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4th ASEAN Business and Investment Summit
"Building Support for Free Trade"
by H.E. Mr Tony Hely
Distinguished Guests, ladies and gentlemen:
On behalf of the Australian Minister for Trade, the Hon Warren Truss MP, I’d like to thank the ASEAN Business Forum for the opportunity to speak here this afternoon on a topic of considerable importance to all of the countries in the region, building support for free trade.
I know that the Minister had been anticipating attending today’s Forum and that he was particularly interested in hearing your views about this issue.
The cause of global trade liberalisation and reform is facing a renewed and serious threat from protectionism.
That is paradoxical given the enormous benefits delivered globally and particularly in this region from the sustained program of market opening and trade and investment liberalisation over the past twenty years.
Many of the companies here today are proof of those benefits.
And the success of the ASEAN economies can be attributed in large part to their embrace of pro-free trade principles and practices.
The experience over the past twenty years has been that trade creates jobs; improves living standards and fosters innovation.
And increased trade makes a major and positive contribution to higher incomes, economic growth and prosperity for people—the ultimate goal of economic policy.
Trade is also a powerful instrument for addressing poverty. The World Bank has estimated that freeing all merchandise trade and eliminating subsidies could lift an additional 32 million people out of poverty by 2015 and boost global welfare by up to US$290 billion.
These benefits speak for themselves. But support for free trade cannot be taken for granted.
That is why the Australian Government continues to pursue an ambitious trade policy agenda at all levels, multilaterally, in our region and bilaterally.
I would like to outline Australia’s policy approach in some more detail, and in so doing demonstrate the contribution our policies are making to the efforts of the wider regional and global community to advance the trade reform agenda.
Reviving the Doha round of WTO negotiations
The Australian Government’s number one priority is to conclude successfully the Doha Round of negotiations in the World Trade Organisation.
The WTO remains the best forum in which to address the major distortions to global trade.
Only through WTO negotiations can we tackle trade-distorting agricultural subsidies.
Agricultural subsidies blight world trade: for example, primary producers in rich countries collect around $280 billion a year in government handouts.
These subsidies create distortions which reduce the ability of many economies, including in ASEAN, to compete in the global economy.
As you know, the WTO negotiations are suspended at the moment because a way forward could not be found on agriculture.
But Australia believes that sitting back and allowing the round to fail is simply not an option. The stakes are too high.
Australia is working hard at all levels to encourage the major players to get back to the negotiating table.
If we do not make progress, if we fail to conclude the round in 2007, we stand to lose the chance to secure major reforms.
The elimination of agricultural export subsidies by 2013 and duty free access to developed country markets for most products from Least Developed Countries are already on the table.
It is encouraging that work has resumed in Geneva, but as yet there is no clear way of breaking the current impasse.
To break the current deadlock and to secure a worthwhile outcome, progress will be needed on agriculture, industrial tariffs and services.
To move any one of these areas forward, there will need to be confidence among all negotiating partners that all three will move.
Australia sees the way forward as requiring specific action in key areas.
On agricultural market access, the European Union and Japan need to lift their level of ambition to enable the prospect of new trade flows.
This includes giving greater definition to so-called flexibility provisions like Sensitive Products so that exporters can be confident new commercial opportunities will be created from a Round outcome.
It will also be important for there to be more ambitious cuts from the major farm subsidising nations, including the United States.
Australia has tabled its ‘5/5’ proposal with precisely the aim of promoting movement on agriculture.
The proposal calls for an additional 5 per cent cut in tariffs over and above the G20 proposal, plus an additional $US 5 billion cut in overall domestic support.
Australia is not wedded to the numbers behind the proposal. We are open to the views of others. Our proposal is intended as offering a reference point for a realistic discussion. We hope it will be first step down a path that will ultimately lead to the closing of gaps in positions.
An ambitious outcome on agriculture would deliver major benefits to ASEAN nations in the form of improved agricultural market access and reductions in rich country trade-distorting farm subsidies which for so long have corrupted global trade in farm products.
On industrial tariffs, there will need to be agreement on a tariff cutting formula that also delivers new market access opportunities.
The position of key developing countries will be critical in this area.
These countries have much to gain from a successful Round outcome as their economies continue to internationalise and as they embrace economic integration policies.
New market access opportunities will be central to underpinning the future economic growth paths of developing countries. We all have a shared stake in working to find the necessary movement on this issue as part of an overall deal.
Services has emerged as a major growth area in world trade.
Nearly two-thirds of the trillion dollars in annual global investment flows are directed to the services sector. Those countries that continue to reform their services policy regimes will benefit most from that investment.
The Doha round outcome needs to reflect this reality and deliver a services package that creates new commercial opportunities across the board.
With the increasing tradability of services, ASEAN economies have much to gain from further action to liberalise their services regimes, and to reflect that liberalising action in their negotiating stance in the WTO.
Such action would clearly deliver benefits - experience in the past twenty years has shown that countries that liberalise their services sectors grow faster than those who do not.
Australia has been disappointed at the progress so far in this area, but we believe that there is still the potential to reach a satisfactory outcome that locks in more open and secure access for services providers.
This has been a snapshot of Australia’s views on the way forward in these vitally important negotiations.
We encourage ASEAN businesses to reflect on the current state of play in the WTO and to take action to contribute to the success of the Doha Round. A strong demonstration of the business community’s support for global trade liberalisation and reform would make a real difference in injecting political-level urgency into the process.
The bilateral agenda - free trade agreements (FTAs)
Reviving the Doha Round is Australia’s top trade policy priority, but we cannot afford to ignore the bilateral and regional economic integration agenda.
In recent years Australia has taken the decision to pursue free trade agreements.
This reflected the reality that standing still on FTAs was not an option given that most of our trading partners were engaged in FTA activity. In these circumstances, the Government had a responsibility to secure Australia’s competitiveness in key export markets.
Australia pursues FTAs where they might offer the prospect of delivering significant benefits more quickly than might be possible through a multilateral round of negotiations.
Australia’s existing FTAs—with New Zealand, the US, Singapore and Thailand—and those under negotiation—with China, ASEAN and Malaysia—account for 43 per cent of our total two-way trade in goods and services.
We are about to launch FTA negotiations with Chile and the Gulf Cooperation Council, and have recently completed a major joint study with Japan on the merits of a bilateral FTA which will be discussed by our Prime Ministers in the near future.
Our pursuit of FTAs reflects a judgement that FTAs can tackle specific issues in more depth and often at a higher level of ambition than is possible in the WTO, for example investment, which is largely outside the WTO’s remit.
We place substantial weight on pursuing an FTA policy that will reinforce and not detract from the multilateral trading system
We favour ambitious FTAs because in our view such agreements are more likely to act as building blocks to global trade liberalisation and reform.
For that reason, we take the view that each FTA should be comprehensive and provide for broad liberalisation across goods, services and investment, as well as covering other issues at the heart of the economic integration agenda such as industrial standards, competition policy, intellectual property rights and trade facilitation.
Australia will continue to place a high priority on working in the WTO, in APEC and in other groupings to secure agreement on rules that will encourage comprehensive and ambitious FTAs.
ANZ-ASEAN FTA negotiations
The current FTA negotiations between Australia and New Zealand and the ASEAN countries is a key priority for Australia.
Massive progress has been made in the past twenty years in developing economic linkages between our countries. Those linkages have delivered major benefits to business and the people of Australia, New Zealand and ASEAN.
ASEAN-Australia trade has grown faster than our trade with any of our leading trading partners, with the exception of Asia’s giants, India and China.
But ASEAN as a group is a larger trading partner for Australia than any single country.
In 2005-06, two-way merchandise trade was around $50.1 billion and services trade was worth around $13.3 billion. This is much larger than my country’s trade with the European Union so it shows the great potential from a truly free market in our region.
The FTA has considerable potential to reinforce further those linkages, to extend and deepen them to our mutual advantage and to strengthen our relationship.
There are already a number of very successful bilateral FTAs between Australia, New Zealand and individual ASEAN countries and these provide the inspiration for the construction of this major regional economic integration project.
The negotiations are making useful progress, particularly in the challenging area of tariffs. Parties are aiming to exchange initial tariff offers early next year.
Of course, negotiations involving twelve countries pose considerable challenges, and much work needs to be done before we conclude a comprehensive FTA in 2007.
Australia appreciates that the scale of this undertaking is a challenging and complex one for the ASEAN region especially given the broad range of interests and differing levels of ambition among ASEAN economies.
Australia has been working collaboratively with our ASEAN colleagues to build technical capacity in several key areas, such as rules of origin, services, investment and intellectual property.
These efforts demonstrate our commitment to making the negotiations a success and to ongoing cooperation on trade and investment policy between Australia and ASEAN.
We bring to these negotiations the same high standards that I outlined earlier in relation to Australia’s approach to FTAs.
This means that the bar is set at a high level.
But we think that kind of ambition is necessary to ensure that we maximise the benefits from the FTA.
We do not underestimate the scale of the challenge, but Australia is committed to a successful conclusion and we are looking forward to continuing to work to that end with our ASEAN partners.
Conclusion
I will be brief in my closing remarks.
As I said at the outset, the cause of free trade globally is in trouble.
Many have forgotten or are understating the huge contribution of multilateral and regional trade liberalisation to the economic growth, prosperity and security of the past twenty years.
This view should be of serious concern to developing countries that have benefited from global trade reform, but still pay heavily for the protectionist measures of others.
Australia is committed to working cooperatively with its partners in ASEAN and others around the world to counter the appeal of protectionism.
We will strive in particular for a successful outcome in 2007 to the WTO round.
And we hope that through our ANZ-ASEAN FTA negotiations we will be able to put in place a solid piece of free trade architecture in our region that will demonstrate our shared view on the way forward.
The Australian Government welcomes the support of the ASEAN business community in these efforts, and I join other presenters in thanking the ASEAN Business Community for this opportunity and wish it well for the future.
Thank you.