APEC Study Centre - RMIT University
Thank you for that introduction Martin Bean, Vice Chancellor, RMIT.
Can I also acknowledge the presence tonight of:
- APEC Study Centre Chairman – Alan Oxley;
- APEC Business Advisory Council members; and
- the numerous members of the diplomatic corps present – Consuls General thank you for coming.
Ladies and gentleman it is a pleasure to be here in Melbourne at Australia's APEC Study Centre.
In just five months I will join trade ministers from around the world for the 11th Ministerial Conference of the World Trade Organization in Buenos Aires.
There is some symbolism, of course, in the organisation that regulates and promotes trade holding its biennial meeting of ministers in Argentina.
The meeting of WTO ministers will come on the second anniversary of the fall of the Kirchner Government in Argentina – a failed populist experiment that introduced import restrictions, export taxes and currency controls.
That election saw Mauricio Macri, the now President of Argentina, elected on a message that trade is a source of opportunity, not a threat.
This seems contrary to the current mood in some quarters. Indeed, words like populism and protectionism are increasingly part of the vernacular.
But history is familiar with this mood, and the damage it causes, as President Macri's Finance Minister said last year:
"Protectionism and nationalism will not make your economy richer and will not accelerate growth. It will increase stagnation and poverty… We've been there."
Nevertheless while one country learns from the mistakes of isolationism, nationalism and protectionism – other countries are considering policies to take them down this path.
The only explanation is that some are confusing nationalism and patriotism as kindred principles.
They are not.
As patriots we should want the best standard of living for our fellow citizens. Nationalism can never sustain this objective.
The problem is what I'll call the 'populism discovery lag'.
The made-in-Argentina policy of the former Argentine Government was popular – and on first blush why wouldn't it be?
A ban on foreign manufactured mobile phones may have seen Apple leave the market but BlackBerry opened a new manufacturing plant in Southern Argentina where jobs were needed.
The then-President herself witnessed the first BlackBerry coming off the production line. What a popular triumph – Argentinians can buy mobile phones made by their fellow Argentinians.
The problem was the phone was two years out of date and twice as expensive as the model produced by BlackBerry's factory in Mexico.
The BlackBerrys produced in Argentina were so outdated and expensive that Argentinians stopped buying them – within two years the factory closed.
The point of Argentina's experience is that: while it may take time, eventually, people realise that nationalism is a hollow promise that leads their standard of living to diminish, not thrive.
The Argentinian example is not unique to history.
The Korean Peninsula is perhaps one of the starkest example of the benefits of free trade.
Since the end of the Korean War in 1953 the South, an open economy trading with the world, has flourished.
South Korea now has the world's 11th largest economy with GDP of nearly $1.8 trillion.
Compare that to the North, which is shut off from the world with a GDP estimated to be worth $16 billion where the stories of suffering and starvation are all too familiar.
Australia, too, has had protectionist policies before.
Trade protectionism and a range of poor economic policies caused Australia to slip from being the third wealthiest country in the world in 1913 to 15th by 1990.
The history books show that the beggar-thy-neighbour trade policies that were implemented in the 1930s did much to deepen and prolong the Great Depression.
This approach compounded the underlying problem and made everyone worse off.
As parts of the world again flirt with protectionism, the Australian Productivity Commission just yesterday released a report that outlines what rising protectionism might mean for Australia.
A self-initiated report of the Commission, it nominated the empowerment of proponents of protectionism in Europe and the election of Donald Trump as motivations for this contemporary assessment.
The Commission found that if tariffs were to rise by 15 percentage points around the world, the ensuing economic dislocation could cause a global recession.
For Australia, this would see economic activity reduce by $12 billion, five per cent of our capital stock left idle and up to 100,000 jobs at risk. Incomes would drop by nearly $1,500 a year.
It's evident, then, that we cannot afford a wide-spread back-sliding into protectionism.
Australia is a trading nation. Our ability, as a country of less than 25 million people, to sell our goods and services to billions of other people around the world is what makes us rich.
The standard of living we experience is among the highest in the world, in fact second highest in the world, according to the United Nations' Human Development Index.
But for Australian households, the benefits of trade aren't just demonstrated by the experiences of Argentina or a United Nations' Index, but these benefits flow straight to the hip pocket – trade liberalisation has lifted the income of Australian households by around $4,500 a year.
Of course, for the one in five Australian jobs that are now trade-related, the importance of open markets means even more to their household budget.
International trade has also made the cost of production in Australia cheaper.
Nearly two thirds of our imports are capital and intermediate goods which are used as inputs into our own industries.
While in New York in January I made the point that running a trade deficit or surplus with any one country should not been seen as a measure of the success, or otherwise, of the trading relationship between those countries.
Indeed, we have a trade deficit with the United States.
But the purchase of Boeing aircraft by Qantas and Virgin Australia supports our tourism industry – our largest services export.
Similarly, the purchase of Caterpillar heavy machinery from the United States supports our coal and iron ore exports.
We may have a trade deficit with the United States but our imports from the United States drive exports, and indeed, trade surpluses with other nations, notably China, Japan and Korea.
Trade is a major component of how Australia has achieved 26 years of uninterrupted annual economic growth.
This is a remarkable feat, given this period spans the Asian financial crisis in the late '90s, the dot-com bubble of the early 2000s and, more recently the Global Financial Crisis.
Australia's annual GDP grew by 2.4 per cent last year– net exports made up more than half of this growth, contributing 1.4 percentage points.
This statistic alone tells you how much our economy, and our standard of living, would be at risk from isolationist policies.
Overall, exports grew by 7.9 per cent in 2016 – three times faster than the rest of the economy.
This growth would not have been possible had Australia not embraced liberalised trade – lowering our own tariffs, opening new markets abroad, strengthening trade rules, welcoming foreign investment and working toward a seamless business environment across borders.
True, things would have been a lot tougher for the Australian economy if it weren't for the resources investment boom in the past decade.
But after the boom, we didn't bust – this was the result of years of policy reform, which had made our economy more flexible and adaptable.
To further advance our prosperity, the Turnbull Government is pursuing an ambitions trade agenda.
We recognise that opening markets and investment opportunities is essential for our future prosperity.
Concluding the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) is at the top of my agenda for 2017.
With a population of over 250 million people right on our doorstep, this Agreement will herald a new era in our economic relationship with Indonesia.
Australian businesses will benefit not only from increased access to Indonesia's growing market, but also new opportunities to partner with Indonesian businesses to access markets around the region.
I am very pleased Prime Minister Turnbull and President Widodo recently recommitted to our end-of-the-year timeframe for concluding those negotiations.
We have also recently launched free trade agreement negotiations with two APEC members, Hong Kong and Peru, and we continue to work towards commencing negotiations with the European Union and the United Kingdom.
Last month, I launched trade negotiations with the Pacific Alliance, comprised of Mexico, Chile, Peru – all APEC members – and Colombia.
An FTA with the Pacific Alliance will create new export opportunities for Australian farmers, miners, manufacturers, educators, service providers and investors in some of Latin America's major economies.
Importantly, this Agreement would open the door to Mexico for Australian exporters – an important economy that offers considerable opportunities.
The Pacific Alliance is a significant trade bloc with a GDP worth more than USD $1.8 trillion. The four countries account for 38 per cent of Latin America's population and 57 per cent of its total imports.
Pacific Alliance members imported goods and services worth more than USD 600 billion in 2016.
Australia's ability to capitalise on this demand is currently limited by high tariffs.
Tariffs of up to 80 per cent are imposed on Australian beef, while dairy products attract tariffs of up to 98 per cent and sugar exports face restrictions that prevent trade into Pacific Alliance countries.
Australia's services exports – including education and mining services – also face competitive barriers.
An FTA will bring down these barriers and ensure Australian businesses have competitive access.
The Turnbull Government is also pursuing regional trade deals.
With the remaining Trans-Pacific Partnership (TPP) parties we're exploring what alternative arrangements we may be able to derive from the agreement.
I remain hopeful that agreement on this important issue can be achieved when the TPP11 Ministers meet in Danang in November, in the margins of the APEC Leaders' Summit.
As for the other potential mega regional trade agreement – the Regional Comprehensive Economic Partnership (RCEP) – negotiations continue to move forward and are currently focusing on the critically important market access element.
We are also seeking ways to make the most of our economic relationship with India.
These ambitions, of course, come on the back of results.
Since 2013 the Coalition has concluded new free trade agreements with China, Japan, Korea, Singapore and many of the Pacific Island nations through the PACER Plus Agreement.
These agreements are already delivering results for Australian exporters.
Take the example of Gapsted Wines in Victoria's beautiful High Country.
An award-winning winery producing premium cool climate wines, it has seen sales to China go from a couple of hundred cases a year two years ago to over 10,000 cases this year.
This is due in part to growing demand, but also because of the privileged market access conditions that we achieved in the China-Australia Free Trade Agreement (ChAFTA), specifically through tariff reductions.
This story is a common one across the wine industry – in 2016, Australian bottled wine exports to China grew by 37.8 per cent, reaching $470 million, as ChAFTA cut the tariff they faced from 14 per cent to 8.4 percent.
That tariff is now 5.6 per cent – and will be completely eliminated by 1 January 2019.
This gives Australian exporters an advantage over our competitors from Europe and the United States, who are still subject to a14 per cent tariff.
There are many similar stories of how our free trade agreements are giving Australian companies new opportunities for growth, in goods and services trade, and in investment.
With the Asia-Pacific region at the heart of Australia's future prosperity, APEC will play a key role in carrying the torch for free and open markets.
In the face of protectionist sentiment, it is critical that APEC economies maintain the forum's long-standing commitment to free trade.
At the recent meeting of APEC Ministers Responsible for Trade in Hanoi in May, I pressed the importance of APEC remaining committed to trade and investment liberalisation and supportive of the rules-based multilateral trading system.
Whilst this not reflected in a consensus communique, I applaud Vietnam's Chair's statement – which reaffirmed our pledge against protectionism.
An encouraging outcome of the Hanoi meeting was renewed support for the APEC Services Competitiveness Roadmap, agreed to by leaders in 2016.
This is a crucial step towards addressing barriers that inhibit our services businesses engaging in across APEC markets.
Enhanced market access for services is central to driving growth across the APEC region. This is especially the case for Australia, where services represent about three-quarters [75 per cent] of our GDP and employ four out of five Australians.
Services account for almost a quarter of Australia's total exports.
But overall, our services sector is primarily oriented towards domestic consumers and producers, with only a relatively small portion of our services output exported.
As such, there is tremendous upside for Australian services businesses.
Services trade has enormous potential to fuel our future growth – if we can boost the competitiveness and international orientation of the sector – and achieve meaningful liberalisation.
To help the Roadmap succeed, Australia has made a $2 million commitment to fund practical capacity-building projects that will enable developing APEC economies to overcome barriers to implementing the Roadmap.
Australia's assistance will help build the capacity of APEC regulators, micro, small and medium enterprises and other institutions to understand and action commitments under the Roadmap.
At home, we are not waiting for APEC to drive progress.
As we committed to do at the last Election, the Turnbull Government has established a Professional Services Mutual Recognition Unit within the Department of Foreign Affairs and Trade.
This Unit provides support to our professional associations and regulators to address behind-the-border barriers and to negotiate the recognition of Australian qualifications and licensing in partner economies.
This initiative will make a practical difference to the access enjoyed by Australian services exporters.
Ladies and gentleman, your outreach to the business, academic and policy communities is a valuable asset to our advocacy agenda.
The Centre's support for Australia's participation in APEC and its advocacy of APEC's objectives has helped us make the most of the forum.
The Turnbull Government will continue to make the case for economic openness, and continue to seek ambitious trade liberalisation outcomes.
We know we must do this to continue our enviable standard of living.