Good evening and thank you for your invitation to speak to this summit.
In my view the future prospects for Australian services are spectacular.
Yet services in many ways are the quiet achiever of our economy.
When we talk exports, many outside the sector automatically think of commodities like iron ore, coal, gold; or agriculture exports.
But as we all here know services are the engine room of economic activity.
Eighty per cent of our economy is services based and services employ four out of five Australians.
Three of Australia’s top five ‘globally significant industries’ are education, tourism and financial services.
Internationally, we have an enviable and growing reputation for services across a wide range of areas, but overwhelmingly those service areas cluster around our strengths as a country.
Australia’s standout sectors – resources and energy, agriculture and agribusiness, education, health and medical research, tourism and hospitality – are either services-based or have strong services, and other industries, which cluster around them.
For these areas in particular, the productivity level of Australia’s services sector is well above the global average.
Demand for services in our region can be expected to grow at a phenomenal rate in-line with the exploding middle classes in the region around us, and as the emerging countries progressively drop the barriers as their need for services grow.
The OECD estimates that the middle class in the Asia Pacific will go from 600 million to some 3 billion by 2035-40. It is almost inconceivable.
High quality services will be fundamental to capacity building, and jobs.
For me, a visit to Hong Kong early last year was an eye opener.
It demonstrated to me the enormous role Australian services can play in Asia, as these emerging nations move from economies with overwhelmingly an export focus, to more domestically focussed, services oriented economies.
In the week of meetings I had, 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 to the highest standard.
Australians, and many Australian service providers, don’t appreciate the very high regard in which Australia is viewed in the region as a highly knowledge-based services economy.
The Hong Kong visit list included banking and financial services, architecture and design, engineering, legal services, environmental services, logistics, project management, IT, event management, tourism and hospitality through to healthcare, including aged care, education and vocational training; the list goes on.
In several of these, for example, education, tourism, banking and project management, we are already making a mark.
During our successful Australia Week in China business mission for instance I had the pleasure of joining Mike Smith to open a new ANZ branch in the Shanghai Free Trade Zone.
On a previous visit, I helped open a new Joint Graduate School in Suzhou, the result of a joint venture between Monash University and Southeast University.
Of course, we have many other stand-out service offerings:
The outstanding Crown integrated resorts in Macau and the Philippines.
- Seek, the largest online job board in the world.
- Hassell, one of the largest multi-disciplinary design practices in the Asia Pacific.
- The Leighton Group, one of Asia’s leading construction and mining service providers.
- Monash, RMIT and many other universities.
- Linfox, which provides supply-chain solutions through the Asia Pacific, and
- Jetstar, including three joint-ventures in Asia.
But this is just the beginning.
Ensuring our services providers are in the best possible position to capitalise on the opportunities is a priority consideration when I negotiate trade deals.
This is true whether the negotiations are bilateral, regional, plurilateral or multilateral.
We also encourage unilateral action by countries to open services markets through forums such as the G20.
The bilateral agreements we have recently concluded with both Korea and Japan for example represent major outcomes for Australian services.
Benefits of Japan and Korea FTAs
Briefly, the deals we have secured with Japan and Korea offer Australian services unprecedented access to these markets.
They represent markets of almost 180 million people.
These agreements amount to the best treatment these countries have afforded any other trading partner.
They are big wins, with great potential.
Take financial services –
Australian businesses will be able to do business in Japan and Korea without the need to open a full commercial presence.
This includes services relating to wholesale securities transactions, investment advice and portfolio management.
And Australian accountants will for the first time be able to provide consultancy services relating to Australian or
international tax or accounting law through offices in Korea.
In legal services –
For the first time Australian firms will have access to Korea’s legal consulting services by being able to establish offices in Korea, hire local lawyers and, in within five years, establish joint venture firms.
Australian lawyers in Japan will be able to take advantage of expedited registration procedures allowing them to provide Australian and international legal services in Japan.
In Education –
Japan has guaranteed Australian education providers access to its higher education services market, including vocational and technical education.
And Japanese students who wish to study with a wide range of Australian providers, including TAFEs, will be able to access low-interest loans offered by Japan student services.
These are just a few examples of market gains – many of which apply equally to both Japan and Korea.
There are also big moves forward in telecommunications, environmental services, engineering, film and television as well as a whole host of other areas.
Australian suppliers will also be guaranteed non-discriminatory access to the lucrative Japanese government procurement market.
Another important change that will make doing business with Japan and Korea so much easier is that both agreements give Australian professionals guaranteed visa access arrangements – including for their spouses and children.
And both have committed to ongoing work to mutually recognise professional qualifications.
So there’s been a lot of positive movement in these areas that many professionals often find the most frustrating.
And which have acted as barriers to trade in the past.
We are also pushing hard for a strong deal on services with China in our FTA negotiations.
This is a tough negotiation but a conclusion this year remains a realistic objective.
And other trade negotiations that we’re currently pursuing such as the Trades in Services Agreement (TiSA) have the potential for enormous gains across a multitude of countries, as does the Trans-Pacific Partnership, or TPP negotiation, involving 12 countries in the Asia Pacific, which represent 40 per cent of the world’s GDP.
More seamless trade, and even lower trade barriers, between these 12 countries will provide a huge stimulus to trade.
It is pleasing to see the Roundtable actively working to take advantage of the benefits that the Korean Free Trade Agreement will bring to the services sector.
The Roundtable was recently awarded an Asian Business Engagement Plan grant from Austrade to provide Australian professional services SMEs access to export ready coaching, and mentoring, to help them achieve success in Korea.
Indonesia, another important trading partner in the region, was also identified as a market that the Roundtable will help services to access, it is expected that within 10 years Indonesia’s GDP will be greater than Germany’s.
t is critical that we contribute to that growth, and we are pursuing a free trade agreement with Indonesia.
Each trade agreement you can secure acts like a brick in a wall.
These bricks represent more and more structural adjustment in different countries, more market openings.
Eventually the wall grows into a virtual multi-lateral type outcome as long as the rules are the same or similar.
Prospects for services in a China FTA
Looking forward, China is our largest services export market.
We are striving for market access gains well beyond what we currently get through the WTO.
A good deal on services remains a top priority for me and Australia’s FTA negotiating team.
But it’s a difficult negotiation given that services have always been a sensitive area for China, so gaining ground won’t be easy.
The timing is good, however, for Australia to open new doors because China is actively reforming its services sector.
It recognises that services are critical to its transition to consumption-led growth and meeting the consumer demands of its middle class.
China has performed a humanitarian miracle by moving 500 million people out of poverty over the last 15 to 20 years. However, China also understands that the task of moving hundreds-of-millions more out of poverty will require a huge move into services, where the large numbers of jobs reside.
If we can gain a strong foothold now, we will be well placed to make the most of developments within China as they occur, and our services skills can assist China greatly with this transition.
Trade in Services Agreement
Beyond our bilateral negotiations, the Trade in Services Agreement could be a real ‘game changer’.
Australia is currently leading negotiations in Geneva with the US and EU.
This is a big negotiation with big ambitions.
Fifty WTO members are taking part – from Switzerland and Canada to Colombia and Turkey.
The 50 economies in the negotiation account for 70 per cent of all global services trade – and more countries are looking to join the negotiations.
This is all about enabling Australian businesses to get the same equal treatment when doing business overseas that foreign businesses already enjoy in Australia.
For example, we want to create a system where if an Australian lawyer, accountant or engineer wants to offer their services in a TiSA market they don’t have to set up an office or live in that market
And we want Australian professional qualifications to be recognised without having to sit onerous exams or pay large fees.
But it isn’t just about what we can achieve now. It’s about the longer term.
It’s about generating momentum to transform TISA into a truly multilateral services agreement.
We want countries like China and India, Indonesia and Malaysia and our other ASEAN neighbours to join TiSA.
The new market openings from such an outcome would be near boundless.
I’m optimistic about the momentum of these various talks.
I think there’s real potential for Australia to gain access to a whole range of new markets.
We’ve already achieved strong gains with Japan and Korea –and the prospect of that access being replicated elsewhere is exciting.
Because I know the quality of Australian services, when I travel abroad I am quite evangelical about what you do.
Our engineers and architects, bankers and accountants, our ICT experts, lawyers, educators, project managers, medical technicians and pharmacists – to name just a few – are among the best in the world.
And given the opportunity to compete on a level playing field the sky is the limit.
To end, I want to express my thanks to the Australian Services Roundtable and the firms and associations who have contributed to our negotiations and supported them at conclusion.
It is only through your input that we can make these agreements useful.
I am determined to ensure our negotiators work more closely with business to ensure our FTAs realise better business outcomes. I look forward to your ongoing contribution.
Thanks for the opportunity.
- Trade Minister's Office: (02) 6277 7420
- DFAT Media Liaison: (02) 6261 1555