PRIME MINISTER
SPEECH BY THE PRIME MINISTER, THE HON P J KEATING, MP
GLOBALISM AND REGIONALISM: AUSTRALIA'S TRADE POLICY
AGENDA FOR THE 905 KEYNOTE ADDRESS TO THE AUSTRALIAN
CHAMBER OF MANUFACTURERS' CONFERENCE ON " ASIA 2010"
MELBOURNE, MONDAY 20 JULY 1992
You have been talking at your conference here today
about our region, and how we the people of the region
will fare over the next couple of decades.
This evening I want to talk about how Australia and
our region may change over this time, and how the
choices we make today will decide what kind of world
we and our children will find in the new century.
You'll notice that I have already taken Australia to
be part of the Asian region, which is in itself
something of a change in our thinking. We are
geographically part of it, and much of the change in
Australia in recent years has been a process of
cultural attitudes somewhat reluctantly accommodating
themselves to geographical facts.
As President Soeharto and I agreed during my recent
visit to Indonesia, it is hard to change attitudes,
but not as hard as changing geography!
our economy is also increasingly integrated into the
region, and the visitors here this evening will have
seen in our cities evidence that the fastest growing
migrant population in this country is from Asia.
In the last decade or so the Asian rpgion has been
transformed into the most rapidly growing regional
economy in the world, with a high share of exports in
output, and a high degree of trade within the region.
If we include Canada and the United States in the
wider region, as we do in APEC, then of course we are
talking about the preponderant grouping in the world
economy, with half the world's output and almost half
the world's trade. Of that trade, nearly two thirds
is with other members of the group.
Australia has been a full participant in these
regional changes, and over the next few decades we
intend to integrate ourselves into our region even.
more closely.
But I think that we will soon have to make important
choices in our region. We will soon have to decide
how we as a region, and Australia as a member the
region, will respond to the emerging new pattern in
world affairs which follows the collapse of the Soviet
Union. One of the powerful realities we must recognise is
that economic regionalism is shaping the post Cold War
order. As the era of the Cold War ended, we discovered that
we were already entering the era of Maastricht and
NAFTA. In our own region Asean has said it will form
a trade area, and all the countries of the region have
created the 15 member APEC grouping with an agenda of
discussions on trade liberalisation.
But paradoxically another powerful force encouraged by
the of the end of the Cold War is globalism.
The market economy model is now nearly universally
accepted in industrial countries. The former
communist countries are rapidly being integrated into
global institutions like GATT, the IMF and the World
Bank. We are seeing issues like the environment and
weapons proliferation dealt with in global forums.
And in Kuwait and Cambodia we witness the United
Nations play a role it has not been able to play for
decades. Though they appear to be contradictory, these two
forces of regionalism and globalism are in fact
complementary. They are the two economically unifying counterweights
to the forces of nationalism, ethnicity and religion
which have also been released by the end of the post
war ideological battle.
Certainly I regard them as complementary, and
Australia's international economic policy embraces
both a global and a regional strategy.
The job for governments everywhere is to fit these two
forces of regionalism and globalism together at a time
when, for better or worse, the Uruguay Round of the
GATT is coming to a conclusion.
This recognition that economic regionalism is a
dominant force in the world ecoomy does not for a
moment mean we have lost faith in GATT. It does not
mean that we will cease doing whatever we can,
whenever and wherever we can, to entrench through the
GATT a stronger set of principles of fair trade to
which all countries subscribe.
But we do recognise that trade and investment growth
today is predominantly within regions, that Europe
from the Atlantic to at least the Urals and perhaps
beyond is firmly set on a course of deep economic
integration over coming decades, and that in all
probability we shall be dealing with another free
trade area from Canada to Mexico by the end of this
year. We might not like this evolution, but whether we like
it or not we cannot stop it. The only question is how
we should respond to it.
That is a theme to which I will return later, but let
me set the scene for the next few decades by telling
you about how Australia has changed in the last decade
to prepare itself for the changes to come.
For the decades following World War Two we in this
country hid behind tariff barriers, creating what by
the early eighties had become an industrial museum.
The economy was highly regulated and unable to adjust
to the explosion of growth which was then occurring in
Asia. over the last-decade we have radically reformed.
We floated the dollar and deregulated financial
markets, replaced conflict with consensus in
industrial relations, set in place a program of tariff
cuts and industry modernisation, and pruned the
government sector
More recently we have encouraged a wholesale shift
into enterprise bargaining as the principal means of
deciding wages, and pushed forward a program of
industry reform which has dramatically increased the
productivity of our ports, and changed the face of our
aviation and telecommunications industries.
We are beginning now on vast new improvements to our
railways and roads.
In our One Nation statement earlier this year, we made
changes to our business taxation system which make it
one of the most competitive among industrial
countries. And I am glad to say that the results of this reform
process have shown up in the transformation of our
trade a transformation in volumes, composition and
destination. A decade ago Australia exported less than one sixth of
our production.
Today we export over a fifth, and it has been steadily
climbing over the whole period.
A decade ago we more often than not imported more
goods and services each month than we exported.
Today, we export more than we import. Most Australians
would probably be surprised to know that we have a
stronger goods trading balance than many other
countries in the region, including Singapore,
Thailand, Malaysia, and Korea.
A decade ago Australia had one of the highest
inflation rates in the industrial world.
Today it is one of the lowest, and lower than most of
our regional trading partners.
A decade ago our cost structure made it hard for
exporters to compete.
Today we have increased our competitiveness by a
tenth, and entrenched our competitive advantage with
low inflation and high productivity growth.
As the sheer volume of our exports increased, their
composition and direction changed.
Both our services exports and manufactured exports
have tripled over the last decade. Last year for the
first time we exported more manufactured products than
rural products. Manufactures earn us more than metal
ores and minerals, or tourism or coal.
Nine out of ten of our largest export markets are now
in Asia and the Pacific.
Today, more than half of our merchandise exports go to
Asia. The countries of ASEAN are today collectively a bigger
export market for us than either the US or the EC.
Our aim is to be at home in the region, with a highly
competitive world class manufacturing sector,
exporting a diverse range of commodities, manufactures
and services to the region and beyond.
The slow growth we and most other industrial economies
are now experiencing as we recover from recession
obscures the very real change in the economy. But
even with slow growth, we have found that far from
destroying our manufacturing base in this country our
structural reforms have nourished it.
Our manufacturing output today is nearly a tenth
higher than it was a decade ago and nearly a third
higher than it was twenty years ago, the so-called
" golden era" of protected Australian manufacturing.
And as I have explained, we are exporting more of our
manufacturing output than ever before.
The range and pace of our structural reforms over the
last decade demonstrate our recognition that whatever
happens in the world trading environment we will cope
with it best if we ourselves are as nimble, fleetfooted
and adaptable as possible.
Both the region and this country have profoundly
changed over the last decade. What will happen in the
next two?
I spoke earlier about the strategic choices we face as
the Uruguay round comes to an end, as Europe continues
on a deeper and more comprehensive integration, and as
the United States creates its own free trade area with
Canada and Mexico.
The choice is between entrenching the prosperity of
the region through increasing global openness, or
being forced onto second best paths which restrict
trade and leave us all worse off.
If governments make the right decisions, if the
Uruguay Round succeeds and the countries of our region
continue to liberalise, then over the next two decades
East Asia will continue to be the fastest growing area
of the world economy.
Growth of Asian markets will continue to exceed that
of other markets, including the EC and North America,
as population grows . and incomes rise.
Japan will be an even stronger, better balanced
economy, while the smaller Asian market economies will
increasingly be concentrating on services and of fshore
manufacturing.
Some, like Korea, will have joined the OECD-and other
industriallid co6untry organisations. There will be a
new pack of " tigers" in South East Asia, benefiting
from political and strategic stability, and more
outward-looking economic policies.
With a new generation of leaders,_ China is likely to
commit itself increasingly to the mariket model, taking
the lead from its thriving coastal trading economy.
Korea may perhaps be reunited, ultimately bringing to
the North the economic prosperity that is transforming
the South.
If all goes well, the three nations of Indochina will
also be growing market economies.
APEC will evolve into an outward looking regional
trading group, with the participation of both Japan
and the United States.
Australia will be changed, too, with an even larger
trade sector, more exports of services and
manufactures, and astill sharper focus on markets
within the region.
The realisation of this world depends upon increasing
trade within the region, which in turn depends upon
countries' being as willing to buy other countries
exports as they are to sell their own.
It depends on making the right decision to lower
regional trade barriers at the same time as we
entrench fairer global rules.
But if we make the wrong decisions, or if they are
forced upon us, we face another possible future by
2010 a future quite different to the one I sketched
earlier. If the region cannot continue to open its own markets,
and still worse if we begin to encounter difficulty in
markets of Europe and North America, then the forces
now underpinning the region's success will be
reversed. we would see a weakened world trade system, with GATT
rules increasingly flouted.
We could see an inward looking North American Free
Trade Agreement, possibly extended throughout the
Americas, edging out competitors from its markets.
We could see Europe going its own way, placating a
multitude of domestic constituencies at the expense of
foreign competitors, and of its own future prosperity.
We could see Japan defensively creating a regional yen
bloc, based on preferential trade and investment
rules. Lesser developed areas, like China and Indochina,
stunted in growth.
And Australia, its exports markets restricted, forced
into difficult economic and strategic choices between
the United States and Japan.
As I said earlier, the choice between the bright
scenario and the gloomy scenario will depend on how we
fit together the forces of regionalism and globalism
in trade policy.
For my part I think the best fit is attained when we
work towards the strongest set of universally agreed
minimum standards we can on a global basis, and at the
same time attempt to do better on a regional basis.
Given the large and diverse membership of GATT, it is
inevitable that an agreement which is universally
acceptable must leave plenty of opportunities for
regions and subregions to improve on the benchmark
without violating its rules.
And given the fact of propinquity, it is inevitable
that regional arrangements which are GATT friendly
will nonetheless be of greatest benefit to the region
concerned. So we will be seeking constantly to strengthen
international trading rules through the global
institution, GATT, at the same time as we seek to
build regional trade and economic arrangements which
take us beyond what we have been able to achieve on a
global consensus.
We remain committed to a successful Uruguay Round
because it can bring us substantial benefits, not just
in agriculture but also in manufactures, services,
intellectual property rights and many other areas.
According to one cautious Canadian study, the package
now before us would, if agreed, increase global income
by something of the order of 120 billion dollars a
year. As you know, no breakthrough came about during the
Munich Summit of the G7. I do not pretend to be other
than disappointed at the failure so far to bridge the
remaining differences. We will be pressing hard for
the G7 leaders to make good their commitment to reach
a balanced agreement before the end of the year.
8
Stalling the round indefinitely would be a failure of
political leadership on a grand scale. It would
represent a shameful capitulation to the selfish
forces of economic protection.
But while successful GATT outcome is important it
won't begin to exhaust the trade growth possibilities
in the region.
According to a study by the Centre for International
Economics, the Asia Pacific region would gain the
equivalent of $ 300 billion if the countries of the
region were to agree to liberalise with a fifty per
cent reduction in tariff and non tariff barriers.
APEC holds great promise in this next phase of trade
reform. Institutionalisation of APEC will signal a
new area in regional economic co-operation. APEC
members have committed themselves to reducing barriers
to trade amongst themselves in a GATT-friendly way.
Already APEC working groups are hard at work in
different sectoral projects. In the next 12 months we
are likely to see substantial outcomes from various
projects which will yield significant practical
benefits for business. These include customs reforms,
changes to administrative barriers to market access,
development of tariff databases, and others.
In some areas it will be possible to move forward in
smaller groups of economies say like-minded groups
in the Western Pacific and then extend agreements
later to take in all APEC members, or even economies
not yet in APEC. The Trade Minister, John Kerin, and
I will therefore be asking our senior trade officials
to explore some of these options with regional
countries before the end of the year.
One possibility is to look at the potential offered by
the growing aviation market in our hemisphere. On
current trends, by 2010 Asia will have consolidated
its place as the world's pre-eminent international
aviation market. -This process could be enriched
through an expansion of regional aviation rights.
Other possibilities include regional agreements on
investment and on services, including
telecommunications, banking and insurance.
As a steel exporter, and also as a supplier of raw
materials to the steel makers of north Asia, Australia
would also be receptive to discussions on a regional
steel agreement, if the global talks remain stalled.
9
Over coming months we will be reexamining trade policy
options in the light of the Uruguay Round outcome and
regional developments. Some of these options are
reviewed in discussion papers commissioned by the
government and prepared by Professor Richard Snape,
which will be released by the Minister for Trade on
Wednesday. The papers will contribute to the debate on our
national trade strategy which will be capped by a
comprehensive Ministerial Statement by Mr Kerin in
October. I have no doubt that regionalism will become
increasingly important to us in coming decades. That
is why I have this evening suggested a few regional
trade initiatives we will pursue. But we should
always bear in mind that the region has founded its
development on trade and, more than any other, enjoys
the benefits of the principles of interdependence and
openness. Over the next two decades we must continue
to demonstrate that the best outcome for all economic
regions is attained when we have strong global rules
while maximising regional trade opportunities.