It’s a real privilege to be here at the National Press Club as Minister for Trade and Investment.
I last addressed the Press Club when I was Federal Director of the Liberal Party following the 1996 Federal Election. So it’s been a long time between drinks, or ties, or whatever gift you bestow these days.
After that election 20 years ago, I was asked by a newly elected PM what I wanted to do. After 7 years as campaign director, with the scoreline one-all, I responded I was keen to get out of the bubble, start my own business, and have a go. And those 8 years I subsequently spent in business has always stood me in good stead after I decided to re-enter politics and stand for Parliament in 2004. Roll forward to just after the last election and another, newly elected PM, asked me what I wanted to do. I’d spent a lot of time thinking about this over the time spent in Opposition, and particularly through my role chairing the policy development process for the Coalition from 2010 to 2013, where the policy issues ranged right across the work of Government.
And other than Treasury – already ably filled - I thought that the Trade portfolio offered a profound opportunity to contribute to a reshaping of our economy for the better, by being the catalyst for significant microeconomic reform.
Because unlike the era of GATT – which ended in 1994, only 2 years before my last Press Club appearance – now the role of Trade Minister is not being swept along by powerful external currents of multilateral trade deals involving 150+ countries.
The difficulty of landing the TPP with only 12 countries, albeit 40 percent of world GDP, illustrates how hard these multi-party agreements are. By the way, while I think it is still do-able, it has to be the right deal for Australia.
Yet, with no WTO deal in two decades, in the modern era, as a country you’ve got to row your own boat in cutting bilateral trade deals, or risk our economy missing coming waves of growth. Waves can be caught, or if you leave your run too late, you can miss the cut and the next set may be a long time coming.
This all helps explain why we placed such priority on quickly concluding Free Trade Agreements with firstly Korea, then Japan and most recently China; the major markets of North Asia, which had stalled under our predecessors.
For us, our trade agreements are a key plank in our plan to see growth and new jobs beyond the mining boom; a critical part of our microeconomic reform agenda in an environment where reform is not easy.
This trifecta of trade agreements – with the major economies of North Asia – are powerful enablers and are part of this government’s efforts to help diversify our economy.
They are about placing us in the best possible position to take advantage of the opportunities that are coming down the line in the region around us.
Our Free Trade Agreements are now not just for the big end of town.
The internet has of course revolutionised commerce, including trade and investment since 1996.
If you are a small business with a great product or service, e-commerce gives you a direct route into the world’s major markets, including of course China.
Just yesterday I met the Managing Director of Fresh Select, John Said, a supplier of fresh produce to the Australian supermarket trade.
John told me how Fresh Select is working with China Merchants on a new model for sending high quality Australian food and beverages directly from growers and manufacturers to families in China.
Produce will arrive from Australia direct into a massive warehouse in Shenzhen. Customers, by the thousands, will order online and be given an electronic access code.
Their order will be robotically filled and couriered directly to their apartment block, to be put in lockers on the ground floor, for secure access using the code. The locker is then available for another customer.
The system provides an assurance of true Aussie provenance to purity-conscious Chinese consumers, cuts out middlemen who soak up margins, and delivers higher prices at the farm gate
What excited me about this story was that a new Australian business was being created today, in the expectation that the umbrella of the FTA will be open for business tomorrow.
The fruits of these trade agreements are not the result of some government-to-government exchange. They’re about this government saying to our industries, our businesses big and small, our farmers, our service providers and all the people they employ, right across our great country ‘we are on your side’. We back you. We trust you to get out there, follow your own visions and succeed.
This provides quite a stark choice because on the other hand you have the most militant unions running a hugely dishonest campaign to stop the China FTA; to rip away the opportunities it will bring. They don’t believe Australians have what it takes to get out there and win. They want us to retreat into fear, not embrace the opportunities to prosper.
Last night the Electrical Trade Union ran so called robo calls into tens of thousands of households in my 66,000 household electorate. The recorded telephone message maliciously asserted that the FTA that I have negotiated with China permitted unqualified electricians to invade Australia putting the safety of Australians at great risk.
Of course, the ETU know full well that this is a complete and utter lie, yet they continue to peddle this scare mongering to an unsuspecting Australian community. I ask you: Why would I put the safety of my fellow Australians at risk? Nor would I do anything that threatens the jobs of Australians. It explains why the labour provisions associated with the China FTA sits within our existing skilled visa program – not a single legislative change is required.
Would I cut a deal that undermines Australia’s prosperity? The question answers itself.
If ChAFTA is up and running by the end of 2015 a wide range of industries will benefit from a double whammy of tariff cuts, one this year and another in January 2016.
Derailing or stopping this agreement will bring an enormous cost to our economy and it will stop thousands of new jobs from being created. It runs the risk of seeing China walk away from a hugely beneficial deal for Australia.
In recent weeks, industry, alarmed by the virulence of the union campaign and unsure of where the Opposition leader stands on the issue, have declared their support of ChAFTA. They’re revealing what’s at stake, the cost of delay or worse.
- The NFF says delay will cost rural communities alone $300 million in 2016.
- Failure to ratify will cost the red meat industry $100 million, dairy up to $60 million, wine up to $50 million and grains more than $43 million.
- The coal industry says that every week of delay will cost it about $4.6 million per week in extra tariff payments on thermal and coking coal –risking jobs at some mines already right on the edge.
- While the Financial Services Council warns that if ChAFTA is stopped it would cost our economy more than $4 billion and almost 10,000 jobs in financial services alone by 2030.
Perversely, what the anti-trade elements of the union movement ignore, is that our FTAs translate into jobs and opportunities for everyday Australians, such as:
- Kimberley Kampers owner Bruce Loxton in Ballina who has big plans to export his caravans into China as a result of the FTA.
He has already applied to double the size of his premises and hopes to add between 30 to 40 staff.
Under ChAFTA the 10 per cent tariff on caravans will be eliminated.
With the one child policy, Bruce figures there’s a lot of grey nomads in China with time on their hands!
- Macadamia Marketing International’s General Manager Larry McHugh says with the Korean FTA:
“We’ve moved from 100 tonnes last year into that market to 250 tonnes this year and we believe that we can get double growth each year for at least the next five years. So over five years we expect that we’ll be selling over 1,000 tonnes into that market.”
- Fletcher International Exports is one of the largest meat exporters in the country and employs more than 1,200 people Australia-wide.
Director Roger Fletcher says ChAFTA is the best move for the sheep meat industry in 20 years.
In eight years' time when the agreement is in full swing, Roger said he expected to see a return of about $150 million a year.
- Western Australia’s Burch Family Wines say the Free Trade agreement with Korea had an impact from announcement, with a 50 per cent increase in sales on the back of it.
Now they’re gearing up for their move into China. CEO Jeff Burch said:
“The big prize for us is China... “The government has created the opportunities, but it’s now up to the individual businesses to do the hard yards.”
- Blackmores is significantly expanding its presence in North Asia, following the tariff reductions secured under KAFTA and similar commitments under ChAFTA.
Chief Executive Christine Holgate said:
“I can absolutely see the demand for our products from Chinese consumers. I can also see that there’s a big differential in pricing between Australia and China – a very large contributory factor these tariffs; this (ChAFTA) will take that away…We’ve just hired 50 new people in Australia and it’s really all on the back of the growth that we’re having in Asia, across the region.”.
This is just a taste of what the unions are campaigning to stop.
Surely sanity will prevail and Labor will ultimately support this agreement with Australia’s biggest trading partner so the major benefits can begin to flow into communities around our country.
Winning new investment
The other thing that’s changed for Trade Ministers since 1996, is a recognition of the critical complementary role of investment to boosting our trade performance. When it comes to encouraging investment in our economy, Australia has to work harder now than we’ve done at any time so far this century.
Since the GFC – around the developed world – business investment has fallen as slow economic growth and low business confidence takes its toll.
The one exception has been the key resource and energy exporters: Australia, Canada and Norway – all had higher gross investment ratios in 2014 than before the GFC.
But now, the tide is going out.
Australian mining investment in the March quarter was 14 per cent lower than a year ago. Sharp falls in resource and energy export prices has equally affected investment in South America, Indonesia, Russia and South Africa.
Growth in China’s business investment is expected to slow further as the economy rebalances from investment-driven growth towards greater domestic consumption – which in turn will dampen the rate of growth in commodity demand.
So unlike the period of record terms of trade from 2008-2013, we can’t rest on our laurels and expect the allure of Australia’s natural endowments in resources to do all the heavy lifting.
We’ve got to focus on making Australia a more attractive destination for investment, in a way we haven’t had to do for many a year.
That’s why – as Australia’s first Investment Minister – I’ve spent as much time listening to major investors, as I have spent in meetings with my overseas Trade counterparts. I’ve conducted 67 investment roundtables across 27 countries over the last 18 months.
And it’s why I’ve focused the efforts of the Department of Foreign Affairs and Trade, and our trade and investment promotion agency Austrade, on a few simple things to assist the private sector in identifying new business opportunities and making investments to back them:
- We’ve opened new markets or improved our competitiveness for Australian exporters through our three free trade agreements;
- We’ve attracted private sector expertise into Austrade in five investment priority areas of Food & Agribusiness, Resources & Energy, Tourism Infrastructure, Economic Infrastructure and Advanced Manufacturing, Services & Technology.
That’s bringing a sharper focus on talking to business, identifying impediments to investment and working across all levels of our Federation to unblock them.
And this approach is already delivering results.
For the financial year ending June 2015, despite the mining tide going out, Austrade’s investment outcomes in terms of private-sector inwards investment attraction were up 28 per cent, with capex of almost $7.75 billion, with nearly 12,000 construction jobs and over 5,200 operational jobs.
Jobs right across Australia:
- Such as Saab establishing a new Advanced Maritime Systems Centre in South Australia, helping to position Australia as an advanced manufacturing centre in Asia, initially providing 100 jobs, a number that’s expected to double when the centre becomes fully operational.
- Or the entry of Wanda Group into Australia as a direct result of their engagement at last year’s Australia Week in China event, resulting in a major multi-billion-dollar tourism project on the Gold Coast and now the acquisition and redevelopment of Goldfields House in Sydney as a luxury hotel and apartment complex, creating hundreds of jobs for local construction workers and their suppliers.
- Or the investment by India’s Cognizant Technology Solutions to acquire Melbourne web and cloud service provider Odecee, enabling small Australian IT companies access to new global customers.
Services are the future
These days, service sectors are where the jobs exist. Nine out of 10 jobs in Australia are in the services sector.
And there is enormous scope for growth in international markets because, while services account for around 70 per cent of our economy, they represent perhaps only 20 per cent of our total exports.
When I speak of services people think of financial and legal services.
But services cover dozens, if not hundreds of other areas of expertise including: architecture and design, engineering, environmental services, transport and logistics, IT, tourism and hospitality through to healthcare aged care, education and vocational training; the list goes on.
To fully capitalise on the opportunities, especially with services, will require the next revolution in Australian business practice – both large and small; namely a preparedness to establish a physical presence in one or several of the emerging markets within our region.
These free trade agreements, along with the digital age and growing air transport connectivity, provide a cost effective opportunity to expand Australian service businesses from a market of 23 million people, into markets involving ultimately billions of people.
There are also the intangibles which flow from our trade and investment relationships and consequent deepening of trust.
I will give you two powerful examples.
- Firstly, our new Air Services Agreement with China – which will see a tripling of air capacity between our two countries from 22,000 airline seats to 67,000 seats a week over the next two years – was quickly finalised once ChAFTA negotiations concluded.
- Secondly, Japan Post’s $8 billion acquisition of Australian freight and logistics giant Toll, a massive endorsement of Australian skills, services and expertise. Toll will receive a huge capital injection that will enable it to spearhead Japan Post’s global expansion ambitions in logistics, masterminded right here from Toll HQ in Melbourne, in time creating thousands of new jobs in Australia.
Just as intangible benefits flow from FTAs, the atmospherics within a country can also have an influence on negotiations.
We are deep into our negotiations with India for a Comprehensive Economic Cooperation Agreement. Our aim remains to conclude these negotiations by the end of this year. India wants to deepen the relationship because it needs access to secure and reliable sources of minerals, energy and food to fuel its growth, and lift hundreds of millions of Indians out of economic and energy poverty. It also values the contribution that Australia’s high-quality services can make to building its domestic capabilities.
But I must say green groups are not making our job any easier.
In the last week, we’ve seen a decision overturning an approval for a project involving a major Indian investment in Australia. Where the reason was not the substance of environmental outcomes – the reptiles in question were the subject of specific conditions in the approval – but narrow procedural grounds. It was ‘lawfare’ brought by activist groups to whom the skink is simply a patsy. They just wanted to kill the project because they don’t like fossil fuels.
This US$7bn project is expected to generate more than 8,000 jobs during construction, and over 5000 permanent jobs during the 100 year life of the mine.
Here we have the largest Indian investor in Australia – a company that’s invested nearly $3billion in Australia so far, followed our rules in a very patient manner over the past 7 years, and now have prior approvals overturned on a technicality. You think that’s not going to change India’s appetite to get an agreement with Australia this year?
10 years on from AUSFTA
It would be remiss of me today not to acknowledge the tenth anniversary of AUSFTA – our Free Trade Agreement with the U.S. – which the Howard Government concluded with the second Bush administration back in 2005.
I understand we’ve got some of the original Australian negotiators here today – so I’d like to recognise and thank them for their contribution.
This agreement has made a most material contribution to deepening the economic and broader relationship between our two countries.
Over the past decade Australian exports have increased by more than 60 per cent to around $18.3 billion, while U.S exports have more than doubled over this period.
Critics of the agreement point to this imbalance to claim we have been short-changed. This is a most simplistic view.
What is ignored, for instance, is how Australia – during a mining boom – greatly benefited through the import of cheaper, high-quality, U.S- made vehicles, machinery and equipment. Think of all that ‘yellow metal’.
The result was faster growth in our productive capacity, boosting our exports to key Asian customers such as China, where we now enjoy a $44bn trade surplus (with about $100bn in exports), up from a $3.6 trade deficit in 2005 when AUSFTA entered into force.
Just in finishing, as our most recent quarterly growth numbers showing that of our 0.9% growth in the March quarter, 0.5% - more than half – came from net exports– if Australia was not so active in its pursuit of trade liberalisation and in the attraction of foreign capital, we would be a demonstrably poorer nation because of it.
When you consider what is in prospect in our region, there is great cause for optimism about the future.
Without doubt the global centre of economic gravity is moving closer and closer to us; in this sense we are blessed by our geography.
Opportunity will be increasingly driven by the surge from 600 million people in the middle class to more than three billion within 35 years, from India through to China and all the countries in between.
There is a narrow window of opportunity to grab market share among the exploding middle class in the region around us, to lock in prosperity for decades to come; and this explains the urgency we have placed on our task as a government.
I suspect that in 2025 – if I had the privilege to come back here again to mark the 10th anniversary of ChAFTA – we would see that these three free trade agreements, and particularly our agreement with China, will have proven to be an economic policy change as profound and beneficial as the opening up of Australia in the 1980’s starting with the float of the dollar – something that echoes down through the decades. We are as a country at a bit of a cross road on this now. We are all the better for this opening up and embrace of the economic dynamism within Australia – Australians have benefited from a 24 years of uninterrupted economic growth, and my kids and the children of yours in the audience have never had to endure a recession. For the sake of today’s kids, I call for this proud bipartisan tradition to continue.
- Trade Minister's Office: (02) 6277 7420
- DFAT Media Liaison: (02) 6261 1555