Transcript
1 June 2009
Press Conference
Subjects: trade liberalisation report; safety of Indian students.
SIMON CREAN: Against the backdrop of the global financial crisis and the concern about the reversion to protectionism, we're today releasing a report that was commissioned by my department from the Centre of International Economics on the benefits of trade liberalisation.
This is a significant and timely report and it's the first time that what it does as a report is to aggregate different models that seek to look at the econometric impact of, in this case, trade.
The significant message out of this is that there have been enormous benefits to the Australian economy and to the workforce and to living standards as a result of trade liberalisation over the past 20 years. There was a similar study done in 1997 to show the benefits over the 10 years. So this is an important extension but, coming as it does in the context of the global financial crisis, it is not just timely, I think the contents of it are very significant indeed.
What the report shows is that the effect of trade liberalisation over the past 20 years has seen an increase in GDP of between 2.5 and 3.5 per cent higher than if there were no trade liberalisation and that that's added between $2700 and $3900 per annum to the average Australian family, that Australia's share of world trade has almost doubled over this period of time and that there are now one in five jobs that are related to trade, one in seven jobs export related, one in 10 jobs import related. And I think it is important to underscore the fact that trade isn't just about exports.
It's also interesting that what the CIE study does is to point to a more dynamic manufacturing sector as a result of trade liberalisation. Between 1998 and 2008 manufacturing export volumes increased by more than a factor of four, four times. Manufacturing has become more export-oriented and average real wages have increased by six per cent in the manufacturing sector over the period.
So this report shows that trade is good, that trade is a multiplier of economic activity, that trade results in increased living standards and increased job opportunities. And it's very important, as we hear from time to time calls for reversion to protectionism, that these calls be countered. And I hope that this information going into the public domain is an important contribution to putting substance and fact into this very important debate.
QUESTION: Isn't it true that the only significant organisation which is calling for a return, if you like, to protectionism is coming from - the voices are coming from the union movement?
SIMON CREAN: Well, I think that that's not the case. I think that - and I'm not too sure what precisely they will determine at the end of their week's deliberations. But I think we do have to understand that the call for the return to protectionism is happening all around us, and the problem for us is it becomes harder to reject that argument if people point to the fact that others are doing it.
Now, there have been lots of international studies that have not just highlighted the disastrous consequences in the last - in the Great Depression of reverting to protectionism and the need to avoid it now. We've been successful in getting into the G20 debate, the importance of concluding Doha but avoiding return to protectionism. We have protested strongly and vigorously against every aspect of trade-distorting measure that's introduced whether it's by the EC, the US or other countries. This report puts it in the Australian context, but much more graphically because what it says is that protecting jobs through protectionism is actually counterproductive; this is the folly of protectionism.
And so for those who think that there is some quick fix, that we shouldn't be embarking on more trade liberalisation agendas, that this somehow is going to help job activity, it won't. It will reduce it. And if people are concerned about creating job opportunities, then they need to look properly at the facts.
QUESTION: But to what extent is Australia fighting a losing battle on this, because, you know, even though you've got countries like the US to sign up to these G20 statements, you've still got things like dairy subsidies coming through from the EU and the US regardless of the fact that these countries have signed up. I mean, is the message being lost in practice?
SIMON CREAN: No, the message is not lost, and I think that we are making impact. Obviously we made it on the Buy America campaign, and because clearly there was the recognition that what had to have - they had to have regard to was their international trade obligations.
In the case of dairy subsidies, those international trade obligations don't exist at the moment, but they would if Doha was concluded.
So we really, I think, have been very successful not only in getting the message up that protectionism is bad and getting the G20 to send strong signals not to revert to protectionism, there's also, if you like, the dynamic effect: how do you stop the spread of protectionism? You conclude Doha because that introduces a new level of protect... of anti-protectionism. Why? Because under Doha export subsidies in dairy are outlawed.
QUESTION: Mr Crean, do you think your message on protectionism is understood by elements in the back bench?
SIMON CREAN: I do. I think that within the party, I do not detect a strong trend anywhere from colleagues that argue that the solution to the global financial crisis or to job activity in this country is to revert to protectionism. I think that debate has been won.
What I think we've got to do though is to get out to the broader community not just that it's a bad thing, we've got to say why it's bad. And we've got to say that for all of the arguments surrounding this issue, this report highlights the significant benefits that come from trade liberalisation.
And in any event, you've got to ask yourself the question in terms of Australia's position, apart from autos and textiles, the level of tariff, if you like, is minimal in this country. Our task is to ensure we get other countries to reflect that lower tariff level. The only way you can do that is to drive harder bargains through the trade agreements that lower their levels.
QUESTION: Would a return to protectionism and some of the union calls to abandon some of the trade deals we have, would that hurt Australia's standing when it's trying to push for either Doha and trade deals internationally?
SIMON CREAN: It will hurt our standing but it will [also] hurt Australian jobs. It will hurt our standing because we can't go with the strength of commitment that we have been making that trade liberalisation is good, we can't say do as we say if we're not prepared to do it ourselves, if we're prepared to turn the clock back.
Now, I was involved in this exercise in the '80s of why it was important to open up the economy. It is true that a number of sectors, specific sectors, were impacted, and that's why we had to have labour adjustment packages to help the transition into the new jobs.
But this report is very significant if you look at the manufacturing sector. I see people from time to time talking about the decline of the manufacturing sector. The truth is if you take the dynamic impact in this modelling into account, there's been an increase in manufacturing exports and an increase in jobs in the manufacturing sector, but they're higher paid.
And you only have to look at the graph that's in the report that plots the reduction in protectionism with the increase in manufacturing exports. It is so dramatically apparent that it is very important that we reinforce the positive dimensions of this message and not simply revert to the view that the way you protect jobs is somehow to go back to some form of protectionism.
QUESTION: So do you think that the benefits of trade liberalisation in the next 20 years are going to be more substantial than what we've seen in the past...
SIMON CREAN: I do, and the reason I say that is that people from time to time say that you look at the Free Trade Agreements we've got, the three Free Trade Agreements in Singapore and Thailand are used particularly, that they've done better out of it than us.
I think we need to understand that to secure the commitment to liberalisation in the ASEAN countries, which we've just done in the ASEAN Free Trade Agreement, huge market, 600 million people, collectively our second largest trading partner against the European Union.
But to secure the agreement, we have to recognise the different stages of economic development in this country, we can't implement a perfect zero to zero tariff reduction, you'd never get the negotiations up.
So the trade liberalisation that is going to happen in those countries, and it will come down to zero, it's just that it will take longer to get to zero, but that's what we've got to bargain for, that's where we have to be much more aggressive, in terms of the negotiating position, going forward in these circumstances, but also be realistic about what we can actually expect from those countries.
But even if it takes time, it's more important to start now, because if you look at the FTA with Thailand, the big - another big set of reductions is going to come in, in 2010. But when it was signed in 2005, we had to effectively give zero on entry in a number of areas, we got zero on entry in a number of their areas, but with a phased reduction going forward, that's the nature of these negotiations, that's why there's no point waiting.
It may be that we don't get as much as we want now, but provided we can secure the reduction going forward, ultimately this will be of increasingly significant, greater benefit to the Australian economy.
We have to trade, we're a nation of 22 million people, you can't just produce for yourself, you have to engage with the rest of the world, and engaging with the rest of the world, involves two fundamental points. Getting access to their markets, and being a competitive and productive economy, it's the twin pillars approach, and I believe we can continue to drive that competitiveness, and productivity drive, because as a Government, we are investing much more heavily now in infrastructure, in innovation, and in skills.
These are the drivers of economic growth, a country that invests more in its infrastructure, lifts its GDP, a country that invests more in its skills, lifts its GDP, and a country that invests more in its innovation, lifts its GDP. That's why I am confident we will secure those higher growth rates, because as a government we're making those investments in our future.
QUESTION: In those bilateral trade negotiations, what more does Australia really have to offer? You've already made the point tariff rates are pretty low in Australia, what can you bring to the bargaining table?
SIMON CREAN: Well see, I think it depends really on the circumstances of the country and that's where I think bilateral arrangements do matter. I think we've got to understand our comparative advantage and why that matters to other countries and why they need to get access.
Now I think increasingly this is going to evolve in the services sector. I think that if you look at countries in the region, they are resource-rich, but are not as good at accessing or developing those resources. That's the services dimension of our resource economy. The same is true with agriculture, whether it's dry land farming, or water management, or productivity, in terms of agricultural production, this is the services dimension, not just the commodity dimension, of agriculture.
And what are we finding in terms of the region, it's not just a Free Trade Agreement that those countries want, they want capacity-building as well. That's [why], when we announced . . . the intention to proceed with the Indonesian Free Trade Agreement, when Marie Pangestu was here at the beginning of the year, it wasn't just a Free Trade Agreement. They need access and support, in terms of developing their dairy industry, for example.
Now I think in the resources and agriculture sector, the huge comparative advantage of this nation, it's the smarts of extracting and developing, not just exporting the commodity, that gives us negotiating coin.
QUESTION: Minister, if the world comes to an agreement in Copenhagen, particularly if the developed world puts a price on carbon, and emissions trading becomes more widespread, do you think that there will be a push for a carbon tariff against those countries that don't have the system?
SIMON CREAN: I hope not, and this is the debate that's going on in the United States at the moment, because potentially its solution to this proposes that, if they don't get the global solution. I think the big problem with the border initiatives, is that it can become the new form of protectionism.
QUESTION: Is it part of their solution?
SIMON CREAN: No, their solution is to say, we want a global outcome. It's saying if we don't get it, we may have to go there, that's not the finalised decision, in terms of the US. But the task for us, and the reason why it is important to take the lead at Copenhagen, and why we need the legislation carried, is we need an Emission Trading Scheme that reflects our comparative advantage in energy production, and extraction of resources. If we can do it more efficiently than the rest of the world, we should get credit for that.
But if you haven't got a scheme that reflects that, we're not encompassing, in the Emission Trading Scheme, a new market mechanism, we're not encompassing a mechanism to reflect that comparative advantage.
That's what Australian industry, I think, has to come to grips much better with, and you know, when you think of it, this is a new market being developed. What are we doing? We're putting the price up on carbon, through a market mechanism, to change peoples' behaviour. Well, if we're changing behaviour to more greenhouse-friendly forms of energy contribution, like LNG, why shouldn't we be getting credit for that?
That's the challenge, and that's better if you've got a market mechanism operating, than if you're forced to revert to the border, because I think what'll happen, if you go - if you start talking of the border mechanism, people will start introducing it, and we'll find that as the new protectionism, undoing all of this work that clearly has demonstrated the great benefits of opening up markets.
The other thing that we should be doing in the climate change debate is actually dropping all tariffs on the trade in goods and services that improve the environment, if we're serious about it. That would be a great initiative. So as part of the, if you like, the Copenhagen exercise to really push as part of the policy settings in that direction as well.
QUESTION: These exports to Japan are a great example of trade liberalisation working; can you reel off four others?
SIMON CREAN: Yes, I can. I think that if you look at the aluminium and light-weight metals, we have seen huge increases, particularly in aluminium, alumina and bauxite, because of the tariff reductions into the US.
Take the auto sector. We saw a huge jump in terms of exports from GMH in particular into the US last year. Now, it's all been turned on its head because of the global financial crisis, the restructuring of the auto sector. But for the first time, because tariffs came down under the FTA, we were able to penetrate.
Another great example is the dairy industry, through the restructuring plans first of all started by John Kerin, completed by me. We saw the huge opening up of a competitive dairy industry. It's now exporting, I think, somewhere in the order of $4 billion worth. That's a good example.
Take services, the thing that I've been arguing about for [some] time, because it's 80 per cent of our economy. Look at where we've been going with education services; it's now our third largest export.
Now, this has all happened because we've been able to . . . be good at what we do and promote it to the rest of the world. In the case of education services, they bring people down, no barriers. There's still issues as to how we can access their markets, but education is a good example of where you can actually export by doing it here.
But in the case of dairy, aluminium and light-weight metals, autos, they are all very good examples in the context of this economy of where there has been huge growth in their sustainability, their job opportunity, the living standards of the people who work in them, because we've opened up markets.
QUESTION: On education, how concerned are you about the protests about racism in Victoria from the Indian students. It's [indistinct] here, how - to what extent could that threaten those [indistinct]? And have you contacted your state counterparts or any other authorities either in Victoria or other states?
SIMON CREAN: Very concerned about it, because obviously, it's not just the quality of the product, it's the safe environment in which we bring people. We have a responsibility to ensure their safety.
I - you mention the states. Stephen Smith and I wrote to our state counterparts I think in July of last year, because I had had representations from the High Commissioner here in Canberra, the Indian High Commissioner. I had obviously visited India earlier in the year. The issue then was raised with us. I'd taken it up, particularly in Victoria with the Chief Commissioner Christine Nixon, the Victorian Government.
All state governments responded very positively, concerned about the issue, looking at ways in which we could cooperate. There had been community forums and hot lines and all sorts of things established.
We have been on top of this issue. We have been concerned about it for some time. We have been talking, not just with the authorities here, but with our Indian counterparts. [The] PM has spoken to his counterpart, the Foreign Minister to his. And we've been in touch with the Indian High Commission, as well.
It is very disturbing what's happened, because it's escalated some extent because of the shocking event of last week, the person in the coma. But it's something we do seriously have to address and we will.
QUESTION: How damaging could it be to education exports?
SIMON CREAN: Well, it could be damaging, if people - there's no point sending your loved ones here to study if they feel under threat.
Now, I think that this has been an issue that we've tried to address now for a number of months. We will continue to work on it. I think we can get on top of it. I think it is a question about community awareness and I think that Australians naturally are very tolerant, they're proud of the fact that they - this is a safe place in which to live and work, it's part of the brand that Australia wants to promote more of, and we have to protect that brand.
QUESTION: When did the PM speak to his counterpart [indistinct]?
SIMON CREAN: I'm not sure of the precise time.
QUESTION: But you say that there's been a representation on this for nearly a year, you're saying?
SIMON CREAN: Yeah, yeah. We've been having representations, as I say, we wrote to our state counterparts in July of last year, so it had been raised with me very early in the piece. I think it was raised with me, interestingly enough, before my visit and it certainly got raised when Kamal Nath, my counterpart, came to Australia. And I think that was about March or April of last year, when we were talking about the Free Trade Agreement with India.
We had discussions with him about that and we have taken their concerns seriously and taken it up with the authorities and the state governments, because obviously, it's the states that have a responsi... particular responsibility in this area.
QUESTION: I mean, there already are rules against bashing people, racial vilification and so forth. I mean, what else can you do legally?
SIMON CREAN: I think we have strict enough laws. What we've got to be conscious of is the circumstances in which these sporadic incidents are toned down. I mean, you can't stop the incident itsel... if the incident's happened, I think what we've got to do is to learn from the experience of that. What caused it, what was it related to? Was it particularly singling out of Indian students? There seems to be some doubt about whether they particularly are being singled out. That's not what the Indian community thinks.
So I think, sitting down, talking through the statistics as well as the mechanisms by which we can address it going forward, respond to particular incidents and try and get some better information, some better educative processes going in the community. That can all be part of it.
QUESTION: Can you [indistinct] to figure out the concerns that were raised with you last March and April? Were they particularly related to students at university or what was the context of...
SIMON CREAN: They were students who were out here, whether they were university students, it wasn't confined to university students. But students that were out here in the sense that they were a particular target.
We took that issue very seriously then and we have continued to work, through the High Commission and through the authorities, since that time.
QUESTION: Was the trouble more in - just in Victoria, and to Victoria?
SIMON CREAN: We wrote to all of the state premiers. Obviously it's - it's one thing to try and identify where the numbers of incidents are, but Australia is Australia. I mean, people looking at Australia to come for education purposes are not going to have that same geographic sense of, you know, is it better to go to Victoria, is it better to go to some other state. We've got to really address the brand as a whole: safe to work, inclusive, accepting and - but that's the brand that we have to protect.
QUESTION: A fair bit of work to do then.
SIMON CREAN: There's always a fair bit of work to do. But there's great drive and energy on our part to do it.
Thank you.
ENDS
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