Address to Japan-Australia Business Cooperation Committee


Speech, check against delivery

31 May 2012

Mr Mimura and Mr Kojima, Chair and Vice-Chair of the Japan-Australia Business Cooperation Committee

Sir Rod Eddington, Chair of the Australia-Japan Business Cooperation Committee

Former Minister Kaieda

Vice Minister Ishida

Parliamentary Secretary Kitagami

Diet Members

Ladies and gentlemen

What a great time to be talking about the Australia-Japan trade relationship.

This year we celebrate the 50th anniversary of the creation of these two business cooperation committees.

The Australian Government applauds the achievements of the Australia-Japan Business Cooperation Committee and the Japan-Australia Business Cooperation Committee over the past half century.

Through their vision and hard work, they have helped forge trade, investment and business links between our two countries.

The importance of these links has intensified as advances in information technology and transport, and the modernisation of financial markets, have converged to interconnect countries' economies like never before.

We commonly call this globalisation – and if ever a word were needed to summarise the last 50 years, then this is it.

For Japan and Australia the challenge has been, and will be, how to keep pace with this transformation, and how to meet the challenges of globalisation.

The global financial crisis, like the oil crisis of the 1970s and the Asian financial crisis of the late-1990s, was one such challenge. Resistance to further trade liberalisation — recently, in response to the global financial crisis — is another.

But first, let me talk a little about the long and enduring partnership that Australia and Japan enjoy.

Australia and Japan are at opposite ends of Asia.

So the idea that we would develop such an important and valuable relationship was never a given.

Australia was still in its infancy when our relationship began.

We were still a collection of British colonies when coal was first exported to Japan in 1865, and when shipments of Australian wool first set sail for Japan in 1888.

Indeed, we were still finding our way in the world when the first Australian trade mission came to Japan in the 1930s.

There must have been some consternation when our two countries signed a ground-breaking Commerce Agreement in 1957, so soon after the end of the war.

Here I pay tribute the Menzies Government for its vision of a mutually-beneficial, complementary relationship between our two countries.

This Agreement extended most-favoured nation treatment to Japan.

Though unsurprising to us now, the Agreement was at the time a courageous move.

It was an early recognition that Australia's future prosperity would increasingly depend on the fortunes of the Asian region.

At that time Australia was an exporter of rural commodities, energy and mineral resources, but we lacked capital.

Japan had a large population to feed, but lacked the natural resources to fuel its burgeoning industrial sector.

Moving forward to 1967, and Japan overtook the UK as Australia's largest goods export market.

Our relationship deepened even further in 1976 when our two countries signed the Basic Treaty of Friendship and Cooperation, which enhanced our trading relations and extended formal recognition into social and cultural issues.

In the 10 years following this treaty, our trade increased almost four-fold.

Alongside the impressive growth in trade between our two countries, we also cooperated to improve the global trading system.

In the World Trade Organization and its precursor, the General Agreement on Tariffs and Trade, Japan and Australia worked together to conclude several Rounds that led to increased trade liberalisation in both countries.

We did not always see eye-to-eye in those discussions.

But as major trading nations we both knew a rules-based multilateral trading system — and more trade — would improve prosperity for us all.

In the 1970s and 1980s, Australia and Japan led the informal regional discussions which resulted in the creation of the Asia-Pacific Economic Cooperation forum — APEC — which remains the region's most successful trade grouping in terms of the results it has already delivered.

The reason for this short history lesson is to emphasise the point that the relationships forged over the last 50 years between Japanese and Australian Governments, businesses and people have dramatically improved the prosperity of our citizens.

Australian exports helped Japan's transformation into an industrial superpower.

Australian consumers relished low-cost, high-quality Japanese-made consumer goods.

And Australian industry developed rapidly, fuelled by Japanese investment.

Today Japan is Australia's third-largest source of foreign investment. Its total stock of investment in Australia is over $120 billion.

Australia's mining and automotive industries would today be unrecognisable were it not for Japanese investment and export demand.

Over the years our relationship has diversified.

Services trade between us is now healthy, but with capacity to grow much further.

And even as our role as an energy supplier to other countries grows, Australia remains a committed and stable supplier of energy to Japan.

This will become even more important as Japan grapples with questions about energy policy and strives to revitalise its economy, as we both adapt to the dramatic change in our region.

But as global prosperity, power and influence shifts to our region, we both have to adapt.

Today, around 30 per cent of global output is created within 10,000 kilometres of Australia – a little over the distance from Melbourne to Tokyo.

That share could double by 2050.

The Asian Development Bank estimates that, on current trends, by 2050 three billion more people in Asia will enter the middle class.

Our nations haven't been successful just because of our approach to trade and developing our bilateral relationship, although that's certainly been crucial.

We've also changed our domestic economies to face the challenges of our times.

From Australia's point of view, our economic relationship is what it is today because of the transformation of Australia's economy in the 1980s and 1990s.

In the 1980s, Prime Minister Bob Hawke and Treasurer Paul Keating embarked on a fundamental and visionary program of economic reform.

Hawke and Keating liberated the finance sector, unleashing capital to drive growth and innovation.

They lowered tariffs, allowing our exporters the chance to compete and succeed on the world stage.

These reforms were unilateral; not part of any multilateral trade negotiation.

They were implemented in gradual and predictable steps over time, giving businesses and workers the chance to adjust, supported by structural adjustment programs.

And they were comprehensive in scope.

In the main, no sectors were given special treatment or "exclusions".

In a single generation, Australia's average effective rate of manufacturing protection fell from more than 30 per cent in 1970 to under 5 per cent today.

In most areas, business adapted to the new circumstances and emerged stronger and more prosperous.

Some businesses and farmers moved on to other endeavours.

That is inevitable in any big reform.

Indeed, in taking forward any major reform, governments should not try to pretend there are no costs.

But most businesses and farmers successfully adapt and find new opportunities to explore – often by focussing on higher value-added products and by targeting new markets, mostly overseas.

The benefits for Australia of these reforms have been profound.

The average family is up to $3,900 a year better off.

Our reforms also had far-reaching implications for Australia's place in the world.

They allowed Australia to engage with Asia from a position of confidence and to capitalise on the growth in Asia during the 1980s and 1990s.

As a result, Australia's economy, when faced by the Asian financial crisis in the late 1990s, and then the Global Financial Crisis in the late 2000s, not only stayed afloat but served as an anchor for others.

These reforms set Australia up to play a greater role in the 21st Century, or as it has become known in Australia, the Asian Century.

The demographic and economic transformation underway is creating immense opportunities in our region, as the global centre of economic gravity shifts to Asia.

Australia is in the right place at the right time to be a part of this historic transformation.

The expansion of the middle class in Asia is creating huge demand for mineral and energy resources, sophisticated goods, high-protein food and high-value services – goods and services that Australia is well placed to provide.

To understand these changes better and plan Australia's response, the Gillard Government has commissioned a White Paper on Australia in the Asian Century.

It is examining our international and domestic policy settings to ensure they equip Australia to succeed as our region evolves.

There is much that Australia can learn from our relationship with Japan and Japan's own experiences.

We are both highly educated, mature democracies with global vision, and intense regional engagement.

But both countries also face stresses arising from the rapid growth of Asia.

In Australia, we are sharing the benefits of the mining boom through a special tax on mining profits.

And we need to address below average productivity by reforming business regulation, building essential infrastructure and educating our children for the new jobs of the Asian Century.

Like in Japan, an ageing population in Australia gives special urgency to the task of lifting productivity growth.

We are also pricing carbon to help make our economy cleaner and more efficient.

Japan is also adapting its economy to the challenges of the new Asian dynamic.

Export industries are learning to compete with emerging Asia and the Japanese Government is looking for ways to revitalise the less competitive parts of Japan's domestic economy.

In both countries, we need to identify solutions and have the courage and vision to implement them – as we have done in the evolution of our economies in the past.

And more broadly, Australia and Japan, as major trading nations, need to work together to strengthen the rules-based international trading system.

At this time of renewed global economic uncertainty, these rules are more important than ever against a resurgence of protectionism.

This is where forums like the G20 and the WTO come into their own.

At the G20 Trade Ministers' meeting in Puerto Vallarta last month, business groups from all 20 countries endorsed Australia's plan to proceed with parts of the Doha agenda separately where the issues are close to finalisation, and bring creative approaches to the remaining aspects of the negotiations.

Along with 16 other WTO members, we are trying to find ways to advance services trade liberalisation – a vital area in world trade.

We are also trying to conclude negotiations on trade facilitation and on the accession to the WTO of a number of Least Developed Countries.

In regional trade, a priority is the Trans-Pacific Partnership, or TPP.

In the TPP, we are seeking an ambitious, 21st century-style free trade agreement that address not only tariffs but behind-the-border restrictions as well.

The TPP is one possible pathway to a Free Trade Area in the Asia-Pacific, as envisaged by APEC leaders.

I warmly welcomed Prime Minister Noda's announcement last October that he was interested in the TPP.

It is for Japan to decide whether it wishes to pursue this opportunity.

For Australia's part, we will assess membership applications individually and seek assurances on the level of ambition and pace of the negotiations.

In my discussions with aspirants I have asked them to demonstrate that they can match the high level of ambition outlined by TPP Leaders.

For Japan, our FTA negotiations — or EPA negotiations, as they are known here — will be an important demonstration of its level of ambition.

This FTA could help to increase our trade flows, which are not growing as fast as they are with some of Australia's other large trading partners.

We should not take for granted that our bilateral economic relationship will continue to expand as it has in the past.

This is why the Australian Government is committed to concluding a high-quality and comprehensive FTA with Japan as soon as possible.

The Commerce Agreement and the Basic Treaty of Friendship and Cooperation added real value to the economic relationship between our two countries.

An FTA is the logical extension of our efforts over the past century and to continue to intensify our relationship.

It would provide greater food and energy security, by making Japan a more attractive export destination for Australian producers.

An FTA would be a boon for our services industries, which account for most of our domestic economies yet still make up only a small share of our trade.

By keeping pace with Australia's other FTAs in the region, Japanese and Australian companies will be able to work together in other markets as part of regional production networks.

It would demonstrate to others that Japan is serious about liberalisation and making the reforms necessary to move its economy forward.

It would send a strong message to the world that Japan is determined retain a leadership role in the global economy.

And it would position both countries to succeed together in the Asian Century.

After five years of negotiations we are now at a stage where concluding the FTA will require concerted political effort on both sides.

I can assure you that Australia remains committed to achieving this goal.

Like domestic economic reform, the FTA will deliver important growth for us as our two countries seek to harvest the opportunities of the 21st Century, the Asian Century.

Thank you.

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