K
.4
PRIME MINISTER
"* PLEASE CHECK AGAINST DELIVERY"*
SPEECH BY THE PRIME MINISTER, THE HON P J KEATING MP
FOREIGN CORRESPONDENTS ASSOCIATION
SYDNEY, FRIDAY 11 NOVEMBER 1994
I am a well known enthusiast for APEC but when I first started talking about it,
it wasn't an acronym which sprang readily to the lips of most Australians.
But things are changing. I was very pleased recently to come across the first
reference to APEC I had seen in an Australian newspaper cartoon.
Once the cartoonists get hold of something you can be pretty sure it is sailing
down the mainstream of public consciousness.
I am glad that is happening, because it is where APEC deserves to be.
It has always seemed to me to be the right idea for Australia, the right idea for
the region and the right idea for the world at large.
It is the right idea for Australia because it defines a region which is critical to
us. It includes the economies to which we sell 75 per cent of all we export,
and our key bilateral relationships on both sides of the Pacific.
It is the right idea for the region because it encompasses its most important
trade and economic links. It helps lock in United States economic and
commercial interest in the region which in turn helps to ensure US strategic
engagement. It provides a framework to help contain or manage competition
between China, Japan and the United States. And it gives the smaller
countries a greater say in the nature and shape of regional trading
arrangements. It is the right idea for the world because it links both sides of the Pacific in a
co-operative endeavour and helps to prevent the division of the post-Cold
War world into three competing blocs.
And it is the right idea because it is not intended to be, and will not become, a
capital " C"-type Community which closes itself against the world, but a small
11c" community of common interests, seeking prosperity with its international
partners through trade liberalisation rather than closed barriers and
subsidies.
One of APEC's great advantages, which we are seeing fully in play in
President Soeharto's proposals for Bogor, is that it spans not only both sides
of the Pacific but the full spectrum of the world's economies from the most
industrialised and developed countries, through the dynamic Asian tigers, to
developing economies like Indonesia.
So when APEC talks about trade and economic issues, when it frames its
actions, it has to take into account the full complexity of eighteen economies,
all looking for growth and liberalisation but at different stages of development.
That is important, because it is the way the global economy is going. Cooperation
across different levels of development is the way we will have to
address these trade and economic issues in future. In this sense, APEC is a
template. On Sunday, I will be leaving for Jakarta to attend the second informal meeting
of APEC leaders. As I said recently, it promises to be the most significant
meeting to have been held in Southeast Asia since the Bandung meeting
established the Non-Aligned Movement in 1955.
When I first suggested, less than three years ago, that APEC leaders should
get together to discuss the challenges facing the region, I hoped in this way
to give the organisation some political horsepower and help it deliver some
real benefits to business.
I must say I am well and truly pleased to be attending the second such
meeting in November 1994. That it is happening is a reflection of the real
benefit regional economies have seen in the APEC process.
The meeting at Bogor will include the leaders of eighteen economies
representing half the world's production and nearly half its trade. And they
are growing fast.
By 2000 these same economies will account for almost 60 per cent of world
GDP and 55 per cent of world trade.
By 2020, seven of them China, the United States, Japan, Indonesia,
Thailand, Chinese Taipei and Korea will be among the world's ten largest
economies. So what happens in APEC can have a long-lasting impact on how the world
operates into the next century.
As in Seattle, this will be an informal meeting. Ministers and officials are
meeting over the next few days to sort out APEC's formal work program. A lot
of valuable work will be done there.
But the leaders, when they get together on Tuesday under President
Soeharto's chairmanship, will have no formal agenda, no set texts. We will
be alone in a room for several hours, without advisers, talking about our own
economic problems and opportunities and what we can do collectively about
them. No wonder the beads of sweat are breaking out on the brows of bureaucrats
all around the region.
This is an unusual model for an international gathering, and as we showed
last year in Seattle, it can deliver creative results.
We will be coming to Bogor with a real sense that APEC is beginning to
coalesce. In the year since Seattle a lot of progress has been made on the initiatives we
set in train then.
Most of the recent press coverage of APEC has focussed on the trade
liberalisation debate. This is understandable. It is a large and important
issue. But it is also important not to forget the progress being made in
cleaning out the region's trade arteries by removing administrative
impediments to the flow of goods and services the trade facilitation agenda.
This is important to business and will become more important as tariff levels
decline. Differences in standards can add between five and ten per cent to
the cost of entering a particular market.
So it is good to see the work on standards going well. We are now moving
into the stage of negotiating Mutual Recognition Agreements between APEC
economies. An APEC network of these agreements will mean that any product tested
once will be accepted as having been tested everywhere. And standards
throughout the APEC economies will be progressively harmonised with
international standards
We have also made good progress on a set of APEC investment principles.
Investment is an urgent issue for the APEC economies. Foreign investment
has been one of the driving forces behind APEC's growth.
But if that growth is to continue, it is critical that foreign investment to and
within APEC keeps flowing. For example, over the next decade East Asia will
require an estimated US$ 1.7 trillion for investment in infrastructure alone.
Much of that will have to come from foreign investment.
At the same time, we will be seeing intense competition for investment funds
from Eastern Europe and other economies outside APEC.
So there is a growing appreciation that to keep investment coming, the APEC
economies need more open and transparent investment regimes. The
reforms which Indonesia introduced in July reflect this recognition.
I hope we will be able to announce at Bogor a set of non-binding APEC
investment principles. That will enable us to take forward the dialogue within
APEC about how we can improve our investment regimes.
It is also worth noting that the first meeting of APEC Finance Ministers was
held earlier this year. As the Asia-Pacific becomes the world's new centre of
economic gravity the economic dialogue instituted at this meeting will be
increasingly important.
APEC is also building people-to-people links. We decided at Seattle to
establish a network of APEC study centres throughout the region.
I am happy to announce that we have decided to establish the Australian
study centre in a joint operation between the University of New South Wales
and Monash University in Melbourne.
These two universities not only have a high standard of academic research
on APEC-related issues but they will be pursuing some innovative ideas for
educating Australians about APEC for example, through Monash's
experience with the Open Learning scheme.
APEC's progress in these and other areas, such as small and medium
enterprises, has been useful and welcome.
But I have been convinced of the need to lift the APEC debate to a higher
level. If we are to maintain the region's remarkable growth rates we need to
tackle the task of bringing down tariffs and non-tariff barriers for goods and
services. President Soeharto shares this view. He has suggested that APEC set at the
Bogor meeting a far-reaching objective of free trade in APEC by a specific
date and on a GATT-consistent basis.
I have spoken with President Soeharto several times during the year and I
know how committed he is to achieving this goal. He knows from Indonesia's
experience just what the benefits of liberalisation can be.
I told him recently that my support for him on this is total and unqualified.
Because this is a remarkable development.
Past pressure for trade liberalisation has come from the industrialised
countries. They have set the agenda. They have put the pressure on.
Now, for the first time, a developing country has said we should commit
ourselves to a free trade outcome. It is vital that we respond positively to this
challenge. Over the next few days something like a sense of awe would not be
inappropriate such is the boldness of what is being proposed.
This is no simple task to get down all barriers to goods and services in the
region by a defined date.
It is an extraordinarily difficult thing for most Governments to contemplate.
The benefits of freer trade are clear but they are spread throughout our
economies. The impact on special interest groups and protected sectors
offers immediate pain. This is a problem we were very familiar with in
Australia as we cut our own levels of protection.
So as Bogor has got closer, and the scale of the proposals has become
clearer, it is little wonder that around the region a slight clearing of the throat
has turned into the odd nervous cough and then, in a few cases, into
significant breathing difficulties.
I have been in touch with leaders from most APEC economies over the past
few months and I hope we will get the commitment we are looking for at
Bogor, but I am certainly not taking it for granted.
For Australia, the important thing is to get the process going. The end-date
matters less, so long as it is not too distant. Because, as we have seen in
Australia, once the decision is made, business will begin to incorporate it into
its planning, and things will begin to move.
No one is expecting fine detail out of the meeting in Bogor.
Even if we reach agreement on a free trade outcome, some very important
questions will remain: What form will the liberalisation take? What coverage
will it have? Will it extend to all GATT members under an MFN arrangement
or will it be preferential?
I don't underestimate the importance of these questions or the difficulties in
filling in the gaps. Some long and arduous talking lies ahead.
But getting the political commitment by leaders is the immediate requirement.
That decision would set the region's economic agenda for the next twenty
years. None of what APEC is doing should be seen as a threat to the global system.
I have said all along that anything APEC does should be GATT-consistent
and equally importantly that it should contribute to global trade
liberalisation.
We understand fully that the growth of the Asia-Pacific economies has been
underpinned by the open multilateral trading system, which itself has turned
largely on the United States's willingness to lead the world in trade
liberalisation. Now it is the Asia-Pacific's turn to lead the way. This is where the growth is.
And despite strong liberalising moves, protection remains high in many East
Asian economies, offering them great scope to benefit from liberalisation.
Our ultimate objective, and our best interest, lies in global free trade.
But there is no enthusiasm now for a new global and comprehensive round.
We have to look for other strategies, and APEC is the best we've got.
APEC trade liberalisation will lock in an outward-looking sense of regionalism
and will reinforce global trade liberalisation.
An APEC-wide approach would bolster the economic gains we would get from
unilateral trade liberalisation, and it would reduce the political costs
because governments will be able to point to new opportunities opened up by
trade liberalisation elsewhere in the region.
The benefits of APEC trade liberalisation for Australia and the region would
be enormous. Economic modelling tends to understate the gains because it
does not capture the full effects on competitiveness and productivity.
But initial Australian modelling work shows that, while APEC members do well
out of the Uruguay Round, they would do even better if APEC was to
embrace full free trade. The annual gain to APEC aggregate national income
from the Round is around $ 112 billion by 2002 when the Round effects have
flowed through fully. But this rises to $ 366 billion by 2010 if APEC free trade
is achieved by then.
Under APEC free trade, Australia's real output would rise by an estimated 3.8
per cent and real national income by 1.2 per cent or $ 6.8 billion annually
This would more than double the projected real income gains for Australia
from the Uruguay Round.
The scale of APEC's advantages to Australia is something which, not
surprisingly, few Australians have yet appreciated.
But already three-quarters of our exports go to APEC, and 31 per cent of
these are manufactured exports. Over the next two years, increased exports
to APEC members are expected to create 70,000 new jobs in Australia.
For Australian business, APEC trade liberalisation is good news, because
Australia is already so far down the path towards free trade.
We have eliminated quotas and, by 2000, average trade weighted tariffs will
have fallen to 2.9 per cent. Motor vehicle and textiles, clothing and footwear
tariffs will be the only stand-outs.
Clearly, going further would be in our interests if other APEC economies also
liberalised. When and at what rate we did so would be a matter for
discussion after Bogor.
Australia's agricultural and minerals exports would flourish in open regional
markets. But our manufactures and service industries would also be well-
7
placed to take advantage of the opportunities that would open up. The
decade of trade liberalisation has made them much more competitive. Our
exports of elaborately transformed manufactures to APEC have been growing
at 18 per cent a year since 1988-89.
Ladies and gentlemen,
The future trade and economic agenda will be the core of our discussions at
Bogor. But the meeting has other less obvious advantages
It facilitates contacts between leaders which would otherwise be difficult to
arrange -either for political reasons, as we saw in Seattle last year when
President Jiang Zemin met President Clinton, or for geographic reasons.
For example, in Sydney tomorrow I will meet President Frei of Chile on his
way to Jakarta. After the meeting President Kim Young Sam of Korea will
visit Australia.
And at the meeting itself a lot of bilateral work will be done. I will be having
separate meetings with President Soeharto, President Jiang Zemin. President
Clinton, President Ramos, Prime Minister Chretien, Prime Minister Chuan
and Prime Minister Bolger.
I will have opportunities to talk informally to the others as well.
And this sort of thing is multiplied eighteen different ways.
Ease of communications between political leaders is important and the
dynamics of international relations within the Asia-Pacific have, in my view.
been changed fundamentally by APEC. The leaders meetings offer
opportunities for contact which can cut through problems and resolve
uncertainties. And, as we are seeing with the visits here of President Frei
and President Kim, they can facilitate contacts between our business people.
So I don't doubt that this will be two and a half days well spent.
Ladies and gentlemen,
Today, of course, is Remembrance Day.
There is something appropriate about the fact that I am talking to you about
the future of the Asia-Pacific on the 11 th of November, when we remember
the sacrifice of those Australians, and the countless millions from other
nations, who fought and died in the wars which shaped this century and
which, for better and worse, shaped Australia's history.
What comes next the legacy of peace, security and prosperity, we owe to
our past will in no small way be formed by what happens in Bogor over the
next few days.
ends