CHE~ CK AC. AINRT nRTLIVRRY E14BARGOQFn UNTIL. nFLTIVERY
SIOEECH BY THE PRIME MINISTER
ASIA-PACIFIC ECONOMIC INSIGHT CONFERENCE
CANBERRA 15 APRIL 1991
Ross Garnaut
Distinguished guests
Ladies and gentlemen
This Conference meets at a time of profound economic change
within Australia, within our region and in the wider world.
I am pleasqd to be able to address you tonight, as I
strongly b~ lieve that the Conference will serve the vital
purpose of alerting Australians to the directions in which
the Asia Pacific economies are evolving and to the
opportunities these trends present for Australia.
It is important at such a time that decision makers in
Australia and abroad seek to understand this dynamic process
of change, and to master it not only so that pitfalls can
be avoided but also so that the undoubted opportunities that
await us as a nation and a region can be maximised and
harnessed to the pursuit of higher living standards.
It is within this spirit that I wish to speak tonight on the
changes underway in Australia by recalling, first, how far
we have come, before outlining to you what we need to do to
make further progress.
Throughout most of this century, Australia sought
deavelopment in comparative isolation isolation based not
only on our distance from markets but also, perhaps
paradoxically, on the bounty of the country which reduced
the pressure on us to search for overseas markets for
anything other than agricultural or mineral products.
But over recent years Australians have been learning that we
ax~ e doing ourselves a great disservice if we pretend that
Australian isolation from the challenges of the region and
the world can somehow continue to be the norm.
This is reflected in changes in our foreign policy, in our
d: scrimination-free immigration policy, and in many aspects
of our national life. But my subject tonight is the
internationalisation of Australian economic policy and
pearspectives, and our increasing enmeshment in the economies
of the region.
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Australia has always been a plentiful producer of primary
goods, helping feed the people of the region and fuel the
burgeoning industries of North East Asia. But never before
have we had such legitimate confidence that we could play a
role as full regional partners across the spectrum of
economic activity. That is the prospect that is at hand
today, replete with significance for all of us.
Since 1983 we have gone a long way up the boulder-strewn and
arduous uphill road of reforming our domestic economic
institutions and attitudes.
Our goal is an Australia with a vibrant flexible economy,
enmeshed with our trading partners in our region and beyond
an Australia wheres work practices, business management and
academic excellence match or better the best in the worldan
Australia where we maximise the potential of our people
and ensure them the economic and political opportunity to
reach that potential.
Our determination to achieve these goals was exemplified in
the recent statement I delivered to Parliament, Building R
nnmp~ titjvA Auigtral La
No better symbol, anad proof, of Australia's historic
preference for isola~ tion over international enmeshment can
be found than our historic legacy of tariff protection. It
is that legacy that this Government has substantially
reduced and, with the 12 March statement, now virtually
eliminated. In summary, I announced the Goverment's decision to
reduce tariffs for most manufactured products Vo 5 per
cent by 1996; and
reduce tariffs to 25 percent on textiles, clothing and
footwear and to 15 percent on passenger motor vehicles
by the year 2000
Turning the pernicious and pervasive tide of Australia's
traditional protectionism will, I am confident, be regarded
as a watershed decision in the history of this nation. The
fact is, behind high tariff walls, Australian industry was
able to regard the domestic market as its captive. Industry
was given little incentive to improve the quality of its
product or adopt nesw technology. Managers and workers were
able to eschew international best practice as an
irrelevancy, and indulge in debilitating confrontation
instead of cooperation.
Worse still, tariff~ s damaged our traditional efficient
export industries agriculture and mining by raising
input prices directly, and encouraging and facilitating
excessive wage increases. 63505
It was the Australian consumer who paid the immediate
penalty of tariffsa: higher prices. But ultimately it was
the Australian economy as a whole that suffered simply,
because Australian industry was incapable of competing on
world markets and all this at a time when the rest of the
world, including our own region, was growing rapidly.
It is important that you understand that these latest tariff
reductions formed part of a wider economic statement aimed
at lifting Austrhlian competitiveness through further tax
reforms, new support for training for managers and
apprentices, and new initiatives to help build Australia as
a " clever country".
One specific initiative that may be of interest to this
audience is our new scheme to facilitate work experience for
our graduates and corporate executives in the Asia Pacific
region. In turn I want to stress that this package of reforms is
complemenfpary to the developing momentum of micro economic
reform in other areas in particular, our unprecedented
campaign to lift the productivity of our waterfront and land
transport systems, historic changes to telecommunications
and domestic aviation, and pathbreaking reforms in workplace
culture and in eliminating the duplications of our Federal
system of Government.
And these in turn must be seen in the context of Australia's
international initiatives. I refer in particular to our
regional diplomacy, spearheaded by my 1989 proposal to
establish a new forum of Asia Pacific Economic Co-operation,
and our campaign as founder and leader of the Cairns Group
in the Uruguay Round of GATT to strengthen the multilateral
trading system.
Ladies and gentlemen,
The building of an internationally competitive Australia has
been a tough task. There is a long way to go before our
people are making full use of their talents in intensive
-two-way trade, beyond primary products, in advanced
manufactured goods and services. But we take some comfort
from the fact that, despite the clouds and gloom of
recession, the long-term structural change that we need is
shining through.
En the second half of the 1970' s our manufacturing exports
grew by a compound rate of 1.4% a year. In the first half
of the 1980' s that had lifted to 4.5% per year. In the
second half of the 1980' s we had improved the rate to nearly
: L3 per year. Growth over the past two years is the
strongest yet, at an average rate of 24% per year. This has
contributed to recent balance of payments figures, showing
t: hat the balance of our merchandise trade has been in
surplus for 9 of the last 12 months and that exports were at
a record level of $ 4,452 million in February.
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By comparison with this encouraging progress in
manufacturing exports, our agricultural exports have
stalled. In the second half of the 1970' s our agricultural
exports grew by nearly 9t per year. By contrast, in the
1980s, despite the large productivity gains of our farmers,
they have been stagnant.
A large part of the reason is clear: agriculture, as you all
know, stands out as a dishonourable exception to the general
commitment by advanced countries to liberal trade.
The combined farm subsidies of the EC, and to a lesser
extent the US and Japan, have recently averaged more than
$ 300 billion a year for a sector that produces about 3% of
their GDP. But this direct cost on their consumers,
manufactures and service industries does not stop there. A
bloated, subsidised agricultural sector restrains the
standards of living in the advanced countries and blocks
development and trade expansion in developing countries, and
in primary exporting countries, like Australia. That is a
pernicious syndrome that we must all work to reverse.
Ladies and gentlemen,
I do not pretend that Australia is anywhere near the end of
our reform path or that our achievements to date are unique
in the region.
But I do say this. Given the magnitude of the reform task
that lay ahead of us, we have made significant progress.
Australia is entitled therefore to expect that economically
developed countries of our region, such as Japan and Korea
will examine their own practices in agricultural protection
and join with us in pressing the EC and United States, in
order of priority, to cease their export subsidieqland wind
back import restrictions, a
Failure to secure commitment to real reform in these areas
will not only jeopardise the potential benefits that we know
will flow from the successful conclusion of the Uruguay
Round, it will also cripple the ability of the world trading
system to continue to provide the engine for further
economic growth. Significantly whilst we will all suffer,
those countries least down the path of economic development
will be damaged the most.
Ladies and gentlemen
The excellent resource publication you have received as
participants in this conference highlights the benefit to
individual countries in our region and elsewhere of low
inflation. For over twenty years Australia has in comparison with its
trading partners b~ een a high inflation country. This factor
has undermined our exporters' competitiveness and has warped
the investment decisions of our business people and foreign
investors. 6507
We are now breaking through to be an economy of
comparatively low inflation with a rate that, at 6.9% is
below the OECD average and is trending substantially lower.
The initiatives announced on 12 March will strengthen that
downwards trend, bringing commensurate falls in interest
rates. t
With these economic foundations in place and the unique
success of the Accord in our approach to industrial
relations we will see the continued natural growth in our
manufacturing and service areas coupled with continued
performance of minerals development and exports.
Ladies and gentlemen
I have focussed on the changes we are making in Australia
with, on the basis of the evidence I believe, some
justif~. able pride in our achievements while acknowledging
the process cannot stop.
Change is occuring in our regional partners and in the 12
March statement we acknowledged that with the decision to
freeze preferential tariff levels for Hong Kong, Singapore,
Korea and Taiwan. In this way we have preserved their
positions whilst our general tariff levels move down to meet
their present levels before both move to
It would be remiss of me to fail to recognise the very real
changes that have occurred elsewhere in our region. They
have complemented our moves and stand to benefit our entire
region. To mention all the countries or all the changes
would take too long and would duplicate much of the program
content of the conference.
In our early meetings, the then Prime Minister of Japan,
Mr Nakasone, and I focussed on the need for the multilateral
trade negotiations, which was later launched as the Uruguay
Round, to deal effectively with agriculture for the first
time. We are getting closer but we are not there yet.
Certainly we recognise the importance of Japan's step, after
many and sometimes difficult discussions at many levels,
including Prime Ministerial, to remove quotas from beef
imports. Japan has also taken the less glamorous but equally
important steps of addressing inadequacies in its anti trust
laws and regulations inhibiting new entry of business.
Protective restrictions on new shopping centre developments
are to be revised. Since 1989 Japan has been the world's
leading foreign aid donor and has kept approximately 80 per
cent of that aid untied.
In Korea there has been signficant reform of financial
markets and structural reforms in the ownership and
management of the large corporate groups.
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Indonesia has significantly removed restrictions on foreign
investment projects, liberalised the financial sector,
reduced maritime transport regulation, moved to a tariff
basis for protection from quantitative restrictions and
reduced some tariff levels and has started a program of
improving the efficiency of its state enterprises that are
involved in so many of the sectors of its economy.
The striking similarity of the economic reform processes
throughout our. region are indicative of the potential we
have in the last decade of the twentieth century for closer
economic cooperation for our mutual benefit.
By our continuing to work together, recognising differences
where they occur and drawing upon our divergent experiences
to address the problems we will undoubtedly face, we can
ensure that the powerful growth continues in East Asia, it
spreads to more countries, including Australia, and that it
brings prosperity to all of our peoples.
Ladies and gentlemen
The unique opportunity we have to work together for our
future is clearly demonstrated in the Asia Pacific Economic
Co-operation process.
This flexible, dynamic process will further facilitate our
ability to develop Individually and as a region. The APEC
process is evolving in a way which complements existing
regional and multilateral structures. I hope it will soon
be extended to include the Peoples Republic of China, Taiwan
and Hong Kong and scan thereafter other regional partners.
APEC participants now account for 46% of world
production and one third of world trade
Our region is one of high growth, rising productivity
and intensive trade and investment interaction.
The underlying forces which gave rise to APEC will intensify
in the coming decadei as the focus of world production and
trade shifts increasingly towards the Pacific and as the
Asia Pacific economies play a more active role in world
affairs. The crucial interest for Asia Pacific economies is in
developing a framework of support for, and commitment to,
liberalising internLtional trade and economic policies.
My Government has committed Australia irrevocably to this
course. Cooperation in trade, investment, human resources
development, and in specific sectors such as energy and
tourism, can bring benefit to all APEC countries.
Even in the collection and sharing of trade and investment
data, there is much to be done 509
-work on trade promotion within APEC, for example, has
led to an important proposal by Singapore for the
electronic exchange of a wide range of trade and
industrial information among APEC economies, based on
the Singapore Trade Development Board's Globalised
Information Network.
APEC has a complementary relationship with the Pacific
Economic Co-operation Conference ( PECC) and the involvement
of the business and research sectors, alongside officials,
in identifying practical opportunities for economic cooperation
within its various task forces and forums.
PECC's work on fisheries and the regional outlook, for
example, feed directly into the APEC process.
In the area of energy, to take another example, the
countries of the region face a number of common issues and
challenges. In co-operation with PECC's Minerals and Energy
Forum, APEC has a promising work program. Work in train on
specific areas includes study of energy supply and demand in
the region; energy conservation and efficiency; clean coal
technology; and research and development and technology
transfer, Significant progress has already been made on
steps to improve energy data in the region. Ultimately,
this work is likely to lead to improved forecasts, with
major benefits in planning energy infrastructure required to
meet rapidly growing energy demands in the region. The
energy project has an important and practical focus on
environmental issues.
The participants in APEC start from the fundamental
commitment to strengthening the open multilateral trading
system APEC members must hold fast to that commitment and take
the steps that are necessary to push it forward at the
national and regional level
I am pleased that non-disciminatory regional trade
liberalisation is on the agenda for detailed
consideration at the next Ministerial level meeting in
Seoul later this year.
APEC's work is being built upon foundations laid in PECC, in
the Pacific Basin Economic Council of business leaders, and
in the Pacific Trade and Development Conference Series. The
meshing of academic, business and Government resources to
define the problems we face, and to find the solutions, is
essential. All these bodies engage in the vital and productive
processes of exchanging ideas and experiences and
identifying opportunities for the future. In this, the work
of economists here tonight has done much to build the
intellectual basis for Pacific Economic Co-operation.
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The Australian Naticnal University has played a central and
valued role in these endeavours.
Tonight I would like to announce a modest initiative to
strengthen further the intellectual sinews of Pacific
economic co-operation. Economists through the region are
familiar with the jajrna1~ fAI Pnfin Ennnomtn
Litgratunrp, which has been produced at the Australian
National University for several years. I am pleased to
inform you that the Australian International Development
Assistance Bureau is developing a program to distribute the
journal through the APEC countries.
I congratulate economists in the Research School of Pacific
Studies, and Ernst and Young, for organising this
Conference. The information and analysis you have assembled
will contribute to enhancing Australia's performance in Asia
and the Pacific. I wish you well in your consideration of
the issues facing our region. 6511