It’s an honour to be invited to speak here this evening as the Minister for Trade and Investment, because APEC is – and has been – such an integral part of Australia’s economic story over the past 25 years.
If success has many fathers, then so does APEC – but Australia’s role in its formation in 1989 and its continuing success is not to be under-estimated.
Our leadership on free trade has made APEC the region’s go-to organisation for the promotion of freer trade and economic cooperation.
It has helped create the environment that we enjoy today – one where Australia can conclude significant trade agreements with North Asian economic giants like Japan and Korea – but I’ll return to that a little later.
This government’s primary message is that Australia is ‘open for business’ and that’s exactly what APEC is all about.
Government approach: four principles
As a government our central objective is to displace big government from the centre of economic policy and replace it with robust growth driven by the private sector.
We have embraced four key but powerful principles to guide our approach.
- We will live within our means.
- Pursue serious deregulation.
- Restore a culture of personal responsibility – both for individuals and corporates.
- And we will back our strengths: the things we do as a country as well as any and better than most.
We are focussed on reducing the costs of doing business in Australia and providing certainty and stability.
We are restoring the government budget back to health after a record build-up of debt and deficit under our predecessors.
For the first time in two decades there is a Commission of Audit to examine the size of government and quality of spending.
Stopping and ultimately reversing the growth in debt will stop the financing of government bonds from crowding out the financing of our small and medium sized businesses; the innovation centre of our economy.
We are cutting red and green tape; we have already identified around 10,000 laws and regulations for repeal.
We will repeat our Parliamentary Repeal Day every six months.
We are streamlining project approval processes, seeking to fully reverse the up to two year blow-out in approval times for major projects.
Since taking office we have granted environmental approval to 125 projects worth $400 billion, some which had been delayed for six years.
We are removing ineffective, highly regulatory, anti-competitive taxes, such as the carbon tax and the mining tax.
We are restoring the Australian Building and Construction Commission (ABCC) to boost productivity and restore the rule of law in the construction industry.
We have also taken a series of difficult decisions to end government hand-outs to underperforming enterprises, for example in regard to SPC, Qantas and Holden.
Progress on our goals
My colleague, the Foreign Minister, Julie Bishop, spoke here a little over a year ago.
In that speech, Julie focussed on three things –
- The Coalition’s commitment to signing free trade deals with the big three of Japan, Korea and China
- Economic diplomacy, and
- The New Colombo Plan.
In seven months we have moved a long way on those goals.
Let me start with the last of those three goals – the New Colombo Plan.
The pilot program this year will support around 40 scholarships, and will fund mobility grants that will see many hundreds of students from around Australia undertaking study and work placements in the region; in Indonesia, Japan, Singapore and Hong Kong.
More nations will come on board next year to see many thousands of young Australians involved in the years ahead.
These are the young leaders of tomorrow; the leaders who will know and understand our region and have had first-hand experience living and, very importantly, working with the people of our neighbourhood.
Julie Bishop has moved very quickly to implement this program, and don’t be surprised if it’s one of those young scholars who is standing here speaking to you in 15 to 20 years’ time.
On economic diplomacy, it is not just a catch-phrase.
It’s now at the heart of everything we do across the foreign affairs, trade and development areas.
The government’s focus is firmly on our own region and expanding the prosperity of the people within it.
It’s about ‘aid and trade’ being more closely linked.
It’s about putting our diplomatic energy into tangible results – getting bang for our buck. It’s about setting firm priorities.
And there’s no greater example of that than the successful conclusion of trade agreements with two of the biggest economies in our region – Japan and Korea.
FTAs – important bricks in the wall
What I am discovering around the world is a disillusionment with a lot of the interventionist policies that followed the Global Financial Crisis.
Some countries, including Australia, became addicted.
There is a realisation that these high-spending, high regulation responses are not delivering sustainable economic growth, growth sufficient to reduce unemployment.
This explains – especially in the developed world – the move to focus on greater trade and investment as drivers of growth.
Many countries are not waiting for the WTO to deliver effective multilateral outcomes, but it is important to not desert the WTO process because of its critical role in setting and fostering global trading rules.
Rather, globally we are now seeing a plethora of bilateral, plurilateral and regional freer trade agreements, such as our success with Korea and Japan.
We are also making encouraging FTA progress with China and working strongly to complete the regional Trans Pacific Partnership (TPP) agreement, with 12 Asia Pacific countries. As well we are engaged, at various stages, in the Trade in Services Agreement (TiSA), the Regional Comprehensive Economic Partnership (RCEP) agreement, the Pacific Agreement on Closer Economic Relations (PACER Plus), the Information Technology Agreement (ITA), the Environmental Goods Agreement, and of course DOHA negotiations continue.
We are also pursuing a plurilateral agreement with the Gulf Cooperation Council, bilateral agreements with Indonesia and India and doing scoping work this year in regard to the E.U.
To me the myriad of smaller agreements, including the bilaterals, are an important part of the trade landscape.
They are like bricks in a wall and in fact are prompting important structural changes in countries
They are not multilateral agreements, they are not perfect, but over time you are starting to see a lot of liberalisation in participating countries, a lot more structural change, and so, as you build the wall, we are heading towards a multilateralised result.
And to the naysayers who invariably pose the question: “What is the value of these so-called free trade agreements?” Just direct their attention to the Closer Economic Relations Agreement between Australia and New Zealand.
This agreement is one of the most comprehensive bilateral free trade agreements in existence, covering substantially all trans-Tasman trade in goods, including agricultural products, and was the first to include free trade in services.
Since it began in 1983, over 20 years ago, the two-way trade in goods between the two countries has expanded at an amazing average annual growth rate of 8 per cent – each and every year – an average 8.9 per cent growth in NZ exports to Australia, and 7.5 per cent growth in Australia’s exports to New Zealand. The results say it all.
And, each year ministers from across the Tasman meet to determine more and more ways to increase the comprehensiveness of the agreement.
So, as a new government in Australia, with trade and investment now centre stage for us, along with a preparedness to make structural changes, we are trying to send a signal to show we want to do business.
Our bilateral deals with both Korea and Japan are most significant.
Australia is the first major agricultural producer to conclude a substantial trade agreement with Japan. It is a vastly superior deal to that secured by anybody else in the world.
We have seized the advantage.
The former US Assistant Secretary of State for East Asia – and a man who’s spoken of as a future Secretary of State – Kurt Campbell – described the agreement as a “massive victory” for Australia.
And I quote: “Europe and the United States … have been trying to get this kind of agreement from Japan for 30 years.”
This says it all really.
As well, former Trade Minister Craig Emerson very graciously took to Twitter and described the EPA “as the best Australia could have achieved”.
There will be benefits worth hundreds of millions of dollars in the first year.
I won’t say it’s perfect, because a perfect deal with Japan was simply not possible.
Difficult compromises had to be made – but what we have is a transformative agreement.
It delivers world’s best access and opens up a wide range of new opportunities with the region’s second biggest economy with a GDP of over $5 trillion dollars, and a population of around 128 million people.
The beef industry alone is set to see gains of $300-400 million per year.
But the wins go well beyond beef.
Tariffs across a wide range of horticulture, vegetables, fruit, nuts, seafood, wine will be eliminated.
That means asparagus growers, with their $13 million dollar export industry – our biggest horticultural export to Japan – will now have their produce enter Japan duty-free.
Tariffs have also been eliminated on more than $16 million dollars in nut exports – macadamias, almonds, walnuts.
Tariffs will go immediately on carrots, potatoes, leeks, garlic, tomatoes, broccoli, cabbage, spinach, capsicum, pumpkins and the list goes on.
They will also be eliminated on mangoes, raspberries, blueberries, cranberries, strawberries, cherries, grapefruit, pears, apricots, peaches, plums and so on.
These aren’t the industries that make the front pages or get a lot of attention. But the Economic Partnership Agreement with Japan gives them enormous growth potential.
The story is much the same for Korea, a landmark FTA that I had the honour of signing three weeks ago in Seoul.
Economic modelling predicts KAFTA will create more than 15,000 jobs in Australia between 2015 and 2030, and that excludes the gains that will flow for services.
It will also add about $650 million dollars per year to our economy when in full force.
Importantly, it also puts us back on a level playing field with competitors like the US, EU, ASEAN and Chile, which have until now had a competitive advantage with their FTAs with Korea.
These aren’t agreements for agreements sake.
They are major advances for Australia’s economy. Steps that create real jobs, lower prices and higher living standards for consumers, and contribute to sustainable growth. And they result in important structural adjustment in all three countries.
Trans Pacific Partnership
Yet, a big agenda remains.
The next meetings of the Trans Pacific Partnership (or TPP) are scheduled in the coming weeks.
Trade with the 12 TPP countries made up more than a third of Australia’s total trade in 2012-13, so the potential is real.
A high quality TPP with comprehensive coverage will set a benchmark for our region, and see more seamless and less protected trade between countries representing a huge 40 per cent of global GDP.
And, as Australia’s Ambassador to the United States Kim Beazley, has said: our successful conclusion of the Japan EPA will serve as a very good stepping stone to a high quality TPP.
As well, new, creative trade rules in the TPP will show the world that members of the dynamic Asia-Pacific region are prepared to work together to address contemporary commercial challenges.
Australia is under no illusions about just how difficult this is.
For many countries, dealing with the 19th century issues, like the elaborate web of barriers confronting agricultural imports, are every bit – if not more – challenging than opening borders to data flows.
But let me be clear.
TPP will not be a worthwhile initiative unless it tackles all trade challenges - at or behind the border.
Opening agricultural markets needs to be a hallmark of this deal, as much as incorporating e-commerce settings.
China – trade and investment
Of course, there’s still another major challenge ahead.
Namely, an agreement with even more potential than the deals with both Japan and Korea.
A free trade agreement with China.
China purchases over a quarter of our exports and is our largest market for agriculture, resources and energy, and services such as tourism and international students.
After eight years of negotiations, both countries’ leaders have expressed their eagerness to bring negotiations to conclusion.
Premier Li, in recently outlining China’s works program for the year, nominated accelerating FTA negotiations with Australia as a priority.
An important contribution to that goal was the overwhelming success of Australia Week in China earlier this month.
I led the biggest ever trade mission to China to strengthen economic ties with our largest trading partner.
More than 700 business people participated in the four-day program in five key cities – Beijing, Shanghai, Guangzhou, Chengdu and Hong Kong.
As all these business people then gathered in Shanghai with the prime minister, it amplified our key message that Australia is open for business.
And it’s not just talk.
I was overwhelmed by the significant number of business participants who reported very material new contacts and leads stemming from the highly targeted dialogues organised by Austrade and other DFAT staff.
Our China posts and their Australian-based colleagues truly excelled.
As well, during the week, 20 separate commercial agreements were signed. The deals will generate estimated value in sales of around $894 million.
RayGen resources signed a $60 million investment and distribution deal to supply its concentrated photovoltaic technology to China.
The Burnet Institute joined with a Chinese investment firm to develop low-cost diagnostic tests to improve the health of people in China and around the world.
Victoria’s Pactum Dairy signed a contract with Shanghai Bright Dairy to supply UHT processed milk.
Blerick Tree Farm in West Gippsland signed an I.P protection agreement for the provision of ornamental landscaping trees.
While South Australian film company AMPCO signed with multiple Chinese production partners to co-produce two films – Tying the Knot and Shimalaya.
I also joined CEO Mike Smith to open ANZ Bank’s new branch in the Shanghai Free Trade Zone.
These are real, concrete outcomes from the visit.
But even more importantly there are also the intangibles.
We built trust. We built relationships.
And undoubtedly we built momentum in the free trade negotiations – both by showing the strong commercial ties between our countries and the political will for an agreement.
But even more than trade, investment is a sign of trust between countries.
Companies don’t invest their money offshore without trusting that their investment will be safe and respected.
China already invests nearly as much in Australia as it does in the US.
It shows faith in what we have to offer.
And it’s good for Australia – we have relied on foreign direct investment to build our nation since the First Fleet.
This Coalition Government hopes to grow North Asian investment in Australia, on the same basis that we welcome investment from the United States and the United Kingdom.
Japan is already our third largest capital investor.
An important investment issue in the negotiations with China is how we treat investment by state owned enterprises.
As a number of countries among the developing world, especially China, transition rapidly to a more market-based economy, we are seeing many of the state owned enterprises adopting a highly commercial nature, and facing governance and transparency requirements more akin to private enterprise companies within the developed world.
Many are no longer like the old nationalised industries we might remember in Australia and the UK, for example.
In the months ahead, as we negotiate foreign investment review thresholds and the like with China, we need to consider the changing nature of significant parts of Chinese business.
Greater flexibility, alongside appropriate concessions by China, is supported by the fact that none of the hundreds of investment applications from Chinese state owned enterprises that have gone through the Foreign Investment Review Board process over the last decade, have ever been rejected.
And so in the months ahead we will work through some of these issues with the Chinese government.
For our part, we are seeking substantial concessions for our services, as well as agricultural goods such as dairy, beef, sugar, lamb, grains, wine, seafood and a range of horticulture across fruit, vegetables and nuts.
Opportunities in the Middle East
It’s difficult to over-estimate the importance of the North Asian market to Australia.
But that doesn’t mean we’re taking our eye off the ball elsewhere.
The Middle East is a case in point.
I’ve just returned from a visit there and the business and trade opportunities are real.
Which is why I was pleased that the Parliament’s Joint Standing Committee on Foreign Affairs, Defence and Trade has launched an Inquiry into our trade relations with the countries of the Middle East. And anyone with an interest can make a submission (by 15 May).
After China and the TPP, a trade and investment agreement with the Gulf Co-operation Council – a group of six nations including the UAE and Saudi Arabia – is my next priority.
It’s good news that the GCC plans to resume talks – that were postponed in 2009 – with its potential FTA partners, and I am pushing for Australia to be at the top of their list.
Australia already has a substantial presence in the Gulf – more than 350 Australian companies are doing business there, and more than 20,000 Australians live there.
Our two-way trade is valued at over $12 billion dollars.
And our contact is growing thanks to the 140 direct flights we now have every week to the Middle East.
Construction, engineering and education are already well established areas of mutual benefit — and there’s great potential to assist the Gulf countries to meet their food security aims.
Food and agriculture are already our biggest exports to the GCC countries – worth more than $2 billion dollars and growing.
We have a strong reputation as a safe, reliable supplier of meat, dairy grains and more.
But these products are all still subject to tariffs.
An agreement that banishes tariffs and facilitates services will mean enormous opportunities for Australian agri-business.
Of course the work we’re doing chairing the G20 this year dovetails with our trade agenda and the work being done through APEC.
It’s pro-growth and pro-business, pro-trade and pro-investment.
Through the G20, we want countries to take domestic action to lower the cost of doing business, remove regulation and pursue aggressive trade liberalisation.
We’re leading by example.
But we also need to push for structural reform — things like:
- removing tariffs and non-tariff barriers
- streamlining customs procedures
- investing in infrastructure, and
- freeing up trade in services.
APEC priorities and Conclusion
These are the sorts of areas where the priorities of the G20 and APEC align.
And so it’s good for Australia, and good for the region that China is the host economy of this year’s APEC.
We’re working together to achieve our goals.
- Advancing economic integration; trade and investment
- Promoting innovative development, economic reform and growth, and
- Strengthening connectivity, infrastructure development and financial regulation.
These are not only Chinese challenges. Or Australian challenges.
They are issues for all APEC economies and ones that will only be addressed if we work together.
In May, I will attend the APEC Ministers Responsible for Trade meeting in Qingdao, China.
Australia will be looking to the trade ministers to deliver a strong statement in support of the multilateral trading system, especially in relation to the early implementation of the recent WTO Agreement on Trade Facilitation.
And we will continue to promote our interests in services trade liberalisation, structural reform, enhancing supply chain efficiency, promoting infrastructure investment and cross-border education co-operation.
For two-and-a-half decades APEC has proved itself to be the premier economic forum of the region.
It has delivered practical outcomes that support Australian businesses.
The APEC business travel card provides express lanes and visa-free travel for more than 140,000 business persons.
Almost US$60 billion in savings were delivered to business through improvements in customs procedures, logistics and regulatory co-operation between 2007 and 2010.
And APEC is currently encouraging a network of Public-Private Partnership centres in the region to improve the enabling environment for private financing of infrastructure.
APEC has shown that economic growth is not a zero sum game.
It’s possible for us all to win.
The free trade agreements we have finalised in the past month show that.
The APEC experience shows us that.
I thank RMIT for hosting the APEC Study Centre and contributing to the great work of this vital regional forum.
- Trade Minister's Office: (02) 6277 7420
- DFAT Media Liaison: (02) 6261 1555