16 January 2008, Mumbai, India

Address by the Minister for Trade to the Bombay Chamber of Commerce and Industry

Salutation

President of the Bombay Chamber of Commerce and  Industry Mr Ranjit Shahani, Vice-President Dr Lall, Australian High Commissioner John McCarthy, Australian Consul-General Peter Forby, members of the Chamber, ladies and gentlemen,

Introduction

It is a great pleasure to be back in India.

India is emerging as an economic and strategic powerhouse. That emergence will help to shape the world in the 21^st Century. India is seizing the opportunities presented by globalisation and has become a hub of global trade and commerce.

And that is why I am here. 

During the election campaign in Australia last year, I was invited to speak to the Australia-India Business Council on the occasion of India’s 60^th anniversary of independence. I said in that speech that a key priority for a Labor Government in Australia was to build a stronger trading relationship with India as a matter of priority. Having been successful at the election, it is wonderful to be the first Minister in the new Australian Government to visit India to pursue our commitment to strengthening the bilateral relationship. 

A dynamic relationship

The trade relationship between India and Australia has shown remarkable growth in recent years. Australia’s goods exports to India have been increasing at around 30 per cent a year making India our fastest growing major export market.

India is now Australia’s fourth largest export market.

A lot of growth has come from exports of commodities like coal, gold and copper ores and, via Antwerp, diamonds. These products are valuable inputs that are leading India’s strong domestic economic growth. They can also be inputs for Indian export industries creating benefits for both our trading sectors. 

Australia imports a very wide range of goods from India. These imports are growing steadily, and they have the potential to grow further in Australia’s open market.

Everyone is familiar with the remarkable growth of India’s services sector. The development of this dynamic sector reflects the benefits arising from the intersection of international trade, globalisation, and the rapid developments of new technologies. It also reflects the strategic decisions India has made to develop its skills base so that it can take advantages of globalisation. Indian IT companies are global leaders in their fields. 

Australia and India’s trade in services is a thriving two-way street. The great majority of our services exports come from education and personal travel. In 2007 there were nearly 60,000 students from India enrolled in Australian educational institutions – an increase of 63 per cent over the previous year. India is now the second-largest country of origin for overseas students in Australia. 

The skills Indian students learn in Australia are taken back to India contributing to its economic growth and just as importantly strengthening the people-to-people links between our two countries developing a greater understanding and appreciation of our respective cultures.

It is these people-to-people links that are so important in helping to take the relationship to a new level in business but also across a broad range of areas like education, health, IT, the arts, entertainment and more. 

Opportunities to work together on the development of India’s vocational education are significant. The new Australian Government has a strong commitment to vocational education in Australia. I served as the Minister for Employment, Education and Training in the last Australian Labor Government and I know the importance of vocational education and its contribution to increasing domestic productivity. Our respective vocational education providers can work closely together in assisting India to raise its productivity growth

Investment is also vital in driving the relationship. Australian companies are confident about the future direction of the Indian economy doubling their level of investment in India in 2006 to over $2 billion. Indian investment in Australia is also growing quickly.

Building the trade and economic framework

So it is time for the bilateral trade and investment relationship to move to a higher level. As Trade Minister I want to do as much as I can to facilitate business between our two countries. I am committed to building the framework which will enable business to pursue the opportunities. 

I consider that comprehensive multilateral trade agreements offer the best framework for the international trading system and that is where my key focus will be. The multilateral framework should then be supported at the regional level by APEC and other regional forums to build on the achievements of multilateral outcomes. As part of the process of building a stronger relationship, I will be meeting with Minister Kamal Nath in New Dehli to discuss where we can work together in achieving an outcome to the WTO Doha round of multilateral negotiations.

A successful conclusion to the Doha Round will bring great benefits to India. I appreciate there are domestic sensitivities, particularly in agriculture and services, and we will discuss these, along with the opportunities for India in greater export market access, including in manufactured products.    

The Australian Government is also committed to doing what it can to facilitate India’s membership of APEC. India’s inclusion in APEC would ensure that the forum contains all of the region’s major economic and political powers. 

In terms of the bilateral framework, our two governments are about to begin a joint study on a Free Trade Agreement (FTA). Bilateral FTAs can enhance the trading relationship if they are truly liberalising across all sectors and consistent with our multilateral trading objectives. Experience has shown us that the more ambitious an FTA the greater the rewards for its members – ambition is the key.  

Economic reform is fundamental

There is more to trade policy than international, regional and bilateral trade negotiations – as critical and time consuming as they are for opening up new trade opportunities for business. A key goal of the Australian Government is to ensure that trade policy is an integral part of our broader economic policy. 

All arms of economic policy must be working together to drive productivity growth. Productivity growth is central to international competitiveness and international competitiveness is key to a strong and prosperous trade performance. 

Despite the international commodities boom Australia’s export performance - especially growth in export volumes - has in recent years slowed considerably. As a result of that slowdown, net exports have actually detracted from Australia’s domestic economic growth for 9 of the last eleven and a half years- and that is despite the resources boom. 

Under the previous Labor Government, our productivity enhancing reform measures ensured that net exports made a positive contribution to domestic economic growth in 11 out of 13 years. The previous Labor Government achieved that outcome because we understood the importance of increasing productivity. Without productivity growth your economy loses international competitiveness and your export sector suffers. 

The key to productivity growth is continuous domestic economic reform. Economic reform is essential to freeing up resources and also essential to ensuring that you are able to lock in the benefits of trade reform. Reform measures taken behind the border maximise trade liberalisation measures taken at the border. 

I was fortunate to be able to participate in Australia’s last major economic period of reform in the 1980s and 1990s from two perspectives. As President of the Australian Council of Trade Unions from 1985 to1990 I understood that job growth and new higher paying employment opportunities required Australia to open up its economy while at the same time equipping our workforce with the skills required to compete in the global economy. Let me assure you that was not an easy period for the trade union movement. A lot of union members were against the policies that the Government of that time was pursuing - there was a lot of opposition - but the union movement as whole understood the need for reform and responsibly participated in the process. 

Following my election to Parliament in 1990, I then served as Minister in a number of portfolios and continued to participate in the comprehensive reform program undertaken at that time. The strong productivity growth of the 1980s and early 1990s occurred because the Government of the day was prepared to take the tough economic reform decisions. This included floating of the Australian dollar, slashing tariffs, deregulating the financial sector, wage restraint through an Accord with the trade union movement to lock in low inflation, retirement income reform, national competition policy, significant cuts to company and personal income tax and greater independence for the Reserve Bank. 

As Australia was undertaking these reform measures India too was beginning a new stage of economic reform – reforms which began the process of opening India up to international trade and the opportunities it generates. It is the international trade opportunities arising from such reform that drive domestic economic growth and open the business sector up to a much larger market. 

As the IMF reported recently, merchandise trade continues to be a driving force of the world economy. Both in volume and in dollar value terms, world merchandise trade has grown twice as fast as world output over the past four years. 

While growth in world trade lost some of its strength last year it continues to grow more strongly than product growth. It is the world market that offers these opportunities and to capture these opportunities both of our economies must continue the process of economic reform. 

In that regard the new Australian Government is committed to:

• An assessment of Australia’s infrastructure needs to address infrastructure bottlenecks;
• Boosting investment in education and skills training;
• Building a world class national broadband network; and
• Cutting red tape and regulation.

I am also soon to announce details on a review of Australia’s trade policy that will assess how we can best integrate our trade policy into the broader domestic economic policy settings. 

Climate Change

A final area I want to touch on is the challenge we are all now confronting as a global community – that is - taking concerted international action to reduce green house gas emissions. This is an issue in which the global community – both developed and developing countries – must work together if we are to succeed in reducing emissions. 

In my first week as the Trade Minister I attended a meeting of trade ministers in Bali in the lead up to the UN Climate Change meeting. This was an excellent initiative by the Indonesian Government reflecting the importance of ensuring that trade ministers are engaged in the climate change debate. 

As I said in Bali, apart from the environmental imperative that drives the importance of addressing climate change – and one of 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. Trade policy has an important role to play in addressing and providing solutions to climate change, although it is only one of the policy tools available. The UN Framework Convention on Climate Change , the Kyoto Protocol and the WTO Agreements each recognise that trade and environment policies need to be mutually supportive in order to achieve our goal of sustainable development.

The need to constrain carbon is driving innovation in energy technology that presents important opportunities for economic growth and employment, as well as addressing the environmental imperatives of climate change. Setting a carbon price will drive investments in low emissions products and technology such as renewables and clean coal.

It is important that we develop an efficient market based trading regime involving all parties that rewards energy efficiency and climate friendly technology. It is very clear that open trade policies are critical to the diffusion of new technology, in particular to developing countries.

Australia and India are working together in the Asia Pacific Partnership on Clean Development and Climate (APP) and I know there will be enormous opportunities for our business sectors to engage on this matter, particularly in the area of emissions reduction technology and renewable energy means.  

Conclusion

I have come to India early in the life of the new Australian Government because of the priority we place on strengthening the bilateral relationship. From a commercial point of view I am encouraged by the strong links that are already developing. Companies like Leighton Contractors, Orica, Macquarie Equities, numerous parts of the Tata Group, Linfox, KPMG are working with their Indian and Australian partners across many sectors of business. 

Austrade will also be using its Utsav Australia (or “Celebrate Australia”) campaign to raise the profile of Australian business in India and showcase Australian expertise, including in India’s major regional centres. And Austrade’s Business Club Australia will continue to provide business networking and matchmaking opportunities for companies against the backdrop of major sporting events, like the 2010 Commonwealth Games in New Delhi. For my part, I am keen to do what I can to help Australian businesses increase their exports in general and to India in particular. 

I also want to say that the Australian Government wants to see more Indian businesses coming to and trading with Australia. And we warmly welcome Indian investment in Australia. The business sector is already off to a strong start and new opportunities will emerge, including in resources and energy trade such as LNG. 

I want to help build on that start – give substance to the new Australian Government’s commitment to the relationship with India through Government to Government, political and institutional channels to provide the framework for the relationship to prosper. 

Thank you very much for your time and I look forward to any questions you may have.  

Media contact: Mr Crean's Office (02) 6277 7420 - Departmental (02) 6261 1555