TRANSCRIPT OF ADDRESS BY THE ACTING PRIME MrINISTER AND
-AINISTER FOR TRADE AND INDUSTRY, MR. J. McEWEN,
AT THE NATIONAL PRESS CLUB LUNCHEON,
CANBERRA, 1st JUNE, 1967
Index Foreign Exchange Vital
The Kennedy Round
Wheat Other Products
Gains and Losses
Questions Page
TRANSCRIPT OF ADDRESS BY THE ACTING PRIME MINISTER AND MINISTER
FOR TRADE AND INDU . MSRT L JHNMW70
NAT ION AL PRESSWCLUB LUN RE ON2 CgAN BERRA
I am just back from the Kennedy Round discussions
and negotiations and these will represent the subject matter to
which I address myself today. These were interesting and important
in themselves but with possibilities and repercussions that not
everyone quite realises.
I thought that before I turn to speak to you of some
of the facts and aspects of the Kennedy Round, I might make a few
general observations of our trading circumstances that would bring
the Kennedy Round and he possibility of Britain joining the
Common Market into what I believe to be the correct perspective of
importance. FOREIGN EXCHANGE VITAL
Australia s a major trading nation. For us our balance
of payments are of tremendous importance to our economic growth.
Over the last 10 years our growth in Australia has
meant we have been geared to import requirements of about 13% of
our gross national product -a quite u~ nusually high percentage of
imports. In terms of current prices this means imports valued
at just over $ 2,800 million, to which must be added a bill for the
so-called invisible items such as freight, dividends, royalties, etc.
now in excess of a further $ 1,400 million.
We cannot develop without earning foreign exchange to
pay for these imports and essential services which are basic to
our development and which now are running at the combined level of
., s4,2OO mil. In 1965/ 66 exports and other invisible earnings
provided almost 80% of our foreign exchange requirements. The
rest came from the essential element of capital inflow Government
borrowings and private capital flowing in.
However, experience has shown this capital inflow to
be a fairly unpredictable element in our growth requirements. For
example, in 1965/ 66 we had a high level of capital inflow amounting
to $ 938 mil. whereas THIS YEAR we look like receiving ONLY HALF
this amount.\
Growth we must have and indeed growth we will have.
iff we are to achieve something approaching a
growth rate on average between now and the mid-1970' s, it is
reasonable to expect that expenditure on imports alone to meet
the demands of this growth could well be of the order of $ 4,700 mil.
compared with $ 2,800 mil. in 1965/ 66. This means that we can
contemplate a rise of exchange to pay for imports of 6% each year.
Allowing for capital inflow at a reasonable level,
by the mid-1970' s exports will need to be earning $ 5,000 mil. a
year to cover their share of our overall foreign exchange requirements.
I recount these figures to place in its proper
perspective the importance of the role of export earnings.
As a nation we will grow in strength, or we will
wither according to the adequacy of our export earnings. It is
against this that I propose with you to have a look at the
Kennedy Round.
THE KIENNEDY ROUND The basic aim of the Kennedy Roundwas to obtain a
significant reduction of trade barrier-s by wqy of an across-theboard
cut in tar-iffs and concurrently a reduction in non-tariff
barriers. Australia's tariff making policy with the Tariff
Board is designed to give sufficient protection to Austrialian
industries, but the whole concept of the Tariff Board is not less
importantly to avoid giving excess protection to our industries,
Clearly a proposal to cut all our protective tariffs
by 50% is a proposal that ould be completely destructive of the
Australian economy and entirely unacceptable.
So at the first Ministerial meeting of the Kennedy
Round in 1963 I had a fierce and long battle at Geneva to have
Australia absolved from the 50% cut and to have it accepted that
Australia should pay in tariff reductions only that which would
equitably reflect the advantages gained in the dismantling of nontariff
barriers to our major exports.
For the first time in negotiations in G. A. T. T. we
had the prospect of meagingful negotiations on the bulk commoditieswheat
and the coarse grains, meat, butter and cheese where the
tariff is of relatively minor importance. The real barriers here
are devices such as quotas and variable levies.
These were the objecl'-ives and opportunities presented
by the Kennedy Round. How does the outcome measure up?
A -i -: comont ñ li n. be es,: e wvith-f I rIa
. a CC u a C. QiLg thle asic ciemcntaS of Ogemewre rrece
in th,: niLdI css. i oni waih ded on M~ ay 1 6th; iL will be some
w'? ks etbefoz-e the actual 0* KCcohlnsoo esziofs will be
f rJ. aLis e d It %, ril] e -en latcy' ho& t.-iey al,? publ. ished,
. YLOJ", dmn
K ? gi; 7c~ Lr:! wee -ie rn&) t v:. ce Lrnd he: sive ever
unerak,.-ii. A2. r-ot 50 co~'' m: c rizg _, or ab~ t80 of
wvorld tx-. ade acp d
L. esot. ce c: 1.4rff CU3averag-ing
~ bIt3% or, ao atd L0io 0n1 3.. r~ tep eC -t.
Tn n-rb.. dyl CDprg CDr .11
n~ wc2 . n -1 j-Cf>, r-o j' Io L cen gl f
1, C, u Ir. 1 1 Y, . icl h
Cr,-P .0,. 2/ 10i1n 9\ 7 ab ~ F:, icd an. E;
thee a S~~ i
II> 3 C. 3il0S''. O r> h2tf. C -Ina4 if the
i~ more id2 Sfd uo a C. ri' : ccitlsoeJ lrf was profitable
> j: nd a t Sa:. e rii rs 1' e u a ale-s v/ oal2d be at
hig9her -p irL as tu-he e i -I. Prt era w . JLJJd, Lecrn committin g
LtI. ems el' uo s Ko a~ n a -erno. n i-L rit e uicc:--whi: ch oive:'-a
2. ri od wculd, lhove Dek-tiro Ic e~ c-i: vpoi t ab I~-
TheTr, m ig'n Lc e 4 il. s hrigher ' L-r~ p2 a-ct'-ual
mia rk et-V p r-; c -s j. r 19 6' 1! 0 cr d i 1~ 56 4./" G-5 ct prices ca be
expected to flutute L abCve -the. new : ni' pun ch as the . y have done
during the cuircncy of er: x ar~' lnS
aC. Ce0 2 ' age le vzl-> 2c;-uarkc--; pri-, es -brov. e the
midnimum cunnot, of coir--e', L c4: TCfo., cas--9u'ft there can
be no doubt-th;-at the S-4-Zn7 iCYeIj. : ~ i. h ivr.~ ap. L
But there can be no doubt that the substantial increase in the
minimum price should move average market prices much nearer to
remunerative levels than in the past.
One aspect of the new agreement which makes it
better than the old agreement is that minimum prices have now been
prescribed for a wide range of different wheats.
. This will ensure that floor prices are much more
effective than in the previous agreements, where the minimum price
applied only to the highest quality wheat traded leaving great
scope for fluctuations of the discount differential for all
other wheats. In the judgment of some experts at Geneva, and
they were there from the exporting countries and the importing
countries, the increase in the average commerfial price of wheat
expected to result from the higher floor price should be, these
experts say, as muzch as 8 to 16 US cents per bushel.
If this is the case, the gain to Australia in
foreign exchange from an export of, say, 300 million bushels, a
year, and thats about the average of the last three years, would
be from $ US 24 million a year to $ US 48 million a year.
In addition we have obtained for the first time,
the commitment of affluent importing countries such as the United
Kingdom, Japan and the European Economic Community to accept
joint responsibilitity for providing food aid to the developing
countries. Australia has in practice extended its food aid in
the form of wheat. She now accepts with the other countires a
contractual commitment to provide wheat as food aid to the
extent of 225,000 tons a year in a total programme of 4-J metric
tons a year.
In these various respects our export trade will be
more profitable,. our access to markets more secure. Affluent
countries will share with us the cost of wheat aid to the needy,
and in general our competitive position in world markets has
been preserved and improved.
OTHER PRODUCTS The whole thing is not ruled off yet but the
United States, for domestic reasons, is under compulsion to conclude
its negotiations to a very strict timetable. Other countries
are not under exactly the same pressure. For this reason our
negotiations with certain important other countries are not yet
quite finalised. In the case of some of these countries we are
confident that satisfactory arrangements covering a variety of
products will be successfully concluded but these cannot be
described at this stage as finalised.
On 1 -Pfm r-' nd veal we expect to finalise arrangements
which will improve our access to important markets such as the
Euro pean Economic Community and Japan.
Our industry will benefit not only from greater and
more predictable access to these markets but the new airangements
will reduce th4 possibility of having to divert meat -to some
other markets such as the United Kingdom and the U. S. A.
Important negotiations are still going on with the
European Economic Commnity, On beef and veal the E. E. C. has
declared its willingness to reduce -the Community tarifi' from
to 16%; but more importantly than that, over 5 months of the
year, to permit imports free of the import levy which might otherwise
have been imposed during that period, and which can make pale
into insignificance the cut in duties.
This concession should really open up the Common
Market for Australian frozen beef and veal in our peak selling
season. Also there are a number of other products such as
honey, beef offals and tallow where there will be reduced tariffs
on Australian exports to the EEC, which is a most important market
for these products. In the case of Japan discussions have taken place in
the hope of securing improved access to that market. The results
of these discussions have been quite encouraging. The present
duty on sheep meats and beef offals will also be reduced.
Out of this I see these negotiations as having opened
up a much better, and quite worthwhile opportunity for expansion
in the export of all our meat products to Japan.
We also have from Japan an undertaking that some of
our most important exports to Japan wool, coal, iron ore and
hides and skins are to be assured duty free entry in the future.
In a number of other markets important for
particular products we also expect to make gains apples and
pears into Swe( den and Denmark, reduced duties on wool and zinc
ores into Norway and many others. The full extent of such
concessions cannot yet be catalogued.
We launched a campaign in 1961 to develop an export
consciousness amongst manufacturers.
Since then there has been an annual increase in the
export of manufactured goods of about 20% per annum. The current
rate of export of manufactured goods is more than double what it
was 5 years ago. Our manufactured exports will consequent upon the
Kennedy Round, benefit from the tariff cuts agreed amongst the
large industrialised countries. The concept is that concessions
given to one are given to all.
On the other hand, and as a result of the negotiations,
some of our preferences in markets such as the United Kingdom and
Canada will be affected.
GAINS AND LOSSES There have been gains and losses for Australia as a
result of the Kennedy Round,
In the case of the United Kingdom we face the
prospect of a cut of in our present preferences on raisins,
sultanas and currants, canned peaches, canned apricots ( but not
canned pears) canned pineapples, unmilled rice and leather, and
perhaps some other less important items.
This is the outcome of the United Kingdom from the
outset offering a 50% cut in all her tariffs. It didn't eventuate
but their position never altered in respect of the items I just
mentioned. The original objectives of the Kennedy Round have not
been fully achieved. There was no success in the attempt to write
a world agreement on dairy products. However, the significant
importers of the major dairy product, butter, are so few in
num~ ber that the door is not closed against bilateral discussions on
this item. Sugar is one of cur great export items, but
-practically every sugar exporting country is a developing country.
These countries have decided to negotiate a Sugar Agreement within
the organisation of not within the organisation of
G. A. T. T. So it was never a matter up for negotiation in the
Kennedy Round. However, there will be a world sugar conference, under
the auspices of U. N. C. T. A. D. later this year.
At this stage we have not secured anything on wool
in the United States market.
Overall, there is no doubt the net results of the
Kennedy Round will have been generally beneficial to Australia and
to the world at large.
When our gains have been evaluated we will be making
payments from selected items in our tariff. Let me describe this,
such payment on our part will have been made without in any way
undermining necessary protection of our domestic industries.
Over quite a major part of Australian imports, the
tariff to date has been free for British Preferential imports with a
nominal non-protective Most Favoured Nation duty on imports from
other sources. These m. f. n. duties wilibe eliminated over quite a
wide range of products, as our preferences in Britain have been
halved over a number of products. In addition some protective
tariffs have been reduced, will be reduced, where the Tariff Board,
being asked has found that a reduction in t~ e m. f. n. rate of duty
was justified. For some other items, there will be a reduction in the
margin between the British Prefcorontial Tariff and the m. f. n. tariff,
again without impairing the protection for Australian industry.
These are the types of concessions which Australia
is making, and with which we will pay for the advantages we have
gained. Of course, until the negotiations are complete the
individual concessions on offer cannot be revealed.
So much for the Kennedy Round.
Time, I think, does not permit me to go, in detail, into
a discussion of what may occur as a result of Britain's application
to join the Common Market, but you have a question time. But let
me say this, in respect of Britain's application to join the
Common Market. Before she made the earlier application she went into
close consaltation with the Common Market countries, describing the
circumstances of her trading contractual commitments to countries
like Australia. Jointly they looked at what would be the effect of Britain
joining under the Treaty of Rome and what, if anything, could be done
to ameliorate the impact upon countries like Australia.
Out of that examination in 1962 Britain and the European
Co~ mmunity issued a statement that, if Britain should join, then for
the major items of world commodity trade world agreements would have
to be relied upon to safeguard the interests of those who had
hitherto depended on the historic terms of access to the British
market world commodity agreements.
The fact that in Geneva it was not possible to achieve
world commodity agreements on other than wheat leaves me with' little
confidence that we could rely upon the early conclusion of worthwhile
world commodity agreements as an alternative to our present
marketing arrangements in Britain.
All thinking Australians will follow developments in
Europe closely over the next few months. It's still too early
to say whether the British application will succeed. But we have
been served notice as a nation not to rest on our laurels nor to
rely too heavily on existing marketing arrangements With Britain.
These recent events must act as a spur to Australia
to-seek out new markets as a hedge against the future. The
Commonwealth Government will do all in its power, and the Trade
Department as its instrument, to assist, but ultimately success
will depend on the initiative of individual industries and
individual traders.
What I've been seeking to say is that, with our dreams
of expansion that we have and the actuality of our fast growth,
there is one essential ingredient to growth, and that is command
of adequate resources of foreign exchange. And that, given the
most favourable circumstances of raising exchange other than by
selling goods at export, you still depend to the extent of
for your requirements on the sale of exports, the sale of export
goods. We must be efficient at home, we must be active at
home; but above all, we must have the right to sell. The days
were when one produced. something one could take it out and sell
it at best. To-day the world is full of countries who say, no,
we won't receive that item at all, we won't receive this item
without something like 100% tariff, we won't receive that item
except to the extent that we can't produce it at any old cost
ourselves. What we've been trying to do is to negotiate a way
through the totality of these obstructions to our opportunity
to earn the wherewithal to pay for the growth that we all insist
on having. We've had a bruise or two in this in the items that
I have mentioned, but over-all there are distinct, identifiable
gains for Australia and a new level of predictability in our
trading opportunities for the future.
-oOo-
QUESTIONS: Mr. Wood: Mr. Minister, I wonder if you can give us some
specific idea of the size and composition of the parcel of industrial
tariff cuts we' re offering Japan. And could you also comment
further on the proposed review of the U. K./ Australia trade treaty
which you mentioned on Friday?
Mr. McEwen: Well, in the nature of things, first of all let me say
whatever is offered to one country, if accepted, becomes agailable to
all. This is the essence of the thing. But to indicate that we've
offered to reduce a duty on an item would be completely dislocating
to normal trading. Th'is is one of the trade secrets. It's never
done.
Mr. Samuel: Mr. McEwen, you referred to the silliness of other
countries producing things at any old cost with tariffs of 100%.
I wonder if you've had time to look at the speech of Mr. Rattigan,
the Chairman of the Tariff Board. He referred rather critically in
many ways to the traditional appraach of both the Government and the
Board itself to tariff matters. One of the things he suggested was
that industries which were very high cost and required very high
tariff protection should be encouraged to phase out their production
over a period of time. I wonder if you've any comments on that?
Mr. McEwen; Well, now, you expect accuracy from me and I expect
it from you. I referred to the " silliness" of other countries
doing this? I did no such thing. I referred to the fact of it,
and it is a fact. I haven't read Mir. Rattigan's speech, but Mr.
Rattigan is the Chairman of the Tariff Board, a man whom I have
immense respect for. He was the Deputy Secretary of the Department
of Trade and we're personal friends. He expresses his views. If
he were expressing a proposal to the Government I'm sure he would
address himself to me. He's not done so. When Mr. Rattigan
addresses himself to me, when the Tariff Board addresses itself to
me, then I'll take this up and study it quite carefully. But
the position is that we make no tariff alterations in this country
except on the advice of the Tariff Board, and the occasions when we
don't act completely in accordance with the advice of th.; Tariff
Board are very few indeed. And when we do depart from thie advice of
the Taiiff Board we explain why we departed from the advi. ce. I don't
know wy other country on earth which doesn't alter its , ariffs
exnept by having a public inquiry in which all interested parties
in its own country are free to go and give evidence in favour or
agairst, and in which every foreigner in the world who thinks he's
interested is equally free to go along and give his evidence.
Australian tariff-making is as clean and as open as anywhere on
earth. And the Government acts on the advice of this body,
or acts with the advioe, and
mostly upon the advice of this Body. If the Tariff Board, or Mr.
Rattigan as its Chairman, felt that there was aneed for us to
depart in our policy-making, I'm sure they would suggest it to ma.
If they thought there was a need for a review of some existing tariffs,
I'm sure they would suggest it to me. This has not been done.
If, on the other hand, there are interested parties in Australia
who feel that some tariff is too high and that it ought to be
reviewed, they are equally free to make a request to me to have a
Tariff Board hearing not for the purpose which is normal, to
consider whether the tariff ought to be increased, but for the
purpose important to them in the contingency I speak of, of
examining whether the tariff should be reduced. There's nothing
that isn't wide out in the open of what is done in tariff-making.
Therc's nothing in our tariff-making that doesn't preserve entire
opportunity for the Tariff Board and all the interested parties to
make proposals to the Government and when a hearing is on for all
foreigners to go to the Tariff Board and make their proposals,
Mr. Catmull: Sir, what do you feel Britain's chances are of
succeeding in its application to join the Common Market?
11.
Mr. MoEwen: Quite frankly, I'm completely incompetent to answer
that question. I don't know.
Mr. Wood: Sir, as a follow-up to the question just before that
one, you say the Board has to get its reference from you,
could you give us some idea of when you'll be meeting the Tariff
Board, and are you still considering the idea of part-time Board
members?
Mr. McEwen: Just before I was going overseas Mr. Rattigan got in
touch with me and suggested to me that, in the opinion of himself
and the Board, it would be useful if we had a meeting I think
he used the word " informal", and I think, over a luncheon. I
instantly agreed to that. This will be when it comes off, my third
meeting with the Tariff Board in eleven years, so I don't stand
over them very much.
As to the question of part-time Board members, I made
a statement in Parliament explaining what prompted me to canvass
this thought and to consult, as I've always done is my ministerial
career, people who had an interested view on this kind of thing.
There was not much support for it, and that might be overstating it.
But whether as a result or not, I don't know, but I had at about
that time a letter from Mr. Rattigan explaining to me in convincing
terms that there were now circumstances in which the Board would be
in the future able to deal more expeditiously, have a greater
throughput of work, than had been the history over the recent
several years. And I accept this as a correct judgment. I think
that probably disposes of the matter.
Mr. Connors: Mr. Minister, Russia, who is a major member of the
International Wheat Agreement, was not present at the G. A. T. T. for
any of the current negotiations. Russia has been a major importer
in the past, and I believe, according to a B. A. E. report, that
she may be an exporter around 1970 or something like that. I was
wondering has Russia given any indication that she is agreeable to
what was negotiated at Geneva?
12
Mr. MoEwen: No, I'm not aware of Russia indicating this at all.
What was agreed at Geneva is not fulfilled yet. There needs to be
legislation or the approval of~ Governments in all the countries: who
are concerned. I've no doubt this will occur. When this is done,
then I would imagine it may be fruitful at that point of time to
sound the Russian reaction, but Russia has never been a disruptive
influence in recent years as an exporter of wheat and the Agreement
itself commits all the traditional exporters of wheat to not sell
below the prescribed minimum, and I don-It think that Russia will be
a dislocating factor in the scheme.
Mr. WNood: Another one, Mr. McEwen. Do you have any specific
evidence, historic or otherwise, to support your contention that a
rise in the minimum price for wheat will lead to a rise in the
world price?
Mr. McEwen: Only what I mentioned. That is, that over the wh~ le
history of minimum price, sales have been more often than not above
the prescribed minimum price. P7irst point. The second point T
said and this is not my own judgment but the judgment of the
people who are engaged in their life in wheat transactions who were
there as advisers to the delegations, to every important delegation
at Geneva, the Americans, the Canadians, the Australians, Argentina,
the delegations of all the major importing countries in each
case it was accepted that the new and higher minimum price would
lead to a higher general commercial level. There were various
views. I know of no view expressed that the commercial level could
be expected to be less than 7ff cents above the prescribed minimum.
I tended to round that off in my speech to 8 cents. Others ventured
an opinion, 16 cents and one who spoke with considerable authority
said he though it would be 20 cents above. This is nct my view.
I can only Taote to you, and that's all I sought to do in my
speech, the expressed views of experts.
Mr. Baudino: Mr. McEwen, if I could just changre the topic. In the
past you have been a critic of the principle of " one vote, one
value" in Australia. Redistribution has reared again at the
moment. Do you still subscribe to this?
Mr. McEvqen; Well, first of all I have never been a critic of the
principle of " one vote, one value". I have been a defender of the law
which has stood since 1900, 19012 which this is on the subject
you're mentioning, I'm sure stipulates that in electorates I
can't bring to my mind the description, but you'll know what I'm
talking about and its's there in the Law electorates where there
are vast areas, sparse population, population of different interests,
that the Electoral Commissioner shall have the right in proposing
boundaries to propose boundaries which would result in a differential
in numbers 20% above the mean or 20% below the mean. If this has
been a good law in this country for 60-odd years I've defended it.
I still think it's a gooa law. Was there another part of your
question that escaped me? No.
Mr. Hutchinson: I might intervene one on the same question, Sir.
Do you think that the difficulties of redistribution posed by the
fact that, as a result of the referendum, the Constitution will not
be amended and therefore the Parliament cannot be enlarged, do you
think those difficulties are surmountable?
Mr. Mcawen: I don't think there have ever been any difficulties
about redistribution. There was a challenge by me and my Party to
a particular proposal, which, let me remind you in one aspoct,
would have taken the State of Western Australia where for many
years the Country Party has provided about half the Government
and the Deputy Premier, and is very strong; a redistribution proposal
that would have drawn lines impossible for my Party to win one
seat in Western Australia, and by general agreement impossible for
the Labor Party to win more than one seat in Western Australia.
And the State of Western Australia, which is a third area of
Australia, to have its nine Members reduced to eight. This'll do
me for an illustration of what I objected to in that proposal,
14.
which was thrown out. But from the day that it was thrown out
I have believed that there was no reason why the Government
shouldn't have gone ahead next day and reappointed Electoral
Coinmissiooiers to make a new proposal. How long ago's that? I
don't remember, but it's a good few years. : 62? 1 think in ' 62
we could have had a redistribution, and in ' 67, before the
referendum or after the referendum, we can have a redistribution,
and we ought to.
Mr. Hurst: Mr. McEwen, in your absence abroad your Government
has had its troubles in the Senate. Could you give us your
personal view on this? Do you think there's any, there is a case
for changing the Senate, or do you feel that it should be abolished?
Mr. McEwenj: Oh, look here now, be your age. No comment.
Mr. Long: Sir, when you were oerseas did you have qn opportunity
to discuss with anyone the idea of the proposed Industry Development
Corporation, and, if so, what was their reaction to this?
Mr. MoEwen: Nlo, I'm afraid the simple answer is that I did not have
an opportunity, or didn't seek an opportunity, to discuss this.
I had a pretty big job on my hand and I concentrated on that.