15 JUN 167
VISITL O U1., CANADA AND UK
N3 YORK, U1SA
ADDRESZS TO THE AMEIRICAN/ AUSTRALIAN ASSOCIATION
BY THE PRIME MINISTER, MR. HAROLD HOLT AT THES
RIV*" ER CLUB " TH JUN-i, 1 W7
I want to speak about matters which are of domestic concern to us but
which I believe are also of importance in the relations of your country with
my own. The mou we can devel6p our own economic capacity in the international
field the more we can help strengthen the American position in our area of the
world. I believe it to be an abiding interest of the United States of America, at
the highest policy level, to assist Where it can to strengthen the economy and the
international significance of a staupch ally and friend who can mean so much to
America in our area of the world.
Growth has been our major objective in the field of economic development
and this has been spelled out in terms of people and capital of vision and
enterprise. These things have been our watchwords since the end of Wlorld
W ar 11. Our objective has been to make the nation secure, prosperous, able to
help our less fortunate neighbours and play a proper part in the defense systems
of the free world. Our needs have been people and capital. Our vision has been
reflected in our long-standing relationships with Britain and America and a
recognition of our special regional position in Asia. I have, as many of you
will be aware, just come back from another visit to four countries of Asia wlich
I think it would have been difficult for many heads of government to have taken
as a general peregrination.
Some might have got to one, or to two or to three of them, but it is a
mark of the special position we occupy in that region that I was able to go in all
friendliness and to be warmly received in such diverse countries with such
diverse policies as Cambodia, Laos, Taiwan and Korea. And what I saw there
heartened me tremendously in the vision I have of the kind of Asia which can
develop in the future a vision which I am glad to say your President shares
and in which I believe the other leading members of your administration fully
endorse. The people and capital we. need have been coming but the pressures of the
day are casting some shadows ahead to us. The United Kingdom, for example,
is facing fundamental decisions, both in her economic relationship with Europe
and in her military and strategic dispositions E~ ast of Suez. These are matters
I have already discussed to some degree with Mr. Wilson and with President
Johnson. I will be discussi ng them further with Mr. W., ilson in London next
week. The Australian economy continues to thrive. The grQwth in gross national
product last quarter compared with the corresponding quarter 12 months previoutly
was 13% F. ' ihere had been a rise of about 2-1 per cent in price level over the
period, partly as a result of government decisions increasing charges in various
directions to help finance a growing defence bill. But the net growth, even
taking that into account, remained considerable. The earlier period, however,
to give a balanced picture, had been affected by drought conditions in some parts
of Australia and an increase in farm income between the two periods was from
266 million to 436 million US dollars, an important factor in the rise. But the
increase in non-farm GNP was, nonetheless, very high at 10 per cent. .92/
Vie shall take increasing strength in future years, thanks to the efforts
which many represented heie today are making, from our growing export
returns from quite dramatic mineral discoveries and a lessened requirement
for oil imports if we continue to make useful discoveries of oil and natural gas.
In the week before I left Australia there were five promising new discoveries
three of oil, one was at Roma in Queensland which was estimated to be the
best since the Moonie discovery. More than a thousand miles away, off the
coast of Victoria, the ESSO-BHP people had a strike which, while it has not
yet been fully assessed, is certainly mor promising. And over on the coast
of WTestern Australia, just by Barrow Island, where a well had been sunk on
another island, Pasco Island, there was, again, another very promising
discovery. The other two discoveries were a natural gas strike just a few miles
from the Coast of Victoria closer, indeed, to the shore than the earlier
ESSO-BHP discoveries of natural gas and an important nickel discovery over
in Wlestern Australia by a company in which Anaconda has a substantial
interest. And I mention this as the experience of one particular week. I
don't say we can do that every week, but we have been doing it in enough weeks
over recent years to raise great expectations for us of the strength this will
brin; to our external position.
While the current state of the economy and I speak subject to dry
conditions in some areas which raise a little concern for the season ahead and
the wheat crop represents a generally favourable picture, our national
requirements for defence and for development continue to place heavy
requirements and pressures on domestic resources. Our manpower is fully
employed. The migration inflow continues to be steady with a gross intake
this year of about 140, 000. V; e have had one of our best trading years, with
imports and exports likely to be close to balance.
On the other hand overseas reserves, while still at a comfortable level,
have been falling to some degree as a consequence of a combination of
factors. We have had reduction in the level of capital inflow following the
policies of restraint exercised by the governments of the United Kingdom and
the United States of America and these are our two principal sources of
capital. There is a reduced availability of overseas loan money. What is
available calls for higher rates than we have been accustomed to pay.
The Interest Equalisation Tax continues to irk us and operate against
us quite unreasonably. Wrhile borrowings have been reduced, we have been
repaying loans of the past. Our total government indebtedness to the United
Kingdom for example, is now more than œ stg 100 million less than it was
years ago. And there are overseas guided missile destroyers, submarines and
the F-1ll aircraft.
There are also our overseas disbursements for military aid in respect,
for example, of operations in Vietnam and the contribution we are maling in
Malaysia. We cannot afford a blockage in our growth systems without direcy
affecting our defence capacity and our capacity to give useful aid to others.
Britain and America have provided Australia with most of its capital
since the war and, despite an increased amount generated internally, we
remain a capital importer and are certain to continue that way. Actually
per cent to 90 per cent of our fixed capital investment is generated within
Australia. But it is the remaining 13 per cent which is of great value to us in
opening up new industry and giving us new techniques. 3/
7e understand the reasons why Britain and America have placed restraints
on the outflow of capital. But we do not feel we are asking for special favours
when we ask that you here in America consider some early relaxation of those
restraints. cannot afford to have our defence and aid programme slip out of
gear. And, remember, we have doubled our defence effort in the last four years.
ie are also the third largest aid diver in net termsn per head of population. It is
all given in the form of grants without conditions. There are mutual advantages
for both our countries if our development in these fields continues.
Defence expenditure has more than doubled since 1962-63. It is now running
close to five per cent of gross national product and this percentage is I am
informed only surpassed by the Unite: i 2tates and the United Kingdom, which do
not have our higher rate of population growth and the degree of provision for
housing and other capital works which accompany . that higher rate of population
growth. withhold from consumption a higher percentage of our gross national
product 27 per cent than any other country in the world except Japan.
The impact of your Interest . iqualisation Tax is one exa. mple of a difficulty
which persists for us on the capital market. You have granted exemptions to
Canada and Japan, and we find it difficult to understand why Australia cannot
receive the same benefit. 7. e are actually losing reserves to the United States on
government capital account unless this borrowing is facilitated. Ou r existing
government debt in New York is requiring repayment and interest charges at the
rate of $ UC35 mcillion annually. Australian Government guaranteed corporations
like the airlines and other instrumentalities also owe money in the United States
and their repayment and interec: charges amount to up to an additional $ UG33 m.
a year. These are continuing burdens, and we hope they will be understood
sympathetically. And to get the full picture of our payments out to you, there is
the growing dividend payment from increased United States investments in
Australia and a degree of borrowing inside Australia over recent years by Unite d
Statec corporations which in earlier times were able to turn to their own
borrowing sources in the United States. Co we want these things to be understood
csypathetically and, we hope, acted on appropriately.
Our efforts to strengthen our position externally are frustrated to some
degree not solely by your country by various policies which continue to
operate against us. I've mentioned the interest equalisation tax, on which I
believe vie have strong case. Our country has been a good ally of the United
States none stauncher over recent years. 7e have not looked for a dollar of aid,
but we have looked for a sympathetic and realistic understanding of some of these
problems. In the last 17 years our exports to America have increased by only about
half the increase of our imports from-the United States. To put it another way,
today Australia imports $ US6C. 3-a Iead from America but exports only $ UC31.
a head. In another form and I think this makes the point a little. mrre
3raphically some 12, 03, 33. Australians import 6C. 33 dollars value per head
from you, and some 23, 330, ; 3 Americans import less than 2. 2 dollars per
head from us. And I have not taken into this account the difference in per-capita
income in our two countries which, in 1965 amounted to 3, 502 dollars an
American citizen and 1, S3dollars an Australian citizen. ! hen you take per
capita consumption measured in terms of consumption capacity again the
disparity beco--es all that much wider.
Australia is, in fact, the fastest growing market, I understand, for
American exports. As we grow and develop vie are going to buy more American
goods, and in the defence field as we grow and strecgthen nationally we will be
playing a larger part in the joint policies that we have in our area of the world,
and, indeed, in the international situation generally. 2o you have special
reasons, including self-interest, in supporting our growth.
The United States purchases from us less than half the value ($ US375 m.)
of goods that we purchase from the United States ($ US80C And this
unfavourable balance has been a chronic feature of the trade between our two
countries for many years. VWe feel that on raw wool we have been given a raw
deal. One of the major disappointments of the Kennedy round was that no
American offer to negotiate a 50 per cent reduction in the wool duty emerged,
although we had a very confident expectation from our earlier discussions that
this would be so. Furthermore, the benefit of the reduction in the wool duty from
34 cents a pound to 25-cents which was made in 1947 was quickly impaired two
years later when the United States we having paid our quid pro quo for this
arrangement introduced subsidy arrangements to encourage local production.
America is, in fact, the only industrial country in the world to impose a
duty on this raw wool, and it puzzles me that Australia should have only .1 of
one per cent of its wool enter without this duty when more than 67 per cent of New
Zealand wool enters the United States duty free. And I remind you that I speak
for a staunch United States ally, not an unfriendly power. I might also note
here our position on sugar, dairy products, meat, lead and zinc. These items
comprise 70 per cent of the value of our exports to the United States of America,
but eachof them is currently under threat of some restrictive action or
legislation in America.
These are anxieties in Australia about what the future holds in our trading
relationships in all these commodities. We are watching with keen interest for
the results of the Tariff Commission inquiry into the effects of imports on the
American dairy industry, and into the need for restrictions on dairy products
not at present subject to import quotas. These may be problems lying ahead for
Australia. There are others imminent. The bills before your Congress
proposing restrictive quotas on imports of meat and lead and zinc, and tighter
restrictions on dairy products, would cut us back perhaps by $ UCS0m. in our
present trade if they become law. You will understand the unease in our
industries at this possibility.
A cut-back in meat exports would be a matter of difficulty for us. The
chances of alternative markets for meat exporters if they are restricted further
in the United States are not good, because the only other major world markets
are Britain and the European Economic Community.
There is quite a long history to our meat transactions. It began as a story
of growth by us to meet your need and we were supplying a type of meat which
was not being supplied by the market here, the inferior quality meat for hamburgers
and that sort of thing. Then at your request, we voluntarily limited our meat
exports, but this was soon followed by more A, er ican restrictions. At present
the latest American estimate of 1967 imports is 402, 000 tons being ab out 2, 000
tons below the quota. So no quota applies. However since quotas are imposed
if imports are estimated to exceed a " trigger" point the legislation sets an
effective upper limit on imports. For 1967 this " trigger" point is 444, COO tons,
or 24, 000 tons less than actual imports in 1963 when Australia agreed to restrict
exports voluntarily. This suggests that we are losing ground, and the
uncertainty is disturbing to our industry.
The other field I mentioned lead and zinc also has shadows falling. The
United States is the world's biggest market for lead and zinc and, as such,
directly and indirectly affects all world exporters when restrictions are imposed.
The recent slackening in demand has led to new proposals for the reimposition
of quotas. No-one liked the old quotas, though we accepted them without too
much protest, but if present intentions are carried out the new quotas would be
more permanent and, under the proposed formula as we see it, they could lead
to a progressive reduction in the rate of imports. Our industry considered the
situation so serious that it arranged, for the first time, to submit evidence at
the recent Senate Committee hearing. Spokesmen for the administration
opposed the proposals and for this we are grateful. Rut the Commnittee reported
favourably on the bill and the risk remains.
Another problem I shall mention is sugar. Y.' e would like o feel
that as the world's largest sugar exportr after Cuba ( which, of course, has
been denied access to American markets) we would be in line for more
generous allocations when there were needs arising from short-falls in
supplies against quotas. It is true we gained access to a lucrative
American market when the break with Cuba took place But we did not
take advantage of the 1963-64 world shortage to divert to more lucrative
markets. 7. maintain . d exports to Am rica in excess of '? CO, C00 tons,
thereby foregoing profits elsevihere.
On wheat, I acknowledge with appreciation that th United States
accepted an Australian request regarding the question of ' basing points'
in the recently concluded international VWheat Agreement.
But the overall result, even there, fell disappointingly short of our
earlier stated objectives, and to secure any agreement at all we accepted
the obligation of increasing what had been a voluntary provision of wheat
aid to the extent of 130, ? C tons per annum to a commitment of 225, 00C tons
per annum. Some of the anxieties I have rmentioned may not develop into
hurtful events, but the possibility is there, and in a spirit of frankness and
of friendship, I wanted to tell you how we feel about them. 7 e need
stability in our trading relationships, just as you do. As a good friend, we
prefer to speak about these things while there is still time for consideration,
rather than grumble too much after the event.
THE MIDDLE EAST
Now if I could turn for a fevw minutes to two matters in the
international field.
have never been able to ignore the incessant condition of
tension that has prevailed betvween Israel and the Arab States ever since
Israel came into dxistence as an independent State. But I am sure all of us
hoped it was not going to bring a major resumption of hostilities among those
countries in the immediate area, or bring us a. d others so close to the brink
of involvement as we may have come in the last few days.
7 e have had at least ten years in which these tensions had been kept
under some sort of control, ten years in which many of us had begun to hope
that realism and tolerance, with the help of the United Nations, would
ultimately bring a political settlement of th! s unhappy conflict.
It is all the more depressing, therefore, that a conflagration has
flared again, and in so doing has threatened to spread to the point of
embroiling the great powers, and possibly a great part of the world, either
directly or indirectly.
At this point in time, there is nothing helpful in accusing either side
of having started the trouble. e can only be thankful that the Security Council
has at least managed to agree on a resolution calling for a cease fire. This
was clearly the first thing that had to be done if we , vwre to avoid the prospect
of another " World ar.
6.
There is no disagreement among us all that the first thing to be
done is to stop the fighting. Then we can look again all of us to see
if, together with our friends, and through the United Nations, we can find
ways of making it possible for both sides in this unhappy and long-lasting
confrontation to live together in peace.
Meanwhile, we in Australia are grateful for the unsparing efforts
that the President and the Administration of the United States, and the
Prime Minister and Government of the United Kingdom, together with other
Governments, have made to brin3 the Security Council to a point of
decision. VI ETNAM Cn Vietnam, I do not need to explain at length to this gathering
why we are involved there. The short answer is because the Republic of
Vietnam asked for our help in combating the attacks directed against it
from the Communist regime in the North, and because we saw this
Communist-inspired and direct -d agression as a threat to free people and
small nations small nations in particular everywhere.
V: gave our help because we believe the Republic of Vietnam has
a right to secure the separate, independent status that was granted to it
under the Geneva Agreements of 1934: that is people have a right to choose
their own way of life and be free to pursue with confidence the social and
economic development for which they yearn.
The Communists in the North do not want this: they want to
impose their own communist way of life on South Vietnam. In Australia,
we believe that if the Communists were to succeed in this, then all Nations
in South East Asia would come under the same kind of pressure.
This is the Communists' proclaimed programme of ' National
Liberation". But properly understood, this programme is not national
it is the programme of the Peking brand of international communism. It
does not liberate to produce a free society it operates to produce anoth
satellite in the Communist orbit.
Our aim, therefore, is both defensive and constructive. Wa ew ant to
see the ambitions of people in the new countries of Asia develop their own
new societies, offering the material and social benefits that other modern
societies now enjoy, but preserving their own national and cultural identities.
Neither we nor you are bent on overthrowing the present regime in
North Vietnam. Strongly as we reject the Communist philosophy an society,
we have no aggressive aims against North Vietnam, nor against its neighbour and
supporter, Communist China. Let them work out their destinies free from
our interference. 3ut they must not interfere with others.
No aggressor can expect his bases and communications and his
war-making capacity to remain immune from attack. This would grant him an
unacceptable military advantage, and j eopardise more lives in the villages
and battlefields of the South. It is for these reasons that we in Australia
continue to support strongly limited, controlled and discriminatory military
bombing of selected targets in the North.
7.
The struggle may be long and bitter. 3ut there is progress. The
Military campaign has not been won, but it is now certain that it cannot
be lost. Despite the ravage and destruction of the war there is heartening
evidence of consolidation in South Vietnam of military, political, social
and economic progress.
Air Vice Marshal Ky and his Administration have lasted longer than
most people predicted, and in doing so have made significant gains not only
in the estimation of their people but in the establishment of order and
security. This is further encouragement to us to see out the issue in Vietnam.
hope the end will come soon, but we cannot look forward to
this with any confidence at the present time. The cost of the war in men and
resources falls heavily on South Vietnam and the United Ctatec in particular.
It is costly to my own country. V.' e are as eager as anyone else to end it.
V: e are anxious to see any avenue to a settlement thoroughly explored, to
seize any opportunity that right offer a credible advance to a settlement.
The hard fact, however, is that not only is no settlement in sight,
but the regime in the North shows no inclination at all despite the flurries
of expectation that occur from time to time to be ready to talk of peace.
All efforts, and there have been a number, to open any sort of negotiation
with the North Vietnamese r1eime have completely failed.
I know of nothing new in the diplomatic field that allows us to hope
this situation might soon change. Until it does, we and you have no
alternative but to continue to combat the aggression. V'' e must hope that a
more realistic view of his prospect will lead the a-grssor finally and
we hope in the not too distant future to the negotieting table.