CHECK AGAINST DELIVERY
No-one tonight should be surprised to hear me say that I had somewhat mixed feelings when I saw the America's Cup on display in this hotel.
I don't want to take anything away from Dennis Conner's great sporting achievement in winning back the Cup. Dennis' comeback from 83 to 86, not to mention his long march from New York to San Diego, is one of the great sporting stories of our time.
But let me just say you should enjoy your time as guardians of the world's greatest yachting trophy, because I can assure you we will be doing our best to see the Cup comes home to Australia after the next challenge round.
At least San Diego's victory means that the America's Cup
which Australia and the United States had traditionally
contested on the Atlantic Ocean, and which had an
all-too-brief stay at Fremantle on the Indian Ocean will
be at last fought out between us on the Pacific.
Because for nearly two centuries, the relationship between
Americans and Australians has been dominated by the
opportunities and the perils presented by the Pacific Ocean.
Australia is preparing to celebrate next year the
Bicentenary of the arrival of European settlers in Sydney in
1788. It could hardly be more appropriate that the United States
Government is contributing to those celebrations by, among
other activities, helping to create in Sydney a National
Maritime Museum.
From the earliest days of the colony at Port Jackson,
American ships ha4re been frequent and welcome visitors to
our ports.
Before the construction of the Panama Canal and the
trans-continental~ railway in the United States, it was at
least as easy to travel from here to Sydney as it was to
reach New York. 0 I'. 1
22. The Pacific Ocean was and remains a broad avenue for trade
and travel and other exchanges between us of the most
diverse kind.
And as the Second World War taught us all too clearly, the
Pacific was and remains absolutely critical to the security
of both our nations.
I had the pleasure of visiting the headquarters of the U. S.
Pacific Surface Fleet this afternoon and recalling that it
was San Diego that supported and supplied the US naval
forces that fought and won those turning point battles of
Midway and the Coral Sea.
Today, the Pacific region remains paramount in our
relationship. Australia and the United States are part of
the most dynamic economic region in the world the Pacific
Rim. In 1984, the value of trade across the Pacific
surpassed for the first time trade across the Atlantic. The
giants of Japan and China, and the increasingly powerful
economies of Korea, Taiwan and the ASEAN countries are set
to ensure the Pacific Rim will continue to exercise a huge
influence in world economic affairs for at least the rest of
this century.
So the Australian-American relationship can only prosper
further if we take advantage of the opportunities presented
to us by the growth in the Pacific Rim region.
Ours is a relationship which encompasses shared values,
common foreign policy interests, intensive defence
co-operation, crucial security commitments and commercial
and economic linkages which ' are of great benefit to both
countries. It is a relationship not just between Governments but
between peoples and private companies and organisations of
many kinds.
It was to foster this increasingly strong and constructive
relationship that the Australian-American Chamber of
Commerce was established in San Diego last year.
As people with a close interest in the relationship between
Australia and the United States, you will, I know,
understand the extraordinary breadth and depth of that
relationship.
These are not mere platitudes but the real characteristics
of a vital and rich relationship. For the United States the
relationship is, I suggest, as friendly and as reliable as
any you have With any country anywhere in the world. It is
something both sides can and do prize.
Australians and Americans see each other as equals and we
see our bilateral relationship as one of equals. And we
will continue to do so, because the aspiration for
independence and equality is central to the psyches of
Australia and the United States. 0 01
But, as is inevitable in relations between a super-power
like yourselves, and a modest regional power like Australia,
there is not always going to be an equality in the degree of
attention we give to each other or to each other's
interests.
We know that there is a great fund of goodwill for us here,
and that there is a growing number of Americans who are
visiting our country, who have seen its films, appreciated
its artists, learned to love its special beauty and
lifestyle.
Yet you are managing on alliance system embracing the
Atlantic and the North and South Pacific and we cannot
realistically-expect that Australia, as one part of that
system, will loom as large in American eyes as the United
States does in Australian eyes.
But we do have the right to ask that our interests and our
self-respect are not disregarded or slighted. We insist
that Americans not only see us as good allies in the
strategic sense but as a people whose economic well-being is
important in itself and in the self-interest of the United
States. Successive Australian Governments none with greater
commitment than mine have firmly committed themselves to
the ANZUS alliance because they saw it as overwhelmingly to
Australia's benefit to do so. In the case of the Hawke
Government, we have successfully fought a political battle
against people inside and outside our Party who honestly
questioned it.
But let me put mutuality to one side for a moment and spell
out in explicit, one-sided, terms, what Australia offers the
United States as' an ally.
we offer bipartisan, stable commitment to Western political
values, and we do not cavil over the price that accompanies
that commitment.
We offer the United States unqualified access to our ports
on the Pacific and Indian oceans, access which is
tremendously important in sustaining the US global role.
We host US-Australian joint defence facilities, which are
vital in the provision of early warning of ballistic missile
attack on the United States and in monitoring arms control
agreements with the Soviet Union. They are enormously
important in maintaining stable strategic deterrence.
Our policies serve ' to support political stability in the
South Pacific, a region whose tranquility cannot be assumed
as easily as it could at the beginning of this decade. our
expulsion of a Libyan presence from Australia earlier this
year, for example, was a valuable step in limiting the
spread of undesirable influences in that part of the world.
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We occupy second place in the world as a cash buyer of US
defence equipment, important for industries in places like
California and not without its impact on your balance of
payments. I suggest that no single ally, anywhere else in the world,
offers as much to the United States as Australia does in
strategic terms.
It is very much in the self-interest of the United States
that Australians should not be given cause to conclude that
they are taken for granted. We do not want to feel that we
are seen as first'-class allies but second-class friends.
Ladies and gentleme~ n
This is an important element of the background for the
economic issues which I want principally to address today.
The post-war period has seen the dramatic rebuilding of the
German and Japanese economies and their emergence as major
exporters; the formation of the European Economic Community
and its gradual entanglement in the thickets of inefficient
agricultural policy; and the emergence of major
international debtors amongst the commodity exportihg less
developed nations.
This is not the place for a considered analysis of the
causes of these complex developments.
What is important for our present purpose is that each of
these developments has brought with it tensions as well as
opportunities for the world' trading nations.
A particular source of tension has been the rapid build up
of massive structural imbalances between the world's majors:
the United States is now running a large current account
deficit, with the counterpart surplus held by Germany and,
particularly, Japan.
These imbalances have accumulated to the point where the
United States, having been a net lender for most of the
post-war period has recently become the world's largest
debtor and is adding to those debts apace.
There is a number of ways in which the world financial and
trading systems can resolve these tensions. Some would do
the job, but only by scaling back the world's collective
attainable growth to accommodate the fears and prejudices
which underlie protectionism. Other strategies would
enhance world~ growth and maximise the opportunities open to
individual communities.
My message to you today as it has been consistently to all
the international forums I have addressed on this issue is
that it is clearly in the interests of all of us for the
world's major economies to opt for strategies of the latter
kind.
The key to those strategies is the deliberate decision by
those major economies, including the United States, to free
up world trade rather than close it down.
That decision must be supported by and co-ordinated with an
equally deliberate commitment by the major nations to make
appropriate adjustments to their domestic economies.
I had the opportunity in January to deliver this message in
the keynote address at a conference of world business and
political leaders in Davos, Switzerland. My message on that
occasion was about the virtues of a liberalisation of world
trade specifically, of agricultural trade.
Australian agricultural producers are among the most
efficient in-the world and yet we are finding ourselves
squeezed out of our markets by producers whose export
success is due less to their efficiency than to massive
subsidisation by their Governments.
I told my audience at Davos that nations which endeavour to
achieve domestic political goals through distorting the
international trading framework are not only deluding and
hurting themselves but hurting others as well.
I assure you that I am not seeking to single out the United
States. Later this month I will be making this very clear
when I return to Switzerland to address the members of GATT
on this issue.
But Americans must realise that protectionism is in no-one's
interests: not the interests of those would-be trading
partners it excludes from trade, certainly, nor those of the
protecting nations themselves.
For the importance of pursuing simultaneously good
international policies and good domestic policies cannot be
over emphasised.
One obvious link between international and domestic economic
policy making is the need to match open trading policies
with domestic policies promoting industrial competitiveness
and flexibility.
An equally crucial link is that massive current account
imbalances are matched by massive, and unsustainable,
imbalances in the distribution of world saving.
The solution in the case of a country such as Japan which is
saving " too much", is to raise domestic consumption and
therefore imports.
Where there is a large current account deficit, such as in
the United States, the need is to increase domestic saving
and to cut back on'the public sector's call on the available
funds.
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In realistic terms, therefore, the essential counterparts of
external economic adjustment for a deficit country such as
the US are internal measures to reduce the fiscal deficit.
This simple reality that the solution to the world trading
imbalances requires fundamental changes to domestic policy
settings of all countries which are involved has been
acknowledged by the leaders of the world's major economies,
including at the 1986 Tokyo Economic Summit and, more
strongly, at the 1987 Venice Summit.
And it has tQ be acknowledged that there has been
significant progress on these fronts in recent times.
In the case of Japan, policy has been eased to permit faster
growth of domestic demand which in time will cut into their
trade surplus. And inv the United States, the Budget deficit
in fiscal 87 is expected to come in at around 3 1/ 2 per cent
of GDP compared to 5 per cent or so in recent years.
These are changes in the right direction.
They have occurred against the backdrop of quite massive
changes in real exchange rates which are at once a sign of
the extent of the underlying problem and a most powerful
instrument for reconstruction. 4.
Since its peak in early 1985, your currency has fallen in
real terms by about one-third against both its trade
weighted index and the yen.
These falls set up two quite different sets of forces.
The initial effect, paradoxically, is to make the problem
seem worse. This has certainly happened in both the United
States and Japan.
But this has camouflaged the underlying improvements which
have begun to occur in the trading position of both
countries. In Japan, exports have fallen and imports have
risen in real terms. As a result, the Japanese real surplus
on goods and services, expressed as a proportion of GDP, is
now roughly half the average of 1985.
In the US the improvement in the underlying trading position
has been less dramatic, but it has also begun. The real
deficit on goods and services peaked at 4.3 per cent of GDP
in the September quarter of. 1986. This June quarter, less
than a yea5 later, it was virtually a percentage point
lower. Clearly, the job for both countries is far from complete.
The task still ahiead is a large one which will require
consistent, patient effort.
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My point is that the challenge now, for the US and the other
major economies, is to sustain the momentum of adjustment
and not arrest it by inappropriate policies which limit
trade; or which postpone essential fiscal adjustment; or
which reduce the flexibility of domestic industries and
consumers to take advantage of the new opportunities which
are opening up.
I am fully aware of the difficulties inherent in my
prescriptions. However, I am not advancing -this solution to you as part of
an academic theory. I am speaking as a practising
politician who is familiar with the real political
constraints that can prevent or delay or distort domestic
adjustment. For Australia has had to confront the same economic choices
as confront the US and it is my proud boast that we are
confronting them successfully.
When my Government came to office we in Australia were faced
with a prospective federal fiscal deficit amounting to 5 per
cent of GDP. In five Budgets we have cut that to zero.
Across all levels of government the public sector's call on
saving at about 2.5 per cent of GDP this year has been
cut to just over a third of its prospective 1983-84 peak.
The current account deficit peaked at 6 per cent of GDP in
1985-86. By this year we expect it to have fallen by
one-third to 4 per cent.
In our case, also, that improvement has occurred despite a
slump in our exchange rate and terms of trade which
initially masked the underlying improvement. In real terms
our goods and services deficit will have improved this
financial year by some 4 1/ 2 per cent of GDP in just three
years.
with business investment expected to comprise the fastest
growing element of domestic demand this year Australia is
well positioned to keep the momentum going.
My Government is determined to continue delivering the
necessary fiscal, monetary and wages strategies.
Moreover we have been determined to co-ordinate those
policies with an open trading strategy and with policies
which boost the flexibility and productivity of our domestic
industries.
We have reduced protection, reduced regulation, encouraged
foreign investment on fair terms, promoted innovation,
reformed our industrial structures and public sector and
encouraged increased reform of work and management
practices. 01 i]
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our reason for. doing so is realistic self interest.
It reflects a recognition that if Australia does not adopt
such strategies our people can only be the poorer.
Further it reflects a recognition that if the world trading
system does not adopt such strategies all peoples,
collectively,. can only be the poorer.
This has been the lesson of our post-war years.
It is a lesson which we ignore at our peril.
Because if all parties t9, the world trading system rich.
and poor alike do not perceive that fair solutions are
being found to the-world's trading and debt problems, there
is an obvious risk that political tensions will escalate.
As I said at Davos, we must avoid anything resembling a
return to the econoic insanities of pre-1939. The world
paid a heavy price in world war 2 for its incapacity to read
and resolve the emerging economic autarky of the 20' s and
Horrendous as that price was, it would be as nothing
compared to the consequences of conflict in this nuclear
age. For those of us in the more developed nations it is
particularly important to recognise that we cannot hope to
settle our differences " in club' at the expense of the
developing countries.
And, just as validly, from the perspective of one of the
smaller developed countries, Australia could not view with
equanimity a solution arrived at between the largest
industrialised countries which did not provide fair and open
trading opportunities to countries such as ourselves.
I am not saying you have no reason for complaint. I can
understand your objections to the barriers the United States
faces to its exports, including exports of agricultural
products, in certain markets.
But do not forget that we in Australia understand those
problems because we share them. We encounter these problems
not only with countries where you encounter them. We
* encounter them as well with the United States.
Sometimes, hearing of what has been said in your Congress
particularly in relation to the Trade Bill I have the
impression that people here think protectionism is something
that only happens outside the United States and that the
United States plays fair while/ no one else does. I am
afraid that is far from the truth.
The protectionist measures contained in the Trade Bill can
only damage American credibility as the United States
approaches the negotiating table at the new GATT round. o)~ 2w-
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The United States,., for example, has put forward a bold plan
for the elimination of agricultural protection for
discussion in the new round. Yet the US Congress is
currently considering legislation which would to nominate
only those areas which directly affect Australia extend
agricultural subsidie's under the Export Enhancement Program,
impose sugar quotas on a discriminatory basis and place
quotas on lamb imports.
So while in the major forum of international trade
negotiations the GATT the United States is seeking to
take a role of lead ' ership in the winding back of protection,
the Congress is contemplating legislation that would have
the effect of further constricting the free flow of trade.
Australians take heart from the fact that the Administration
continues to resist where it can the surge in protectionism
evident in the Congress over recent years.
As Prime Minister, I am especially heartened by the
statement by President Reagan at the IMF that he would veto
any protectionist legislation developed by Congress.
I welcome too the commitment by the U. S. and Canada, in the
recent Free Trade Agreement, to work together in the Uruguay
Round to eliminate subsidies which distort agricultural
trade.
But I fear that the tide of protectionism in the US cannot
be turned back by the Administration alone.
There appears to be a groundswell of opinion here that the
appropriate means of correcting the American trade imbalance
with Japan and other major countries is the erection of new
and high barriers to imports from those countries and the
use of America's influence to exert bilateral pressure to
provide preferential access to US products.
we in Australia can only react with disappointment and
displeasure to American steps which damage legitimate
Australian interests.
In talking about this I want to be very careful not to be
misunderstood. I am not talking about circumstances in
which the United States beats Australia to some export
contract in a third market where the United States has a
commercial edge and where the importer decides between us on
that basis. That is fair competition of the kind we all
understand and respect.
Very differ ent though is a situation where non-commercial
factors distort that competition.
In view of the importance to Australia of continued
competitive acceiss to the Japanese market, we attach the
greatest possible weight to assurances we have received from
both your government and that of Japan that this distortion
will not occur. ( 1W tE
Even so, when we in Australia look at the tensions and
pre ssures attendant upon the trade imbalances between the
United States and other major trading countries, we have
reason to fear these things.
We are apprehensive that adjustment will take place for the
worst of reasons: inot as part of efforts to restore
fundamental competitiveness but through artificial subsidies
and agreements to accommodate real or perceived political
pressures. Ladies and gentlemen
Nearly forty six years ago, my predecessor as Prime Minister'
of Australia another Labor Prime Minister, John Curtin
made an historic declaration about the future of Australia.
In 1941, in the depths of wartime in the Pacific, Curtin
dramatically reoriented Australia's strategic face away from
Britain, which had hitherto been our principal ally, to the
United States.
He said: " Without any inhibitions of any kind, I make it
quite clear that Australia looks to America, free of any
pangs as to our traditional links or kinship with the United
Kingdom." 6
Those words and the prompt, indeed the heroic, response
they received from the Ame-rican people laid the basis for
the successful defence of Australia and, ultimately, for the
conclusion of the Pacific war.
Australians and Americans have never, I believe, forgotten
that historic co-operation. I know AVstralians have never
regretted the closer ties between our two nations which
followed from that co-operation in the post-war era of peace
and reconstruction.
You will understand from what I have said already that I
have no doubts about the importance of a continued
constructive relationship between the United States and
Australia. That is why I have been so concerned to stress the trade
matters as I have done today.
I call attention to them not just because of the economic
damage they threaten to my country, but because of the
damage that could thereby be done to the overall
relationship between us.
If they are not resolved successfully our wider relationship
could only be hurt. I
I urge instead the US to stand firmly for a fair and open
international trading system, to reject unequivocally the
false short-term comfort of protectionism in whatever guise,
and to accept as unavoidable the requirements of economic
adjustment both at an international and at a domestic level. L~~ 1Y~ MWwk
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World trade problems are not going to be solved by a cycle
of protection and retaliation. They must be solved by
negotiation. The vehicle is at hand in the new round of
Multilateral Trade Negotiations.
Even an economy as big as yours cannot dictate the terms of
the outcome. But America will have huge influence. You can
lead the way. You have shown that in the past.
In this great task, you need and deserve partners willing to
act independently in pursuit of their own interest, but
conscious always of wider Western interests, both strategic
and economic.
Australia is such a friend, ally and partner.
Let neither of us, by things done or not done, jeopardise
that great friendship, alliance and partnership. 01
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