PRIME MINISTER
SPEECH BY THE PRIME MINISTER THE HON P J KEATING MP
WORLD CONFERENCE OF THE INTERNATIONAL COUNCIL FOR
SMALL BUSINESS, SYDNEY WEDNESDAY 21 JUNE 1995
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I am grateful for the invitation to speak to you at the closing of this 40th World
Conference of the International Council for Small Business.
I want to use this speech to say some things about Australia's trade policy and what
we are doing to help our business people make the most of the enormous
opportunities which exist in this Asia-Pacific region, the fastest growing in the world.
The Minister for Trade, Senator McMullan, is today issuing a statement called
" Winning Markets: Australia's future in the global economy" and I want to use this
opportunity to formally launch this document.
This international conference about small business is an appropriate place to do this
because one of the things which has been very much on the Government's mind in
drawing the strategy up is the increasingly important role of small and medium
businesses in Australia's trade.
I also want to use the opportunity to speak to those of you who are here from
overseas about the opportunities for business in Australia. Because this country
offers overseas investors a very competitive environment, and is an ideal base for
companies including small companies wishing to tap Asian markets.
It is now a very familiar notion that the globalisation of production is dramatically
reshaping the way national economies work and businesses operate. More than
one third of world trade is now conducted by firms trading within their own structures
across national boundaries.
I am sure this has been a theme of many of the formal and informal discussions you
have had at this conference.
The driving fact behind globalisation, of course, is the rapid movement of people
and information. Indeed, the movement of people and information rather than goods
is the fastest growing segment of world trade.
The information revolution has generated whole new areas of business many of
them created by small enterprises and it is transforming the way other business is
done. More and more firms, for example, are marketing their products and services,
locating their production, conducting their research and sourcing their materials
wherever in the world it makes the best economic sense to do so.
Your choice of Sydney as the venue for this conference reflects these changes.
The Council's World Conference has convened outside North America only three
times since it first met 40 years ago. And all three of those meetings have been in
the past five years.
The globalisation of production is confronting businesses with unprecedented
challenges. And small and medium-sized enterprises are no more immune from
these changes than are large ones.
Markets in most economies are becoming increasingly contestable. For small and
medium-sized businesses increasingly that means opportunities abroad and
overseas competition at home.
The result is that few businesses, including smaller ones, can afford to look to
domestic markets alone. This is especially so in Australia with our relatively small
population and an economy tightly integrated into world markets.
But despite these challenges, small and medium-sized enterprises may, in fact, be
the best placed to exploit the opportunities of globalisation.
They tend to be less bureaucratic than large firms and more innovative and
responsive. They have probably gained most from those improvements in
communications and transport which have reduced the cost and complexity of
international business.
Globalisation has also been driven and encouraged by the great growth over recent
years in direct foreign investment. In the second half of the 1 980s foreign direct
investment grew at an annual average rate of 30 per cent, more than twice the rate
of world exports.
The trend has been obvious for Australian investment. In 1980 this country's stock
of equity investment overseas was around $ 7 billion. By 1994 it was around
billion.
Australian companies have understood that, in a world of integrated production,
often the best way to secure entry into a market is by establishing operations there.
And as we have seen here, such investment will often lead not only to increased
sales in the new market, but also to more exports from Australia.
This country's small and medium-sized enterprises have been vital to the success of
our shift towards an international ised economy. Around 4,500 such Australian
businesses are now regularly and actively involved in international trade. They
generate $ 6.5 billion in international turnover. And we expect this to double over
the next five years.
But a great many other small and medium businesses farmers, tourist operators,
hotel and transport providers are also responding to the challenges of international
trade. Their level of involvement is certain to increase.
Success in global markets is vital for Australia's continuing prosperity.
During the past decade this Government has reversed the long-term decline in
Australia's performance as a trading nation. In 1980 the proportion of our GDP
provided by exports of goods and services had fallen below the OECD average. In
1993 it was again above it.
Our exports of manufactures have been doubling every five years.
They now account for almost one-third of our total goods exports.
We have also diversified the composition of our merchandise trade. The most
dramatic shift has been in the value-added area precisely where it was most
required. Five years ago, elaborately transformed manufactures accounted for 16 per cent of
our merchandise exports. Last year it was 22 per cent.
Another major shift has been in the strong growth of our exports of services. These
now form a quarter of total exports. In fact, the services trade deficit is now less
than a third of what it was a decade ago. On current trends, we will soon have a
surplus. Tourism and education make an enormous contribution to services trade, but we are
also seeing rapid growth in telecommunications, financial services and legal
services. Australia now has a trade surplus in computer software, for example.
Earnings from exports of computer software have grown by 60 per cent over the
past five years to nearly $ 400 million.
The Winning Markets trade strategy which Senator McMullan is releasing today is
designed to improve on this performance. It reflects extensive consultation with
business, and is focussed particularly on getting smaller Australian firms exportready
and operating off-shore.
Australia's natural resource-based exports minerals and agriculture are, of
course, the core of our export trade and they will remain so. Increasingly we are
adding value to these exports and tailoring them to particular markets.
Winning Markets gives greater priority than in the past to value-added exports, and
especially in manufacturing and services. This is in part because these are the
areas where the Government can add its own particular value for our exporters at
present. The Winning Markets study starts by acknowledging that the factors that will
determine Australia's success as a trading nation are our fundamental economic
policy settings, our access to overseas markets, and the extent to which we can
develop a trade and investment culture, especially among our small and mediumsized
companies.
It recognises that our trade performance depends, often crucially, on domestic
factors. In Australia's case, our macro-economic policy settings have provided a solid basis
for our exporters. We have kept inflation low, and growth high.
We have introduced greater competition through lower tariffs and, more recently,
the adoption of the Hilmer reforms on competition policy, thereby reducing the costs
of doing business.
We have a national commitment to invest in innovation and research and
development. Later this year, the Government will bring down a statement on
support for innovation and best practice in Australian business
Over the long-term, one of the things which will matter most for our future is the
investment the Government has put into upgrading education and training for our
workforce. Over the past decade the proportion of students completing year 12, and the
proportion of young Australians going on to university, have more than doubled.
We have opened up tens of thousands of opportunities in vocational training.
The skills base and the technical excellence we have nurtured, our world class
scientific and research base, our telecommunications capacity these are highly
prized assets in a fast growing region where individual countries are in fierce
competition for resources and wealth.
These are all quality reforms with lasting benefits.
But, of course, just as you need to continually meet new challenges to stay ahead in
your businesses, Government must be able to respond to current developments in
its policy settings.
And that is what my Government has been able to do time and again.
I am pleased to say that you will see further evidence of this tomorrow when we
meet with the major union groups to conclude a further agreement under the Accord.
This will ensure a continuation of low inflation and job creation. It will provide the
means for us to radically lift our national savings performance.
I am also pleased to be able to let you know that it will address a particular concern
of many businesses domestically, namely the treatment of unfair dismissals.
It is crucially important that all employees can feel confident that they will be treated
fairly in their place of employment. After all, Labor Governments have been
traditionally concerned with the rights and protections of workers.
One of the most important areas where employers have considerable responsibility
is to ensure that in the event of dismissal of employees the action is not harsh or
unjust or unfair, and that the right weight is given to following correct procedures.
In the area of unfair dismissals, the Government is committed to shielding
employees from the small minority of unscrupulous or unjust employers who may not
at times be acting ethically in this area. The Government will maintain this principle
in its approach to questions of dismissal.
With this as background it may still be the case that some of the application of the
current unfair dismissal laws have not always been what all business, and small
business in particular, have thought is right. Indeed, there have been expressions
of public concern that the Government is interested in addressing.
The essential challenge in the area of unfair dismissals is to get the balance right
between the right protection for employees and making sure that the process is not
so legalistic as to mean that the system is not working properly.
Laurie Brereton and I have talked through this issue with both the ACTU and a
number of employers and employer groups.
As a result of these discussions it has been decided to take some action in the area
of unfair dismissals, and the Minister will be announcing further details this
afternoon. Ladies and Gentlemen,
The Government's policies have delivered tangible success.
Australia's international competitiveness has increased around 40 per cent since the
early 1980s.
This competitiveness is reflected in the number of companies establishing regional
headquarters in Australia.
I
Since 1993, when the Government intensified its efforts to attract regional
headquarters here, another 54 companies have located operations and brought jobs
to Australia. These include firms like IBM, Oracle and Data-General.
The reasons are straightforward:
our management pool is 7 to 8 times bigger than Singapore's and 3 to 4 times
bigger than Hong Kong's
office accommodation in Australian capitals is some 6 to 8 per cent less
expensive than comparable space in Singapore and Hong Kong
we offer high quality, low-cost expatriate accommodation, health and
education
our international telephone calls are about the cheapest in the world
we have well qualified and highly competitive support services, such as
lawyers, accountants, management consultants and computer specialists
Australian salaries for qualified and professional executives are 60 per cent
more competitive than Singapore and 50 per cent more than Hong Kong
our rapidly expanding commercial and cultural ties with the Asia-Pacific
region help support business operations across the region
Our diverse multicultural population is another important asset for this country.
Many Australian SMEs are operated by people from non-English speaking
backgrounds. They often have skills, personal links and knowledge of business
networks in their home countries that can help companies win new markets.
One of the real advantages for Australia of our location in the fastest growing region
of the world is that, much earlier than in Europe, we understood the nature of
competition from the dynamic new Asian economies. We realised that we needed to
compare ourselves and compete not just with our own past performances, or with
other mature industrialised economies, but also with the ' Tigers" around us.
The second part of Winning Markets describes how Australia goes about improving
our access to overseas markets and exploiting these more effectively.
Australia has important traditional markets in Europe and the United States and
smaller emerging markets in the Indian Ocean region and Latin America.
But Asia remains our main target for export growth. The reason is that, by the year
2000, the East Asian economies will constitute the largest market in the world,
surpassing Western Europe and North America.
Last year alone showed how things are changing. Australia's merchandise exports
to South-East Asia grew by 12 per cent. South-East Asia now accounts for about
per cent of those exports compared with 9 per cent a decade ago. Korea overtook
the United States to become our second-largest export market after Japan. And if
you add together the markets of China, Hong Kong and Taiwan, the China region is
now our third largest trading partner.
Because Australia's trade is diverse we need our trade policy to operate on a wide
range of fronts. For example, we need to address the obstacles that face our
exporters of agricultural and mineral commodities, of manufactures, our overseas
investors and our exporters of skills and ideas. They all have different problems
and need different responses
The best way of doing this is undoubtedly through the multilateral trade system of
the World Trade Organisation.
Australia alone cannot prise open markets. Even if we had the disposition to do so,
we don't have the clout that would enable us to operate unilaterally.
An effective and comprehensive multilateral trade system is our best protection
against the worst excesses of the unilateralists, or of inward-looking bilateral or
regional arrangements.
One of the goals set out in Winning Markets is that of rekindling global enthusiasm
for multilateral trade liberalisation. We saw at the recent G7 summit that support for
such liberalisation is pretty thin in Europe and the United States.
We hope that by the time of the first meeting of the World Trade Organisation in
Singapore next year, Australia can build support for an ambitious agenda that will
include the further liberalisation of trade in agriculture ( with the help of the
Australian chaired Cairns Group), the development of fairer global investment rules
and real movement on the liberalisation of trade in services.
This is a sector of great interest to many small and medium businesses. Australia
has already successfully shaped the course of global negotiations on
telecommunications. And we will be just as active in the negotiations on
professional services, where Australian firms, large and small, are increasingly
turning to export markets, only to find a bewildering array of barriers.
I am sure that the successful APEC leaders' meeting, which President Clinton
chaired in Seattle, did a great deal to bring about the conclusion of the Uruguay
Round. I think APEC can also assist in further global trade liberalisation.
Australia has invested a lot in APEC and we will continue to do so. The Asia-Pacific
region has the fastest growth in the world three times that of established
industrialised countries.
APEC encompasses a dynamic region that already accounts for more than 40 per
cent of the world's population, half of the world's GOP and 46 per cent of its exports.
The enormous achievement of APEC so far has been to reinforce a region-wide
trend towards liberalising trade and investment in the Asia-Pacific.
It provides the framework in which regional governments can take the hard
decisions on economic deregulation and structural change. Recent deregulation in
Indonesia and China, and tariff reductions in Malaysia, indicate the direction Asia is
heading. These developments strengthen the region's dynamism and ensure
continued high growth rates.
And this process will be strengthened as a result of the historic commitment of
APEC leaders at Bogor last year to free trade and investment in the region by 2010
for developed countries and 2020 for developing countries.
APEC may be the most productive manifestation we have yet seen of what used to
be called the North/ South dialogue.
The commitment to free trade and investment in APEC goes well beyond the
liberalisation of tariffs. It will address a host of market access issues that
increasingly matter to Australia's traders and investors in the globalised trade
environment services, investment, transfer of technology and intellectual property.
Different standards alone add an estimated 5 to 10 per cent to the costs faced by
exporters entering a market for the first time. So APEC's work in areas such as
standards, the mutual recognition of testing procedures and the streamlining of
customs procedures can offer real gains to business.
It is vital that small business is in a position to take full advantage of the
opportunities provided by free trade and investment in APEC. This will be the major
theme of the meeting of APEC ministers responsible for small business policy to be
held in Adelaide later this year.
With many US business people here, it may be worth noting a fact that seems to
receive little attention in the United States: that US exports to East Asia are growing
at twice the rate of East Asian exports to the US.
US projections have put Asia, even excluding Japan, as the United States' largest
export market by 2010.
So APEC is important to the United States as well as to Australia.
The access Australia achieves to markets through multilateral activities like APEC,
the World Trade Organisation and other forums such as the development of links
between the ASEAN Free Trade Agreement and the Australia-New Zealand Closer
Economic Relations Agreement is supported by our bilateral activities with
individual governments.
A model of what we can do in this area is found in the many layers of government
and commercial cooperation Australia has built up with Indonesia.
It is perfectly true, of course, that only businesses can do business. But sound and
creative govern ment-to-govern ment relationships provide a foundation of confidence
which is often reassuring to business people.
Another theme of this Government's work bilaterally and a direction we want to
continue to move in is encouraging the development of alliances and partnerships
between Australian and overseas companies. Linkages with other firms, particularly
large ones, is a key strategy for SMEs wanting to exploit the opportunities of
globalisation. Examples of what we already have done in this area is the establishment of a fund
to examine ways in which Australian and Korean companies with complementary
capabilities could capture opportunities in the " information superhighway" which
neither can do alone.
Similarly, we have set up a fund to help establish consortia of Australian and
Singaporean companies to bid for large projects to encourage involvement in the
expanding Asian infrastructure market.
The third key element of Winning Markets involves fostering a trade and investment
culture among local business.
Recent studies in Australia have found that a major factor distinguishing those firms
that export from those that do not is the presence, or lack of it, of an export culture
within the companies.
Such a culture has begun to take root in Australia but it still needs nurturing.
Recent studies of Australian manufacturers and service exporters have identified
huge untapped export potential in both areas. A relatively small number of firms in
these sectors is exporting at present.
The research also showed that the major constraints on the ability of SMEs to
operate internationally include difficulties in getting timely information on market
opportunities and managing uncertainty and risk.
The Government is already assisting exporters through our export assistance
agency, Austrade, and another body Ausindustry.
Ausindustry works to help businesses commercialise research and development
technology, and assist their activities such as product design and quality systems,
marketing and networking.
Austrade works to help exporters secure positions in overseas markets.
Following extensive client research by Austrade, Senator McMullan is announcing
today a new client service strategy which will mean more and better services for
Australian exporters.
Austrade will now provide extensive information and advice free of charge to new
and potential exporters. This is a major commitment to the needs of potential
exporters among Australian small and medium-sized businesses.
A second group of companies seeking practical assistance to enter and build export
markets will receive subsidised services.
A third group, including experienced exporters building on established overseas
business, can receive tailored, intensive assistance from Austrade on a cost
recovery basis.
As a result of the work done on the Winning Markets strategy and the discussions
which have been held with business, Senator McMullan is also announcing a
number of other decisions which will help Australian exporters and strengthen the
trade policy debate in Australia.
Among these initiatives are a parliamentary enquiry into export-related airfreight
issues. Over half Australia's non-primary merchandise exports are transported by
air. The enquiry will examine Australia's airfreight infrastructure and recommend
how services to exporters, particularly of perishable products, can be improved.
To enable the Government to record and follow-up more effectively Australian
business concerns about export barriers, an export barriers reporting scheme will
come into effect from 1 July 1995 as part of a new unit within the Department of
Foreign Affairs and Trade.
To build a stronger export culture in Australia and to link trade research and
education more closely with business interests, a Chair and Centre in the Practice of
International Trade will be established, with business support, at the Melbourne
Business School at the University of Melbourne.
In response to the difficulties experienced by smaller Australian companies in selling
their products to some of the more difficult, unfamiliar markets such as Japan,
Austrade is examining the feasibility of setting up an Australian enterprise to
manage effective distribution for Australian processed and manufactured products in
selected markets. The project would draw heavily on private sector involvement and
would operate on a fully commercial basis.
Finally, consultations with industry have shown that the cost of market information is
an important barrier to the expansion of exports from small and medium-sized
enterprises. So a new integrated, electronic exporter and marketing service on the
Internet called the " Australia TradeBlazer' program will be established by
Austrade. In its first stage, it will provide on-line access to relevant export
information.
The Winning Markets strategy, and the associated announcements which are being
made are a further commitment by the Government to ensuring that Australian
companies and our small and medium-sized enterprises especially will continue
to be able to compete with the best in the world's markets.
Governments commonly talk about their " commitments", I know. They talk about
them at least as often as small businesses talk about the failure of government to
actually deliver.
I suspect our relationship needs a different language: one which reflects the fact
that we are engaged in the same project, which is the creation of a dynamic export
economy. Perhaps we need to see the relationship as a joint venture and talk more
in terms of shared goals and common efforts to which both must deliver.
From the Government's point of view, small and medium sized businesses are an
arm of national policy and, notwithstanding the fact that we cannot act for you or
give you the ideas and courage you will need to succeed, we will do all we can to
make you stronger.
Thank you for having me with you today.
Ends