E&OE...........
Well thank you very much Mr Doughty, ladies and gentleman. I want to thank the chamber for the invitation to address it today and I do so against the background of course of a very long and close and deeply embedded bilateral relationship at so many levels between Australia and the United States. And I think it was the great English diarist Dr Johnson who said that we should keep our friendships in good repair. And the friendship between the United States and Australia is no exception to that injunction. And it's never wise to take close relationships, either of a personal nature or indeed relationships between two societies, for granted. And it's always essential that we do, in different ways, build on those relationships. And the American-Australian Association of course is most deeply rooted in the common values that our two societies share.
And when I had the privilege of addressing a joint sitting of the United States Congress in June of this year, I said that there were many things that our societies shared in common. We shared a common belief in individual liberty. We shared a belief that a person';s worth was determined not according to class, or race, religion, or social background, but rather the strength of character of the individual and the contribution that he or she was willing to make to society. I also said that we shared in common two other very important values and one of those was a belief that competitive capitalism was the true foundation of a generation of national wealth. And that is certainly a credo by which my own party, the Liberal Party of Australia, exists and is certainly something that I have endeavoured to defend in the time that I've been Prime Minister.
I want to say something in a moment about the economic relationship between our two countries. But before I do so, it would be unrealistic if I did not address some remarks to the current situation surrounding Iraq and the responsibilities that are falling upon, particularly but not only, the President of the United States and others who are concerned to ensure that a realistic approach is brought to bare on this very challenging issue. Nobody wants a military conflict about anything. I say that unequivocally and unconditionally. And in the past few weeks, I've had the opportunity of talking personally to the British Prime Minister and in a lengthy telephone conversation with the American President. And can I say very deliberately that in relation to both of those gentleman, I was talking to two people who are committed to achieving a peaceful, diplomatic outcome to the current challenge - if that is at all possible. No right-minded person easily contemplates any kind of military conflict and all of our experience tells us that it is something to be avoided, if at all practical and if at all humanly possible.
We do face at the moment an issue that won't go away. History tells us that potential threats don't die of their own volition, they only disappear if appropriate action is taken. And in that context, I want to strongly support the attempts that are now being made by the United States and the United Kingdom to secure the passage through the Security Council of a new resolution, because a new resolution is needed to deal with the problem of Iraq's weapons of mass destruction.
And we've had a perfect demonstration of why a new resolution is needed within the last 24-hours, because we've had an agreement reached between the United Nations weapons inspector and the Iraqis which is faithfully echoing the existing resolution and that is the problem because the agreement that has been reached does not provide unconditional comprehensive access to all potential weapons sites within Iraq. And the reason it doesn't is that it's based on the old resolution and the old resolution has many gaps in it. Part of the agreement that was announced overnight was the exclusion of the so-called presidential sites, there are 8 or 9 of them.
And in case anybody imagines that a presidential site in Iraq is some kind of tiny holiday shack, let me, just for your information, give you an idea. Now, this is an illustration, not my illustration, this is an illustration taken from the dossier tabled in the House of Commons last week by the British Prime Minister, which in turn is based upon the assessments of British intelligence. So, it';s not just a figment of some Downing Street spin doctor. It has been faithfully compiled. In case anybody is wondering what that red spot is, that';s Buckingham Palace. There';s the presidential site and this is Buckingham Palace, appropriately in old Empire red, which gives you an idea of how big this particular presidential site really is. There are apparently eight or nine of them, and I';m not saying they';re all that big. It gives you an idea of how big that one is.
Now you take those out of the weapons inspection regime and you don';t have - to use an old Australian expression - you don';t have a fair dinkum inspection. And that is why the President is quite rightly, with the support of the British and many others including Australia, that is why the Americans and others are calling for the passing of a new resolution. And in fairness to the weapons inspectors, they can only operate under the existing resolutions of the Security Council. And that is why it is necessary that efforts continue to get a new resolution.
Now this is a difficult issue. We';d all like it to go away. We';d all like to wake up tomorrow morning and find that it had miraculously disappeared. But unfortunately life is not quite as simple as that, and it has to be dealt with in a very painstaking, systematic, serious fashion. And we here in Australia, difficult though the situation is, very strongly support the approach that has been taken by the United States and the British Government.
And I think it is important that we acknowledge the responsibilities that are carried by the United States Administration. It';s very easy to be critical of the strongest country in the world. It';s very easy to be critical of the understandable sensitivity that is felt within the United States on this issue. But there are many reasons why America is taking the stance she is. Not least of course is the greater sense of vulnerability that country very understandably feels as a result of the attacks of the 11th of September last year, because they have introduced into world security consideration a new hitherto unimaginable dimension. Because however much we may look back and try and rationalise what our state of mind may have been before that event, if people are honest to themselves they will accept that not many of us imagined that something like that would ever happen. And it having happened, it is now very understandable that nations should factor in to their national security arrangements a capacity to safeguard against and where possible and where appropriate, prevent the occurrence in advance of indiscriminate terrorist attacks orchestrated from abroad.
Ladies and gentlemen, over the weeks and months ahead it is important that we carefully assess and take the decisions that ultimately of course here in Australia will be governed by our assessment of this country';s national interest. And this country';s national interests are never served in my view by walking away from international realities. This country';s national interests are never served by separating ourselves without proper reason from those countries whose values and whose view of life is similar to our own. And that naturally includes amongst many other countries, the United States and the United Kingdom.
So much then my friends for the international situation which is understandably occupying the minds of so many of us. But it is important I say a few things about the economic linkages between Australia and the United States. And I say that against the background of being Prime Minister of a country whose economy is performing probably better than most, if not all developed countries in the world at present. And that strong economic performance has not been accidental. It has been the product of reform carried out in many areas over the last 15 or 20 years in Australia.
And what in particular has happened in the last five and a half years in Australia is that we have had underlined to us that Australia has very close and enduring economic linkages with what I call the three economic constellations of the world. That';s the Asia Pacific region, Europe and North America. It is self-evident to any Australian, and indeed to any American living in Australia or doing business with Australia, how important the Asian Pacific region is to us. Only a few weeks ago we were successful in obtaining the largest ever trade deal that this country will sign and that is the natural gas deal with China, which is a very important symbol of the close relationship that we have developed, despite our different histories and our different cultures, the close relationship we';ve developed with China. That underlines graphically the importance of the Asian connection.
But as I have stressed continuously since I became Prime Minister in March of 1996, our policy is one not of, when it comes to economic and other issues, of Asia first but not Asia only, and that we do have very important links with Europe and the United States of an economic nature as well as of course, as you all know, of a political, cultural and historic character.
And the significance of those economic links was illustrated in 1997 when the Asian economic downturn overwhelmed most of the countries of our region, it didn';t overwhelm Australia. And one of the reasons it didn';t overwhelm Australia was that we were able to shift so much of our economic activity and our export performance to the countries of North America and of Europe. And one of the reasons that we were in turn able to do this is that we have an improved capacity because of economic reform to participate in the process of globalisation. When you look back at the Australian economy of 20 years ago and you reflect upon the way in which we have been able to change and reform to marshal the benefits of globalisation it is a very strong and a very compelling story. The floating of the exchange rate and the dismantling of exchange controls were an important component in that regard. I mean the flexible exchange rate, the way we were able to take the adjustment on our exchange rate in 1997 and 1998 was one of the reasons that we were able to ride out the Asian economic downturn.
The members of this chamber will be well aware of the important commercial links that exist between Australia and the United States. The United States is our second largest trading partner and it provides our largest source of imports. But of growing economic interest and importance apart from those trade flows is the growing importance of the investment flows between our two countries. We remain as you all know a net capital importer. That';s consistent with our historic experience of attracting overseas funds not only from the United States but also very much from Britain and after World War II from Japan to exploit local investment opportunities. And a very significant feature of Australia';s recent economic performance has been a marked increase in the level of direct investment abroad by Australian companies. You may not know that Australian direct investment abroad is now greater than direct foreign investment in Australia and this is occurring as highly efficient Australian companies go elsewhere. And recent ABS data shows that the bulk of foreign direct investment by Australian firms is into the United States. Direct investment by Australian companies in the US at June 2001 was $95 billion, or 55 per cent of total direct foreign investment from this country. The second most important was the United Kingdom at almost $30 billion, less than one-third of the total direct foreign investment from this country to the United States. Your Chairman has already mentioned the importance of the Social Security agreement and most significantly the importance of the double-taxation renegotiation which was completed last year and has removed some very important impediments that existed between the two countries. The review of Australia';s international taxation system is currently underway and it';s examining issues relevant to Australia as a location for international entities. So already we have a solid base of economic linkages. And they are linkages which are very much of the present and the future as well as linkages of the past. We are not looking at an economic relationship which is slowly disappearing over the horizon. Rather we';re looking at an economic relationship which looks more to the future than it does to the past. And that is why my Government has committed itself very strongly to exploring the possibility of negotiating a free trade agreement between Australia and the United States. I don';t make the claim that it';s going to be realised and I acknowledge up front that it';s going to be very difficult. There are clashing interests, sectoral interests, agricultural to start with. The American farmer is highly protected, highly subsidised and by Australian standards very pampered, and that is a reality. And there will be a strong resistance at a political level in the United States for many people against any kind of arrangement that assists in changing that situation.
And to give you an illustration if you think my language is exaggerated, the value of assistance to the Australian farmer as a percentage of annual production is four per cent, is Europe it's 35 per cent and in the United States it';s 22 per cent. And in Japan it';s also very high but I';ve forgotten the figure. Now you can understand against that background the sensitivity of Australian farmers when we start talking about a free trade agreement. And I';ve made it very clear to them and I repeat it today that we are not going to bargain away the interests of Australian farmers in any free trade negotiation with the United States. And if it becomes impossible to achieve that agreement without sacrificing the interests of Australian farmers, well we won';t be signing the agreement because Australian farmers are an important part of the Australian society, they';re an important part of the Australian economy and they are also by world standards a very efficient and a very lowly protected industry sector.
But despite all of those formidable barriers that we should recognise up front the stakes are very high because if we could negotiate a free trade agreement between our two countries, on a proper basis, there would be enormous economic and other benefits to flow. Studies have shown that there would been tremendous boosts to the GDPs, particularly of Australia but also of the United States, if we were able to achieve further tariff and non-tariff reductions. And the indirect benefits of greater facilitation of investment would also be very significant.
Now it';s going to be a very long journey and it may not reach the destination and we should be realistic about its prospects up front. But I believe that there is political will on the part of the Administration and there are certainly political will so far as Australia is concerned. But we have to understand as we travel that path that we are looking here about trying to achieve a commercial agreement that is in the economic interests of our two countries. I';m often asked, particularly at the present time, about the interrelationship between political and economic alliances. I have to say in very direct and practical terms that I don';t trade the two off. This country takes a stand in relation to international issues, according to our assessment of the values at stake and the strategic interests at stake. When it comes to economic negotiation I recognise the inherent self-interest of all industry sectors in all countries, including the United States and including Australia. And we';ve got to be hard headed and we';ve got to be pragmatic. But having said that I think there is a sentiment in the business communities of both countries to work as hard as possible to achieve a free trade agreement. When I was in New York at the beginning of this year at the meeting of the World Economic Forum, the Australian Ambassador and the United States got together 40 of the leading business figures in the United States for a morning discussion about the prospect of free trade agreement. And there';s certainly an industry and in the financial community very strong support in the United States, and I would encourage all of you who have linkages into industry leadership in the United States to do what you can inside your own organisations to promote the cause. Because it will meet a lot of domestic political opposition in the United States, there are interest groups that will be feel threatened, understandably, particularly in the rural sector, and they will need to be argued against and advocated against by those who see some of the longer term interests.
So ladies and gentlemen the relationship as I said at the beginning of my remarks is one deeply embedded in history, it';s deeply embedded in the experience of our two societies over a long period of time. And it';s certainly been given the lively expression here in Australia through the investment and the involvement of American companies and as a result of Americans in Australian business life and culture and in the broader Australian community. It is a cliche to say that we live in a highly globalised world and a world that is much smaller in so many ways than what it was, even 20 years ago. But despite those developments, despite the greater globalisations, despite the shrinking of the world, it nonetheless remains the case that there are some societies that are closer and share more values in common than others. And when I think of the countries with which Australia relates most easily and most readily and most naturally, one automatically thinks amongst others of the United States. And in the end it is about values and about an attitude to life more than anything else. You can have your disagreements on trade, on economics, on politics, you can even play very different sports on occasions and have all sorts of other differences, but in the end the thing that holds nations together more than anything else is a common view of what is right and wrong and a common set of values. And in the long history of our two countries it';s those values and that common assessment of what is right and what is wrong and when it is right and appropriate to take a stand that had mattered most. And no two countries have shared values more closely over the years than have Australia and the United States. And I believe that will continue to be the case in the future.
And I want to thank all of you who';ve made a contribution to the Australian economy, to the great success story of the Australian economy, I won';t go into any more detail about that because I might detain you a little too long. But can I say that the investment flows from the United States, the commitment of so many American companies and personnel to this nation of ours has played a very significant role in the economic achievements of the past few years. And I want to record my thanks to all of you for that, I want to congratulate the Chamber for the contribution I know it is making to the strength of the bilateral relationship, particularly at an economic and business level.
Thank you.
[ends]