STRICT EMBARGO UNTIL DELIVERY
PROME MINISTER
FOR PRESS 19 JUNE 1978
ADDRESS TO CONFEDERATION OF AUSTRALIAN INDUSTRY
The task of Government and industry will be made much easier
now that there exists a top level national organisation covering
the entire spectrum of Australian trade, industry and commerce
primary, secondary and tertiary.
I know that Max Dillon and his committee have worked extremely
hard over a long period to bring this Confederation into being.
I congratulate the Associated Chambers of Manufactures of
Australia and the Australian Council of Employers Federation on
their initiative and foresight in coming together in this way.
As you will know, I returned home today after extensive discussions
in the United States, Europe and South East Asia on the international
economy and world trade. I am now more convinced than ever that
the world economic trade situation is critically balanced.
During the next few months, the world's main trading nations
will be making decisions of crucial importance. It is currently
intended that major decisions will be taken by mid-July in the
Geneva Multilateral Trade Negotiations. The seven-nation
economic summit will be held at Bonn on 17th and 18th of July, and
it is expected that, later this year, the UNCTAD negotiations for
a Common Fund to stabilise world commodity trade will be
reconvened. This then is a year in which decisions will advance world trade,
or resurrect protectionist pressures. This is a year in which
either nations will recognise and act on their mutual economic
interdependence to their common benefit or allow narrow
self-interest to predominate to the detriment of all.
This is a year in which decisions will take the world forward
with more sensible trading arrangements, or slide backwards
into protectionism.
It is imperative that the right decisions be taken, decisions
that will reduce trade barriers and lead to an expansion of world
markets; decisions that will enable mines, farms and factories
to expand their production, their employment, their overseas
trade. If the wrong decisions are taken, then I believe there
would be grave risks of a world-wide retreat to the type of
beggar-thy-neighbour , protectionist policies we witnessed in the
/ 2'
It is in this nation's interest as a country heavily dependent
on world trade to do all in its power to avoid such an outcome.
If these negotiations do fail, it will not be for the want of
trying on Australia's part.
This has been my prime objective, my main concern, in my
overseas discussions which began with Prime Minister Fukuda
in Japan, in April and which I have pursued in ' the United States,
Europe and South-East Asia in the past few weeks.
It is clear that the world economy is far from having recovered
from the setback caused by the excesses of previous years.
The rate of growth in world trade, a key to the full economic
recovery of all nations, continues to be sluggish. It will only
increase if the trading nations improve the conditions under
which trade is conducted in three inter-dependent areas in
manuftctured products, in agricultural products ( meat, grains,
daily products, and fruits), and in other commodities.
In the first two areas, manufactured products and agriculture,
critical decisions will have to be made in the next few weeks
in the Geneva Multilateral Trade Negotiations. All sections of
our economy mining, manufacturing and primary industry will
be affected by these decisions. They will have an impact on
the lives of every Australian, and on our wealth as a nation.
A successful outcome to the negotiations is of vital importance
for the entire trading world.
To date, the negotiations have focussed almost exclusively on
reducing tariff and non-tariff barriers on manufactured products.
Agriculture has been neglected despite the fact that it forms
a most significant part of world trade, and must play an
important role in any broadly-based expansion of trade. The
fact that there has not yet been any movement in reducing
the rigid barriers against many agricultural products is a matter
of deep concern.
The plain fact is that the tentative agreements so far reached
in the Multilateral Trade Negotiations the " MTN" relate
only to certain industrial products. Tariff reductions in
these products would affect 40 per cent of the exports of the
major trading blocs, but only 20 per cent of world trade, and
no more than 5 per cent of the exports of Australia or of many
developing countries. On average tariffs for most industrialised
countries, the proposal would result only in a reduction of half
a per cent a year spread over eight years. Such a limited
agreement plainly could make only a marginal contribution
towards expanding world markets.
If the final MTN agreement is to make a real impact across
the broad spectrum of world trade, it is essential that agriculture
be included. The United States and Australia are united in our
efforts to see that the negotiations are broadened to encompass
trade in agricultural products and incorporate a code of behaviour
on export subsidies. We both want an agreement which is wide
ranging, covering all sectors of trade. Unless agriculture is
/ 3
included, the US will walk away from the Geneva negotiations.
I received firm and categoric assurances on this in Canberra
from Vice-President Mondale, and in New York from President
Carter's Special Trade Representative, Mr Strauss.
The trade benefits we can achieve for our rural industries
industries which account for half our exports would benefit
all Australian enterprises. Strong rural industries contribute
to a stronger Australian economy, to greater demand, to greater
growth within Australia and to greater markets for Australia's
own manufacturers. More than ever, we need to understand the
essential interdependence of the different sectors of the
Australian economy. Indeed, the wide membership of your new
Confederation itself is a recognition of this central fact.
While many factors have contributed to the sluggish state of
Australia's manufacturing economy, * one major factor the
present impoverished state of much of Australia's rural industriesis
too often overlooked. Achieving a meaningful MTN result which
will lead to a broadly based expansion of world trade will
require the maximum effort and commitment by all trading nations,
and a willingness to look beyond narrow self-interest.
For Australia's part we have decided to make the greatest
contribution we can, for in negotiations of this kind any
additional weight in the right direction can help to make the
difference between ultimate success and failure.
Accordingly, Australia decided to participate in the 40 per cent
formula cut approach for tariffs on industrial products. This
decision differs sharply from the irresponsible 25 per cent
across the board tariff cut of 1973, which was made unilaterally
without exceptions, without reciprocity. Our offer is of course
subject to receiving fully reciprocal benefits, including
reciprocation at last for the earlier unilateral cut.
Like all other countries adopting the formula cut approach
our offer will be subject to appropriate exceptions, it will
be phased in over the next decade, and we will, of course,
retain our existing rights to safeguard under GATT.
Australia has made this positive and prudent offer at the
negotiations because of the importance of a successful MTN.
We have made every effort to bring about a successful outcome
to the negotiations, which would benefit all sectors of Australian
industry. our offer is not a " trade-off" between industry and agriculture,
it offers benefits to all Australian enterprises. A stronger
total economy will give manufacturing industry a better export
capability. Coupled with specific government policies to
assist industry, including our new export incentive scheme it
will help many manufacturers to get back into, or increase their
penetration, of export markets.
By making the formula cut offer we have extended the challenge
of reciprocity to the major industrial countries, a challenge
to offer realistic reductions in their barriers to agricultural
imports. JIA
4.
In this regard, the European Community has a particular
responsibility. As the world's largest trading bloc, it should
ensure that there is a successful outcome to the total trade
negotiations. We shall be using the forum provided by the
MTN to test the EEC's response to our own demands for a more
equitable balance of trading opportunities. At the same time,
Mr Garland will continue our bilateral negotiations with the
Community.
We are resolved to continue the pursuit of a realistic and
equitable trading relationship with the EEC. Unless the EEC
is prepared to move towards an equitable relationship Australia
will have no alternative but to reappraise the totality of
our trading -and commercial relationship with the Community.
I have advised Mr Jenkins, the Pri sident of th~ e EEC, that the
Community would be seriously mistaken if it underestimated
Australia's resolve and determination in this matter. The MTN
does not only hold out a promise of expanding world markets,
from which all nations would benefit, it also presents the
threat of failure and a reversion to protectionism.
In particular, we must strongly oppose an attempt by European
nations to have the principle of " selective" or discriminatory
safeguards accepted in international forums. Such so called
" safeguards' could be reminiscent of the worst features of the
destructive protectionism of the 1930' s.
The most fundamental principle of the General Agreement on
Tariffs and Trade is the most favoured nation rule this
specifies trade rules instituted by one member nation of GATT
must apply equally to all others. GATT members are not
permitted to discriminate against each other. This rule is
the most important single aspect of GATT that protects middle
range developed countries, and the developing nations against
the dangers of arbitrary and discriminatory action against them
by the major trading powers.
If it were to be accepted under international agreements that
nations had the power unilaterally to impose restrictions
on imports from particular countries this would strike at
the very heart of the GATT and the pressure to impose such
restrictions could be irrestible.
If the breach of the most favoured nation principle was conceded
discriminatory rules proposed could be used against smaller
countries, weaker countries, the newly industrialising developing
nations. Discriminatory action could be directed against Australia.
I now turn to the third area in which there is a need for
concerted action to stimulate world trade growth. I refer to
trade in commodities, and the need to take more fully into
account the interests of the developing world. This is not a
matter of charity. It is a matter of self-interest.
Many developing countries rely overwhelmingly on one or a few
commodities for their export earnings. Even when petroleum -is
excluded, commodities account for 55 per cent of the exports
of developing nations. The developing countries represent a
huge potential for new market growth. As their economies grow
an enormous expansion of trade will undoubtedly follow. For
this to happen, their export earnings must be stable and growing.
In the last decade, markets in the developing countries have
grown from about $ 50 billion to $ 215 billion. Over the same
period, our exports to developing countries have grown from
$ 0.73 billion to $ 3 billion over one quarter of our exports.
What has happened is that, as developing countries enter economic
take-off, our trade has grown very rapidly. Ten years ago, our
exports to the Republic of Korea totalled $ 8 million today
they are running in excess of $ 200 million, a graphic illustration
of the scope of the expansion of such markets. On the basis of
such mutual self-interest, Australia has been pressing for a
better deal foi the developing countries, and for a more pragmatic
approach to be taken by both developed and developing countries
on ways of stabilising world commodity prices. This is the issue
symbolised by the concept of a " Common Fund".
Through our own experience with the International Wheat and Sugar
Agreements and our Wool Price Reserve Scheme, Australia believes
that commodity stabilisation arrangements can be made to workand
bring stability to prices.
At the present time, there is a wide divergence of views between
many of the developed and developing nations on this issue.
But I am convinced, that with proper will and determination, a
fair compromise can be reached between the two extreme points
of view. I know that the Commonwealth Secretary-General, Mr Ramphal,
is working particularly hard to achieve such a result.
All these questions will be discussed at the seven-nation
economic summit meeting in Bonn next month. This will be a
meeting of fundamental importance and one of great difficulty.
Most of the principal participants have different objectives.
The United States and Britain want stronger economies, such as
Germany and Japan to pursue higher growth rates; Britain and
France want discriminatory safeguards to form a principal feature
of the new trading arrangements em ergin; from the MTN; the
prime aim-of Germany and Japan is to-ensure that the world does
not slide back into protectionism.
The Australian Government believes that any agreement reached
at Bonn will need to reinforce the efforts of national governments
to put their own domestic economies on a sound basis, so that
long term growth can be achieved without renewing higher rates
of inflation.
Some countries have tended to say that if only the stronger
economies would reflate more weaker economies could be pulled
out of their difficulties. But what has to be understood is that
countries suffering high inflation rates must themselves establish
the essential preconditions for non-inflationary and lasting
growth. / 6
6.
The Japans and Germanys of this world cannot solve all the world's
economic problems. Even such a powerful economy as that of the
United States will, as President Carter has recently affirmed,
require remedial action if their recent resurgence in inflation
and their imbalance of payments is to be overcome.
It is disappointing that the United States, which has been
maintaining a rate of growth which many of us wo~ l~ d like to see
has slipped back into an unhappy inflationary situation as a result.
The United States is thus once again in the position where it has
to exercise restraint.
The Australian Government believes that the Bonn Summit should
also make a commitment to fairer and more broadly based internatonal
trading agreements reaching a consensus that the final
MTN trade agreement should cover all the major areas of tradenot
just industrial products.
Australia and many other countries also look to the seven
nations at Bonn to fulfill their great international responsibilities,
particularly to the developing world.
There is a need for international leadership, particularly on
the important issue of fairer trading arrangements for commodities,
and the establishment of a Common Fund.
The Bonn Summit presents a challenge to statesmanship. The actions
which these major nations take affect all others. Their views are
critical to achieving a practical and far-sighted resolution of the
current international trading negotiations.
All the discussions I had overseas greatly reinforced my belief
in the appropriateness of the policies which the Australian
Government has steadfastly pursued for the past two and a half
years. Our economic policies have emphasised not the chase after shortterm
growth rates, but getting the fundamentals of the Australian
e , conomy right. In this way, we may be assured of not merely
temporary growth but lasting growth into the 1980' s and beyond.
It has been very encouraging to see the way in which, gradually,
many of the unpalatable inescapable truths of economic policy in
our private enterprise economies are today being accepted internationally.
No less encouraging is the marked change in attitude among foreign
business and financial leaders towards the Australian economy.
When I spoke with foreign business and financial leaders in 1976
and 1977 there was some reserve about whether we could really
put our economy to right again. There was a respect for the
efforts we had been making and the successes which these efforts
were then just beginning to show. But nonetheless there remained
a clear suspension of judgement on whether we would have the
staying power and will to see it through. / 7
During these past few weeks I have found a very different mood.
These independent observers of the Australian scene and most of
them are very well informed about us are now much more convinced
both of our policies and of the clear progress these policies are
now producing.
I need hardly say how important this is for Austr~ lia, particularly
in view of the immediate prospects for international trade which,
for the reasons I have already outlined will continue to be
difficult for some time yet.
In the rather cold world in which we shall have to go on living
the countries with the best domestic policies will be the ones
best able to withstand and overcome these international chills.
In the weeks ahead, when Cabinet is considering the outlook for
1978-79, we shall be maintaining the same policy attitudes that
have brought us our success to date. We shall in particular be
bringing to our deliberations the most rigorous attitude towards
public spending. For only in that way can we hope to maintain
an appropriate firm grip on the deficit, the growth of the money
supply, and less directly the escalation of wage increases.
If there is one thing which experience has taught us in recent
years, it is that the growth of total demand in the economy is
not helped rather it is hindered, by excessive growth of government
expenditures. Such a route has proved disastrous in its implications
for private business investment which lies at the productive heart
of our economies, and which is an essential prerequesite of raising
our living standards. It is very easy to be seduced into spending
some hundreds of millions of dollars on falsely conceived " employmentcreating"
schemes.
But it ought to be understood that spending by governments in that
way can alter the basic perception of the Australian economy held
by investors here and abroad. The result would be that increased
government spending of three or four hundred million dollars could
reduce private investment and consumer spending by much more than
that. While there would be more people on the government payroll,
there would be fewer people employed overall. That, I believe, is
a bad bargain. It is not one that my Government will entertain.
Mr President, I am delighted to have been able to speak with you
at the inauguration of this Confederation. Australian industry
is a central force in our economy. I know you have been through
a long and difficult period. The world trade and economic scene is
likely to remain difficult not for months, but for years, and we
cannot hide from the hard times ahead. We are a trading nation and
our prosperity ultimately depends upon trade. It is therefore up
to all of us as Australians to commit ourselves to this country;
to commit ourselves to success, to boldness, to innovation; to
seek out and develop new markets here and abroad, not merely by
aping products and tech * niques devised overseas, but by developing
our own products, our own expertise.
We cannot tell with accuracy how the world economy will fare, nor
can we know with certainty what direction the MTN will take, or
how rapidly world trade will grow. / 8
8.
Of one thing we can be certain. The stronger the Australian
economy, the more we can develop our own products and expertise,
the better we shall be able to withstand the difficulties and
grasp the opportunities which lie ahead.
Our future depends above all upon ourselves upon our capacity
to overcome difficulties, to respond to change to meet future
challenges. Our greatest resource is the skill and capacity
of our people. It is time we used these qualities to the full
to take advantage of our opportunities.
My Government will, through predictable and stable policies,
give Australian industry the effective support and encouragement
it needs.
We will do everything we can to re-establish the basic
relationships which ae essential to your health within the
Australian economy better profits, incentives for investment
and development, and a lower inflation rate.
In this way, industry can once again thrive, invest and make
profits and provide jobs.
I wish your Confederation every success.