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CHECK AGAINST DELIVERY EMBARGOED UNTIL DELIVERY
SPEECH BY THE PRIME MINISTER
COMMITTEE FOR ECONOMIC DEVELOPMENT OF AUSTRALIA
SYDNEY 26 MAY 1989
There are many reasons why it is a pleasure to be here
today. Most immediately, it is a welcome duty for me to launch John
Nieuwenhuysen's book Towards Freer Trade Between Nations.
It is an important book on an important subject, and-having
already expressed my endorsement for it in my Foreword to
the book I appreciate this opportunity, which I shall take
up shortly, to comment in greater detail on it.
It is a pleasure also to be here to congratulate the
Committee for Economic Development of Australia CEDA
both for sponsoring the publication of this book and for
hosting this conference. For many years CEDA has made an
impressive contribution to the generation and discussion of
ideas in domestic and international policy-making.
By all reports, this conference has once again demonstrated
CEDA's commitment to creating a more informed public debate
on the key issues we face at the close of the 1980s.
Most of all, however, I welcome this invitation to address
you today because of the overwhelming importance of the
issues you have been discussing for the past two days, and
because of the constructive contribution Australia is making
to the development and resolution of those views.
The theme of this conference, The Pacific Era Your Future?
poses a significant question.
For a long period of Australia's history, most Australians
would have believed their future lay with the region that
gave us this nation its birth Europe, and most
specifically, Great Britain.
Today, the Australia-Europe relationship remains very
strong, whether it is measured in economic, cultural,
political or demographic terms. Indeed in a month's time I
will be making a visit to France, Great Britain, Germany and
Hungary, as well as the United States, in order to reaffirm
and strengthen those ties.
But throughout this century, as Australia matured as an
independent nation, the orientation of'our commercial and
diplomatic activity has increasingly been towards the
Asia-Pacific region.
So much so, in fact, that today, any moderately well
informed Australian, when confronted with your conference
title, would edit it, remove the question mark, and make the
affirmation: The Pacific Era Our Future.
Of course our future lies with the immediate region.
That has been apparent since, first, Japan and, then, other
Asian economies sought Australian raw materials to fuel
their growing industries in the decades following world war
Two. It has become increasingly apparent as the consumer markets
of Asia grow in sophistication and affluence, presenting
immense opportunities to our manufacturers and service
exporters. It has become increasingly apparent as Australian industry
benefits from investment and imports from the Asian region,
and as European investors come to appreciate the obvious
advantages of Australia as their springboard into Asia.
In 1987/ 88 Australia's trade with the Western Pacific region
accounted for nearly half of our total trade, and this rises
to two-thirds with the inclusion of North America.
Around half of the total foreign investment in Australia
originates from the Asia-Pacific region, and almost 60% of
Australia's overseas investment is located in the region.
Eight of Australia's top ten export markets are in the
Asia-Pacific region: Japan, the United States, New Zealand,
Hong Kong, South Korea, Taiwan, China and Singapore.
The question is not, then, for an Australian: Does our
future lie with the dynamism of the Pacific? It is: how
best do we position ourselves, what actions do we need to
take, to ensure the benefits of that enmeshment are obtained
and not wasted?
In the same way, as Dr Nieuwenhuysen's book recognises, the
question is not: Is free trade an appropriate mechanism for
building prosperity?
That question is already answered. Just look at the
astonishing growth of this region and you see a growth and a
prosperity that was built, in the early post-war decades,
through reliance on open and competitive trading policies
especially those practiced in the United States.
Already the Asia-Pacific region provides more than half of
the world's economic output, with the outlook for further
growth in that share, and accounts for more than one-third
of world trade.
So the relevant question Dr Nieuwenhuysen's book asks is:
how do we ensure the survival and reinforcement of the
practice of free trade, so that we may continue along that
path of prosperity?
To bring these two sets of questions together the nature
of our Pacific future and the importance of trade I note
that conferences such as this are likely to dwell in glowing
terms on the glorious future that awaits us in what is
referred to as " the Pacific Century".
That is good as far as it goes. But the real issue and
very much the harder issue is ensuring that those glowing
predictions are achieved.
How do we usher in the Pacific Century? Surely, through
free trade. Because surely, the health and vitality of
world trade underpins our capacity to provide better living
standards for ordinary men and women in our region and,
indeed, around the globe.
This is of course the theme of Dr Nieuwenhuysen's book. one
of his contributors put it nicely: trade is not a war won
by running a trade surplus and lost by having a trade
deficit. Another adds: trade is a positive sum game in
which all the participants benefit.
The implication is clear. Those who impose restrictions on
trade certainly harm their trading partners, and they damage
the overall trading system but they also delude, and harm,
themselves. So the message of Dr Nieuwenhuysen's book is that
progressively moving towards a free and open international
trading system will contribute to greater prosperity and
stability in the world economy.
Despite the validity of this argument in a scholarly sense,
however, there are too many disturbing trends in the global
market place to be confident that this truth is being
universally understood or acted upon.
Let me enumerate them.
First, the continuing presence of significant trade
imbalances between a number of regional countries and the
United States continues to be associated with bilateral
pressures to open markets in a manner which discriminates
against efficient exporters.
Second, we are faced with a trend towards the formation of
bilateral or regional trading arrangements which run the
risk of being inward-looking and undermining a truly
multilateral international trading system.
Third, fundamental tensions continue to exist within the
GATT framework of multilateral trade rules, despite the
recent resolution of the Montreal mid-term Review of the
Uruguay Round.
I hope this book will be widely and fully read, so I am
loath to suggest to potential readers that they should
consider taking any short cuts. But I do recommend in
particular Dr Nieuwenhuysen's summary of its themes, which
includes a valuable distillation of five proposals for
action necessary to-achieve freer trade.
He outlines these needs:
The need for greater transparency in the nature and cost of
protection; the need to open up agricultural trade; the need
for a timetable for ensuring application of GATT rules; the
need to understand and address the costs incurred by some in
the process of adjusting to change; and, finally, the need
to combat protectionism by a persistent effort to reveal and
promote the advantages of free trade.
In regard to this fifth point, of course, this book itself
will play a very prominent role.
All these five points are forceful and practical steps
forward. Each is reflected in the decisions Australians
have made in recent years to ensure our more competitive
participation in world trade.
Australia of course has been a trading nation for most of
its two hundred year history. within only two decades of
the arrival of the First Fleet here in Sydney in 1788
Australia exported its first wool clip to Europe.
The problem of course was not that we found export difficult
or markets elusive. For most of our history we found it
easy to build high living standards on the basis of
exporting a range of commodities to an eagerly waiting
world. Our mistake was to pretend, as we did as late as the 1950s
and 1960s, that we could go on like this ad infinitum, and
that we could therefore shirk the more difficult task of
building an export capacity beyond primary production.
The debate between free traders and protectionists in
Australia dates back to before the Federation of the
Australian colonies in 1901. Progressively, and
comprehensively for most of the four decades since the
Second world war, this debate was won by the protectionists.
The challenge of manufactured exporting was avoided; we
built instead a range of weak, inefficient manufacturers
catering for our small domestic market, supplemented where
necessary by imports of higher technology equipment.
The crash, when it came, was rough. In 1985/ 86 it was
brought home very forcefully to Australians that the world
did not have infinite willingness to support our living
standards through high commodity prices. our decades of
protectionist industry policy meant that we had very little
to offer the world beyond the traditional staples produced
on our farms and in our mines.
It has been an overwhelming priority of my Government since
1983 to diversify our export regime so as to remedy those
profound traditional vulnerabilities of the Australian
economy. This required the most dramatic restructuring of the
domestic economy, as well as a concerted effort in our
diplomacy to create a more export oriented, competitive,
efficient, diverse, open and productive Australian economy
and to ensure a world trading system in which the fruits of
those reforms, our exports, could compete on fair terms.
Maintaining our prosperity will require the development of a
domestic economy adequately equipped to take advantage of
international and regional economic growth, and it will
require access to international markets.
So, profound changes have been underway in the Australian
economy since 1983.
We have implemented policies designed to encourage a more
open, flexible and responsive industry structure one which
is capable of investment and growth not only in the domestic
market but also as a base for involvement in markets through
the Asia-Pacific region and elsewhere in the world.
We have sought to internationalise the Australian economy
through actions such as floating the Australian dollar and
deregulating the financial sector.
Changes introduced in 1988 will reduce the level of tariff
protection afforded to Australian manufacturing industry by
around 30% and our primary industries have been made more
responsive to changes in the international market place. We
have plans in place to reduce substantially over time the
protection afforded Australia's textile, clothing and
footwear and passenger motor vehicle industries. Such
reforms are designed to encourage international
competitiveness, and to reduce the burden that protectionist
policies place on Australia's exporters.
The consensus approach to industrial relations, which has
been a central feature of the relationship between my
Government, industry and workers, has resulted in
significant real wage restraint, major and genuine
restructuring of employment awards, and a marked improvement
in the industrial relations climate in Australia.
Since 1986, Australia's foreign investment policy has been
essentially an open-door approach which welcomes
constructive and mutually beneficial investment into the
Australian economy. Foreign investment guidelines are
essentially open and transparent, with few restrictions.
Last year we announced a major overhaul of the corporate
taxation system, with corporate tax rates being reduced from
49 to 39 per cent. This, coupled with the tax imputation of
dividends, provides a favourable environment for business
investment.
All of these changes have created considerable opportunities
for Australian companies and also for foreign companies
based in Australia which seek access to the Asia-Pacific
market. International companies have set up business in
Australia to capitalise on the opportunities that abound
here and in the region, recognising that we are now an
effective and competitive springboard into the Asia-Pacific
market. You will no doubt be aware of concerns at present about the
way in which Australia's excessive demand is fuelling a
serious balance of payments deficit. This is not the place
to enter into a lengthy discussion of Australia's economic
situation.
But I do say this: don't let these admitted short-term
difficulties colour your judgement of the fundamental and
enduring reforms that have been undertaken in this country.
Australians have their eyes on the long-term future, and
thanks to the fact'that our underlying economic problems are
being effectively addressed, as never before, gives us
confidence that we will be playing a very significant role
in this region into that future.
Ladies and gentlemen,
The effectiveness of these domestic reforms would be
substantially reduced if the rules of open international
trade were to be abandoned or flouted by the major
economies. So it has been a major priority of our diplomacy to pursue,
at the bilateral, regional and multilateral levels, policies
which will encourage greater openness in the economies of
our current and potential trading partners.
In particular, we have taken a close and active interest in
the Uruguay Round of Multilateral Trade Negotiations. We
fought successfully for the inclusion of agriculture in the
GATT round so as to bring pressure to bear on the massively
protectionist policies of the major economies, particularly
Europe's C. A. P.
Through the Cairns Group of Fair Agricultural Traders,
formed in August 1986, we have successfully worked to create
a powerful third force in the negotiations. The recent
decision in Geneva provided a significant breakthrough at
the half-way mark of the current Round but we recognise
too that there is a long way to go before the absurdities
and inefficiencies of the C. A. P. are eliminated.
We are also pressing for significant reductions in
protectionism in other sectors, including natural resource
based products and the new areas of services and
intellectual property rights.
In our bilateral dealings with all countries we take the
opportunity to urge our partners to remove or reduce trade
barriers that invariably exist. Last year we reached an
agreement with Japan to liberalise significantly their beef
market, and helped to convince the Americans to amend some
of the more damaging measures originally proposed for their
1988 Trade Bill.
Ladies and gentlemen,
What is particularly important is that we combat any
emergence of restrictive trading blocs, be it in Europe
post-1992, in North America, or elsewhere.
As a region, we must employ what means we have at our
disposal to ensure that the international trading system
does not fragment into exclusive zones.
That would be ultimately to the cost of us all.
It was in part to harness the region's efforts to prevent
such an outcome that earlier this year, as part of an
official visit I paid to the Republic of Korea, I proposed
the establishment of a new and more formal vehicle through
which the governments of the region could cooperate in the
analysis and discussion of key economic and trade issues
facing us.
I see the primary task of such regional cooperation as being
the reinforcement of support for an open, non-discriminatory
international trading system operating within an expanded
and strengthened GATT formula.
That is a goal the nations of this region broadly share and
towards which we are already working. Collective action,
through strength in numbers, should help us achieve it.
Second, I see the need for the region to investigate the
scope for further dismantling of barriers to trade within
the region, in ways which do not discriminate against the
rest of the world.
Third, closer regional cooperation would be a valuable means
of identifying the broad economic interests we have in
common. We need to investigate whether, through improved
policy coordination, we might better capitalise on the
extraordinary complementarity of the economies of our region
and so stimulate even greater economic activity within the
Asia-Pacific.
Our region, of course, contains a very diverse set of
countries,. at different stages of economic development, and
with quite different social and political systems. To
respect these differences and still achieve our common goals
is a challenge that will require close consultation and a
mutual commitment to achieving consensus.
As a guiding principle for participation we believe the key
criteria must be the extent to which countries have economic
linkages with the region and their willingness to contribute
meaningfully to regional economic cooperation.
Recently, my special envoy, Richard Woolcott, the Secretary
of the Department of Foreign Affairs and Trade, has been
visiting the capitals of the Western Pacific region to
pursue this proposal. So far the feedback we have received
has been positive and encouraging.
Australia began the initial soundings of regional views by
focusing on ten countries in the Western Pacific, the ASEAN
nations, Japan, the Republic of Korea, New Zealand and
Australia. This was not an attempt to exclude any country
but it did represent the realistic assessment that any broad
process of economic cooperation in the region would need to
involve these countries as the essential and minimum group.
Subsequently, Mr Woolcott has visited China, Hong Kong and
the United States, and will shortly visit Canada.
In all of the countries consulted by Mr Woolcott, the
principles underlying my proposals have been strongly
endorsed. There is wide acceptance that our mutual economic interests
would re -ceive a significant boost by developing a more
effective vehicle for regional intergovernmental economic
cooperation.
Now more than ever, there is a regional desire to ensure the
economic achievements of recent decades are built upon and
extended a growing regional self-confidence and
determination to ensure the pendulum swings towards, not
away from, freer trade.
There are many issues still to be worked out. These include
questions of participation, the nature of any support
structure to underpin greater economic cooperation between
governments, and the relationship of any new vehicle to
those that already exist.
These are issues that Australia looks forward to addressing
over the coming months with the countries of the region.
I stress that we do not seek to create a vast new
bureaucracy. That is in no-one's interests. Nor do we seek
to derogate from the important role and functions of ASEAN,
which continues to be a major political influence in
Southeast Asia.
PECC, too, has been an extremely useful institution which
has built up the habit of multilateral dialogue and
research.
But I believe it is now the time to extend that habit up to
the governmental level throughout the region and so provide
an additional, effective, means for advancing our region's
concerns in the changing international economic environment.
Ladies and gentlemen,
My address today has largely been cast in economic terms.
Dollars and yen are critical, after all, in determining the
prosperity of the peoples of our region.
But it would be a profound mistake if we were to assume that
we are dealing purely with issues of global economic
management, or if we were to pretend that such issues do not
have vital relevance to, and impact on, broader questions
including the fundamental question of global peace and
stability. In January 1987 I had the honour of delivering the opening
address to the World Economic Forum's Symposium in Davos,
Switzerland. I said then that if we were to learn anything from pre-war
history it must be that the global conflict of the Second
World War was in large measure the product of the failure of
political leadership to recognise and adjust to the collapse
of economic relationships between and within nations.
The world paid a heavy price then for its incapacity to read
and resolve the emerging economic autarky of the 1920s and
1930s. But as horrendous as that price was, it would be as
nothing compared to the consequences of conflict in this
nuclear age.
I warned on that occasion at Davos that commercial tensions
in the 1980s among the developed industrial democracies
and I was referring in particular to the debilitating
dispute over trade in agricultural products would, if
continued, considerably erode Western political and security
relationships.
That the process might be subtle and gradual, rather than
sudden and dramatic, would make it no less pernicious and
its ultimate consequences no less damaging.
That was January 1987.
Since then we have witnessed, over nearly thirty months, an
astonishing political transformation a transformation that
only heightens the relevance and sharpness of my warning.
What we are seeing is nothing less than the emergence of a
new era in world affairs.
At the level of superpower relations, including strategic
nuclear arms control, and at the regional level in
Afghanistan, Angola, and Cambodia, we are witnessing a new
capacity for negotiation leading to sensible and farsighted
solutions. In the massive programs of reform underway in the Soviet
Union we are perhaps seeing the erosion of the command
economy model and its replacement with a more responsive
economy and a more open society.
Throughout Eastern Europe we are seeing a diversity and
acceptance of change unparalleled since the Iron Curtain was
erected.
What an irony it would be if, at the very time when the
merits of the market economies are starting to be understood
and emulated by these command economies, we market economies
were to abandon the fundamental factor behind our success
the principle of free trade.
And what a tragedy it would be if the emerging signs of
maturity in the conduct of political relations between
nations were to be flouted and jeopardised by an incapacity
satisfactorily to manage our economic relations.
The fundamental truth is that we are all interdependent.
The poverty or prosperity of one of us are questions that
concern us all. They effect not only our own economic
well-being but also, fundamentally, our political security
and stability.
As a region, we have much to offer each other. We have
substantial shared political and economic interests, and a
powerful complementarity in our economic skills, resources,
and business, cultural and political links.
The opportunity is now at hand to grasp the potential of our
region.
By working to liberalise multilateral trade, and by seeking
to build regional cooperation, we are seeking to safeguard
and enhance our future.
That way, I believe, we can ensure that we enter the next
century with confidence that our great potential will be
fulfilled.