Former Minister for Trade
Australian Commonwealth Coat of Arms

10 June 2009

Speech delivered to the PNG Ministerial Forum, Business Breakfast, in Brisbane

The Pacific Region: Realising the Potential

Thanks very much for all being here today, my ministerial colleagues from both sides of the dialogue, and of course the three business councils that have sponsored this breakfast this morning, and not just PNG but Fiji and the Pacific Islands.

We do treat our engagement with the business communities seriously, because in many senses as much as we're here today engaged in the government-to-government dialogue, the other critical dialogue is the government-to-business dialogue.

And of course what we hope we do between ourselves - government-to-government and government-to-business - is to facilitate a much more effective framework in which the business-to-business relationship occurs and drives commerce and drives the entrepreneurial flair and contributes to the economic development within the region.

I also have just come overnight from Bali, where we had a very successful meeting of what's known as the Cairns Group, the group of countries that pursue and have been pushing for some time - formed obviously in Cairns back in the last Labor Government - but to push reform in the WTO, the World Trade Organization.

The significance of the meeting over the last couple of days very important because, not only did we meet and determine to push to try and get the Round concluded, but we were able to have engagement with two of the key players. Two ministers recently installed, one from the United States and one from India. Both of these countries were something of stumbling blocks the last time around, so to be able to engage them firsthand and get the same level of commitment, I think, was terribly significant and hopefully will be a platform for moving the Doha Round forward, which again is important to not just world trade, but in the context of the global financial crisis, important as an impetus in terms of the economic stimulus, because trade is a stimulus.

World trade grows three times faster than world output. That multiplier effect has always increased each time there has been a successful trade round negotiation. And so in the context of the global financial crisis, the urgency of concluding this round is even more important.

The other dimension of course is that by advancing the Round, we strengthen the rules based system. And for the concern that is out there, that if we do not settle there will be in the current climate a reversion to protectionism. Concluding the Doha Round is also crucial because it will introduce a new set of rules that prevent the spread of protectionism. A good example of that is one of the criticisms that we've been making over recent months, dairy export subsidies being resorted to in the EC, the retaliatory action by the US.

All it does is to drive dairy prices down. We get hit in the crossfire.

But at the moment, despite the fact that G20 leaders say don't revert to protectionism, don't introduce any new protectionist measures, both of these trading blocs have because they can.

Under the WTO rules at the moment, what they're doing is legal. The difference is under the WTO rules if we conclude Doha it won't be legal and it is an important demonstration effect as to why we need to conclude because it does offer much better insurance against that spread of protectionism.

We meet today and it is a huge gathering and I'm delighted that what we thought was the biggest dialogue between the two countries ever last year in Madang, has now been exceeded here. I think on the PNG side we have something like 20 ministers, on our side, ministers and parliamentary secretaries, something in the order of 13.

This is the largest ministerial forum gathering ever in this country, and I think it is a recognition by both of our countries of the importance of that relationship. And I'm delighted that we've been able, in such a short space of time being back in government, to really demonstrate the political commitment that we have to not just reconnecting, but re-energising this vital relationship between our two countries.

This is the nineteenth forum since 1988, but as I say, it's the largest gathering of ministers for a bilateral forum ever in Australia.

We have a very busy agenda over the coming day of engagement. I look forward particularly to my discussion with Sam Abal as to how we can advance the trade interests, but there are many areas of common and cooperative opportunity that we will be discussing over the course of the next day.

It’s also great that one of the suggestions when we met with the Business Council on the last occasion in Madang, the tradition had been to bring the Business Council in at the end of the meeting. I think a suggestion that Bob McMullan made at the time made a lot of sense to us, and that was that ‘what's the point of doing that because they're reporting their deliberations and circumstances in which we've already taken ours’.

So on this occasion the engagement with the PNG Business Council, the Australia PNG Business Council, is going to take place during the meeting and I think that is not just important for the optics, it's important in fact. It enables the opportunity to input, to engage and to do it in a more strategic part of the meeting.

I think it's fair to say that the Australian Government has an ambitious agenda for trade and complementary economic engagement with PNG, as well as the wider Pacific region. And we want to ensure that business is actively involved in that engagement.

I was not able to come to the meeting that was held at the Australia PNG Business Council in Madang last month, but my colleague Anthony Byrne, the Parliamentary Secretary for Trade, did attend and I understand that there was some very positive outcomes from the forum.

The forum itself endorsed the earliest possible commencement of the PACER negotiations, and I firmly believe that this is an important initiative for the economic sustainability of the region, and I do welcome the business forum's formal support for that.

I was also pleased to see that the forum made a particular note of the employment and business opportunities presented by the PNG LNG project, and we look forward to having further discussions on that because Sam and I and our Prime Minister and myself had some very good discussions recently in Canberra when Prime Minister Somare was down in Australia for important bilateral discussions.

I want to turn to both of those issues and just make a few observations as to the basis for moving forward. Many will be aware of the plans for renewed trade and economic integration through the Pacific Agreement on Closer Economic Relations, PACER Plus. Pursuing greater economic integration and bolstering growth is the central plank of the Government's Pacific engagement strategy.

I've said on many occasions that I'm a strong personal supporter of PACER. I think it is in the long-term interests of the region. But it is going to take some effort to get the broader acceptance going forward. I think we're making some important headway in that regard.

It stems - why is it important? It goes back to those points I made in my opening remarks. Trade is the economic dynamic for any economy. If trade grows three times faster than output, it's fundamental to any country - it doesn't matter what stage of development it's in - that it engages in trade.

The question though is how do you enable that engagement with trade? It isn't enough just to open the markets. That's what trade liberalisation is all about. It's what the WTO is about. It's what all of these free trade agreements are about.

But think about it. SPARTECA itself was not enough to get the real engagement. Simply opening markets is not enough, unless the countries themselves have the capacity to compete into those markets.

And that's why we're not just talking about in PACER Plus a trade agreement. We want to put substance into the Plus, and the substance in the Plus is the capacity building. We've got to enable countries within the region to be competitive enough and productive enough to take advantage of the market openings.

Quite frankly, Australia doesn't need PACER for its economic development. We have opportunities all round the world, and it's why we are pursuing these agreements. So we're not driven, as some would argue, that we are – Australia, New Zealand - for some sort of takeover of the region. That's not the purpose. It's to try and create the environment in which we secure the economic sustainability of the region. That's what's in our interests.

It's in our interests to have an economically sustainable grouping of countries within the region. Otherwise, if we end up with the failed states, we'll be paying for it in a much bigger way.

The smart way forward is to build the capacity in the region to be able to develop its own economic sustainability. That's why I believe PACER Plus is so important.

What we're trying to get in terms of this development is a commitment to commence the negotiations. That's what the leaders in Niue said they wanted last August.

What's required in Cairns this August when we host the Pacific Leaders Meeting is a discharge of that mandate. If the leaders said last August we want the roadmap to commence negotiations this year, quite frankly, it's up to us as trade ministers to give them that roadmap.

Now I've heard all sorts of excuses in terms of it. We need consultations. Of course you need consultations. And you need consultations, amongst other things, with the business groups that are represented here, whether it's PNG, whether it's the Fiji Business Council, the Pacific Islands Business Council, of course you need consultations. But what are we going to consult about unless we've commenced the negotiations.

And the other thing is this argument that says there'll be revenue losses in the region because we'll lose the tariff revenue base, that's true. But we've already demonstrated within the region that there are alternative mechanisms for addressing the revenue loss. And, in any event, that revenue loss is going to occur in most countries anyway because they're seeking, or have got, accession to the WTO.

So whilst we understand this is an issue, it's an issue that's not going to go away even if we don't proceed with PACER. And it's also an issue that can be addressed by creative alternatives, depending upon the circumstances within the country.

That's why we've provided financial assistance to each of the countries within the region to understand - to undertake a study, to do a stock take as to what the consequences of PACER is going to be for them. And we've been urging countries to take up that offer and to undertake the study. I hope that that will inform a lot better.

And the final point that I would make in relation to PACER is that what we are seeking is the commitment to commence the negotiations, not to conclude it. A decision to conclude the negotiations will be a function of how successful those negotiations go. If people are not satisfied, we can't force them to sign up. So what we're trying to do - and we appreciate the strength of support that PNG has given us in a commitment to commence these negotiations.

It is going to be a difficult task forward but there are going to be issues that all countries can benefit from. And there are going to be issues that each country specifically is going to have to deal with, issues specific to those countries. That can all be dealt with in the context of this framework of greater economic engagement.

But issues that are common - for example - quarantine standards, the ability to grow and get into our markets, sending up quarantine inspectors to train people as to the basis upon which they can actually get product into our markets, doing something creative with their service rights because that's the lifeblood of many economies. The tourism dimension and the connectivity within the region. The development of a real labour market mobility program within the region, not just people coming to Australia to pick fruit or similar things when the opportunity arises and repatriate the money.

Of course we can accommodate that scheme, but when you look at the PNG gas pipeline, when that gets under way it's going to require seven and a half thousand people simply to construct the pipeline. Where are they going to get them from?

The argument that we've been trying to put is let's look creatively at the economic development within the region that is going to be a demander of labour and look at a creative mechanism, not only in which we train the labour - and that's where the capacity building argument can come in. And we can do it creatively for the economic needs of the region in a way that's ongoing. Train it for the pipeline but then understand the importance that you've developed in terms of the skill base. It's a skill base in the development of infrastructure.

And if you look at whether it's aid money or the economic development money within the region, there's going to be huge demand for infrastructure of different sorts. What we have to do, I think, is to develop also entrepreneurship courses, the development of people undertaking subcontracting, linking them to the banks in terms of micro-finance operations.

These are all huge opportunities in terms of capacity building and the economic development in the region, which we can drive if we're actually doing it together. They're the common sorts of interests, for example. Rules of origin, getting some better and common understanding as to what that means in the region. These are the sorts of things we can negotiate under the heading for all countries in PACER Plus.

And then you've got the stream of individual country scheduled specific items that we can develop now.

The other issue, of course, in all of this is complex. It's terribly detailed and in parts negotiation. We understand we've got to make provision to enable countries to participate actively and effectively in those negotiations. Again, we are prepared to commit resources to enable them to do it.

But my point is we should really take on the doomsayers or the name… naysayers, in terms of this. This is a real opportunity for the region. We as a government are committed to try and advance it but we can't do it on our own. And unless there is support for this and, crucially, the business community has to understand the opportunities that present themselves here and identify their program of opportunity, the sort of issues that they think are important going forward and work with us to try and overcome these concerns.

Bob and I have visited the region in April, basically to deal directly with people's concerns about this - Samoa, Tonga, Solomon Islands and Vanuatu.

We didn't just meet with government. We also met with the NGOs and we met with the business community.

So we're prepared to engage. We're prepared to deal with the issues and the concerns but we still see some hesitancy because either people don't know what's in it, how it's going to impact.

This is the opportunity to be somewhat bold, understand that there is a huge opportunity here and try and forge a security going forward to give effect to that opportunity.

I've mentioned before the LNG pipeline. I am delighted in terms of the PNG circumstances that progress, significant progress, Sam, seems to be being made in this regard. We know that there are a lot of issues. We are particularly pleased with the tax arrangements that have been entered into.

But I think it is really important that we get to a circumstance in which this does progress in an effective way, in a lasting way. This is going to be huge potential for the PNG economy and we do have to guard against what gets referred to from time to time as the resource curse.

We have to get the capacity building arguments right, the skill formation right. We have to ensure that the revenue streams are allocated in a way that provides for lasting and sustainable input into the PNG economy and we look forward to a closer engagement because I know in the discussions that our two prime ministers had in Canberra a couple of months ago we see a real opportunity to work with you in a constructive way and work with the business communities, in a way that draws the complementarities, draws on the strengths that ensures that what you get is the most efficient and lasting benefit from this development, which my firm belief is not just a huge potential for the PNG economy, but a very good signal in terms of the rest of the region.

So, in concluding, I just want to say how pleased I am to be with you today. It was a meeting that was scheduled some time ago. It got complicated because of this meeting in Bali, but I am pleased that I've been able to make it. I look forward, along with my colleagues, to closer engagement, better engagement, deeper engagement with the business community. But to just reassure you that in terms of this relationship, we're committed to it in terms of government-to-government. I'm sure, and we all feel, that the PNG government is equally committed to it. It is a new resolve. The size of the meeting is one manifestation of that, but I think that from what we've tried to say in terms of the trade front we also have taken a strategic approach.

We have put a lot of work in. We are prepared to do it. I think it is going to be beneficial in terms of the commercial relationships between our countries. We want to provide the framework, the facilitation for that.

You need to be engaging with us to understand what the agenda going forward is, what the framework is, where you see some of the roadblocks, the engagement in these ongoing dialogues is a basis for you to have that input.

I thank you for the opportunity to be with you today.

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