23 January 2008, Tokyo, Japan
Australia-Japan Economic and Trade Relations
Address by the Minister for Trade to the Australia and New Zealand Chamber of Commerce in Japan
Mr Tim Lester, Chairman of the ANZCCJ, Your Excellency Ambassador Murray McLean, Members of the ANZCCJ, Members of the AJBCC, Ladies and Gentlemen
It is a great pleasure to be here in Tokyo and to have the opportunity to speak to the Australia and New Zealand Chamber of Commerce in Japan.
I have been to Japan many times throughout my career and met with many Japanese delegations visiting Australia. That has included my time as President of the Australian Council of Trade Unions (ACTU) and as a Minister in the previous Labor Government in a range of portfolios including Primary Industries and Energy and Employment, Education and Training.
As the first Minister to visit Japan so early in the term of the new Australian Labor Government I want to convey three key messages to you this morning. These are the central messages that I am conveying to the Japanese Government during my visit.
The first is that the Australian Government has a strong and enduring commitment to the Australia-Japan relationship. A commitment that reflects the importance of the political, strategic, trade and economic links our two countries have developed over the past 50 years. This is a relationship that has matured into a strategic partnership between our two countries.
The second, is that the new Australian Government is committed to the implementation of a comprehensive trade and economic reform program to restore Australia’s level of productivity growth, which has declined in recent years, and restore our level of international competitiveness. Despite the global commodities boom, Australia’s exports have underperformed and the Australian Government is committed to turning that around.
The key facets of this commitment will be to once again ensure that the WTO Doha round is Australia’s number one trade priority. That is because the multilateral trade negotiations offer the biggest potential gains for Australia and the global economy.
Our multilateral agenda will be complemented at the regional level via APEC and at the bilateral level via Free Trade Agreements, including the FTA with Japan.
Another important aspect of my approach will be to ensure that trade liberalisation at Australia’s border is supported by productivity enhancing economic reform behind the border. This will be achieved by ensuring that trade policy is part of our broader economic policy – all arms of policy working together to drive productivity growth.
I see this in the context of the twin pillars for sustainable economic growth. That is, the benefits of trade liberalisation at the border will only be maximised complemented by economic reform behind the border. Economic reform creates the productivity growth. Productivity growth enhances your international competitiveness. International competitiveness maximises the economic gains from the global trading system.
And the reason we should be seeking to open up to the global economy is because merchandise trade continues to be a driving force of the world economy. Both in volume and value terms, world trade has grown twice as fast as world output over the past five years. It is the world market that offers greater opportunities and to capture these opportunities economies must continue the process of economic reform.
Finally, I want to convey the message that the substance and closeness of Australia’s relationship with Japan gives our two countries the opportunity to forge even stronger partnerships and to work together in the pursuit of our mutual interests.
These initiatives go beyond the trade and economic goals that I will focus on today.
The Australia – Japan Relationship
Ten years after the signing of the Australia-Japan Commerce Agreement in 1957 Japan became Australia’s number one export market. Japan has held that position ever since and is likely to do so for many more years to come.
Australia’s trade with Japan is broad and deep. A trading relationship that must be seen in strategic terms. The reliability and security of supply of Australian resources is critical to sustaining both the Australian and Japanese economies.
The trade and investment partnerships that have been forged in the resources and commodities trade were critical in developing Australia’s primary industries, and all that has flowed from that, and critical in developing Japan’s economic might. This includes Australia’s exports in resources and commodities – coal, iron ore, LNG, aluminium and beef. As well as rapidly developing trade in services and new areas of trade including Australian providers of serviced offices, ski field accommodation development and medical equipment., to name a few.
Commensurate with the trading relationship is a strong investment relationship. Total Japanese investment in Australia is worth over $50 billion making Japan the third largest foreign investor. Australian investment in Japan is continuing to grow off a low base as the Japanese economy continues to liberalise. The people to people links arising from the commercial relationship now extend well beyond trade building a higher level of familiarity, trust and understanding.
While the trading relationship is mature and highly sophisticated it cannot be taken for granted. Both our countries must continue to work at the relationship and the new Australian Government is strongly committed to doing so.
Trade and Economic Reform
Australia’s economy continues to perform well. It is now in its seventeenth consecutive year of growth.
The new Government’s priorities are to combat the threat of rising inflation, improve productivity by investing in education and infrastructure and to boost the international competitiveness of Australian industry and exporters.
One area that needs to improve is Australia’s trading performance.
Notwithstanding the global resources boom, Australia’s export growth both in value and volume terms have declined in recent years. As a result, net exports made a positive contribution to economic growth in Australia for only 2 out of the past 11 years.
By comparison, under the previous Labor Government, net exports made a positive contribution to economic growth in 11 out of 13 years.
As Trade Minister I want to begin the process of turning that situation around. I want to make sure that Australia’s trading performance once again makes a positive and sustained contribution to economic growth.
I will soon announce the details of a review of Australia’s trade policy that will be undertaken to assess the reasons for our recent underperformance and how best to address that. However in broad terms, I will outline the new policy direction we will take.
Australia’s trade negotiating priority will be the WTO Doha Round of trade negotiations. The Doha Round offers the largest potential trade and economic gains to the global community, to our region, and to each of our countries. A successful outcome to Doha will also be critical to maintaining the momentum of global trade liberalisation, particularly at a time when the global economy is confronting real challenges.
It will be difficult to progress the Round in the short period of time we have before the political calendars of key countries come into play. However, Australia is strongly committed to the Round and securing the benefits that will arise.
I am looking forward to working closely with my Japanese counterparts in pursuit of this goal. While we may have differences on some aspects of agriculture we have common interests on industrials and services. Japan in particular stands to benefit a great deal from an ambitious outcome on industrials. That will only be achieved if Japan is prepared to be ambitious on agriculture. As Chair of the Cairns Group of agricultural trading nations I am discussing this in detail with the Japanese Government.
At the regional level, Australia and Japan were founding partners of APEC. APEC has served our two countries extremely well. Notwithstanding the development of other regional forums, in Australia’s view, APEC remains the pre-eminent forum in the region. The opportunity it provides for our two countries’ Prime Ministers to meet annually with their counter-parts from the US, China, Indonesia, the Republic of Korea, Russia and other APEC economies is of enormous strategic importance. APEC also provides the opportunity for developed and developing economies in our region to work together constructively in maintaining the momentum of trade liberalisation.
The results cannot be underestimated. APEC has contributed to the economic growth, development and stability of our region.
Australia looks forward to working closely with Japan in the lead up to their hosting of APEC in 2010.
At the bilateral level our two countries are making good progress in the FTA negotiations. A comprehensive FTA will complement what is achieved in the Doha round and the trade liberalisation work secured by APEC. I understand Japan’s sensitivities on agriculture and we will need to work through those. Importantly, an FTA will strengthen the economic, political and strategic nature of our relationship.
But there is more to international trade policy than trade negotiations – as critical and time consuming as that is for opening up new export opportunities for our business sectors. As I mentioned earlier, a key goal I am committed to is ensuring that Australia’s trade policy is an integral part of our broader economic policy – all arms of economic policy working together to drive productivity growth. That is education, skills training, manufacturing, industry, innovation infrastructure and IT policy are all critical in complementing our trade policy to ensure we maximise the gains from trade liberalisation.
On this particular point, Australia is fortunate to be a resource rich country. However, the wealth generated from those resources along with the benefits of economic reform that began in 1983, has created for us an internationally competitive manufacturing sector and a highly competitive services sector.
The Australian Government is committed to maintaining a strong and vibrant manufacturing sector which currently contributes around 20 per cent of our export income – similar to that derived from our services sector.
A Relationship for the 21st Century
The foresight and vision shown by our Leaders of the past through:
- the Commerce Agreement of 1957
- the Basic Treaty on Friendship and Cooperation –the Nara Treaty - of 1976;
- the Joint Declaration on the Australia-Japan Partnership in 1995; and
- the Joint Declaration on Security Cooperation in 2007
have all played important roles in shaping the framework under which the relationship operates today. I am confident our contemporary Leaders have the vision and imagination to build on this framework to project our two countries into the 21st Century.
The strength, trust and integrity of our relationship today ensures we are extremely well placed to continue to work together in tackling the challenges confronting us regionally and globally.
Working together our two countries can:
- Make a major contribution to addressing the urgency posed by climate change. One of the very first acts of the new Australian Government was to ratify the Kyoto Protocol and now that Australia has a seat at the negotiating table we can help shape the post Kyoto Protocol arrangements – including ensuring that there is proper consideration of the significant trade, economic and employment opportunities arising from the response to climate change.
- We can work together in securing a comprehensive and successful outcome to the WTO Doha Round. Despite our differences in some areas of agriculture we do have mutual interests in achieving ambitious outcomes in industrials and services. Such an outcome will be good for our domestic economies but equally as important in providing renewed confidence and impetus to the world economy, particularly in light of yesterday’s steep decline global stock markets.
- We can work together in helping to shape the regional architecture of the Asia Pacific which over the past decade has been the driving force of global economic growth. This could be through our joint efforts in APEC in the lead up to Japan’s hosting of APEC in 2010 or helping to shape the emerging structure of ASEAN plus 6 ( East Asian Summit).
- Importantly, we can work together in helping to ensure energy security to the Asia Pacific region. Australia and Japan have worked cooperatively for many decades on this facet of our bilateral relationship. But it is a huge strategic issue that goes to the economic and political stability of the region and beyond.
These are only a few of the issues which will underpin the Australia Japan relationship for decades to come. Our capacity to address them bilaterally will influence the Asia Pacific’s regional arrangements and in turn help shape the international arrangements that ultimately arise.
The new Australian Government is committed whole heartedly to working with the Japanese Government on these and many of the policy challenges we confront.
I believe that with the right leadership, the political will and the intellectual and institutional capacity of our two nations we are up to the task. We have done it in the past and I am sure that the strength and depth of our relationship will ensure we continue to meet the challenges of the future.
Media contact: Mr Crean's Office (02) 6277 7420 - Departmental (02) 6261 1555