Federal Republic of Germany
Speech by the President of the Federation of German Industry,
Dr Guenther Sohl, on the occasion of informal discussions with the
Prime Minister of Australia in Cologne on 16 January 1975
It is a special honour for me to welcome you, Mr
Prime Minister and the gentlemen of your team,
here at the House of German Industry.
As President of the Federation of German
Industry and on behalf of the representatives of
the German economy gathered together here,
I offer you a very warm welcome.
I wish to thank you for your readiness to undertake
this informal exchange of views, and in
order to leave as much time as possible for discussion
I shall confine myself to some brief
words of introduction.
Many of the gentlemen present in this circle
know your country at first-hand-as indeed I
myself do. The tremendous riches of the Australian
continent, above all in natural resources-
a most enviable asset in today's raw
material situation-is known in German economic
circles, and valued accordingly.
Developments in the past year have made it
clear to all of us that we must in future utilise our
available resources in a more careful and
rational manner than hitherto. The energy crisis
which co-incided with a scarcely controlled
bout of worldwide inflation and further aggravated
this phenomenon, has created problems
for the world economy which individual nations
can no longer master alone.
Australia is, admittedly, largely independent
from importing energy and other important raw
materials. At any rate it is less dependent than
most other industrial nations. But a collapse of
the existing world trading system with a retreat
into nationalism would hit the entire world
economy and call into question advantages already achieved through international cooperation.
If this is to be avoided, then in my
opinion only the co-operation of all nations participating
in the international economic process
can lead us out of the present situation.
A high degree of co-operation already exists
between Australia and the Federal Republic.
However, up to now this has been confined primarily
to an exchange of investment goods from
the Federal Republic against raw materials
which we obtain from Australia. Just last year
there was a marked expansion in German-
Australian trade. It is pleasing to note that both
our countries pursue a liberal foreign policy.
Free access to world markets is of vital importance
equally to Australia and to the Federal
Republic. In our own interest we should
endeavour to maintain and strenghten the system
of free world trade based on GATT.
Admittedly, the European action in banning
imports of beef, which affects Australia, is a blot
on the picture of free trade. I can as3ure you that
there is little support for this measure in the
German business community. At the same
time, however, German exporters are concerned
about certain tendencies in Australia to
protect some industrial sectors either by tariff
increases or, in some cases, by import restrictions
against foreign competition. From the experience
of German industry over the past decade
I can only say that a wider access for foreign
competitors is the best spur to the development
of domestic productive capacity.
But quite apart from an exchange of goods, a
closer co-operation between enterprises in
Australia, a country with such tremendous
reserves of raw materials, and enterprises in the
Federal Republic, one of the large industrial
processors, offers itself as an eminently sensible
proposition. I am glad to say that connections
between Australian and German companies are
already numerous.
So far as I am informed, more than eighty German
companies are engaged in Australia to date
through direct investments.
The industrial interest in Australia led early in
1971 to the visit of a German economic delegation
to your country under the chairmanship
of my predecessor, the former President of the
BDI. This visit brought about a number of promising
new contracts. Even so, I have the impression
that the existing possibilities for German-
Australian co-operation above all in the sectors
of coal and iron ore, have not yet been utilised to
the extent that might be desirable. And certainly
the total engagement of German companies
in your country to the extent-up to
now-of about 275 million deutschmarks is not
as high as could be expected in terms of
Australia's importance.
There are several explanations for this. From the viewpoint of German companies, Australia's
distance from Europe and the delays and costs
of transport connected therewith, play an
important role: also the relative limitation of the
Australian market so far as the production of
manufactured goods is concerned.
The double-taxation agreement, which will
now come into force within a few weeks will
very likely improve conditions in this regard
since the absence of such an agreement has had
a disturbing effect in the past.
On the other hand, the uncertainty as regards
Australian investment policy has contributed to
the fact that German enterprises have hesitated
in recent years to invest in Australia. As regards
raw materials in the energy field, foreign investments
were completely excluded until
November 1974. The liberalisation decreed in
the meantime and the new rulings which are directed
more stongly towards joint projects, have
been welcomed by German industry. But even
now, there is still some uncertainty over here
regarding the freedom of action available to
foreign companies in the case of investments on
a longer term.
The Prime Minister in talks in Bonn with the Chancellor of the Federal Republic of Germany, Mr Schmidt.
Prior to engaging in investment abroad, a German
industrialist naturally desires to be able to
calculate on a fairly reliable basis the possibilities
and also the limitations for placement of his
capital and for making business decisions. This
is one of the pre-requisites for long-term planning,
and in the case of investments in basic
products, such as would be offering themselves
in Australia, it is indeed mainly a question of
long-term planning.
We would thus be grateful, Mr Prime Minister, if
you could explain in a few words what Australia
in her economic policy expects of foreign
investments in the natural resources and the
processing industry field.
We hope, Mr Prime Minister, that your visit to
Germany may contribute to a strengthening of
the good relations between our countries and to
the initiation of new links.
Speech by the Prime Minister of Australia on the occasion of
informal discussions with the President of the Federation of German
Industry in Cologne on 1 6 January 1 975
In large measure the economic relationship between
Australia and the Federal Republic
reflects the basic complementarity of our two
economies. Australia is a prosperous country
with a strong and technologically sophisticated
industrial base. On a per capita basis our gross
national product approximates yours. At the
same time Australia is in an unusual position
among industrial countries, for we are well
endowed with raw materials. By contrast the
Federal Republic is substantially dependent on
imported raw material. The pattern and growth
of the trade between our two countries and the
increased interest that you have shown in
investment in Australia clearly reflect this economic
complementarity.
The result has been a healthy growth in our
trade. Australia's exports to the Federal
Republic are increasing and are now valued at
over 700 million deutschmarks a year. The
principal items are raw materials and agricultural
commodities. Your exports to Australia
have been rising even more rapidly, now
amounting to over 1 1 20 million deutschmarks
a year. The major components are motor
vehicles, electro-technical products,
pharmaceuticals, plastics and chemicals. German
direct investment in Australia over the
years has amounted to around 260 million
deutschmarks and is increasing, I think you said
some other figure somewhat likely.
Let me say a few words about foreign investment.
We have become more selective in determining
which types of foreign investment are
welcome in Australia. This in no way amounts
to hostility to foreign capital as such. Indeed at
the moment there are very few restrictions at all
on worthwhile capital investment. We recognise
that Australia has a long-term need for
capital from abroad. Foreign investment has
undeniably made a significant contribution to
the rapid development Australia has enjoyed in
the past and will continue to do so in future. We
welcome your interest in investing in Australia and are happy to consider any proposals you
wish to make. We are convinced, however, that
we must promote Australian control of Australian
resources and industries and aim at the
highest possible level of Australian ownership.
When we social -democrats came to office two
years ago we found that foreign control extended
to some 26 per cent of the manufacturing
sector and at least 60 per cent in mining;
that is, the energy resources for instance and
mineral resources which held out so much hope
for Australia's future prosperity were in fact
predominantly controlled from overseas.
I'm sure you can understand that we considered
this an unsatisfactory situation. It was certainly
unsatisfactory to public opinion in Australia,
and I believe unsatisfactory to any Australian
Government which would ever be elected from
now on. We are committed to redressing this
situation, but I stress that whenever it may be
necessary to change a rule we shall do so
responsibly, fairly, with ample notice and with
due regard to the interests of all concerned. 11
would be irresponsible and disruptive to acd
otherwise. The promotion of Australian control oli
Australia's own resources and industries must
be viewed as a long-term objective. Our aim is
to rectify the situation in two ways:
( 1 We are trying to increase the already
high rate of capital accumulation iii
Australia itself. The extension of the
activities of the Australian Industry'
Development Corporation which was
established about four years ago by the
previous Australian Government and
the establishment of a national investment
fund should be seen in this light.
In screening more carefully proposals
for foreign investment we have in mind
a number of criteria: whether t[ he
investment will be in partnership with
Australian capital, the degree of foreign
participation already existing in the
industry concerned, the importance in
terms of the national interest of Australian
control of the industry itself, the
size and location of the proposed project,
the extent to which a project uses
advanced technology for which
Australia has a need, marketing arrangements,
environmental aspects,
labour relations and the interests of
Australia's Aboriginal people. The last
matter concerns some mineral deposits
but not in general secondary inustry.
All foreign investment proposals will be considered
on their merits in terms of these criteria.
There are some cases in which I can specify
more closely what our attitude is likely to be.
Restrictions on foreign investment in some sectors
have been of long standing. This is the case
in banking, in radio and in television, and in civil
aviation. My Government has retained these
bans. We don't generally favour foreign investment
for the establishing of new insurance
companies and non-bank financial institutions.
Foreign investment in real estate will not normally
be approved other than investment which
is purely incidental to other purposes, such as
the establishment or extension of a factory.
This reflects an important principle in our policy,
that foreign capital should be associated with
productive investment adding to Australia's real
resources and bringing real additional benefits.
This is also the reason behind the legislation
dating back to September 1972, that is three
months before we were elected, designed to
control takeovers by foreign concerns of Australian
enterprises.
All these things have been there for years. We
haven't introduced them, although we haven't
altered them or criticised them. Since January
1973 my Government has assumed control of
all mineral exports. Now, this was not to stop
mineral exports as some people thought. You
work under a Federal Government, a Federal
System, so does Australia. And to control
exports was the only method open to the Federal
Government in Australia to achieve certain
other purposes. These purposes were to ensure
that export prices for Australian minerals are at
a reasonable level in relation to export prices of other countries and that in future the Government
has full knowledge of all details of export
contracts. I think it is clear that many of the contracts
which had been made before we were
elected to government were not very farsighted
indeed. And also it must be clear it was
astonishing that the Federal Government didn't
know the details of export contracts in Australia
and until we brought in these export controls we
were not able to find this information. And I
think also it must be said that in Australia many
of the States, the Laender, had competed
against each other for short-term objectives and
had not taken due regard to the overall national
long-term interest.
Now let me illustrate our approach by taking the
case of uranium: The era of cheap uranium has
ended. Some have thought equity participation
in Australia's energy is a means of guaranteeing
supplies. My Government has an objective of
full Australian ownership of this vital national
resource. The amount of uranium exported to
any country will not depend on whether that
country sponsors exploration in Australia. We
have constanty assured our trading partners
that they will receive supplies from our available
exports and I give this assurance again to you,
Gentlemen. Continuity of supply can be adequately
safeguarded through long-term contracts.
There were several contracts when we
came into office. We will see that every one of
these contracts is honoured in future.
In future the Australian Atomic Energy Commission
as the agent of the Australian Government
will participate in the mining and treatment
of uranium locations in the Northern Territory
of Australia. The Atomic Energy Commission
was established by an earlier Australian
Federal Government in 1953. There have been
no amendments to the Act since we came in.
And why I emphasise the Northern Territory is
that it is totally within Federal jurisdiction. The
Laender don't have anything to do with it and
most of the uranium in Australia so far discovered
has fortunately-we would regard itbeen
found in the Northern Territory. Now the
Commission will be the sole exporter of
uranium. It will also undertake all the new
uranium exploration in the Northern Territory.
Australia is making joint studies with Japan of
the enrichment of uranium in Australia.
The world has been irreversibly altered by the
oil crisis which emerged in the last quarter of
1973. This has led to some discussion of the
role of other groups of countries exporting raw
materials. Some have banded together to seek
increased revenues for their exports. Australia
has participated in the development of some
mineral producer groups, such as the International
Bauxite Association. And in this last
week officials of our Government and the other
iron-ore exporting countries have been discussing
an iron-ore exporting association.
The Australian view is that such groups, while
different from the earlier international commodity
agreements, are not necessarily disruptive
and exploitative international resource cartels.
Though this dosen't apply to Australia, it is
worth remembering that many of the countries
concerned in the bauxite and copper cases for
instance, while rich in these raw materials, are
rich in virtually nothing else. They are developing
countries with an understandable concern
to receive reliable and fair returns for their
scarce resources. Clearly a balance must be
achieved between the interests of both groups
and a few countries who purchase the finished
product. I don't pretend this will always be
easy. I believe however that in achieving the
required balance countries like Australia have a
special role to play. Australia is one of the few
countries combining the interests of both sides
and therefore in a position to exercise a moderating
influence.
Finally a word about our tariff policy. Let me say
at the outset that international trade is of fundamental
importance to the Australian economy.
It would clearly not be in Australia's interest to
look upon trade as a one-way street. Our economy
requires a wide range of imported capital
goods and materials to maintain our expanding
manufacturing sector. My Government's attitude
to tariff policy is clearly flexible. In July
1973 we reduced practically all Australian
tariffs across the board by 25 per cent. Nevertheless
it must also be stressed that Australia
relies almost solely on the tariff to protect domestic
production. I need hardly add to a group
such as this that there are other countries or
economic groupings in the world today where
various devices, such as import prohibitions,
quotas and other quantitative controls are used
74 to supplement tariffs to protect local industries.
In view of this it is hardly surprising that in some
cases Australian tariffs are higher than in other
larger, longer established countries. This is not
intended to imply that all Australian tariffs will
always remain high. Our Industries Assistance
Commission is undertaking a tariff review which
will cover an appreciable segment of Australian
manufacturing industry and is expected to be
completed within four years.
A special feature of the Australian tariff system
is the provision for entry of goods either dutyfree
or at concessional rates under our by-law
procedures. This generally provides for concessional
entry for goods where Australian industry
cannot make available suitably equivalent
goods. In 1972-73, 25 percent of the value of
all goods imported into Australia was covered
by the by-law system. I'm sure many German
manufacturers were included in the list of those
benefiting from this procedure.
You will see that in all our policy Australia
remains flexible, co-operative and responsible
in her dealings with her trading partners. We
welcome the co-operation of German industry
and investment in the development of our
country and we trust that this partnership will
strengthen and develop.