10 December 2007, Singapore
Address by the Minister for Trade
The new Australian Government: Trade Policies and Priorities
To AustCham Singapore Breakfast
Good morning His Excellency Miles Kupa, AustCham officers, ladies and gentlemen.
I am very pleased to be here this morning at your AustCham Singapore breakfast.
This is the second time I have had the opportunity to address you.
As Leader of the then Labor Opposition - and it’s wonderful to once again be back in Government - I addressed this forum on 1 October 2003 and so it is great to be afforded this opportunity again today.
As I noted then, the Australian Labor Party has a long history of engagement with the Asian region. The region is of critical importance to Australia and Australia to the region.
It is also wonderful that within the first week of being sworn in as the Trade Minister of the Rudd Labor Government I have the opportunity to make a bilateral visit to Singapore.Australia and Singapore share a strong and enduring relationship based on long standing links across a range of historical and contemporary economic, strategic and political links.It is because of these links and Australia’s commitment to the bilateral relationship that I wanted to visit Singapore so soon after being sworn in to Government.
Australia – Singapore Relationship
Singapore is Australia’s largest trade and investment partner in ASEAN, and our fifth largest trading partner overall. This country is an international trade heavyweight —according to the Economist Intelligence Unit, the value of Singapore’s exports came to 253 per cent of GDP in 2006.
The Singapore-Australia business community deserves credit for seizing the opportunities in this dynamic economy.
Let me say a few words this morning about the new Australian Government’s trade policy.
We have some challenges – In October Australia recorded a $3 billion monthly trade deficit.That is, the biggest monthly trade deficit ever recorded by Australia and the 67th consecutive monthly trade deficit. Our trade figures are ringing the warning bells that it is time for a change in the direction of our trade policy approach.
Net exports are a dead-weight on Australian economic growth, despite our resources boom – the biggest resources boom and most propitious terms of trade in over 30 years. Net exports have made a positive contribution to economic growth in just 2 of the last 11 years.
Export growth rates should be much better. In the last 5 years, despite the resources boom, export volumes have increased by just 2.9% per annum.
Australia pays a price for the underperformance of our exports sector through lower economic growth and lost job opportunities. Most directly, it contributes to a higher current account deficit and has delivered a record foreign debt of $570 billion.
This might sound like a depressing story to start with this morning but I believe that with energy and good ideas we can lift Australia’s international competitiveness and reinvigorate export growth.
A framework for export growth
Australia’s export performance over the past decade has deteriorated largely because the country has lacked an overall trade strategy. A whole of government approach is needed if we are to see a recovery in export growth levels.
Labor has always recognised that productivity growth is central to lifting Australia international competitiveness and export growth. Without rising productivity Australian businesses and industries cannot remain competitive in the global marketplace. The strong productivity growth we saw in the 1980s and early 1990s occurred because the Labor Government of the day was prepared to take the hard decisions needed to drive productivity growth.
These tough decisions included:
- floating the dollar;
- bringing down tariffs;
- deregulating the financial sector;
- putting in place a formal Accord between government and unions to lock in low inflation;
- retirement income reform, including compulsory superannuation that has produced for us one of the most sophisticated financial sectors in the world;
- national competition policy;
- significant cuts to personal and company tax rates;
- greater autonomy for the Reserve Bank – which has been further enhanced by the Prime Minister’s announcements last Thursday;
– and the list goes on.
It was a Labor Government that ended centralised wage fixation, and moved to enterprise bargaining, linking wages growth to improvements in productivity. This led to the highest productivity growth cycle in almost half a century.
It is interesting to note that in the year since the introduction of the previous government’s Workchoices legislation, productivity growth has fallen to only 0.4 per cent.
Trade performance is enhanced by addressing the drivers of productivity – skills, infrastructure including broadband, research and development and more productive workplaces.
It is the integrated approach we are committed to implement to address Australia’s underperformance on exports in a period of unprecedented resources boom.
That is why Australia’s new trade policy to lift international competitiveness will be boosted by:
- Establishing Infrastructure Australia – a Commonwealth Statutory Authority to coordinate the planning, regulation and development of infrastructure – and to overcome the infrastructure bottlenecks confronting so many of our export industries.
- A new National Broadband Network to bring fast broadband to 98 per cent of Australia’s homes and businesses and improved services for the remaining 2 per cent. This will ensure that Australian exporters have world class broadband linkages to customers around the world.
- An Education Revolution, including investing $1 billion over four years to turn every secondary school in Australia into a digital school. And the new Cabinet took steps at their meeting last Thursday to begin putting this into effect.
- A commitment to Skilling Australia, including the funding of an additional 450,000 skilled training places over the next four years.
- Addressing the growth of red tape and regulation – including trade facilitation or the ‘behind the border’ issues that many of you confront. Our commitment here is recognised by Lindsay Tanner’s appointment as the Minister for Finance and Deregulation. He will be assisted in this task by Craig Emerson – the Minister Assisting the Finance Minister on Deregulation; and
- Building a truly national innovation and research system including a $200 million Enterprise Connect initiative aimed at connecting businesses to new ideas and new technologies.
In the lead up to the election we announced all of those plans to address all of those areas that are so important in improving Australia’s productivity performance.
We are committed to these ambitious plans to kick-start Australia’s flagging productivity growth rates.
A new approach
And we can and will be taking a new approach to trade policy. I’ve hit the ground running and I’m working closely with my Department to put in place Labor’s fresh ideas.
Let me outline some elements of the new trade policy in broad terms.
Achieving Multilateral Outcomes
We are focussed on achieving multilateral world trade reform through the Doha Round as the main game.
It is our number one priority.
I took advantage of the APEC meeting in Sydney earlier this year to have discussions about the Doha Trade Round with WTO Director General, Pascal Lamy, and United States Special Trade Representative, Susan Schwab.
The Trade Ministers Climate Change meeting I have just attended in Bali provided me with the opportunity to meet over a period of two days with a broad range of Trade Ministers and Representatives including US Trade Representative Susan Schwab; Minister Pangestu from Indonesia – who I also called on in Jakarta last Thursday – along with Minister Boediono; Minister Celso Amorim from Brazil; Minister Kim Jong-Hoon from Korea; Pascal Lamy, Director General of the WTO; and others.
Throughout these meetings I reinforced the message that apart from the environmental imperative that drives the importance of addressing climate change – and one on the very first acts of the new Australian Government was to ratify the Kyoto Protocol – it is my long held view that there are significant economic, trade and employment opportunities arising from the global response to climate change.
Any measures to address climate change must be consistent with open trade policies.
Following my discussions, I continue to believe that a positive outcome from Doha remains an achievable possibility and, in any case, the potential benefits for us all mean that we must continue to work to overcome remaining obstacles to a resolution.
We cannot afford to give up.
While our main focus will be on the multilateral Doha round, we do see a role for regional and bilateral agreements, provided they are consistent with our multilateral trade objectives.
APEC has a vital role to play bringing together our friends across Asia, the Pacific and the Americas in pursuit of freer world trade. It was the former Hawke Labor Government that drove the formation of APEC and Prime Minister Keating then played the key role in the development of the Bogor goals. Bogor added to and enhanced the Uruguay Round outcome. It was Uruguay plus.
This is the way we see regional agreements as adding to any multilateral outcome.
I see an important role for APEC but reforms are needed.
I am keen to work with the next chairs of APEC: Peru, Singapore and Japan, to further the reform process. The reforms I have in mind include expanding membership to bring in India and some other economies, and using the opportunity to make improvements to APEC’s governance structures.
I also see an important role for APEC in addressing the ‘behind the border’ issues that plague many exporters, particularly in the services sector.
As I said earlier, we do see a role for bilateral trade agreements but they must be consistent with our multilateral aims.
For example they ought to embody the most favoured nation principle.
I believe there are opportunities to drive this approach through the negotiations with Chile, Indonesia, and others.
This is a more strategic approach. It will ensure FTAs strengthen our commitment to multilateralism and not weaken it.
Behind the Border and the Services Sector
In any trade negotiation the Australian government will give much greater emphasis to addressing the “behind the border” issues in international trade, especially issues involving the services sector;
And we want to recognise the critical role the services sector plays in Australia’s export performance; services are 71 per cent of our economy but only 21 per cent of our exports, so there’s big potential for further development.
Given these figures it is apparent that there are significant opportunities to expand exports from the services sector.
In the lead up to the election I announced that there will be two important reviews in my portfolio area. We’re going to have a comprehensive review of trade policy and programs — a clean sheet—to look at how best we can start implementing our plans.
I want to know why, in the midst of a resources boom, export growth has been so sluggish and I want to know how we can improve export policies and programs to increase export growth.
And we are going to have a review of Free Trade Agreements (FTAs) to see how well performance has matched expectations, and to develop some benchmarks for any future FTAs that will ensure that they are better placed to deliver positive results and are consistent with our multilateral positions.
An early start
But we will not be waiting for the results of these reviews before making a start on the reform process.
I have already announced important changes to Australia’s key export facilitation program – the Export Market Development Grants scheme.
There will be more funds available to foster more exporting businesses. And the scheme’s criteria will be broadened to allow greater range of businesses and, for the first time, approved regional development bodies, to access the scheme.
Singapore Australia FTA
I want to finish by giving you a sense of the kind of standards I expect from free trade agreements.
The comprehensive Singapore-Australia Free Trade Agreement is a very good one. Australian services exports to Singapore grew at double-digit levels in 2006-07 to nearly $3 billion. But I’m very interested in seeing even greater involvement of Australian professionals here, particularly in the legal, telecommunications, engineering and architectural fields.
These are all areas which we will pursue with the Singapore Government as part of the SAFTA review process.
Success on these fronts will benefit Singaporean consumers, Australian businesses like all of you here this morning, and Australian exporters.
A great result all round.
Today I will be discussing Australia’s new approach to trade policy and the new opportunities it will provide for the bilateral relationship with Singapore’s Foreign Minister George Yeo and the Trade Minister Lim Hng Kiang.
I am also looking forward to a number of other trade and economic related meetings and a meeting with the APEC Secretariat this afternoon.
In conclusion - international trade is crucial to Australia’s economic future and there is work ahead to develop new ideas and to start implementing them.
Australian business here in Singapore has a real stake in this because you live and work in a country that is so trade-focussed.
I look forward to working with you in the years ahead and I would be happy to take any questions you may have.
Media contact: Mr Crean's Office (David Garner) Departmental (02) 6261 1555