CHECK AGAINST DELIVERY EMBARGOED UNTIL 9 P. M.
SPEECH BY THE PRIME MINISTER
21ST ANNUAL JOINT MEETING OF THE AUSTRALIA/ JAPAN
AND JAPAN/ AUSTRALIA BUSINESS COOPERATION COMMITTEES
MELBOURNE 26 OCTOBER 1983
It is with great pleasure that I join you tonight
on the occasion of your twenty-first Joint Meeting.
Your committees have been at the forefront of
extraordinarily productive exchanges over the years to the
benefit of both our countries.
Your success demonst. rates very clearly how a close
relationship can flourish when people from two countries sit
down and discuss common problems in a frank and open manner.
Your efforts have contributed importantly to
broadening our two countries' understanding of each other.
They have strengthened the relationship and
provided a sound basis for growth in mutual trade.
But we cannot afford to rest on the gains already
achieved. I
The recession has made deep inroads into overall
growth of global output, employment and international trade
and has seen measures adopted which are seriously eroding
efficiency in the use of national and international
resources. Both Australia and Japan have a shared interest in_
redressing this situation.
We have a joint interest in the maintenance and
extension of an open trading and payments system.
It may be the case that little more than half of
the value of world trade is now transacted on the basis of
the non-discriminatory provisions of the GATT system and
that bilateralism has increasingly come to supersede
multilateral approaches.
But as countries whoze prosperity critically hinges
on vigorous growth in international trade we need to act
together to enSUre the. mainteniance oL conditions necessary
to a strong and resilient world economic and trading system.
I can think of no better place to start than with a
rev-iew of issues current in the Australia/ Japan trading
relationship. Contemporary Australia is dedicated to an open,
non-discriminatory international trading system.
We see our future as being closely linked with the
maintenance and further development of our partnership in
the dynamic economic growth of the Asia/ Pacific region.
Within this region of growth, we are ready to stand
on our own competitive capacity.
Naturally these perceptions find a particular
reflection in Australia's trading relationship with Japan.
There is no doubt about the fundamental importance
to both Australia and Japan of the bilateral economic
relationship. It is a striking fact that. Australia's export trade
with Japan is greater then our trade with our next four most
important trading partners put together.
Japan is now overtaking the United States as our
most important overseas supplier.
But if anything I fear constant reiteration of
recoqnition of this interdependence over recent years may
have blunted awareness of important changes taking place,
particularly within Japan.
The key change has been that in the last two to
three years Japan ' s economic growth has slowed again
following the earlier movement to a lower growth trajectory
following the first oil shock.
In a buyers' market Japan has cut back markedly on
imports from Australia, both in quantity and price.
The basic materials industries are now among the
low growth sectors of the Japanese economy.
It is quite possible that activit~ y in these
industries may have plateaued permanently.
While there will be some short-term recovery due to
cyclical factors, the inescapable fact is that Japanese
industry is restructuring and forward planning is directed
to the promotion of high technology industry and products.
These industries will consume less energy and less
basic metals. Fortunately for Australia, other markets are now
opening up in newly industralising countries of the region.
But those markets should not be considered a
substitute for the Japanese market.
The Japanese market will continue to be vitally
important for Australia.
The slower growth in total Japanese demand for
resources that is now in prospect focuses attention on
Japan's import souircing policies.
Japan has been experiencing increasing pressure to
give other resource suppliers privileged ( and, in our view,
economically unjustified) access to its markets, either to
offset imbalance in other parts of a larger commercial
relationship or for broad political/ strategic reasons.
On this point my Government was very pleased,
indeed relieved, to receive the assurances the Japanese
Trade Minis', ter and Foreign Minister recently gave senior
Australian Ministers that Japan has no intention of solving
trade problems with third countries at the expense of
Australia. The Australian Government had been deeply concerned
at the weight of pressure being applied to Japan and regards
it as critically important to avoid a response that is at
the expense of such close and reliable partners as
Australia. But there is another aspect to the sourcing problem
which continues to cause Australia concern.
The development of equity tied mining arrangements
by Japan is soon going to im,, pact heavily on both the coal
and iron ore trade.
I have heard it said that new Canadian coking coal
mines which have significant Japanese equity and loans have
contracted tonnage representing 12-15 per cent of a more of
less static Japanese import demand for coking coal. This
could be accommodated only if the new su~ pplies were forced
into an already oversupplied market.
The United States, being the higher cost producer
may, as some observers suggest, be the ' swing supplier' in
this sitUation.
But whlether or not this less ineff icient outcome is
chieved depends on the the considerable bilateral pressure
being exerted on Japan by the United States to ease its huge
trade surplus by importing more US products, including coal.
Similar factors are at work in the iron ore trade.
The pattern of increased Japanese overseas
investments in alternative raw material. resources and iron
and steel. production could threate-n the share of the
Japanese market available to more efficient Australian raw
material produce-rs.
For example, one major iron ore project in another
country has recently received significant Japanese financial
support in the form of equity and loan funds respectively;
and there are commitments by Japan to purchase ore from the
project when it comes onstream.
For Australia this can only create problems.
Maintenance or improvement of our market share will
be the more difficult.
For coal, both coking and thermal, the issue is
more one of growing unease over the value of long-term
contracts and uncertainty about the stability of the market.
This has been highlighted recently by severe
cutbacks on existing suppliers who have long-term contracts
and proven performance.
These suppliers have made investments on the
assurances provided by Japanese buyers within long-term
con tracts. It is a matter for regret and real concern that
those assurances have not been fully honv-ured at the samc
time as the buyers are mounting investments and uindertakinq
commitments elsewhere.
But there is another aspect to the Situation which
cannot be ignored.
Considerable difficulty has beeon encountered in
obtaining adequate and reliable information on Japanese
future demand prospects and in assessing the extent to which
countracted tonnages were likely to be taken up.
Levels of forecast demand have brought forth
over-supply. Australian producers are now geared to supply much
larger markets than are now or potentially open to them.
The transformation in Japan's energy demand
structure and the consequent reported downward revision of
approximately 20 per cent in the Japanese government's
energy demand forecast for 1990 carry major implications for
our energy resource trade.
Obviously, Australian sales of raw materials and
energy resources to Japan will remain large in absolute
terms but we cannot ]. ook to the kind of cjrowth we have come
to expect in the past.
This ha s significant conseqnences for Australian
development and for our entire induIstrial structure.
For some products Australia may have to face
cutbacks in sales to Japan.
This is now the reality.
But I believe strongly that Australia is, and will
remain, a reliable, competitive supplier of resource goods
and traditional commodities.
This belief is grounded in recognition of:
the importance of Japan's market to Australian
industries serving the raw materials trade, and the
associated advantages of working within a
large-scale established trading relationship;
the highly competitive position of Australian
suppliers vis a vis suppliers in North America,
China, South Africa and Latin America and
the commitment of my Government to ensure that the
industrial framework in Australia buttresses the
underlying competitiveness of these industries.
Australia should bc and oxpects to be given fair
access to the presently limited Japanese market. If one
party takes advantage of short-term market fluctuations to
change arrangements temporarily in its own favour, there
will be no satis * factory basis for long-term commercial
relationships. Australia's record in handling the necessary
adjustments to-dislocations in the raw materials and
agricultural trade is testimony to our reliabilty as an
economic partner. Australia, for example, met its full commitments to
supply beef to Japan throughout the very severe drought of
1982--83 and is committed to continue to do so.
We do not seek privileged treatment on the basis of
non-commercial considerations.
Australia is not in the business of seeking special
favours in the international market place but asks only for
a careful appreciation of our capacities and for a long-term
perspective to be applied to present difficulties.
We expect recognition by Japan of the'particular
and enduring advantages of trading with Australia.
As a country Australia has:
very large reserves of a wide range of high quality
minerals and other resources, particularly energy
resources geographical proximity to Japan
large-scale, low--cost operations
political stability and
common security interests and membership of the
Western alliance.
The continued complementarity and interdependence
of Australia and Japan is an inescapable reality.
This is not to deny that both Japan and Australia
have a legitimate interest in diversifying supply sources
and markets. The growth of Asean and of the niewly industralising
countries of this region offer significant opportunities
that are already of considerable interest to both Australia
and Japan. Due regard must be had, however, to the effect of
diversification on exisiting facilities and infrastructures
established ( often on the basis of long-term contracts) in
the expectation of continued non-discriminatory access to
each other's markets.
Australia cannot go on expanding production while
some mines are selling at a loss.
We need to sort out the real basis and operational
validity of traditional long-term contracts with Japan.
We need to achieve mutual recognition of the
dangers of encouraging over-supply initially for the
supplier but in the longer-term equally for the consumer.
This danger becomes real once market uncertainty
prevents investments from proceeding and artificially low
prices force the closure--or abandonment of mines and
facilities that would otherwise operate economically.
To avoid these problems it would be useful to
increase information sharing between our industries and to
develop common perceptions with competitor Supplier
countries. Our membership of several international agreements
and study groupe could facilitate such consultation.
As a productive first step, these efforts could be
directed to improving the accuracy of demand forecasts.
Clearer and more effective guidelines about the
future requirements of Japanese industry for Australain
resource materials are needed.
An equally clear statement of Australia's
situation its development plans and problems would also,
I am sure, be of value to Japan.
Sufch matters should be the subject of effective and
continuing consultations at both the business and
Governmental levels. This would, I believe, be of
substantial value to producers and consumers alike.
Sir John Crawford's recent proposal at the
Australia-Japan Economic Issues Symposium for an
" international forum on security of supply and market access
in the resources trade, notably in coal", is more ambitious.
It is nevertheless, as recent circumstances suggest, timely;
it merits serious consideration by all parties concerned.
Mr Nagano,
Closely linked with consideration of Australian
competitiveness must be an assessment of our reliability as
a supplier. Although I beli6ve concern on this point has often
been exaggerated and motivated more by an interest in
negotiating leverage than in realities, the point is
sufficiently central to merit close attention.
Last year Brian Kelman of CSR presented at this
meeting a carefully considered analysis of Australian
industrial relations in the context of the trade in natural
resources between Australia and Japan.
The picture which emerged bears repeating:
Time lost due to strikes in Australia was about
average by world standards
Most. Japanese buyers of Australian commodities
experienced little or no inconvenience or
additional cost due to industrial disputes in
Australia There were a couple of industries in Australia with
a worse than average past record, but in these
cases the current situation had either improved or
was improving
In at least one of these latter industries, the
most competitive supplies available to Japan
continued to emanate from Australia.
Had Mr Kelman conducted his analysis this year I am
sure the picture would have been even more positive
There was a significant decline in the level of
industrial disputes nationwide in the 12 months to
Juily 1983; only 289 working days were lost per 1000
employees compared with 6-71 days the year before.
In part this situation reflects the impact of the
recession; it also reflects more effective industrial
relations a trend which State and Federal Labor
Governments are well placed to nurture, and are intent on
co-operating to do so.
While we can take satisfaction from this trend, it
offers no grounds for complacency.
Industrial disputes have caused problems which we
could all have done without.
Whatever the progress that has been made, room for
improvement on all sides still exists.
The Australian iron ore industry has had a
particularly chequered record.
Although there has been no occasion since Australia
began shipping ore to Japan that production by the Japanese
mills was interrupted due to disruption of Australian
supplies, the situation at the Pilbara has for a long time
been difficult and a source of legitimate concern.
Some of you would be aware that back in 1976, as
President of the ACTU, I addressed a meeting at the Pilbara
on industrial relations issues in the iron ore industry.
Subsequently, in January 1977, 1 led a delegation
to the Japanese steel mills to discuss the same issues.
Now in Govcrnment I have given high priority to
improvement of Australian industrial relations in general
and Pilbara industrial relations in particular.
The Western Australian Premier, Brian Burke, and
his senior Ministers, share our views on the priority of
these industrial questions.
Some of you may have seen reports recently in the
West Australian papers about the possible establishment of
an Iron Ore Industry Consultative Council involving State
and Federal Governments, unions and employers.
This is currently the subject of active
consultations among interested parties.
Consistently with my Government's approach to
matters of this kind, we would want any new institutions to
have the positive support of all interested parties.
If any new plan is to be successful, those affected
need to conlcur with it and be involved in bringing it to
completion. If it could be achieved I would see the
establishment of a tripartite body along these lines as a
most significant development.
This joint initiative constitutes a particularly
clear demonstration of Australia's comnmitment to maintaining
and improving its performance as a reliable supplier.
The Western Australian and Commonwealth
Governments look forward to a fresh start: in industrial
relations in the Pilbara.
But the current situation requires more than just
getting our own house in order.
Australians must also be more active in the
international market place.
We need to expand the base of our exports to Japan
and to do this we need to know better what the Japanese
market wants. The Japanese economy continues to grow and
represents a lucrative import market for those countries
able to supply its needs at this advanced stage of its
development.
Japan's high adincreasing living standards will
generate opportunities for items such as high quality
processed foodstuffs a~ nd high technology manufactures,
leisure and sporting goods, high fashion items, travel and
recreation, and the products of the services industry,
particularly education services.
If Australians Eire sufficiently concerned with
innovation and q4uality, and do their homework thoroughly, we
will not be denied a place in that market.
I beliieve that wie even have some natural
advantages in these new areas as well.
Our small scale, highly differentiated
manufacturing industry could be well suited to filling
niches in this highly sophisticated market.
We can succeed with a carefully conceived and
committed approach aimed at understanding Japanese needs and
developing our capacity to meet them.
The assurances given to both Mr B~ owen arid Mr Hayden
earlier this year by their Ministerial counter-parts in Tokyo
that Japan swill co-operate constructively with Australia In
the context of Japan's program of import expansion give me
further confidence. I welcome these assurances as a measure of Japan's
desire, shared by Australia, to see the relationship
flourish. This squares well with Australia's aim to
strengthen manufacturing productitity, upgrade our resource
based processing, manufacturing and exporting, and take full
advantage of the existing opportunities for stronger
technolog ical co-operation.
That said, the huge anid strategic raw materials
trade remains of critical interest in the Australia/ Japan
relationship. Neither our business communities nor our
Governments can afford to neglect the problems involved in
that trade. Where Australia is competitive, as we are in
energy, raw materials, agricultural and other commodities,
Australia can legitimately expect the maintenance of its
established shares in the Japanese market, especially in
these times when the market is tough.
past This is not simply a matter of clinging to the
.2 .11.
Instead it is a matter of recognising the
importance of building across the business community, t". c
governments, the geneoyal. community in Australia, Japan and
other Western Pacific countries a climate for open trade
pol icies. Our two countries share a strong interest in the
maintenance of strong trade expansion and economic growth
throughout our region.
This implies an even more open, vigorous and active
partnership between Australia and Japan.
It requires business in Australia and Japan to
recognise our strong mutual interest in efficient patterns
of trade; in drawing supplies from the most competitive
sources, independently of external political or commercial
pressures. The reward of our success will be the m. iintenance
of our region as a centre of economic dynamism without equal
in today's world.