FOR MEDIA WEDNESDAY, 2 JUNE 1982
SPEECH TO THE NATIONAL PRESS CLUB
I have accepted your invitation today in order to
address a topic of profound and indisputable
importance the disturbing economic situation in which
the world finds itself and the need for concerted action
and leadership to turn around the world's economic
fortunes. Three weeks ago, Cabinet took the decision that
Australia should put forward a package of three
proposals for consideration in the context of the
Versailles Summit, and Cabinet agreed that if the seven
summit countries would adopt these three proposals, then
Australia would immediately join in. The substance of
the proposals a standstill on existing and new forms
of protectionism; a commitment to abolish export
incentives and subsidies over a five year period; and a
comnmitment: to significant and progressive reductions in
overall p!-otection would by now be known to everybody
here. The Government took this decision because we believed
that unless definite proposals were put forward there
would be much less chance of achieving the kind of
action required to break out of the circle in which
negative economic influences constantly reinforce one
another and in which individual countries are
increasingly driven towards the ' beggar-thy-neighbour'
approach of rising protectionism.
At that time the Government was not aware of any
alternative sets of proposals coming forward to achieve
effective action at the Summit and in fact no other
proposals of this kind have yet been placed on the
table. it should therefore surprise nobody that the proposals
which I p-it to President Reagan in Washington and which
have subsequently been discussed and considered by a
number of world leaders have been received with a degree
of interest which must be heartening to anyone who
really hopes for progress. So I want to talk further
today about the relevance and appropriateness of our
proposals to the current economic situation, about the
impact and benefits which would flow from them, and
about the quality and significance of the support which
has been extended to them.
In formulating its proposals, the Australian Government
was acutely aware that in spite of seven previous annual
summit meetings world economic conditions today are in
some important respects worse than when the first summit
meeting Nas held in France seven years ago; and in spite
of the considerable success that Australia has had in
swimming against the tide of world economic recession
the longer that recession continues, the more Australia
is bound to be affected.
The reality is that although oil prices have been
falling, although inflationary pressures have been
decreasing in most major economies particularly in the
United States where, in March, the CPI actually fell for
the first time since 1965, there are few signs that a
strong and durable recovery is imminent. Indeed, real
interest rates, especially in the United States, remain
at historically unprecedented levels, suggesting that
inflationary expectations remain entrenched; in large
measure 1L-ecause of the apparent difficulty of getting
acceptable budget deficits.
Moreover, the growth of Output among major O. E. C. D.
countries continues to decline; the volume of world
trade has stagnated, and actually fell in value in 1981
for the first time in over 20 years; unemployment
already high is rising and set to exceed 30 million
people ir the industrialised countries of the O. E. C. D.
during this year. And, against this background of
economic stress, a growing tide of protectionism and
dangers ef retaliation seriously weaken prospects for
building recovery. In seeking a way out of these
economic difficulties renewed growth in trade is vital.
The experience of the 1950' s and 1960' s is a clear
illustration of this for through those years the volume
of world trade grew at an average annual rate of about
providing rapidly expanding employment
opportunities and leading to G. D. P. growth rates that
could double people's real incomes every 20 years or
less. Buit it is clear that in a world where governments
are beset. by the social and political pressures that
naturally come with continued recession and increasing
unemployment, where the pressures for measures that
would restrict rather than expand trade are intense
indeed, trade can only be restored to its place as an
engine of growth and prosperity if governments and
peoples from many countries are prepared to show a
willingness and a will to join together and adopt a
common ani comprehensive strategy to wind back the
barriers which constrain achievement of the economic
revival which everybody seeks.
The package of measures which Australia has proposed to
the summit participants addresses this fact head on.
Indeed, because of its breadth and scope, because it
offers opportunities to everyone which far outweigh any
difficulties which countries might find in implementing
certain parts of it, it has the quality of
comprehensiveness which the situation plainly requires.
To be effective, our package would need to be adopted by
countries acting together.
Indeed action of this sort and scale would not be
possible for any country acting alone, nor would it meet
the problem for any particular country in isolation to
do so. Each component of cur package has its own
contribution to make, if adopted by nations in common.
A standstill on the spread of protectionism would not
only reduce the threat ol retaliation and the danger of
increasing economic isolationism, but it would also
reduce an important source of inflationary pressure; a
progressive reduction in overall levels of protection
should actually help to reduce prices and stimulate
overall c6emand and production, while encouraging
restructuring of domestic industries in directions
consistert with comparative advantage; and a winding
back of export incentives and subsidies would eliminate
wasteful and futile competition, and free resources
which could be used to cut taxes and stimulate
investmen~ t.
But it is; as a total package that these measures would
0 offer a basis for strong, non-inflationary, and
sustainable growth in the industrialised countries.
Australia has done what it can by agreeing in advance to
adopt the proposals if the summit nations themselves
agree to do so. Indeed it is a matter of enlightened
self-interest for us, as for all trading nations, to
agree to implement them in co-operation with one
another. In Australia's own case, it is evident that
opportun-. ties for trade are vastly important to our
prosperit~ y, for the annual value of our international
trade is equivalent to over one third our gross domestic
product and we need trade with large and growing
overseas markets to develop our full potential to create
growing employment opportunities and rising living
standards.
When overs5eas economic conditions are poor, the
Australian economy is bound to be affected. And while
we are far from the worst affected country, while we
have showni that we have the capacity to help
ourselves, the longer world recession continues, the
longer protectionism persists and the further it
spreads, the more it will affect Australia.
But it is not only the wealthy industrialised countries,
including Australia, which would benefit from
implementation of our proposal. The developing
countries, also stand to benefit enormously if they can
obtain greater access for their products to markets
which are at present closed to them. Indeed, we believe
that a high priority should be given to significant
reductions in protection in areas of interest to
developing countries, not least because their interests
were treated inequitably in the Tokyo round of
multi-lateral trade negotiations. Opening their own
markets to developing countries is also in the
enlightened self-interest of the developed nations for
it would inevitably help to boost trade in both
directions. Er believe that our proposals can in effect be seen as a
significant step towards breaking the current global
negotiations impasse, because of the benefits which they
could bring to developing nations. By the same token,
support for the proposals from the developing
countries in the form of undertakings to reduce their
own protection measures could add real strength to their
momentum. Before turning to the quality and significance of the
support which has been extended to our proposals, it is
important to realise that the Government would not claim
that these are the only proposals worth considering or
that protectionism is the only issue to be tackled. But
we do believe that these proposals, or others like them,
are vital to the achievement of economic revival and
nobody has come forward to deny that. The proposals
themselves have helped to crystallize a good deal of
thinking about the need to address the protectionism
issue and I believe that the fact that they have been
brought forward as a possible circuit breaker, has
focussed many people's attention on the need for the
Versailles Summit to result in positive action.
obviously the gover nments with whom we have discussed
the proposals, especially those taking part in the
summit, have not been in a position to commit themselves
directly or immediately to adopt the proposals: indeed
we did not seek any commitments. It is not surprising
that various governimients, depending on their particular
practices and situation, should have greater initial
difficulty in supporting some partz of the package than
others. 3ut in the course of our discussions, there has
been virtially universal acceptance of the underlying
principles of our proposals and the proposals
themselves have been seen as sensible and effective in
advancing the interests of all, if they are adopted
multilaterally. We have been advised that they are receiving detailed
and serious consideration with a view to discussing them
at Versailles and subsequently in other forums. Their
logic has been described as impeccable. It has been
said that they should not come to be regarded as another
superficial exercise, and the view has been expressed
that they should be pursued further regardless of the
outcome of Versailles. In fact, I believe that both
this Government and many of the international supporters
of these proposals will want to ensure that they are
carried forward beyond Versailles, although as one of
the Summit leaders has said, if Versailles has no
concrete results, the loss will never be recovered.
It is also worth noting that our proposals have received
support from influential sources beyond governments.
The OECD Director-General Van Lennep has strongly
endorsed them as an interesting and bold initiative; the
Secretary-General of the United Nations De Cueller has
expressed interest in them and would be taking them with
him during his forthcoming visit to Europe. The
President of the World Bank, Clausen, has recently
argued the need for the adoption of policies along the
lines of our proposals. There has been support for them
from within the Commonwealth, in particular from the
Secretary-General Ramphal. And in a new national
security strategy recently announced by U. S. National
Security Adviser, William Clark, the importance of a
more open trading system has been emphasised as a basis
for strengthening political and strategic security as
well as economic security.
It is obvious that proposals of this kind are certain to
face practical difficulties in implementation. There
will be c. ifficulties in deciding whether some practices
fall inside or outside their scope; there are likely to
be political considerations which need to be taken into
accou~ nt; and there are strong pressure groups whose
demands will need to be faced. In this regard, I have
been greEtly encouraged by the attitude taken towards
these proposals by the Australian community and by the
leaders of industrial and commercial groups within
Austral ia.
The Government took steps to consult and advise industry
and other leaders about our proposals on the eve of
making them public and I regard the response as
tremendously positive and as indicative of a
determination within the Australian community to make
sure that we do everything we can as a nation to
maintain economic growth and progress. It is that kind
of positive response, from business and governments,
that is needed in all countries for, unless action of
some kind is taken to break out of the circle, human and
political costs arising from prolonged world recession
could in nany places be far greater than the immediate
difficulties which so easily divert attention from the
really important objectives.
It is because these costs could be so great that the
present situation calls out for effective action and
leadership from the summit. The world desperately needs
the kind Df vision and commitment which was forthcoming
only a few decades ago in initiatives like the Marshall
Plan, the Bretton Woods Agreement, the establishment of
the World Bank, and the institution of the liberal
system of trade and payments which took place after the
world war.
Those initiatives were designed to meet a situation in
many ways analagous to that which we now face. They
were decisive in securing the kind of growth and
prosperity which people came to take for granted in the
1950' s an-1960' s and which it must be the objective of
all parties, all governments and all countries to
re-establish in the 1980' s.
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