INCREASING TRADE AND INVESTMENT BETWEEN AUSTRALIA AND EUROPE

Address by The Hon Alexander Downer, MP, Minister for Foreign Affairs, to Australian Business in Europe, Brussels, 29 January 1997.

(UNDER EMBARGO UNTIL 1930 CANBERRA TIME)

Introduction

. I am delighted to be here.

- This is my first official visit to Belgium as Australia's Foreign Minister - though I served here many years ago in our Brussels mission.

- I am very pleased to be able to address this distinguished group of business and political leaders.

. ABIE is a valuable networking vehicle for Australian business people and I am delighted to see it and other Australian business groups working effectively throughout Europe.

- From my perspective, ABIE is an important forum. It not only advances Australia's trade and investment interests, but also works to raise the broad national profile of Australia.

. My theme today is the extensive trade and investment relationship between Australia and Europe and how it can be made even stronger.

- First, I will outline the current state of Australia's links with the EU, including

: EU-Australian cooperation at the Singapore Ministerial meeting of the World Trade Organisation (WTO),

: the EU's developing relations with the Asia Pacific

: and Australia's pivotal role as a competitive base for the Asia Pacific region.

- Second, I will outline Australia's economic and trade policy priorities.

Australia and the European Union

 

. Many of you here today will be aware of the magnitude of the Australia-EU trade and investment relationship. But the figures are worth repeating.

. For Australia, the EU is:

- the largest source of foreign investment, including foreign direct investment (A$112 billion - 28 percent)

- the major destination for foreign investment, including foreign direct investment - a strong and growing investment relationship second to none (A$39 billion - 27.6 percent)

- the largest source of imports, including capital goods (A$19.4 billion - 25.1 percent)

- the second largest market for exports of both goods (A$8.4 billion - 11.2 percent) and services

- a global leader on international trade issues: one of the major players in the WTO, the OECD, the Asia/Europe Meeting (ASEM) and the Energy Charter Conference, and a force in the development of global trade and investment policies.

- a major source of migrants to Australia.

. For the EU, Australia is:

- a strongly growing market, with import growth exceeding intra-EU trade growth over the last five years (ranked 21st EU trading partner)

- a relatively open, sophisticated and easily accessible market

- a base for hundreds of large EU companies, many with strong links to the Asia-Pacific region

- a key player in a range of international groups and organisations including the WTO, APEC, the OECD, the Energy Charter Conference, and the Cairns Group

. The history of Australian exports to Europe holds both good news and bad.

- After growing briskly for most of the 1980s, Australia's exports to the EU faltered in the early 1990s, due to a real drop in our exports of primary processed products ( the area where the EU is most protective).

- But, at the same time, we increased our EU market share in elaborately transformed manufactures (ETMs).

: Impressively, the growth in EU imports of Australian ETMs exceeded overall EU ETM import growth by 100 percent during the first half of this decade.

. The Australian Government remains concerned about Australia's significant trade deficit with the European Union

- There are several reasons for the deficit, including changes in Australia's trade patterns, but the restrictions imposed on imports to the EU in sectors where Australia is particularly competitive (agriculture and energy) are also a major factor.

- Australia will continue to press to have those market barriers addressed

. On the political side, Australia-EU relations have benefited from the conclusion of the Uruguay Round and the introduction for the first time of multilateral disciplines on agricultural subsidies.

. At the same time, bilateral cooperation began to expand across a broad front as the pace of European integration accelerated following implementation of the Single Market and ratification of the Maastricht Treaty.

. In April 1995, Australia proposed that an agreed framework be developed to put its increasingly substantial bilateral relationship with the EU on a formal footing.

. Those negotiations are now under way, but - even before those negotiations are concluded - I am pleased to say that cooperation between Australia and the EU is expanding rapidly. For example

- last July, officials from Australia and the Commission initialled an Agreement on Mutual Recognition in Relation to Conformity Assessment, Certificates and Markings

- negotiations on a bilateral veterinary agreement are well advanced

- implementation of existing bilateral agreements on science and technology and wine continues, and

- initial discussions have been held on a bilateral customs cooperation agreement.

. Australia is committed to strengthening and expanding this important relationship.

. My meetings with the Commission Vice-Presidents and other Commissioners later today, and the visit to Australia next week - as a guest of the Australian Government - of Agriculture Commissioner Fischler, will provide opportunities to do just that.

The WTO Singapore Ministerial: EU-Australian Cooperation at Work

. The European Union has shown a growing recognition of the need to strengthen the multilateral trading system.

. The WTO Ministerial meeting in Singapore late last year produced outcomes of vital importance to Australia and Europe.

- The Commission, through Sir Leon Brittan, played a key leadership role in mustering support for the Singapore outcomes, and has helped develop the idea of a "millennium" round at the end of the decade.

. Clearly, Australia and the EU share many common interests in advancing global trade liberalisation.

. The Singapore Ministerial outcomes are very satisfying on a range of important issues, from the traditional farm and food sectors to the rapidly growing information technology and services industries.

- Ministers agreed to complete the sectoral negotiations on basic telecoms and financial services in 1997, and to expedite work on professional services.

- Australia was particularly pleased with the agreement by WTO Ministers to the commencement in 1997 of analytical work on all the key agricultural issues;

: and to the commencement of a similar program of information exchange and analysis to prepare the way for the resumption of the postponed services negotiations, also due to resume by 2000.

. Another major outcome from the Conference was the agreement to negotiate an Information Technology Agreement (ITA) by April 1997.

- The aim of the ITA is to eliminate tariffs for information technology products by 2000.

- Australia has also agreed to join on condition that participating countries account for at least 90 per cent of world information technology trade and that core APEC economies also join.

. Ministers agreed to commence a work program on industrial tariffs with the aim of equipping the WTO to undertake further liberalisation negotiations more effectively.

. There were also significant outcomes on the `new trade issues'.

. On trade and labour standards, however, Ministers did not agree that there was any place in the WTO for the regulation of labour standards.

- Australia and the great majority of WTO member countries were satisfied with this outcome, as indicated by the Singapore Declaration which rejected the use of labour standards for protectionist purposes.

. The excellent outcomes achieved in Singapore should deliver significant benefits to all WTO Members, and set the WTO firmly on the path towards new multilateral trade liberalisation by the end of the decade.

The EU's Role in the Asia Pacific

 

. The EU has been more active in recent years in developing its relations with the Asia Pacific region.

- The EU's "Towards a New Asia Strategy" endorsed at the Essen Summit in 1994 recognised that the EU had neglected important aspects of its relations with Asia and set out a number of proposals to redress the imbalance.

. The Asia Europe Meeting process (ASEM) is a very significant part of the EU's growing relationship with the Asia Pacific.

- Australia has a natural role to play in ASEM, and has much to contribute to the ASEM process.

- Australia plays a vital role in the economic growth and prosperity of the East Asian economies, and operates as a regional base for many European companies trading and investing with Asia.

. Of course, Australia's vital role in APEC is particularly valuable for the EU

- APEC's share of world GDP has more than doubled in the last 20 years and it now accounts for 56 percent of world output, which could rise to two-thirds by the year 2020.

. As many of you will know, APEC made strong progress in 1996.

- The meetings in the Philippines marked a further stage in APEC's evolution, with a focus on practical implementation of the ambitious free trade agenda endorsed by APEC Leaders at Bogor in 1994, and on generating practical, business-oriented outcomes in areas like trade facilitation.

- Australia continues to see this work - and APEC's activity on economic cooperation - as important in sustaining regional dynamism and strengthening regional integration.

. Australia's strong economic and people-to-people ties in the Asia-Pacific means that Australia is an attractive option for European companies looking to expand their operations in the region.

- Well-known companies such as Bilfinger and Berger Bau, Accor, Siemens, Unilever, AGFA Gavaert, GEC-Marconi, Atlas Copco, Gestetner have all established regional ventures of differing sorts in Australia.

- They have identified numerous key factors in deciding to operate in Australia:

: our well developed information technology and telecommunications infrastructure

: our strong skills base and familiar legal and accounting systems

: and our attractive, safe, low cost living conditions

. It is also clear from Australia's pivotal role in the Asia-Pacific region - and the EU's renewed interest in Asia - that there are many other opportunities for cooperation in the region.

- These include the development of democratic institutions, the promotion of fundamental human rights, and combating the proliferation of weapons of mass destruction.

Australian Economic Policy

. Let me turn now to developments in Australia's economic and trade policies.

. At the heart of Australia's economic strategy is a commitment to increase domestic savings by raising public savings. The rationale for higher savings is to achieve a higher speed limit for economic growth over the long term without the constraints of rising current account deficits and inflation.

. Achieving this goal, while maintaining low inflation, will progressively produce a climate for low real interest rates, which in turn will stimulate investment.

. Together with our fundamental labour market reform, this is forming the basis of a change in the composition of the Australian economy. What we are already beginning to see is a shift in our resources to the production and sale of more exports.

- In short, a leaner, more competitive domestic economy is making Australia a better, more competitive exporter

. The Government has moved decisively in our first year of office to cut Australia's underlying budget deficit and to take steps to ensure the budget is balanced by the end of this Parliamentary term.

- The Government also has a very strong microeconomic reform agenda that will push aside inflexible and inefficient work and business practice.

. We aim to establish a more flexible labour market, reduce the burden of regulation and paperwork for business - particularly small business - and to improve efficiency in the provision of infrastructure services in areas such as the waterfront, aviation and energy

. As you know, the Australian economy has consistently outgrown those of other industrialised economies.

- In the last financial year, the Australian economy grew by 4.1 per cent, around double the OECD average rate.

- At a forecast 3.5 per cent, growth will remain at the stronger end of OECD growth in 1996-97.

. The fundamentals of the Australian economy remain very sound.

- Investment growth is likely to be around 14 per cent in 1996/97

: reflecting high levels of capacity utilisation, confidence about future business conditions and profits

- The current account deficit should fall as a share of GDP to 4 per cent or around $20 billion in 1996-97.

: We should see a continued improvement in the terms of trade

- Employment should continue to pick-up through this financial year.

- The underlying inflation rate is forecast to be 2_ per cent in the year to the June quarter 1997.

. The Government's economic reforms will enhance Australia's competitiveness further

- and will make Australia a more attractive investment destination.

. Australia's resources and farm sectors are not the only areas where we are world-class competitors.

- Australia is now a much better prospect for those looking to invest and develop joint ventures in manufacturing and services.

. The upshot of the Government's economic reform process is that our export performance - to Asia in particular, but also to the world - will be strengthened substantially.

Australian Trade Policy

. On trade policy, Australia now has one of the most open economies in the world and, as a global trader, we are particularly concerned to see that global trade liberalisation is not de-railed by new preferential, and hubs and spokes arrangements

. Through APEC, Australia is pursuing regional trade liberalisation in accordance with the free trade commitments agreed by the region's leaders in 1994 - that is, that APEC would achieve free trade by 2010 for developed countries and 2020 for developing countries.

- The APEC agenda is for this to occur on the basis of open regionalism.

. Beyond this, APEC is pressing for the most ambitious possible global trade liberalisation through the World Trade Organisation.

- We would therefore hope that the EU, as one of the world's leading trading groups, would also fully support the call for the most ambitious possible global trade liberalisation.

- This would moderate the threats that some have identified to the integrity of the multilateral trading system from the proliferation of regional free trade arrangements.

Conclusion

. It is clear from everything I have said that Europe and Australia have shown the capacity to expand mutually beneficial economic links by building on each others' knowledge, expertise and strengths. The trade and investment relationship is strong, but Australia is committed to making it even stronger as we move ahead together into the 21st century. I am convinced that Europe is equally committed to this goal.

- For Australia and Europe, investing and doing business in our respective regions makes more than just good business sense. It is an essential investment in our future prosperity.