SPEECH GIVEN BY THE PRIME MINISTER
ECONOMIC ORGANISATIONS ( KEIDANEN) T 17 JUNE 1976.
Thank you for your kind comments and words of welcome. It
gives me great pleasure to be in Japan. I am especially pleased
to have the opportunity to address this distinguished group of
industrial and business leaders.
Yours is the principal responsibility for the continuing
development of the Japanese economy, which has such great
significance for Australia and for much of the world.
Both of our countries have had to cope over the last couple of
years with the disturbing combination of recession and inflation.
The Governments of both Australia and Japan have had to find
new solutions to these problems.
Fortunately, there are signs of economic recovery in your country
and ours. There are still many problems to overcome but with
patience and care we can look forward to better times.
our main objective in Australia has been to restrain public spending
in order to transfer resources to individuals and to companies.
Through these means the private sector is acquiring the resources
and the room to expand so that economic growth can once more take
place. I am pleased to say that the Australian economy is now recovering.
The economic recovery in Japan is also of great importance to us,
as our recovery is to Japan.
It is too often forgotten that the chance of improvement on the
economic wellbeing of the people of the developing nations depends
on the health and strength of the economies of the developed
nations. We have seen the effects in the developing countries
over the last couple of years of a decline in world economic
activity and a slackening in demand for their products. Until
we see an improvement in world trade there is little hope for those
countries of any significant improvement.
The new Treaty of Friendship and Co-operation emphasises,
in Article IV, that " the continuous expansion of international
trade on an open, multi-lateral and non discriminatory basis is of
fundamental importance for the sound development of the world
economy." .2/
-2-
The development of trade between Japan and Australia as you would
know best has been remarkable.
Nineteen years ago our two countries signed the Commerce Agreement.
Since then trade between us has increased fifteenfold. It is now
the seventh largest trade flow in the world.
Japan has now become Australia's major trading partner. In
1974/ 75 you toc30% of our exports and provided 20% of our
imports. The reason for this is plain. Our trade is complementary. Australia
has become a major source of raw materials and foodstuffs for Japan.
In return Japan is a significant source of manufactured goods for
Australia. Growing interdependence between our two countries has been an
inevitable effect of the complementary nature of our trade. Some
people suggest that such interdependence breeds risk and
vulnerability. I cannot share that concern.
Our interdependence reflects the national advantages which Japan
and Australia possess. The nature and degree of our interdependence
may change, but it will continue to provide a basis for a secure
and stable relationship.
We must continue to seek out and explore opportunities for economic
cooperation to ensure that our trade is placed on the soundest
possible footing.
It is important that we each strive to develop the greatest possible
degree of predictability and stability. This is the way to an
enduring confidence between us.
I strongly believe that both countries will benefit from the fullest
possible consultation on supply and market prospects and on the
development of domestic policies affecting trade and investment
between the two countries.
Present arrangements for discussions between Australian and Japanese
Ministers and officials offer a useful and effective means of raising
many of these issues in a cooperative atmosphere. These arrangements
should be developed as the need arises.
Perhaps the most important link which has emerged between our two
countries over the last decade has been our increasing interdependence
in respect of raw materials. Recognition of this factor prompted my
Government to ask Mr. Anthony, Deputy Prime Minister and Minister for
National Resources and Overseas Trade, to come to Japan early this
year. He came on the first overseas visit by a minister of my
Government. 3/
-3-
Australian exports of minerals to Japan are of fundamental
importance to both countries. Australia has no other markets
of such size and with such potential for growth. Japan has
no other supplier with such a wealth of resources and the
potential for security of supply.
All the factors are present for the further development of an
economic relationship which should confer enormous benefits on
both countries.
Since we came into office we have taken action to give confidence
in Australia as a long term source of supply.
Japan has emphasised the need for a secure and increasing supply
of steel-making raw materials. The last couple of years have
been difficult around the world. Predictably this has had its
effect on the Japanese steel industry. It is now clear, however,
that recovery is underway.
The information supplied by Japan suggests that many new projects
must come on stream within a fairly short time.
Given the lead-time and the huge amounts of money involved
for projects of the magnitude envisaged decisions must be made
now to ensure that these raw materials will be available when
required. We recognise that fact.
In the case of coal, representatives from the Japanese steel
industry and the Japanese Government indicated their concern that
new projects should be developed in Australia. Between them these
probjects will make available in excess of an additional 13 million
tonnes of high quality coking coal per annum.
My Government had urgent discussions with the companies concerned
to remove impediments in the way of the development.
In the case of iron ore, various Australian companies are promoting
with Japanese mills a new generation of iron ore projects based
on the vast, rich reserves of the Pilbara in Western Australia.
These potential projects include completely new mining operations,
and incremental expansions of existing mines.
For some time now the Australian companies have met Japanese mills'
request for bulk samples and detailed feasibility studies. They
are now awaiting the mills' decisions on export contracts.
I would explain that my Government is not setting any priorities
as between individual projects, recognising that this is properly
a matter for commercial negotiation.
Japan will never find a more stable, convenient and efficient iron
ore supplier than Australia.
Australia first commenced exporting iron ore a little over a decade
ago. In this time, Australian iron ore producers have supplied
Japanese steel mills with 400 million tonnes of iron ore a virtual
mountain of iron ore a mountain worth more than $ 3000 million
Australian dollars. 4/
-4-
Further development of this mutually beneficial trade, depends
on the new iron ore developments being brought into production.
I look forward to Japanese mills reaching decisions soon on new
export contracts for these projects. The urgent attention the
Australian Government gave to these projects demonstrates, in
a way that words never can, Australia's attitude to Japan. It should
reassure your country of the reliability of Australia as a stable,
continuing long term source of supply of raw materials.
I have emphasized our trade in minerals because it is so important.
But Australia is also a major exporter of agricultural projects to
Japan and other countries. Access to international markets for our
beef, wheat, dairy projects, wool and sugar and stable marketing
arrangements for these products are of great importance to
Australia. The development of our minerals industry has been based on the
security of long term contracts.
We would like to see the development with Japan of similar
arrangements or at least minimum access assurances for our
agricultural products.
I am pleased in this respect that the market for Australian beef
in Japan has started to grow and that your Government has decided
to announce six monthly quotas. This will introduce a degree of
predictability into the market.
It is important that industries that have been developed or
expanded to meet your requirements are assured of a stable market
at fair and reasonable prices. The stronger the assurances that can
be given the more confidently can businessmen undertake the necessary
investments.
One matter which I know has been a source of concern for Japan is
the question of the Australian Government's export control ! powers.
I wish to put any of your concerns on this matter to rest by defining
first the role of business and then the role of Government in this
matter. Let me make it clear that my Government looks to the
private sector to negotiate and carry out export contracts in
respect of minerals.
We are fully committed to the private enterprise system. This
confidence is based on our belief that the private sector is
fully aware of the need to maintain and develop our trade.
We believe that the private companies carrying our commercial
negotiations are the best qualified to make judgements about what
things are reasonable or not reasonable in mineral negotiations.
Commercially acceptable agreements and reasonable market prices
satisfactory to both buyer and seller are more likely to result
from free and open negotiations by companies than general
intervention by a Government that thinks it knows best. This
is particularly so where differences between buyers and sellers
a're on fine points which only exports can properly resolve.
if commercial negotiations produce a commercial result, related to
world market prices, there is no role for Government. Only if the
prices do not reflect world market prices if Australia's national
interest is being adversely affected has the Government a proper
case for intervention.
I believe that in the short time my Government has been in office,
we have provided evidence of our intention.
Recent negotiations on iron ore and soft coking coal prices between
Australian producers and the Japanese mills were settled on a
commercial basis without the need for Government intervention.
Given goodwill on both sides, there is no reason why this cannot
be the pattern for the future.
As well as the large and growing trade relationship between our
countries, Japan is increasingly important as a potential source
of investment capital.
Traditional sources of overseas investment in Australia have been the
United States and the United Kingdom. Japanese investment has
represented only about 10% of total overseas investment over the
last ten years.
With the progressive relaxation of the Japanese Government's control
over capital outflow, I expect that Japanese investors will play an
increasingly important role in Australia's development.
We welcome Japanese investment. Japanese investment is as welcome
as the investment of any other country.
My Government regards foreign investment as being of major importance
to Australia's development. It brings with it job opportunities,
new technological, managerial and workforce skills, increased
export incomes, a broader and stronger industrial base.
0 my Government's positive policy towards foreign investment has
been thoroughly spelled out. Its major objectives are to encourage
foreign investment and to ensure that the benefits of this investment
are fairly shared between the foreign investor and the Australian
community. To this end we screen certain categories of new
investment to determine whether such investment would be contrary
to the national interest.
We would like to have Japanese capital in partnership-with
Australian capital. One way to ensure that projects will be
developed to meet Japanese needs is through joint ventures with
Australian enterprise. Developments in Australia are also a way
of securing access to Australian Markets, as Toyota and Nissan have
discovered. In the case of mineral development and other natural resource
projects, we have laid down guidelines on acceptable levels of
Australian equity participation. 50% Australian equity is
generally required. 75% in the particular instance of uranium. 6/
These guidelines have been laid down because projects in these
key areas involve the development and exploitation of the natural
resources wealth of the Australian continent and off-shore areas.
The Government believes that Australians should have the maximum
opportunity to participate in the ownership and control of
these projects. The Government recognises that Australian
equity capital may not always be available on reasonable terms
and conditions for some projects.
Where adequate Australian equity participation is not available
a project may still be permitted to proceed where it would not
be against the national interest for it to do so. In such
circumstances we will, as appropriate, seek satisfactory
arrangements for increasing Australian equity within an agreed
period. Australia's approach to foreign investment is not inflexible
or rigid.
If any potential investor is uncertain about whether a project
satisfied the guidelines my advice is that the proposal be
submitted to the Foreign Investment Review Board. The Board will
be very happy to advise him and the Government will give a decision
on any subsequent formal application as soon as possible.
Concern has been expressed in Japan about Australia's participation
in the bauxite, copper and iron ore producer organisations.
I would like to dispel any grounds upon which these feelings might
be based. As a participant in these organisations Australia has made
it clear that its commitment is to producer/ consumer cooperation.
Australia will not be a party to any action aimed at holding
consumer countries to ransom. Producers of raw materials are entitled
to receive fair prices for their exports. Consuming countries are
equally entitled to reasonable supplies of raw materials at fair
prices. The cooperation made possible throu~ h these producer bodies should
assist to fulfill both our countries interests through the orderly
development of production and trade.
Both of our economies have undergone rapid change in recent years.
I would not expect the dynamism of development to slacken though
its form may differ.
Herein lies an opportunity for both our countries; Japan's interest
for example, in deploying a greater share of its-investment towards
high technology industries can be complemented closely with,
Australia's aim to upgrade the processing of our raw material
production. .7/
-7-
Yesterday, I had the great pleasure of signing with your
Prime Minister the Basic Treaty of Friendship and Co-operation.
That Treaty is a symbol of the relationship which has developed
between our two countries.
But it is much more than that. It is also the symbol of what lies
before us, of the wider relationship which will develop in the
political and cultural areas as well as in the economic field which
has so far been paramount.
Our relationship will not be without its difficulties. These are
only natural. But our relationship is a mature one. We can talk
and resolve differences. The important thing will be not to lose
sight of our long term objectives.
All of us here today will have an important role to play in this
new and exciting development.