g3FM4 2 02: 25 5. ISPTM RICOHAX 2 Z4595 P. 2
EMBARGOED UNTIL DELIVERY.*
SPEECH BY THE PRIME MINISTER
EAF SYMPOSIUM
DAVOS 29 JANUARY 1987
FOR SOME YEARS NOW YOU HAVE BEEN KIND ENOUGj TO INVITE ME TO
JOIN" YOU HERE IN DAVOS-IT WOULD 9E EASY T( SAY THAT ITHAS
NOT BEEN PHYSICALLY POSSIBLE TO ACCEPT YOUR INVITATION
BEFORE THIS BUT IT WOULD BE UNTRUEWHILE
THE TYRANNY OF DISTANCE HAS FOR US IN AUSTRALIA BEEN
DIMINISHED BY THE MARVELS OF MODERN TRANSPORT, ONE. DOES'NOT
LIGHTLY CROSS THE WORLD MERELY FOR THE PROSPECT OF CONGENIAL
COMPANY OR SALUBRIOUS SURROUNDINGS AFTER ALL WE ARE NOT IN
OUR COUNTRY ENTIRELY WITHOUT THESE ATTRACTIONS* PARTICULARLY
AT THIS TIME OF THE YEAR.
BUT TWO RELATED CONSIDERATIONS LED ME TO AGREE, WITH
PLEASUREa TO OPEN THIS 1987 SYMPoSIUM.
FIRST, THE STATURE OF DAVOS HAS BEEN GROWING. THIS REFLECTS
THE GREAT CREDIT YOU DESERVE FOR YEAR AFTER YEAR ASSEMBLING
IN THIS FRANK AND INFORMAL ATMOSPHERE SEVERAL HUNDRED OF THE
WORLD S LEADERS IN FINANCE, TRADE, INVESTMENT AND
GOVERNMENT-PUT IN THE SIMPLEST OF LANGUAGE, THIS IS BEING
INCREASINGLY RECOGNISED AS A BODY OF CONSIDERABLE CLOUTSECOND,
THERE IS A RISING SENSE OF FRUSTRATION FELT BY THE
PEOPLE OF AUSTRALIA AND MANY OTHER NATIONS ABOUT WHAT CAN,
WITHOUT EXAGGERATION, BE DESCRIBED AS THE DISINTEORATION OF
THE GLOBAL ECONOMIC SYSTEM AND THE THREAT TO WORLD SECURITY
THAT THIS tS FUELLINGSO
I COME HERE TO GIVE VOICE TO THAT SENSE OF FRUSTRATIONI
COME TO MAKE SOME SPECIFIC, RELEVANT AND PRACTICABLE
PROPOSALS. AND I COME WITH THE CONVICTION THAT I DO SO iN A
FORUM COMPOSED OF PEOPLENOT SATISFIED MERELY TO EXCHANGE
VIEWS, IDENTIFY PROBLEMS AND THEN TO CONTINUE ON THEIR WAY
AS BEFORE.
I I
I 3I 29 ' 87 OZI6 V&. ST PM
I COME
ON ALL
TO ACT
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WITH A CONVICTION THAT YOU RECOGNISE A RESPONSIBILITY
OF US AT THIS CONFERENCE, IN OUR VARYING CAPACITIES,
DECISIVELY TO REMOVE THE OBSTACLES STANDING IN THE
A" DURABLE ECONOMIC AND POLITICAL REVIVAL'
LADIES: AND GENTLEMEN:
I SPEA( TO YOU THIS EVENING AS A PRACTISING POLITICIAN. THE
PRIORI | ES OF THE TASKS I FACE MAKE IT AN UNACCEPTABLE
LUXURY MERELY TO ENGAGE IN SPECULATION ON THE PROBLEMS
CONFRONTING US.
INSTEAD, MY BASIC CONCERN IS TO OUTLINE SOME OF THE MEASURES
BY WHICH WE CAN MAKE IMMEDIATE PROGRESS TOWARDS THIS GOAL OF
POLITICAL AND ECONOMIC REVIVAL.
HOWEVER, ALLOW ME, BY WAY OF NECESSARY BACKGROUND, TO
ESTABLISH THE CONTEXT FOR THESE PROPOSALSTHE
STARK ECONOMIC PROBLEMS FACING THE WORLD ARE FAMILIAR TO
THIS AUDIENCE-WE LIVE IN AN ERA OF UNCERTAINTY WITH
TROUBLING WORLD-WIDE DEVELOPMENTS IN DEBT ACCUMULATION,
CURRENT ACCOUNT IMBALANCES, INTEREST RATES AND UNEMPLOYMENT.
BENEATH THESE PROBLEMS LIE DEEPER COMPLEXITIES. MANY OF THE
PREMISES OF THE POST-WAR DECADES ARE ERODING OR HAVE
VANISHED ENTIRELY WITHOUT BEING REPLACED BY NEW PRINCIPLES
UPON WHICH TO BASE THE RESOLUTION OF OUR DIFFICULTIESTo
UNDERTAKE EFFECTIVELY THE SHAPING OF THESE NEW PRINCIPLES
WE SHOULD APPRECIATE HOW THESE PREMISES OF THE POST-WAR
DECADE WERE THEMSELVES SHAPED. -I
I.. 4 j
JAN 29 ' 87 02: 27 AF* ST PM RICOHfRX 2 245965 P. 4
3,
IF WE ARE TO LEARN ANYTHING FROM PRE-WAR HISTORY IT MUST BE
THAT THE GLOBAL CONFLICT OF WORLD WAR 2 WAS IN LARGE MEASURE
THE PRODUCT OF THE FAILURE OF POLITICAL LEADERSHIP TO RECOGNISE
AND ADJUST. TO THE COLLAPSE OF ECONOMIC RELATIONSHIPS BETWEEN AND
WITHIN NATIONS. ONE OF THE MORE REMARKABLE MINDS OF THIS CENTURY
JOHN MAYNARD KEYNES HAD HOISTED THE EARLY WARNING SIGNALS. 0
FIRtS T IN HIS oECONOMIC CONSEQUENCES OF THE PEACE" ( 1919) AND
LATER IN THE ' GENERAL THEORY OF MONEY, EMPLOYMENT AND INTEREST"
( 1935-36).
IN THE AFTERMATH OF THE CONFLICT-WHICH KEYNES HAD FORESEEN, THE
WORLD SHOWED THAT IT HAD LEARNED CONSIDERABLY FROM THOSE MISTAKES.
WITHIN NATIONS, THE IMPORTANCE OF, AND MECHANISMS FOR MAINTAINING,
ADEQUATE AGGREGATE DEMAND WERE BETTER APPRECIATED AND APPLIED.
As BETWEEN NATIONS, THE VICTORS NOW, FAR FROM IMPOSING GREATER
REPARATIONS UPON THE VANQUISHED, SET ABOUT ASSISTING THE
RESTORATION OF THEIR ECONOMIES WITH THE REMARKABLE SUCCESS TO
WHICH Wt ARE ALL WITNESS; AND MECHANISMS WERE ESTABLISHED FOR THE
BETTER CONDUCT OF INTERNATIONAL ECONOMIC RELATIONSHIPS,
AS A RESULT, IN THE DECADES AFTER THE SECOND WORLD WAR, CHAOS
AND BEGGAR-MY-NEIGHBOUR POLICIEC GAVE WAY TO MULTILATERALISM
WHICH PRODUCED GROWTH AND PROSPERITY#
BUT, IN TURN, THAT WORLD HAS GONE. THE CLEAR ECONOMIC LEADERSHIP
PROVIDED BY THE US HAS DISSIPATED. RELENTLESS TECHNOLOGICAL
CHANGE AND THE EVOLUTION OF THE INFORMATION SOCIETY HAVE RENDERED
MANY OF OUR EXISTING INSTITUTIONS AND ATTITUDES OUT OF DATE. A
SIMPLE FAITH IN THE KEYNESIAN PANACEA IS NO LONGER ADEQUATE NOR,
FOR THAT MATTER, MIGHT I SAY IS THERE SALVATION IN THE NOW MUCH
MORE MUTED DOCTRINES OF MONETARISM,
AS DECISION MAKERS FACE4 WITH THE RESPONSIBILITY OF MANAGING THESE.
CHALLENGES, WE MUST BE PREPARED TO RELINQUISH WHATEVER SUPERSEDED
ASSUMPTIONS AND INHERITED IDEOLOGIES IMPEDE OUR TASK OF LEADERSHIP
IN THE FINAL YEARS OF THE TWENTIETH CENTURY.
71'
JPi2917 M22R9IACTO W-AX
IN THEIR PLACE, WE MUST ACCEPT AS A BASIS FOR ALL OUR
DECISIONS-THE NO0W INDISPUTABLE TRUTH OF OUR TIME -OUR
COMPLETE INTERDEPENDENCE-WE MUST AVOID ANYTHING RESEMBLING
A RETURN TO THE ECONOMIC INSANITIES OF PRE-1939. FOR LET ME
EMPVIASISE* THIS POINT. I HAVE SAID THE WORLD PAID A HEAVY
PRICE IN WORLD WAR 2 FOR ITS INCAPACITY TO READ AND RESOLVE
THE EMERGING ECONOMIC AUTARKY OF THE 20' S AND 30' s
HORRENDOUS AS THAT PRICE WAS, IT WOULD BE AS NOTHING
COMPARED TO THE CONSEQUENCES OF CONFLICT IN THIS NUCLEAR
AIDE. THIS COMPLETE INTERDEPENDENCE MEANS, AS THE DEBT CRISIS AND
THE COMMODITY PRICE SLUMP DEMONSTRATE, THAT THE POVERTY OR
PROSPERITY OF INDIVIDUAL NATIONS ARE QUESTIONS THAT CONCERN
US ALLIT
MEANS THAT NATIONS WHICH SEEK TO ACHIEVE DOMESTIC
POLITICAL GOALS THROUGH DISTORTING THE INTERNATIONAL TRADING
FRAMEWORK ARE DELUDING THEMSELVES WHILE THEY ARE HURTING
OTHERSFROM THIS ' IT FOLLOWS THAT SUCCESSFUL LEADERSHIP WILL REQUIRE
TWO CLOSELY RELATED COMMITMENTSFIRST.
GOVERNMENTS MUST SHOW THEIR WILLINGNESS TO
RESTRUCTURE THEIR OWN ECONOMIES, WITH DEVELOPED COUNTRIES
LEADING THE WAY.
WE MUST ALL ACCEPT THE LESSON THAT GOOD DOMESTIC POLICY AND
GOOD INTERNATIONAL POLICY ARE INSEPARABLE-IF WE CANNOT
PERSUADE OUR DOMESTIC CQJ4STITUENCIES TO ACCEPT CHANGEINDEED,
IF WE ALLOW TtIEM TO ISOLATE AND INSULATE THEMSELVES
FROM IT AND ENCOURAGE ITHEM TO RESIST AND RETARD DOMESTIC
STRUCTURAL ADJUSTM4ENT -WE HAVE FAILED NOT ONLY THEN BUT THE
ReST OF THE WORLDcl 2 tj
No. 062 733693 29,01,87 12: 09 P. 06
JAN 29 ' 87 02,30 RUST PM RICOfAX 2 245965 P. 6
IN THIS RESPECT I ASK YOU TO OBSERVE WITH ME ONE OF THE MORE
INCONGRUOUS AND CERTAINLY LESS ATTRACTIVE FEATURES OF THE
PRESENT WORLD ECONOMIC LANDSCAPE. REFER TO THE CONSTANT
LECTURING TO THE DEBTOR NATIONS OF THE DEVELOPING WORLD ON
THE NEED TO EXERCISE THE HARSH DISCIPLINES OF RATIONAL ND
RELEVANT ECONOMIC POLICIES AND THIS BY MAJOR ECONOMIC
POWERS WHO AT THE SAME TIME THEMSELVES ESCHEW THE
STRINGENCIES RELEVANT BOTH TO THEIR OWN CIRCUMSTANCES. AND TO
THE VERY CONDITION OF THOSE WHOM THEY LECTURE*
OUR SECOND COMMITMENT MUST BE TO THE DEVELOPMENT OF FREE AND
FAIR INTERNATIONAL TRADEFOR
RESTRICTIONS ON TRADE TODAY STAND OUT AS MAJOR OBSTACLES
TO RENEWED PROSPERITYPROTECTIONISM IS SPREADING LIKE A PLAGUE-QUOTAS, VOLUNTARY
RESTRAINTS, DOMESTIC PRICE SUPPORT SCHEMES AND CONTRIVED
QUALITY STANDARDS HAVE SUPPLEMENTED TRADITIONAL TARIFFS TO
FORM BARRIERS TO TRADE IN A STAGGERING RANGE OF
MANUFACTURES, FARM PRODUCTS AND SERVICESo
WE MUST BE ABLE TO TRADE OUR WAY OUT OF OUR PROBLEMSo AND TO
DO THIS WE NEED, AS A BASIC AND URGENTLY REQUIRED CONDITIONo
A MARKET'PLACE FREE OF THE DISTORTING INFLUENCE OF
UNNECESSARY GOVERNMENT INTERVENTIONNOWHERE
IS THE RELATIONSHIP BETWEEN THESE COMMITMENTS CLOSER
NOR THE NEED FOR ACTION GREATER. THAN IN THE TRADE IN
AGRICULTURAL PRODUCTS, WHICH CAN FAIRLY BE SAID TO BE IN ITS
DEEPEST CRISIS SINCE THE GREAT DEPRESSIONSHORTSIGHTED
LRICULTURAL PROTECTIONISM HAS ALLOWED INDEED
ENCOURAGED FARMERS IN SOME COUNTRIES TO IGNORE THE NORMAL
MARKET SIGNALS OF OVERSUPPLY FOR THEIR PRODUCTS, SUCH AS
FALLING INTERNATIONAL PRICES AND EXCESSIVE OVERSTOCKING-
062 33' 2 0 1 7 1 2: 10 F .07
JSW: 29 ' 87 02132 RUST PMRICOHF-X 2 Z4565 P. 7 i~ k
AS A RESULT THEIR FARMS ARE LIKE MACHINES OUT OF CONTROL,
CHURNING OUT GLUT ON GLUT OF WHEAT AND BEEF, BUTTER AND MILK,
SUGAR AND-RICE. SINCE THE BEGINNING OF THE DECADE, INTERNATIONAL
WHEAT PRICES HAVE FALLEN BY NEARLY HALF, SUGAR PRICES BY MORE
THAN TWO THIRDS YET STILL THEY ARE PRODUCED, AND STILL THE
PROTECTIONISM HAS FOSTERED SOME TRULY LUDICROU ANOMALIES,
BUDGETARY ASSISTANCE IN BOTH THE EC AND THE USIIS DIRECTED TO
FARMERS WHO IN MANY CASES ARE WEALTHIER THAN THE AVERAGE INCOME
EARNER WHOSE TAXES PROVIDE THAT SUPPORT. SOME EC DAIRY FARMERS
PAY MORE TO IMPORT FEED FOR THEIR COWS THAN THEY COULD HAVE
RECEIVED ON THE WORLD MARKET FOR THE MILK PRODUCED FROM IT.
JAPANESE RICE PRODUCTION IS SO HANDSOMELY REWARDED THAT PART
OF THE ANNUAL OVERSUPPLY HAS BEEN SOLD AT HUGE LOSSES AS ANIMAL
FEED. FARM SUPPORT PROGRAMS FOR 1986/ 87 ARE ESTIMATED AT $ US23 BILLION
IN THE EC AND $ US26 BILLION IN THE US WHILE JAPAN IN 1985
SPENT MORE THAN $ US10 BILLION,
IN ADDITION TO THESE DIRECT BUDGETARY COSTS, HIGHER DOMESTIC
PRICES MEAN THE CONSUMERS IN EACH SOCIETY ARE PAYING BILLIONS OF
DOLLARS MORE EACH YEAR TO KEEP FARMERS ON THE LAND.
THE TOTAL SUBSIDIES ARE HUGE. AS JUST ONE INDICATION, DAIRY
FARMERS IN EUROPE RECEIVE AROUND $ 400 A COW. THAT MAY SOUND
AN EXTRAVAGANT SUM AND IT IS. BUT IT IS MODEST COMPARED TO
AMERICAN SUBSIDIES WHICH AMOUNT TO SOME $ 835 FOR EVERY DAIRY COW IN
THE UNITED STATES.
BUT DESPITE IT ALL, AND'THIS IS THE MOST DAMNING INDICTMENT OF
PROTECTIONISM, IT JUST ISN'T WORKING NOR COULD IT EVER HAVE DONE
SO. THE INCOMES OF PROTECTED FARMERS HAVE NOT RECOVERED AND FARM
BANKRUPTCIES ARE CONTINUING. ' C
No
* JPr4 29 D87 02133 ALUST F11 RICOWfRX 2 Z45V65 P. 6a
7.
BECAUSIE OF THE MISALLOCATION OF RESOURCES AflD RESULTANT
HIGHER COST AND PRICE STRUCTURES, THE ECONOMIC, GROWTH RATES
OF EUROPE ARE LOWER AND THE DOLE QUEUES AT LEAST A MILLION
PERSONS LONGER.
AT T. HE SAME TIME, IT IS HURTING THE. REST OF THE WORLD. LESS
DEVELOPED COUNTRIES ARE HURT BY B~ IN% EXCLUDED FROM THE
WORLD AGRICULTURAL MARKET. FREE RADE IN FARM PRODUCTS
WOULD ALLOW DEBTOR NATIONS TO EARN SUFFICIENT FOREIGN
EXCHANGE TO MORE THAN DISCHARGE THEIR INTEREST COMMITMENTSMiORE
IMPORTANT, THEY WOULD BE ON THEIR WAY TO DEVELOPMENT
THROUGH TRADE* NOT JUST AIDLADIES
AND GENTLE~ MEN,
WE KNOW THIS PROBLEM IS NOT PURELY AN ECONOMIC ONE# TO BE
CURED PURELY BY ECONOMIC MEASURESFOR
THE ISSUES AND VALUES AT STAKE ARE ESSENTIALLY POLITICAL
ONES THE LIVING STANDARDS OF OUR PEOPLE' AND THE
COMMITMENTS I HAVE URGED THE PURSUIT OF STRUCTURAL
ADJUSTMENT AT HOME AND THE CREATION OF AN ANTI-PROTECTIONIST
ETHOS ABROAD ARE ESSENTIALLY POLITICAL ONES TOO, REQUIRING
THE bALANCING OF THE OFTEN CONFLICTING DEMANDS OF FARMERS,
CONSUMERS, TAXPAYERS, CONSERVATIONISTS AND OTHERSIN
THE SEARCH FOR THESE POLITICAL SOLUTIONS, I BELIEVE THE
AUSTRALIAN VOICE HAS CREDIBILITYOUR
CREDIBILITY DERIVES NOT FROM THE FACT THAT AUSTRALIAN
FARMERS# PERHAPS THE MOST EFFICIENT AND LEAST PROTECTED IN
THE WORLD, HAVE BECOME TAlE INNOCENT VICTIMS OF THE CYCLE OF
PROTECTIONISM BY THE WORLD'S RICHEST COUNTRIES THOUGH THAT
CERTAINLY FUELS OUR FRUSTRATIONS'
OUR CRiDIBILtTY ARISES FROM4 THE FACT THAT WE IN AUSTRALIA
HAVE LEARNT TH4E LESSON THAT MANY OF OUR TRADING PARTNERS
SEEM SLOW TO GRASP-OR RELUCTANT TO APPLY -THAT SIMPLY
STATED LESSON OF OUR WORLD-WIDE MUTUAL INTERDEPENDENCE-
No. 062 733693 29,01,87 12: 11 P. 09
JFI 29 ' 67 02134 AUST PM RICOHFAX 2 24965 P. 9
8.
AS A MEMBER OF THE ASIA-PACIFIC REGION, THE MOST DYNAMIC AND
FASTEST GROWING PART OF THE WORLD ECONOMY, AUSTRALIA HAS HAD
NO CHOICE-BUT TO LEARN THAT LESSONSIMPLY
TO SURVIVE AS A R LEVANT, MODERN ECONOMY AND SOCIETY
IN XHIS DYNAMIC REGION, IUSTRALIA COULD NOT CLOSE ITSELF OFF
BEHIND ARTIFICIAL AND AR( HAIC BARR. ERSAS
ANYONE WHO HAS SOME ACQUAINTANCE WITH THE RECORD OF MY
GOVERNMENT FOR THE PAST FOUR YEARS'WILL KNOW. WE HAVE SHOWN
OUR WILLINGNESS TO MEET THE TWO COMMITMENTS I MENTIONED
EARLIER-WE ARE RESTRUCTURING OUR DOMESTIC ECONOMY, AND WE
ARE OPENING OURSELVES UP TO FREE AND FAIR INTERNATIONAL
TRADE WE ARE PHASING DOWN PROTECTION OF OUR MANUFACTURING SECTOR
AND AS A RESULT OUR CAR MANUFACTURERS AND TEXTILES, CLOTHING
AND FOOTWEAR MAKERS ARE FACING STEADY REDUCTIONS IN
ASSISTANCE. SIMILARLY THE GOVERNMENT HAS DECIDED TO REDUCE
TARIFFS ON CHEMICALS AND PLASTICS TO RATES MORE IN LINE WITH
OTHER OECD COUNTRIES. THE STEEL AND HEAVY ENGINEERING
INDUSTRIES, WHICH HAVE NOT IN THE PAST BEEN HIGHLY
PROTECTED, ARE NOW BEING REVITALISED THROUGH SECTORAL PLANS
WHICH WILL ENCOURAGE THEM TO LOOK OUTWARD TO COMPETE IN THE
WORLD S MARKETSø
IT IS TRUE THAT SOME AREAS OF AUSTRALIAN PRODUCTION CONTINUE
TO RECEIVE HIGH, ALBEIT DECLINING, BARRIER PROTECTION-IT
IS NOT TRUE HOWEVER, DESPITE THE FREQUENT MISREPRESENTATIONS
TO THE CONTRARY. THAT THESE MEASURES CAN BE PLACED IN THE
SAME CATEGORY AS THE NON TARIFF PROTECTION PROVIDED TO
AGRICULTURAL AND IN SOME-" CASES INDUSTRIAL PRODUCTION, IN
EUROPE, NORTH AMERICA AND JAPAN.
tito . c6, 2 _ I6 2 j 12: 12 F.
3 2g9 o a" JS3T PM RIC10HFAX 2 245965 P. 10
LET ME EXPLAIN THE KEY DIFFERENCES. AUSTRALIA'S BARRIER
PROTECTION IS GENERALLY EXTENDED BY WAY OF TARIFFS. THIS Is
A TRANSPFARENT FORK OF ASSISTANCE. IT ALLOWS SIGNIFICANT
MARKET ACCESS TO IMPORTS-IT IS NOT PROJECTED BEYOND OUR
BORDERS-IT IS NOT RESPONSIBLE FOR THE CREATION OF MASSIVE
$ U4LUSPj ODUCT ION.
NOR DOES IT WEAKEN OUR TRADING PARTNERS' ACCESS TO
TRADITIONAL MARKETS THROUGH DUMPING AND OTHER EXPORT
SUBSIDISATION SUCH AS WE SEE WITH* THE CURRENT TRADE WAR.
FINALLY, AUSTRALIA IS COMMITTED TO THE STEADY REDUCTION OF
PROTECTIONISM OVER THE NEXT DECADE.
AS A PRACTISING POLITICIAN LET ME TELL YOU THERE iS NOT MUCH
SHORT-TERM POPULARITY TO BE GAINED IN TELLING WORKERS THEY
MUST ACCEPT REAL WAGE CUTS AND CHANGE LONG-STANDING,
COMFORTABLE BUT OUTMODED WORK PRACTICES, OR IN TELLING
ELDERLY PENSIONERS THEY MUST ACCEPT A DELAY IN THE RECEIPT
OF THEIR PENSIONS, OR IN TELLING AN OWNER OF A BUSINESS OR
PURCHASER OF A NEW HOME THAT THEY SHOULD PAY HIGHER INTEREST
RATES THAN THEY MIHT HAVE EXPECTEDBUT
THE HARD DECISIONS YIELD LONG-TERM BENEFITS A MORE
RESILIENT AND COMPETITIVE ECONOMY AND A HIGHER STANDARD OF
LIVING. OUR SUCCESS IN THE TASK OF STRUCTURAL ADJUSTMENT HAS RELIED
ON THE WAY WE HAVE GONE ABOUT THE TASK* I HAVE A LONG-HELD
CONVICTION THAT PROGRESS TOWARDS FAIRNESS AND PROSPERITY CAN
ONLY BE ACHIEVED THROUGH CO-OPERATION RATHER THAN
CONFRONTATION-IN PLANNING OUR REFORMS, MY GOVERNMENT HAS
SOUGHT THE VIEWS OF ALL THOSE AFFECTED AND AIMED AT BUILDING
A COMMUNITY CONSENSUS AS THE BASIS FOR OUR DECISIONS*
No. 06 33 3 12: 13 P. 11
JAN 29 ' 87 02: 37 AUST PMRICOH* F -2 245% 5
IF I COULD PUT THIS PERHAPS IN EVEN MORE DIRECT TERMS. I
HAVE OPERATED ON THE BASIS THAT IN THE SWEEP OF HISTORY THE
HORSE. CALLED ' MORAL IMPERATIVE* HAS, UNFORTUNATELY, USUALLY
BEEN A POOR-PERFORMER. THE ONE CALLED * SELF INTEREST" IS A
SUPERIOR CONVEYANCE BECAUSE IT IS ALWAYS TRYING. THE SECRET
OF SUCCESSFUL POLICY ACHIEVEMENT 16 TO MAKE THE RELEVANT
CONSTITUENCIES UNDERSTAND THAT ENLIGHTENED SELF INTEREST
ME NS UNDERSTANDING THE INTERESTS OF, AND CONSTRUCTIVE
CO-OPERATION WITH, EACH OTHER.
IT IS A FORMULA WHICH COULD WELL-BE -APPLIED TO THE
RESOLUTION OF OUR AGRICULTURAL TRADE PROBLEMS, AS THIS WILL
REQUIRE PATIENT NEGOTIATIONS AND A REALISTIC IF YOU LIKE,
A SELF-INTERESTED UNDERSTANDING OF THE BENEFITS TO BE
GAINED FROM ENDING THE TRADE WAR.
LADIES AND GENTLEMEN:
A MAJOR STEP TOWARDS RESOLVING THE PROBLEM OF AGRICULTURAL
PROTECTION WAS TAKEN WITH THE RECENT DECISION TO LAUNCH THE
URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS, WITH
AGRICULTURE SERIOUSLY ON THE AGENDA FOR THE FIRST TIME.
l
THIS NEW ROUND PROVIDES A TIMELY OPPORTUNITY TO RESTORE
CONFIDENCE IN THE MULTILATERAL SYSTEM AND PROVIDES SCOPE FOR
A RETURN TO FREER TRADE TO THE BENEFIT OF ALL COUNTRIES.
AUSTRALIA WAS EAGER TO BE AT THE VANGUARD OF THIS REFORM
MOVEMENT. WE CONVENED A MEETING IN CAIRNS OF REPRESENTATIVES OF
FOURTEEN FAIR TRADING NATIONS IN AGRICULTURE. THIS CAIRNS
GROUP PROVED TO BE AN EFIECTIVE ALLIANCE AT PUNTA DEL ESTE
LAST SEPTEMBER. P. 11 I
ii
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JTAN 29 187 eZ 38 RUST PM I i4 I-IRICOHFAX
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WE ARE FULLY COMMITTED TO MAKING THE MTN ROUND A SUCCESS.
To DEMOt _ LRATE AUSTRALIA'S COMMITMENT, I AM PREPARED TO
STATE NOW THAT WE ARE WILLING TO NEGOTIATE THE BINDING OF
TARIFF LEVELS IN ALL SECTORS OF AUSTRALIA'$ TARIFF REGIMETHIS
Is A. SIGNIFICANT COMMITMENT, GIVEN THAT REVIOUS
AUSTRALIAN GOVERNMENTS HAVE BOUNDONLY A VERYLOW PORTION OF
ITS TARIFF.
SFRONG MOTIVATION AND COMMITMENT 1 REQUIRED OF ALL THE
PARTICIPATING COUNTRIES IF THE NEW MTN ROUND 18 SUCCESSFULLY
To LIBERALISE WORLD TRADE. THE NEW ROUND MUST BE ALLOWED TO
PROCEED FREE OF FUTILE DELAYS, AND NOT GET SIDE-TRACKED BY
PERIPHERAL OR TECHNICAL ISSUES. SOME PARTICIPANTS WILL
HAVE TO CONTEMPLATE OPENING UP PREVIOUSLY STRONGLY PROTECTED
SECTORSBUT, LADIES AND GENTLEMEN, WITH ALL THE COMMITMENT IN THE
WORLD, THE MTN ROUND WILL STILL SPAN GGVGRAL YEARS-MY
CONCERN 1$ THAT MANY COUNTRIES CANIT AFFORD THE LUXURY OF
WAITING TO SEE WHAT THE NEW ROUND BRINGS.
INDEED, IF PRICE CUTTING BETWEEN THE US AND THE EUROPEAN
COMMUNITY CONTINUES AT ITS CURRENT FRANTIC PACE, THE TOTAL
INTERNATIONAL TRADE FRAMEWORK MAY BE UNDERMINED BEFORE THE
NEW MTN ROUND ACHIEVES ANY RESULTS.
SO THIS EVENING I WANT TO EXPLAIN HOW WE CAN START MAKING
PROGRESS IMMEDIATELY.
BECAUSE OF THE IMPORTANCE AUSTRALIA ATTACHES TO THIS ISSUE,
I WANT TO SPEND A LITTLE TIME OUTLINING TO YOU THE STEPS I
BELIEVE CAN AND SHOULD BE TAKEN TO ACHIEVE THIS-( A MORE
DETAILED STATEMENT AMPLIFYING THIS PROPOSAL 1S BEING
CIRCULATED-) MI
V
JAN 29 ' 87 02: 39 AUST PM RICOI--( 2 245% 5 P. 13
12-
CENTRAL TO T1tE AUSTRALIAN PROPOSAL IS THE OBSERVATION THAT
THE CORRUPTION OF WORLD AGRICULTURAL TRADE is BEING CAUSED
BY GOVERNMENTS RAISING THE PRICES THEIR FARMERS RECEIVE
ABOVE PREVAILING WORLD PRICES, RESULTING IN A SUBSIDY TO
UNECONOMIC PRODUCTION. THIS PRICE ADJUSTMENT GAP PROVIDES
A CLEAR PICTURE OF THE ALMOST UNBLIEVABLE AMOUNT OF
PROTECTION PROVIDED TO SOME PRODUdTS,
THE DOMESTIC PRICE OF EC WHEAT IS DOUBLE THAT OF WORLD PRICES,
FOR BUTTER IT IS AROUND TWO AND A HALF TIMES WORLD PRICES, FOR
EC AND US SUGAR IT IS AROUND THREE TIMES WORLD PRICES, AND FOR
RICE THE JAPANESE PRICE IS SOME EIGHT TIMES WORLD PRICES.
[ F WE ARE TO RESTORE SOME SANITY INTO THE WORLD AGRICULTURAL
MARKET WE MUST SEE WORLD MARKET PRICES BETTER REFLECTED IN
DOMESTIC MARKET PRICES. AN ABRUPT CLOSURE OF THIS PRICE GAP
IS NOT POSSIBLE. BUT A MOVEMENT IN THE RIGHT DIRECTION IS
NEEDED OUR CENTRAL OBJECTIVE SHOULD BE TO AGREE ON WAYS TO FREEZE
THE LEVEL OF SUBSIDIES AND TO REDUCE THE PRICE ADJUSTMENT GAP
FOR ALL AGRICULTURAL COMMODITIES,
THIS IS CONSISTENT WITH THE TOKYO SUMMIT CALL FOR ADJUSTMENT
MEASURES IN AGRICULTURE AND THE OBJECTIVES ADOPTED AT PUNTA
DEL ESTE,
WE HAVE DISCUSSED OUR FREEZE, OR CEASEFIRE, PROPOSAL WITH
OFFICIALS OF THE US AND THE EC. BELIEVE BOTH AGREE IN
PRINCIPLE WITH THE NOTION. THEY ARE EACH TOTALLY AWARE OF THE
FUTILITY OF THEIR TRADE WAR AND OF ITS CONSEQUENCES FOR THEIR
TREASURIES,
WITH A FREEZE IN PLACE, THE GAP COULD BE CLOSED BY A COMBINATION
OF MEASURES AIMED AT SIMULTANEOUSLY REDUCING
INTERNAL ADMINISTERED PRICES AND FACILITATING AN INCREASE IN
INTERNATIONAL PRICES BY REDUCING SUPPLIES,
P. 1
Z9170: 4 TP
A RELATED MEASURE MUST BE THE ORDERLY DISPOSAL OF THE
EXISTING HUGE STOCKS SO THEY CAN BE PROGRESSIVELY RELEASED
ACCORDING TO AN INTERNATIONALLY AGREED APPROACH WHILE
CAUSING MINIMUM DISRUPTION TO THE MARKETIRECOGNISE
THAt ALL [ HIS WiILL NOT BE ACHIEVED WITHOUT
TRANAITION DIFFICULTIES. WHERE NECESSARY, FARM INCOMES WILL
HAVE TO BE SUPPORTED BY A ' RANGE OF SUPPLEMENTARY ADJUSTMENT
MEASURESBUT THIS SHOULD NOT 8E PURSUED BY COUNTERPRODUCTIVE MEASURES
WHI1CH LINK THE LEVEL OF SUPPORT TO THE AMOUNT PRODUCED.
AN OPPORTUNITY TO FURTHER THESE OBJECTIVES IS PROVIDED BY A
SERIES OF IMPORTANT MEETINGS TO BE HELD OVER THE FIRST SIX
MONTHS OF THIS YEAR, INCLUDING THE WHEAT EXPORTERS MEETING
NEXT MONTH, THE GATT TRADE MINISTERS MEETING IN MARCH, THE
OECD MINISTERIAL COUNCIL MEETING IN MAY AND THE UN WORLD
FOOD COUNCIL AND ECONOMIC SUMMIT IN JUNE.
LADIES AND GENTLEMEN:
THE OPPORTUNITY FOR SUBSTANTIAL REFORM IN AGRICULTURAL TRADE
IS AT HANDIF:
THE MAJOR PLAYERS SUCCEED IN REACHING A CONSENSUS
BELIEVE OTHiER COUNTRIES WILL FOLLOW SUIT.
AND IF WE SUCCEED NOW, SUCCESS AT GATT WILL SURELY FOLLOW.
BUT If WE FAIL, WE RUN THE RISK OF TOTAL COLLAPSE OF THlE
INTERNATIONAL TRADING 6YSTjM.
INDEED, WE RUN THE RISK OF EVER MORE SUBSTANTIAL DAMAGE THAN
THAT-
1 F I
-C r~ r1E
14. RIOOHAX 2 Z45% 5
THE-REALITY, AS I HAVE ADUMBRATED EARLIER, IS THAT THE
PROBLEM OF PROTECTIONISM GOES TO THE HEART NOT JUST OF OUR
ECONOMIC WELL-BEING BUT OF OUR FUNDAMENTAL POLITICAL
RELATIONSHIPS-IT CONTAINS THE SEEDS OF TURMOIL. As
LEADERS WE MUST PREVENT THE GERMINATION OF THESE. DEADLY
SEEDS.
THIS is UNDERLINED FORCEFULLY IF WE AGAIN CONSIDER THE
PROBLEM IN THE LONGER HISTORICAL SWEEP. IN THE FIRST
POST-WAR DECADES, THE PRINCIPAL ECONOMIC DEBATE CENTRED ON
THE IDEOLOGICAL CONTEST BETWEEN EAST AND WEST. IN THE
1970' s, WE FOCUSED OUR ATTENTION AS WELL ON THE NORTH-SOUTH
PROBLEMSNEITHER OF THESE BIG IssuEs IS RESOLVED. YET IN THE 1980' s
THE DEVELOPED DEMOCRATIC NATIONS OF THE WEST AND THE NORTH
NOW FIND OURSELVES PREOCCUPIED WITH A DEBILITATING DISPUTE
AMONG. OURSELVES IN PARTICULAR, AMONG THOSE NATIONS WHICH
THROUGHOUT THE POST-WAR ERA HAVE PROVIDED THE BEDROCK OF OUR
POLITICAL CO-OPERATION AND ECONOMIC LEADERSHIPAM
NOT PREDICTING THAT THE TRADE TENSIONS WILL LEAD TO THE
COLLAPSE OVERNIGHT OF CORDIAL POLITICAL RELATIONSHIPS IN THE
WEST-OUR DEEP HISTORICAL, DEMOCRATIC AND STRATEGIC LINKS
ARE ALL FAIRLY DURABLE COMMODITIES AND ARE CAPABLE OF
ENDURING A HIGH DEGREE OF DISAGREEMENT ON ECONOMIC ISSUES.
BUT WE MUST BE ALIVE TO THE PLAUSIBLE THESIS THAT COMMERCIAL
TENSIONS, IF ALLOWED TO FESTER, WILL OVER TIME ERODE WESTERN
POLITICAL AND SECURITY RELATIONSHIPS TO THE POINT WHERE THEY
EVENTUALLY LOSE THEIR DAY-TO-DAY VITALITY-WE COULD BE LEFT
WITH FORM, BUT LITTLE SUBSTANCE.
THAT'THE PROCESS MIGHT BE GRADUAL AND SUBTLE, RATHER THAN
SUDDEN AND DRAMATIC, WOULD MAKE IT NO LESS PERNICIOUS AND
ITS ULTIMATE CONSEQUENCES NO LESS DAMAGING.
1.41-1
No. 062 733693 29,, 87 12: 18 P. 16
JAN 29 0-0. 43 A. PM RICOAX 2* 24596
MY COUNTRY 18 PART OF THE WESTERN ALLIANCE AS A MATTER NOT
ONLY OF TREATY OBLIGATION BUT OF HARD STRATEGIC ASSESSMENT
THAT WESTERN STRENGTH AND UNITY OF PURPOSE ARt ESSENTIAL.
AND YET IN AUSTRALIA WE HAVE HAD A TASTE OF THE WAY IN WHICH
PROTECTINISM BY OUR FRIENDS CAN PROVOKE PUBLIC ANGER AND
LEAD TO HE QUESTIONING OF ALLIANCE CONNECTIONS HITHERTO
CONSIDERE ALMOST SACROSANCT.
INDEEDi OUR CAPACITY TO PLAY A ROLE IN ADVANCING THE
INTERESTS OF THE WEST CAN ONLY BE. LESSENED IF OUR ECONOMY IS
WEAKENED BY THE SHORT-SIGHTED PURSUIT OF PROTECTIONISM BY
OUR WESTERN ALLIES.
IF THE REACTION Or AUSTRALIANS TO AMERICAN OR EUROPEAN
AGRICULTURAL EXPORT POLICIES IS ANYTHING TO O BY, THE
FRUSTRATION AND RESENTMENT BUILDING UP AmONG AMERICANS,
EUROPEANS AND JAPANESE ABOUT THE TRADING PRACTICES OF EACH
TOWARDS THE OTHER MUST BE TRULY CORROSIVE OF LONG TERM
WESTERN COHESION.
LADIES AND GENTLEMEN:
I OPENED MY REMARKS THIS EVENING BY ACKNOWLEDGING THE HIGH
CALIBRE OF THIS DAVOS GATHERING. You HAVE AN EQUALLY
SUBSTANTIAL OBLIGATION TO DISCHARGE.
IT IS MY HOPE THAT IN THE DAYS AHEAD YOU WILL CONSIDER THE
PROPOSALS I HAVE OUTLINED IN THE INTERESTS OF A FAIR AND
OPEN INTERNATIONAL ECONOMIC ENVIRONMENT IN WHICH TRADE CAN
FLOURISH AND IN WHICH THE QUALITY OF RELATIONS BETWEEN
COUNTRIES CA" BE ENHANCEDIf
LEADERSHIP IN THE TREND OF IDEAS AND OF POLICIES CANNOT
COME FROM PEOPLE SUCH AS YOU, THEN I DO NOT KNOW TO WHOM
ELSE WE CAN LOOK POR THE VITAL COLLECTIVE ENTERPRISE WHICH
LIES ANC$ j OF Us-