Australia's place in the transfer of power and influence from the Atlantic to the Pacific

Address to National University of Colombia

Bogota, Colombia

Speech, check against delivery

17 April 2012

Thank you very much for having me here at the National University of Colombia, as part of your lecture series on Asia and Trans-Pacific relations.

By looking at the change taking place in Asia, this university is going through a similar exercise to one in which we're engaged in Australia.

We, too, are looking at the transformation underway across the Pacific and at how best to position ourselves to be part of the prosperity and wonderfully diverse career opportunities that are being created.

To this end, Australian Prime Minister Julia Gillard has launched what we call a White Paper project on Australia in the Asian Century.

In this exercise, industry groups, academics, labour unions and other interested parties are submitting ideas for government consideration on how to best tap into the phenomenal economic growth and social change taking hold across Asia.

Although the White Paper project is new, Australia's official recognition that its future would be closely tied to Asia is not.

We made a decision early to be a part of the Asian growth story by beginning the process of reforming our economy.

In the period after World War II, one of our former Prime Ministers, Ben Chifley, saw the potential of what was then a billion-strong Asian market to Australia's north.

In the early 1970s, another Prime Minister, Gough Whitlam, saw what might come of China if it were embraced by the international community.

His response was to open diplomatic relations.

And in the 1980s and 1990s, Prime Minister Bob Hawke, and then his successor, Paul Keating, saw the virtue of tying Australia ever closer to Asia.

Prime Minister Hawke called it "enmeshment" with Asia.

He and Mr Keating worked hard to prepare Australia for global competition and the challenges and opportunities that would come with Asia's dynamic growth.

I know, because I was part of that reform, working as an economic and trade adviser to Mr Hawke from 1986.

Our experience is that reform pays handsome dividends.

Through floating the dollar, liberalising financial markets, dismantling trade barriers, privatising inefficient government business enterprises and implementing national competition policy, we created an open, competitive economy that was strong, flexible and able to benefit from the rise of Asia.

There is still much work to be done, and I'll come to that later.

But thanks largely to government economic stimulus and to those reforms, and how they helped us integrate our economy with Asia's, Australia was one of the few developed countries to make it through the recent global financial crisis without recession.

Opening us up to competition from the international economy has been transformational for Australia, and has helped our trade and economic partners in their own transitions.

The result is that right now Australia is playing a large role in China's industrialisation.

Unprecedented demand from China for energy and minerals is driving a resources boom in Australia.

In 2001, Australia exported 38 million tonnes of iron ore to China, bringing in less than US$1 billion in export revenue.

By 2011 that figure had risen to 297 million tonnes – earning US$50 billion in export revenue.

And it's not just minerals: in 2010 China replaced the United States as Australia's largest services export market.

This is a trend we are looking to encourage as the expansion of China's middle class drives demand for everything from education and tourism to legal services and urban design.

Thirty years ago, China's economy was 9 per cent of the size of the United States' economy.

Today the Chinese economy is half as big as America's. On some projections, within four years it will be almost two-thirds the size of the American economy, and still growing.

The result of this growth is that China has lifted 500 million people out of poverty in the last two decades and 200 million people have entered the middle class – the largest shift in wealth in history.

If Australia had kept its "Fortress Australia" mentality of the 1970s – if we'd failed to take advantage of the new markets opening up to our north – we would have been left behind.

If we'd clung to the old protectionist policies, and refused to bring down our tariff walls, we would be living with the cost today.

All Australians would be paying more for the necessities of life.

Protectionism imposes costs that otherwise would not have to be borne by society.

And the economic cost of each protectionist measure is greater than it has ever been.

Trade as a share of global output is now three times what it was in the early 1950s.

A large part of that is because the process of making products has been fragmented across many different countries.

Today, over half of global trade is an input into making other products.

As production increasingly occurs across borders, the cost of protectionism accumulates.

Consumers end up paying more and more jobs end up being lost.

Later this week I will be attending a special G20 Trade Ministers' meeting where we will be looking at these issues.

As the new Asia takes shape to our north, we are continuing to fight for reform – reform in our own economy, and greater economic reform in our region.

India, a country of 1.2 billion people, began opening its markets in the early 1990s.

During the last decade, the Indian economy grew at 7 per cent per annum.

Korea, too, has been liberalising, growing at 5 per cent per annum during the 2000s.

We've long worked with our ASEAN partners to promote economic liberalisation and integration across the region.

That commitment – not just on Australia's part but also held by our ASEAN partners – has helped ASEAN grow at a collective 5 to 6 per cent a year, despite the global recession.

In only six years, the 10 ASEAN countries increased their share of the global economy by 50 per cent.

Indonesia, on Australia's doorstep, could be a US$1 trillion economy by next year, and some are tipping it will be among the global top ten economies by 2030.

And Japan is now looking at the possibility of economic reform, seeking to integrate its economy more fully with that of the rest of Asia.

The global financial crisis has prompted a sharp acceleration in the shift of global economic gravity towards Asia.

Australia sees the 21st Century as the Asian Century.

Of course, Australia is very much aware that South America is an increasingly dynamic part of the world economy with great prospects.

That is why I have spent the last 10 days here in South America and why I am visiting Colombia – which is very much an example of the good things happening in this continent.

But for Australia the transformation happening in Asia is of particular significance.

That phrase 'the Asian Century' captures the transformation happening within the countries of Asia as relative economic weight returns to the region for the first time in more than 200 years.

In Australia, we have great strengths in minerals and energy, agriculture, education, tourism and a vast array of other service industries, as well as in niche high-end manufacturing.

We would be crazy not to want to find opportunities with these strengths in the energetic industrialisation and urbanisation underway in Asia.

The new middle classes that will evolve in Asia over the next 20 years will have a profound impact on the shape of the world in which we live – and offer huge opportunities to countries like Australia and Colombia.

Australia and Colombia are joined by an ocean – the Pacific – and several other common features.

We have large resource bases, and are efficient agricultural producers.

We produce the industrial raw materials and food that the rising middle classes of Asia are demanding as their incomes grow.

Like us, you've been engaged in asking yourselves a fundamental question about the world in which we live today.

Successful nations will be those that can maintain a commitment to reform, to making their economies work as effectively as possible as the economic currents ebb and flow.

Reform creates flexibility, the capability to respond to changing circumstances.

As the centre of world economic activity shifts to Asia, flexibility is what is needed.

We recognise that Australia – like all countries – needs to continue to make productivity gains if we are to remain competitive and sustain our high standard of living as our region develops.

Reform – particularly in education, innovation, infrastructure development and easing the regulatory burden on business – improves productivity.

We cannot afford to stand still. No-one else in our region is standing still.

Colombia is not standing still.

Colombia's own reform program has helped it achieve an average of 4 per cent economic growth over the last decade.

Australia's decision to open a new Australian Consulate-General in Bogota in 2012 is a reflection of Colombia's strong economy.

We are natural partners to champion a global economic system that reflects our shared experience with domestic economic reform.

It is now indisputable that global protectionist sentiment is rising. Australia and Colombia can and should join like-minded nations in arguing strongly against protectionism.

As northern hemisphere countries struggle to recover from the global recession, we should be asking what the new sources of sustainable growth will be.

For debt-ridden nations it cannot be more fiscal stimulus. For those that have undergone multiple rounds of monetary easing, it cannot be further easing.

And, in any event, fiscal and monetary stimulus can never be sustainable sources of growth.

Further trade liberalisation is such a source.

Instead of squabbling over a fixed or declining number of jobs around the world, we could be creating new jobs through specialisation achieved by further trade liberalisation.

Yet much of the world is opting for keeping existing trade barriers in place and, where they can get away with it, some countries are increasing them.

This is a sure-fire formula for economic anaemia.

If there's a better plan for economic recovery than trade liberalisation, then let's hear it.

In truth, countries that want to keep their existing trade barriers in place, and even increase them, are hoping they can get away with it without other countries retaliating.

It's like free-riding; trying to pick up some gains at the expense of others. It's ultimately job destroying – but politically popular, of course.

Australian and Colombia, as like-minded countries with heavily trade-dependent economies, share an interest in clear, robust international trading rules.

In the World Trade Organization we have been natural allies in the fight for global agricultural trade reform through the Cairns Group.

But if we are to continue the momentum of global trade reform and avoid it stalling, we need to start delivering results.

That's why Australia has not given up, and is working closely with many of its friends in this region of the world to bring to fruition the hard work we've already done through the Doha Round negotiations.

Prime Minister Gillard and I have been arguing for new pathways in these negotiations – and for the need to step away from the cross-dealing that has caused the log-jam of the past few years.

That is why Colombia and Australia are working together with 16 other WTO Members to find a way to advance services trade liberalisation – an area of growing importance to world growth and job creation.

We are also looking to move forward in other areas of the Doha agenda that would provide the widest common benefits for WTO Members.

Two such areas are supporting the process of accession to the WTO by Least Developed Countries and an agreement on trade facilitation.

Australia and Colombia both seek an outcome this year on trade facilitation.

The streamlining of customs and handling procedures could provide a massive increase in global income of up to US $67 billion, comprising a major share of the potential benefits of the entire Doha Development Round.

And most of the benefits of this deal would accrue to developing countries.

Given these benefits, and the uncertainty surrounding the global economy, it is simply not good enough to argue that trade facilitation negotiations can't progress because other areas of the Doha agenda aren't moving.

These contrived conditionalities will not help our efforts to reform global trade. They are little more than a convenient excuse to do nothing.

I'll be urging my colleagues in coming Ministerial gatherings in Puerto Vallarta, and in Paris next month, to expedite progress on the trade facilitation discussions.

Australia is in the right place at the right time – in the Asian region, in the Asian Century.

Just as domestic reform and economic integration with Asia are positioning Australia to take advantage of the Asian Century, we can perform a unique role: Australia can be a connecting rod between the growth engines of Latin America and Asia.

Businesses in Latin America seeking to tap into the dynamism of Asia could consider establishing a presence in Australia.

We have a mature, transparent legal system. We have a strong financial system. We have a stable political system.

We are in the right time zone.

We have a good reputation in Asia. And we have long experience in the region.

In my meetings in Chile and Brazil during this mission to South America I have found genuine interest in this idea.

Indeed, it has been suggested to me by some Ministers.

A further extension involves combining the English language-speaking capacity of Australia with its growing capability in Mandarin and other Asian language teaching.

Already, Brazil's leading meat processing and packing company, JBS, is well established in Australia and using that base to expand its presence in Asia.

And Brazil's iron ore giant, Vale, has established its global coal headquarters in Australia.

They are pioneers.

Others, it is hoped, will follow, affirming Australia's place in the transfer of power and influence from the Atlantic to the Pacific.

The only way to get ahead and stay ahead in the Asian Century is by continuing to tackle the difficult task of economic reform, strengthening economic competitiveness on tough markets.

As we do so, we are keenly aware of how important it is that we work with our like-minded global partners, those with whom we share perspectives and interests.

It is this that brings me to Latin America, to Colombia.

And I'm honoured to have been able to share these thoughts with you.

Thank you.

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