.
Doha would also mean real market opportunities for Australian industrial producers and for our service providers.
Doha also offers us an insurance policy against the danger of protectionism.
We were very close to concluding Doha in July 2008, before negotiations stalled.
The last two years of Doha negotiations have been difficult and at times frustrating, but we have not stood still - nor has what is on the table unravelled.
COMPLEMENTING DOHA
The Australian Government is totally committed to Doha and it is the over-arching focus of my work as Australian Trade Minister.
Multilateral agreements such as Doha are the pinnacle of trade agreements. Nothing can match the global benefits of completing a Round. We saw that with the completion of the Uruguay Round in 1994.
History shows us that since the 1950s trade has grown three times faster than world output and each round of trade liberalisation has grown the multiplier.
But the Australian Government is not putting all its eggs in the Doha basket. We are developing trade relationships on many fronts and that is the way it should be.
There is a complementary relationship between multilateral, regional and bilateral Free Trade Agreements, which I call the cascade effect.
Our scorecard reads like this: Australia has six FTAs already in place. We’re negotiating a further seven, and two more are under consideration.
What is crucial is the quality of FTAs and what they set out to achieve. The ultimate goal has to be trade liberalisation and economic integration.
The danger of bilateral FTAs is that you can be drawn back into preferential trade deals. Trade deals that favour one country, or group of countries over another, and stifle economic integration. This is not where the Australian Government wants trade policy to go.
An example of the benefits of an FTA is the Australia Free Trade Agreement with the United States. Last year when the US introduced its “Buy America” package, it was the US FTA that reinforced the Australian position and cushioned the Australian economy from this attempt to mandate the use of American products.
I note that the Closer Economic Relations agreement (CER) with New Zealand is a gold standard in FTAs and a dynamic model
The ASEAN-Australia-New Zealand Free Trade Agreement is another excellent model.
Our FTA with ASEAN, which entered into force on 1 January this year is Australia’s largest FTA, covering 12 countries and a population of some 600 million people, with a combined GDP of $3.1 trillion.
It is the most comprehensive FTA that ASEAN has ever concluded, covering a range of issues affecting trade behind the border, such as intellectual property and electronic commerce
On top of this, a crucial element of the ASEAN FTA was the focus on aid-for-trade. An emphasis on capacity building, such as skills training in local communities, was central to the ASEAN agreement.
There is little point to opening markets if nations can not take advantage of such opportunities.
For developing nations, we must bridge their capacity-building deficiency for them to take advantage. Developed countries must assist them in that task.
Capacity building is fundamental to our global trade policy.
The ASEAN-Australia-New Zealand FTA is also an important contribution to evolving regional economic architecture and fits into the broader discussion Australian Prime Minister Kevin Rudd has initiated through the Asia Pacific community concept.
Another key trade agreement that is driving the trade agenda forward, as well as strengthening our links with Latin America, is the Trans Pacific Partnership Agreement, or TPP.
Australia, together with the US, New Zealand, Singapore, Chile, Brunei, Peru and Vietnam will begin negotiating this ambitious FTA in March in Melbourne.
The TPP represents an important basis for regional economic integration. It can be a building block towards the APEC goal of a Free Trade Area spanning the Asia Pacific.
BILATERAL FTAs WITH OUR TOP EXPORT MARKETS
Beyond the regional trade agreements, this government is taking a strategic approach to bilateral FTAs. Where we do not have FTAs with our top export markets, we are in the process of negotiating or discussing them.
FTA negotiations are underway with China, Japan and Korea. An FTA with the US came into force in 2005 and a feasibility study will soon be completed on an FTA with India.
In less than 10 days, the 14th round of negotiations with China will be held in Canberra after being stalled at the technical level for more than a year.
The key market access areas of these negotiations have been difficult, and negotiations have taken longer than we would have hoped. But high-level political commitment on both sides remains.
We remain committed to concluding a comprehensive and high-quality FTA with Japan.
The negotiations – which began in 2007 - are making steady progress but, not surprisingly, discussions about agriculture remain difficult.
The election of the new Democratic Party of Japan government in August last year signalled a big change in that country.
I am pleased with the progress being made on our FTA negotiations with the Republic of Korea.
Finally, a feasibility study on the merits of an FTA between Australia and India, our fourth largest merchandise export market, is close to finalisation.
Other bilateral FTAs under negotiation are with Malaysia and the Gulf Cooperation Council. While negotiations began last year with Pacific nations and Australia and New Zealand on PACER Plus. An FTA with Indonesia is also under consideration.
BOOSTING TRADE LINKS
Taking a step back for a moment, and looking at where Australia has, or is negotiating FTAs, I think there it is fair say there are two major missing links. We have no FTAs with either Africa or Europe and two of our top ten trading partners are the United Kingdom and Germany.
The continent of Africa with almost a billion people was ignored for more than a decade by the Howard Government. The Rudd Labor Government is changing that and making engagement with Africa a priority.
As part of the engagement, I was in Africa less than ten days ago and attended a major mining conference in Cape Town, South Africa. Australian mining companies have already signalled investment of more than $20 billion in projects in more than 35 African nations. The Australian resources sector is committed to Africa.
Australia is increasing targeted development assistance to Africa with $163 million in 2010 - an increase of 40% from last year. But beyond this, I believe there is scope for greater focus on capacity building in Africa. Australia resource companies know the value of capacity building and the Australian Government can work in tandem.
As I told the Mining Indaba conference, Australia knows the importance of working with indigenous populations and working in remote areas. In Australia there is respect for the land and an appreciation for the importance of land rehabilitation.
This is part of the Australian brand and this is what we are bringing to Africa.
Moving away from Africa to Europe, which is the other missing link in Australia’s trade policy.
First, it should be noted that the European Union is a key partner with Australia in progressing the Doha negotiations.
Second, Europe is generally an open trade and investment space for Australia and we continue to work on building and strengthening this.
The European Union, as a bloc, is Australia’s largest trade and investment partner, and two-way trade has continued to grow despite the global economic contraction brought about the global financial crisis.
While a Free Trade Agreement negotiation with Europe is not currently on our agenda and I made this point when I visited Brussels last year. We are interested to note that the previous decision of the EU to only do FTAs with developing countries changed when they signalled their preparedness to do one with Canada. We have sought clarification whether this heralds a different approach.
We will monitor closely developments in the European Union’s Free Trade Agreement negotiations with other countries.
I look forward to continued close cooperation with the new EU Trade Commissioner Karel De Gucht who I met in Davos.
CONCLUSION
To conclude, let me make the point that when it comes to trade, Australia is not backing just one horse. Far from it.
Doha is the priority, especially in 2010, with the instructions from G20 world leaders to conclude this year. But Australian Government is not restricted or blindsided by Doha.
The trade policy approach I’ve outlined today underscores Australia’s ability to back multiple processes in support of free trade - multilaterally in the WTO through the Doha Round and regionally and bilaterally through FTAs.
These are processes that complement each other, and they are all aimed at achieving trade liberalisation and greater regional economic integration.
Trade does matter, and the Global Financial Crisis has put trade at the centre of the global recovery.
We must grasp the opportunity for trade to play its key role in the recovery. Doha is the low hanging fruit of international trade.
Thank you and I look forward to hearing your comments and questions.