Former Minister for Trade
Australian Commonwealth Coat of Arms


13 October 2009

Minister Crean's remarks at Global Services Summit, Washington DC

MODERATOR, MIKE DUCKER, PRESIDENT, INTERNATIONAL FEDEX EXPRESS: I want to thank Ambassador Kirk for agreeing to be with us today and for setting the tone of the discussion and really highlighting the importance of services and what we need to do with trade in this global economy. And really it’s an honour for me too to welcome this distinguished panel today. I mentioned in my opening remarks that many people have said that this is the best summit that they have seen witnessed by the powerful people that we have in the room that really control much of the discussion with regard to global trade and what we’re going to do in the future of the services industry.

History really shows us that countries develop and grow their service sectors become really increasingly important in their domestic economy – the evolution toward those services-based economies enhances quality of life, generates wealth and creates a more highly skilled workforce. And it’s also clear to us – we had quite an open discussion at breakfast this morning – that services goes hand in hand with manufacturing and agricultural productivity. The more efficient your service sector is, the more productive the rest of your economy is going to be. Services has enabled a rapid growth of global supply chains and all of the economic benefits that go with those, and to quote the former USTR, “if you have access to the Internet and express delivery, you can participate in the global economy”.

But I think Ambassador Kirk mentioned and several others have mentioned that services is still not living up to its potential, as demonstrated by the relatively small portion of global trade that it makes up, and what we want to do during this panel session this morning is too ask our distinguished panel to address those issues in some detail. I’m going to encourage them to hone in on some specific areas where policy-makers, business and others can focus our efforts to achieve meaningful and significant growth in services and services trade.

And what we’re going to do today is to ask each Minister to share with us their thoughts for five minutes or so regarding how the services sector and services trade empowers their economies, and we hope also that you can share with us the key services market opening initiatives that are ongoing at this point in time, and what you’re currently focused on to achieve greater liberalisation in trade services. So again, let me thank you for being with us today, and we’ll start with Minister Crean.

SIMON CREAN: Thanks very much Mike, and for the opportunity to be here. I think that when Bob Vastine extended the invitation to be here and when I had the opportunity to talk with him earlier this year, it became obvious that this was a forum that, used properly, could hopefully put some momentum into helping us conclude the Doha Round.

I’ll come to that in a minute, but, I suppose that as far as the services economy in Australia is concerned – it is very similar to that which it is here in the US – services make up 80% of the domestic economy and 30% of our export opportunities. Interestingly, it’s the behind-the-border issues, the market access issue, that make access for services that much harder in terms of the markets we want to penetrate. It’s also the case that, take our resources out – and there’s been a huge growth in resources, which has been part of the reason Australia has weathered the financial crisis far better than most – the services sector has been one of the fastest-growing export sectors in our economy. So whilst it’s from a smaller base, the growth opportunities are there. But I guess beyond the statistics, the key messages that I want to convey today is the enabling dimension of the services sector and the aspirational dimension of the services sector.

Now, to give some sense to the enabling factor. Why is Australia in the position it is? Yes, we are rich in resources, and we are a surplus agriculture producer. But it’s not just because we can export the commodity that makes us attractive in those areas. Our comparative advantage is not just the commodity, but the ability to produce it and extract and rehabilitate the processes that are associated particularly with mining, and to do that in a competitive and a sustainable way. It is the services dimension of the commodity base that is our strength, and therefore we’ve got to, in our country, convince the markets that we don’t just supply them with agricultural produce or commodities. We provide them with the capacity to value-add their food industry and their product market or increase the efficiency of their agricultural market, or for that matter, and particularly this is true with a lot of the developing countries, with their resource base. How better to competitively extract that and to exploit it. So it’s the services side of it.

But I go further, and this is really, I think, the challenge here in the US. The manufacturing sector here. Look at the steel sector. I know from our country, that our comparative advantage in steelmaking isn’t just the fact that we have the resource, but we’ve developed technologies that are more efficient and more environmentally friendly than a blast furnace. That’s the case here, no doubt in the US. Take the auto sector. It is the US – and Australia for that matter – that has the full capability of taking a car from design to showroom floor. But who’s the biggest market in the world? It’s China. Who’s the biggest manufacturer in the world? It’s China. But it does not have the full range of that capability. So therefore trying to argue the case that it’s in their interest to embrace our services, our smarts, to help them develop that broadened capability, I think is a real opportunity. The same is true with India in terms of its automotive market. And similarly, take chemicals, another sector that in a manufacturing sense, the US sees strong opportunity for in the manufacturing sector. Of course, this is difficult because of developing countries’ defensive interests. But there are capabilities within the chemical sector that those countries don’t have but need. Agricultural efficiency. More environmentally friendly fertiliser. Green technology. Solar panels, silicon. So, my real pitch is for the services sector to not see itself as a separate sector, but to see itself as an enabler and a driver and an opportunity for the manufacturing sector that sees no value in Doha at the moment. And so therefore, it’s the integrated approach that the services sector not only needs to embrace here, it needs to drive, and it needs to advocate.

The second point I want to make is the aspirational one. And this goes to developing countries. You’ll look at the profile of developed countries, and they have a higher proportion of services contributing to their economic growth. Developing countries can’t aspire to the higher levels of development unless they too build their services sector. So we’ve got to convince those countries that our assistance in services and opening services hastens their pace for development. And that’s why, in the context of the Doha Round, it is terribly important, also, to continue to drive the services sector as an integral part of the Doha Round. Now, how we get the Doha Round up, the other thing I think we’ve got to do, apart from the services sector taking a more driving and a more strategic role and linking itself to the manufacturing sector and the agriculture sector to show that it’s adding value, we’ve also got to present Doha not just as a trade negotiation, but as economic stimulus. An exit strategy that does not cost the budget. A strategy that will put money in people’s pocket because it doesn’t take it out of them for tariffs. An economic dynamic that is there because trade is an economic multiplier.

Historically, world trade has grown three times faster than world output. And each time, there’s been a successful trade round, that multiplier has advanced. What sort of nonsense is it for us to be talking about coordinating fiscal stimulus strategies unless we’re going to coordinate as well the multiplier. And that’s why this government in particular needs to get the message that Doha ain’t just a trade round. Doha is fundamentally about an economic stimulus. So they’re my two points. I might say in just, on Doha, the other significant factor in Doha is it’s the most effective insurance against the spread of protectionism, because it is a rules-based system, and if we get Doha up, it can give greater insurance. I think I’ll finish there, Mike.


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