Address by The Hon Alexander Downer, MP, Minister for Foreign Affairs, to the Australia-British Chamber of Commerce, Sydney, 17 September 1997.
Introduction
Derek Fatchett, Philip Higginson (Federal President of the Chamber of Commerce), Neal Blewett. It is a great pleasure to be here today.
- I particularly want to welcome Derek to Australia - your presence is a sure sign of the continuing vitality and importance of the Australia-UK relationship. I am looking forward to exchanging views with you on a range of issues later today.
No two countries in our respective regions know each other better, trust each other more, and have closer relationships than Australia and Britain.
One of the Australian Government's achievements in foreign and trade policy since coming to office last year has been our successful revitalisation of Australia's relations with the EU and its key member countries.
In particular, two landmark events this year have highlighted the Government's practical and innovative approach to relations with Europe.
- First, the Government tabled Australia's first ever White Paper on Foreign and Trade Policy last month.: It defines anew what it means to be an outward-looking 'Confident Australia' with broad horizons - not just in Asia Pacific, but across the globe.- Second, earlier this year, I signed the historic Joint Declaration governing Australia's relations with the European Union.
: Forty years after the Treaty of Rome created the EEC, the Joint Declaration has established the framework for Australia-EU relations in the 21st Century.
I want to focus my remarks today on what the White Paper says about Australia's very important links with Europe, including Australia's growing importance as an investment destination and 'gateway to the Asia Pacific'.
- I also want to speak briefly on the positive trends in Australia's modern relationship with the United Kingdom.
PART ONE: Australia and Europe: Pursuing Global Interests Together
The White Paper's starting point is that Australia has global interests which require a foreign and trade policy of broad scope.
- The high priority which the Government attaches to Australia's relations with countries of the Asia Pacific does not diminish the important interests Australia must pursue in Europe and elsewhere.- Australia's economy is bigger than all but three of our East Asian neighbours - China, Japan and South Korea.
: This means that we are a major partner for Europe in our part of the world.
Europe is a global pillar of stability and prosperity.
- Australia suffered directly this century when European conflicts became global conflicts.: Australia therefore has a fundamental interest in Europe managing successfully the great challenge of developing political, economic and security institutions appropriate to the changed realities of the past decade.
The White Paper concludes that a unified Europe will rival North America and East Asia as centres of economic activity.
- It makes clear that - over the next fifteen years - Australia will be dealing with an increasingly integrated Europe.
Growing Economic Links with Europe
Like the White Paper, the Joint Declaration with Europe that I signed earlier this year advances the shared interests and common values that underpin the Australia - Europe partnership.
- It means that we are now dealing with the EU on a wide range of issues and working cooperatively in many new areas - such as environment protection, scientific and technical innovation, and education and training.: One of the key areas for further cooperation highlighted in the Joint Declaration is that of employment creation where Australia and the EU have much to learn from each other's experience.
But our growing trade and investment links remain at the heart of the relationship.
- Taken as a single entity, the EU remains Australia's single largest economic partner, a position it has held for the last seven years. It is our largest source of investment, with a 32 per cent share of total accumulated foreign investment in Australia.- The EU is the second largest destination for Australian investors, which means that more than 25 per cent of Australia's total foreign investment went to the European Union.
- The EU is also Australia's second largest overseas market for services, and for merchandise exports. It is also our major source of imports.
- The EU as a whole was in 1995/96 Australia's largest trading partner.
The White Paper makes clear that, through expanded trade and investment, Australia will enhance its access to Europe's high technology capabilities and Europe's strengths in the development of industry and infrastructure.
A Shared Interest in Trade Liberalisation
The White Paper also demonstrates that, if our exports are to continue to grow, leading to sustained economic growth and new jobs - in Australia and Europe - then further trade liberalisation must be pursued at the regional and global levels.
- 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 advanced further.
For example, genuine reform of the EU's Common Agricultural Program (CAP) is proceeding more slowly than we would like.
- The EU is still the main distorter of world agriculture trade.- CAP expenditure was A$ 59.5 billion in 1997 - it currently absorbs 0.6 percent of the EU's GDP, or half of the European Commission's total budget.
The new Europe has come a long way towards recognising that it cannot go on subsidising its farmers to produce goods that no one wants at their real price
- It certainly cannot subsidise millions of new adherents among the farmers of Eastern Europe.- Everyone gains by freeing up international trade in agriculture and moving it away from continued expensive subsidisation.
On the positive side, the Uruguay Round outcomes which have brought agriculture under WTO disciplines have provided a valuable forum to discuss these issues, and have helped lay the basis for Australia's improved relations with all our European partners, including the United Kingdom.
- Australia will continue to appreciate Europe's leadership on international trade issues in international forums.
PART TWO: Australia as a Gateway to the Asia Pacific
The White Paper reaffirms that Australia's unique economic and cultural profile makes us particularly attractive as a conduit for business between Europe and the Asia Pacific.
- Australia has absorbed over two centuries of European experience and technology.: Our institutions draw from and rival Europe's best.: Our economy has long been a major destination for European investment.
- Australia's position in the Asia Pacific is unique in the way we straddle two worlds.
: We can often repackage what Europe has developed in ways that are more interesting or relevant to an Asia Pacific audience or market.: Australia can be a regional gateway economically, and a valuable interlocutor strategically, for our European partners.
In particular, the White Paper states that in some areas Australia can serve as a platform for European investment into East Asia.
- European firms are looking both to take advantage of Australia's excellent growth prospects and to seize the opportunities afforded by our proximity to the engine room of world growth - the Asia Pacific.
I believe that British companies have good reason to look to Australia as a launch pad for Asia Pacific operations.
- Australia measures up very well against most of the key advantages sought by British investors.: These include an educated, skilled workforce, a large and sophisticated domestic market, our strategic location close to Asia Pacific markets, first class infrastructure services, a world class research and development base, and relatively liberal foreign investment and ownership rules.: Australia is very cost competitive across a wide range of business inputs, especially in commercial and industrial property, and in managerial and professional salaries.
More than that, we have a regional headquarters (RHQs) program to encourage global companies to establish RHQs in Australia.
- In particular, the Government provides limited tax concessions, such as wholesale sales tax and dividend withholding tax exemptions, as well as immigration agreements for firms establishing RHQs.: Two hundred foreign companies have established regional headquarters or regional management operations in Australia over the last three years.
I am pleased to say that British companies have been leading the way in this trend of utilising Australia as a base for Asia Pacific operations.
- British companies make up over sixty percent of the EU companies that have established regional headquarters operations in Australia.
PART THREE: Australia and the United Kingdom: A Modern Partnership
The White Paper makes clear that Australia's future is tightly bound up with the future of the Asia Pacific.
Likewise, the future of the United Kingdom is tightly bound up with the future of Europe.
- But - as I have already emphasised - we both have important and growing interests in each other's regions.: We need the markets of both to create new jobs and prosper.
The fact that Australia and Britain are focusing their attention on greater engagement with their respective regions should not, in my view, diminish the importance or relevance of the Australia-Britain relationship.
- Our preoccupations closer to home don't drive us apart or somehow make us less relevant to each other.- Rather, they enable both countries to focus on the increasing range of advantages each can offer the other.
- I was delighted to hear Robin Cook's comments just last month when he said that, "Australia is a much more valuable partner to Britain in the modern world than at any time in those past two centuries. The growing importance of Asia and of the countries around the Pacific mean that Australia is much stronger for Britain as a bridge into an area of the world of growing importance."
These complementary interests, and the vital roles we play in our respective regions, constitute the most compelling reason to keep the bilateral friendship as modern and dynamic as possible.
Of course, Australia and the United Kingdom already enjoy a sophisticated partnership that is expanding across an extraordinarily diverse range of areas.
Our dynamic trade and investment relationship goes back a long way.
- Forty years ago - in 1957 - Australia and the UK re-negotiated a 25 year old Trade Agreement which the then Trade Minister, John McEwen, described as "a valuable step towards maintaining traditional trade and commercial ties with the UK".- That Trade Agreement no longer exists, but it helped lay the basis for today's flourishing trade and investment partnership which remains very important to both countries, even though Europe and the Asia Pacific have changed dramatically in economic, political and strategic terms since the 1950s.
: I believe that the Australia-British Chamber of Commerce can take a great deal of the credit for these robust commercial ties.
Britain is the second largest investor in Australia with $86 billion worth of investment here, a long way in front of Japan in third place on $57 billion.
- The UK is the largest investor in Australia's manufacturing industry, providing nearly 40 percent of the total direct foreign investment in manufacturing: The British High Commissioner, in an address at the National Press Club earlier this year, estimated that British investment in Australia created around 300,000 jobs in this country.- After the US and the Netherlands, Australia rivals France and Germany as the next largest foreign investor in the UK (almost $30 billion).
The Australian Economy: A 'Good Bet' for British Investors
I want to emphasise that Australia remains a 'good bet' for British investors.
- Let me explain why.
Australia's economic prospects, as outlined in Australia's 1997-98 Federal Budget, are good.
- The forecasts are for strong growth - with low interest rates, negligible inflation and faster employment growth - in fact, Australia now has the most affordable housing loans since the Beatles broke up.- Australia's real GDP is forecast to rise by 3.75 per cent in 1997-98, underpinned by a supportive international environment and structurally sound household and corporate sectors.
Moreover, the Australian Government is establishing a framework for economic growth for years to come by building on the already substantial fiscal consolidation implemented last year.
- In our first term of government, we will have turned an underlying budget deficit of more than $10 billion into a surplus of $1.6 billion. By 2000-2001, the budget should be in the black to the tune of $10 billion.: That's quite a reversal. And there's more. The Commonwealth's debt to GDP ratio will be cut from 19 per cent in 1995-96 to under 10.5 per cent in 2000-2001.
The Government is achieving this without increasing existing taxes or introducing new taxes in the latest Budget.
- Clearly, tax reform is an area needing some attention and we are encouraging an active debate on this issue.
At the heart of Australia's economic strategy is a policy to increase national savings which will make possible faster economic growth over the long term - as the constraints of rising current account deficits and inflation will have been removed.
The Government's economic policy settings will bring about an economic climate making today's very low real interest rates sustainable.
- This will encourage substantial increases in investment.
More than that, we intend to press ahead with further reforms to give Australia's competitiveness an even sharper edge. We will continue:
- Vigorous microeconomic reform to increase productivity, including in key sectors such as telecommunications, transport and energy.- Labour market reform for a more efficient and flexible labour market; and
- Regulation reform to reduce the compliance burden and costs for business.
As a result, when British companies look at Australia they will see economic reforms being put in place which improve Australia's international competitiveness and make Australia an even more attractive investment destination.
- They will also see an economy which has consistently outgrown those of other industrialised countries.
Enduring People-to-People Links
Of course, the extensive investment that Australia and the United Kingdom have made in each other over the years goes well beyond the economic or commercial realm.
- It extends to the enduring ties that bind peoples across the globe - the shared aspirations and values, the historical and institutional associations, the abiding links of family and community, and decades of cultural cross-fertilisation.: 1.4 million Australians have a parent born in the United Kingdom.: The UK is our third largest source of tourists after Japan and New Zealand, and accounts for more than half of all the tourists who come here from Europe each year.
: Over 380,000 Britons visited Australia last year, an impressive increase of 12 percent on the 1995 figure. One in every thirty two Australians visits the UK each year.
It would be easy with a history as rich and durable as the one shared by the~United Kingdom and Australia to allow that history to dominate our perspective on the future of the relationship.
- That is why the Australian and British Governments have given a strong and practical commitment to making the partnership as contemporary and forward-looking as possible.: In particular, the New Images promotion is doing a great deal to communicate up-to-date perceptions of our economies, our societies, our directions and our peoples.
Conclusion
In conclusion, the White Paper demonstrates that Australia's interests in Europe are best served when our bilateral relations with its major countries are sound and comprehensive.
- It emphasises that the presence in Australia of major communities of European origin is a major asset in building these strong bilateral ties.- It shows that - through expanded trade and investment with Europe - Australia will be able to enhance its position as a gateway to the Asia Pacific, add new momentum to its regional export push, and gain better access to Europe's high technology capabilities and other economic strengths.
The Australian Government has redressed the recent neglect of Europe by revitalising bilateral relations with the EU and the key member countries of the European Union - none more so than with the United Kingdom.
Australia and the United Kingdom have global interests, and these interests ensure that we will maintain and improve ties with each other and other parts of the world in the next century.
- Australia's natural advantages and assets as a key member of the Asia Pacific are being enhanced further by our positive macro-economic fundamentals and the Government's sustained renovation of the Australian economy.: The Australian Government remains committed to working with the Chamber of Commerce in bringing the British and Australian business communities even closer together.