Thanks very much Michael and my friend and colleague Julie Bishop, distinguished guests one and all.
Julie I think has very eloquently described what we mean by economic diplomacy.
I think it could be said that all governments would argue that they engage in economic diplomacy.
And it is true they do.
Australia for instance has always been a proud trading nation.
And broadly there has been bi-partisan support for this.
Since the First Fleet we have also been reliant on foreign investment and you could argue even more so today.
Notwithstanding, we came to office with a clear view that a lot more could be done to optimise our economic engagement with the world.
Julie said that our objective with economic diplomacy is to deliver peace and prosperity.
I think his could be further emphasised by our belief that economic diplomacy will deliver peace through prosperity.
And that is a critical context in which I think you need to measure this move to economic diplomacy.
And it is even all the more important and apparent in the new world of global supply chains.
Things have changed over the last 15 to 20 years. In the early 1990s just over 20 per cent of all exports around the world ended up as inputs into other products that were ultimately exports or consumer items in their own right. Today, that figure is around 70 per cent. So the figure has grown from over 20 per cent to 70 per cent.
In many ways we have always had a focus on exports – a preoccupation with exports – but what it now means is that imports are as important as exports.
We now need to consider what is happening with imports as much as we do with exports and what is happening with other countries.
It has driven if you like our almost obsession with getting these free trade agreements concluded because many of what other countries export to us – those inputs – will go into things we export elsewhere.
Recently, as I was preparing to go to Germany, I noticed there was a trade surplus of $9 billion. There was $11 billion in exports from Germany to Australia and $2 billion in exports from Australia to Germany last year.
When I arrived in Germany and spoke to the Ambassador and said there was a $9 billion dollar trade deficit he said not to be confused by the raw data. He told me that when you take into account global supply chains, the movement of products sometimes five or six times across borders, before they end up in a final product, the real situation is that Australia has a $350 million dollar trade surplus when you make all those allowances.
It just shows that it is a far more interconnected and far more globalised world that we are dealing with and many of the 40,000 SMEs that are exporting from Australia are also importing goods and services so that they can deliver those exports.
This economic diplomacy is recognition in many ways of that quite dramatic change in the world trading system over the last 20 years and this refocus seems even more timely I think.
In many countries I have visited there is a clear disillusionment with the interventionist approaches to public policy in the aftermath of the GFC – the debt fuelled spending, and firestorm of regulation that has swept the developed world.
Like Australia, countries are pursuing alternative approaches so that they can achieve sustainable growth high enough to see unemployment come down.
And so, many are looking to live within their means, and replace big government with robust growth of the private sector.
Along with other productivity related policies there is a renewed emphasis on trade and investment, so the competition to conclude trade agreements and for new sources of foreign capital is fierce.
The success we ultimately achieve through our economic engagement depends on the extent and quality of that engagement.
All relationships, in particular diplomatic and economic relations, are built on trust and respect; building and maintaining trust and respect are central to our efforts.
Most importantly, the success of our economic diplomacy program depends on the practical things we actually do, to give life to what otherwise is just a concept.
In my areas of engagement the practical is of particular relevance.
We are making a concerted effort to take our levels of engagement to an entirely new level.
It explains our aggressive and ambitious trade and investment agenda.
In this regard effective economic diplomacy for Australia, translates into economic growth, job creation and new sources of investment to further build on the quality of life and standards of living we enjoy as Australians.
It is also critical to our efforts to help further diversify the Australian economy, to reduce reliance on any one sector, regardless of how strong.
As a government we have made a priority of backing our country's strengths, those things we do as well as any and better than most.
Our stand-out sectors are resources and energy, agriculture and agribusiness, international education, health and medical research and tourism and hospitality – and all the services, logistics and high end manufacturing which cluster around these sectors.
It is no surprise that these are the areas we are particularly looking to leverage and grow through our economic diplomacy efforts.
Already, our approach, which is unapologetically bullish, is delivering good results.
Let me give you one current example.
Just last week, China’s Wanda Group announced it will invest $900 million in the development of a luxury five-star resort on the Gold Coast.
It is hopefully the first of many similar investments the company will make at the quality end of our tourism sector.
And there is a back story to this.
Wanda’s heightened interest in the Australian market directly stemmed from a tourism infrastructure forum that I chaired as part of our overwhelmingly successful Australia Week in China (AWIC) business mission back in April.
At 700-strong, this was Australia’s biggest ever business mission to China, immediately resulting in commercial deals worth close to $1 billion and sending a very positive message to our biggest trading partner of the value we place as a government in the relationship.
This was a very high-profile display of economic diplomacy in action.
On the trade front, we placed priority on quickly concluding bilateral trade agreements with the major economies of North Asia.
In some quarters we were criticised for setting a target of concluding agreements with Korea, Japan and China within 12 months; three countries which make up more than 50 per cent of our exports.
But a new approach was essential, given our predecessors were unable to conclude any of the three deals in six years.
Rather than undermine the negotiations, by setting an effective deadline, it demonstrated to our trading partners that there was a new political will, a window of opportunity to finally conclude these long-running negotiations.
We prioritised these negotiations, dedicated all available resources to them and concluded very strong agreements with both Korea and Japan. And importantly, our Prime Minister, Tony Abbott threw his weight behind the strategy.
The negotiations with China continue apace, they are tough negotiators, but a conclusion this year remains a realistic objective.
This trifecta of agreements, if completed, will add billions-of-dollars to our GDP and create tens-of-thousands of jobs for Australians over the coming years.
In regard to China we are pushing hard for a deal that affords strong market access within China for Australian services, which are particularly strong across a wide range of areas.
For me, a visit to Hong Kong early last year was most revealing.
It demonstrated the enormous role Australian services can play in the emerging economies of Asia.
During a week of meetings no fewer than 32 services were raised with me, some multiple times, that are in demand in China, and which Australian providers are capable of delivering at the highest standards.
The list included banking and financial services, all the trades, architecture and design, engineering, legal services, environmental services, logistics, project management, IT, event management, tourism and hospitality through to healthcare, including aged care, secondary and higher education, vocational training; and the list goes on.
In several of these, for example, education, tourism, banking and project management, we are already making a mark.
So a successful outcome on services in an FTA will of course benefit Australian services providers, but it will also assist China’s continued economic transformation.
Over recent decades China has performed nothing short of a humanitarian miracle in moving 500 million people out of poverty.
It is committed to the task of moving hundreds-of-millions more out of poverty requiring continued economic adjustment.
This includes a transition away from export led growth to consumption led growth.
China fully understands that continued growth in services is fundamental to meeting the demands of its burgeoning middle class.
To put its growing demand into perspective, in 2003 the Chinese services sector was 40 per cent larger than the whole Australian economy, by 2013 it was 230 per cent larger, despite our own uninterrupted economic growth.
Services is also a sector than can provide vast numbers of future jobs within China.
So, Australia can play a significant role in not only delivering resources and energy, and premium agricultural products but also both providing services and building China’s capacity to deliver them given our strength and reputation in these areas.
Achieving this type of mutual benefit would again be economic diplomacy at work.
And while I am the Minister for Trade and for Tourism, I am also our first Federal Minister for Investment, again a very deliberate decision.
DFAT is now the Department for Foreign Affairs Trade and Investment.
And Austrade is an increasingly crucial part of our strategy to attract foreign investment and to drive business growth, through its broad footprint of 82 offices.
In regard to investment we worked quickly with the states and territories to identify five National Investment Priorities which reflect the national sectoral strengths I mentioned earlier.
These priorities include:
- Food and agribusiness.
- Resources and energy.
- Economic infrastructure.
- Tourism, education and health, and
- Advanced services, manufacturing and technologies.
We are also in the process of appointing five Senior Investment Specialists within Austrade who have extensive corporate experience across these priority areas.
They will work with the states and territories and the private sector to help identify and realise significant opportunities in Australia for inbound investment.
I have also appointed our first Trade and Investment Policy Advisory Council (TIPAC), which includes 20 individuals, highly-respected in their fields, to offer the government insight and expertise again across our areas of strength.
As mentioned, and as you would expect, I am required to travel extensively abroad in my job, including for regular trade-related negotiations and meetings.
Without exception, I always use these visits to promote Australia’s strengths and investment opportunities to significant international investors.
To date, I have chaired 37 high-level investment roundtables in 14 different countries in Asia, Europe and North America, involving investors and fund managers representing trillions-of-dollars.
These roundtables are producing significant new leads and also investment commitments, like the Wanda decision following AWIC. They also help instill new levels of confidence in, and enthusiasm for, Australia as an investment destination.
For example, an investment forum on the sidelines of the recent G20 Trade Ministers’ meeting for example major Chinese developer Greenland revealed plans for up to $4 billion of additional investment in Australia in tourism, infrastructure and agriculture on top of its $1.5 billion of existing investment.
It has heightened interest in Australia again linked to what is viewed as an improving, pro-investment environment. The notion of Australia being ‘open for business’ has taken hold.
I cannot begin to tell you how well some of the domestic policy decisions we have taken as a government are resonating abroad.
Scrapping the carbon tax for example and our asset recycling initiative have resonated very strongly among the international investment community.
As have our decisions to aggressively attack red and green tape along with streamlining and accelerating approval processes for major projects.
In my area of responsibility, the Export Finance and Insurance Corporation (EFIC) is also providing important credit access for our exporters, including small and medium businesses, helping to open doors to all important Global Value Chains.
We took the decision to inject $200 million of capital into EFIC to restore the integrity of its balance sheet after our predecessors stripped funds out as a so-called dividend.
This increases EFIC’s scope to assist our SMEs where there are gaps in the finance market.
As a government, support we are looking to provide through our programs, are aimed squarely at helping business to grow the pie.
We have taken some difficult decisions in moving away from what can be described as corporate welfare in areas such as QANTAS, auto-manufacturing and SPC.
We are endeavouring to restore a culture of personal responsibility, whether it be for individuals or corporates.
As Julie mentioned, we have also moved tourism into the domain of DFAT which is totally compatible with the priority we have placed on international tourism, including capturing a growing share of the exploding markets of Asia.
Tourism Australia leads our marketing efforts to attract increasing numbers of international visitors and is active in 18 international markets.
To get the most from our economic diplomacy it is vital that the respective capabilities of our departments and agencies are both recognised and utilised both at the political level and within the departments and agencies themselves.
A key message is that we simply cannot operate in silos.
To succeed more broadly we need to build a greater commercial awareness across not only the areas that Julie and I have responsibility for but across government as a whole.
In our own space, we should look to do more to leverage the intelligence we gather through our 95 different posts and broad associated networks.
We have a deep need to make greater use of our insightful geo-political intelligence to understand the impact, on trade, foreign investment and our reputation as an investment destination.
The intelligence that flows through DFAT and our agencies from across the globe 24/7 is simply immense.
Of course, what sophisticated analysis we do as a government would require all the necessary security safeguards given the sensitivity of the information and data.
Improved capability in this area is something I think we must aim to address.
As I mentioned earlier, building trust and respect in our international relations is an absolute priority of mine.
In finishing I would like to leave you with one further, practical example of this.
China Merchants Group is one of China’s major enterprises, it is a State Owned Enterprise.
It has recently committed to investing $1.75 billion jointly with Hastings group in a 98-year lease of the Port of Newcastle, which represents so far China Merchants largest investment in Australia.
Preceding this I met with the company several times, including its chairman Liming Yu, in both Australia and China.
At the chairman’s invitation I also spent a half Saturday visiting its extraordinary port operation in Shenzhen, a port which exceeds the combined capacity of Australian port operations.
I also visited the Shekou Industrial Zone which is a stunning example of 21st century urban planning.
Following the visit Chairman Yu wrote to me sharing the good news of China Merchants decision regarding the Port of Newcastle investment.
He said and I quote:
“One of the key factors that give us confidence in making such a significant investment in Australia is the proactive approach your ministry has taken in attracting foreign investments and your commitment of providing an open, fair and level playing field for all the investors to invest in Australia.
“I strongly believe that with such an open, transparent and pragmatic approach to investment and business under your ministry, there will be more and larger investments occur in Australia.”
This endorsement highlights the value of a genuine and sustained level of personal engagement to build trust and respect. There is no substitute for face time.
This is true of my approach to engagement whether it be in other parts of Asia, Spain, Germany, Zurich or Houston, it doesn’t matter.
I have been inspired by the response of our posts around the world in embracing the economic diplomacy approach to deliver a truly team Australia outcome.
Thank you for both your time today and your interest in what we are doing.
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