Australia and Europe: Not So Distant Neighbours

Address by the Hon Alexander Downer, MP, Minister for Foreign Affairs,

at the ABIE Breakfast, Brussels, 4 February 1999.

(Introduction)

Ladies and Gentlemen.......

Thank you very much Jane and James Nicholson, MEP, who is the Chairman of the European Parliament's Delegation for Australia and New Zealand, Excellencies, ladies and gentlemen. Well can I thank Australian Business in Europe and Jane in particular, for organising this function today and to say that it is always a great pleasure for me to come back to Brussels, where 1 lived for three years between 1977 and 1980, working at the Australian Mission to what is now the European Union. It is a genuine pleasure to come back here and to dive once again into all of those issues that are associated both internally and externally with the European Union. I am pleased that for the one speaking opportunity i have here, I am able to speak to Australian Business in Europe, to ABIE, because I do think they do a terrific job all around Europe, not just here in Belgium but in other parts of Europe, in promoting Australian commercial interests.

When we first came to Government in March 1996, we made it clear that, as an Asia Pacific country, understandably our first priority in foreign and international economic policy was going to be our own immediate region and every country on earth, with the possible exception of the United States, does that. But we also said that Australia is not just a regional country, it's a country which has global interests and we were enthusiastic about promoting our global interests in some parts of the world where we thought those interests had been insufficiently promoted in years gone by. The best illustration of that was the European Union. I can say, given the enormous changes there have been in the European Union over the last two years, that the investment that we have made over recent times in strengthening our relationship with the European Union has, I think, been particularly wise.

As Jane said in her introduction, in 1997 in Luxembourg I signed, with Sir Leon Brittan and the then President of the EU Council of Foreign Ministers, the then Dutch Foreign Minister, the Joint Declaration which was a symbol of the strengthening of our relationship with the European Union.

Since I suppose, a little before 1973 when Britain joined the European Union, since the late 1960s when negotiations for Australia and what is now the European Union has been one that has been characterised by confrontation over agricultural trade issues. Now I don't criticise my predecessors for their focus on those agricultural issues, because in the early days the common agricultural policy did Australian agriculture very great damage and so, understandably, if the national interest is affected in that way, the government will make a significant issue of that and the Australian governments did. I just want to make the point that since, in particular, the Uruguay round negotiations were concluded, that relationship with the European Union has become a broader relationship and thankfully it has become a much more constructive relationship.

Of course, the agricultural issues are still on our agenda. In particular, we want to see a liberalisation of the European market, a reduction in domestic subsidies and the abolition of export subsidies for agriculture. We very much hope that the Agenda 2000 programme can be endorsed in the first few months of this year - perhaps in March of this year - as a step towards introducing greater rationality to European agricultural policy and ensuring that international agricultural trade is not distorted in the way it currently is. But having said that, as a good illustration of the broadening of our relationship, in recent times Australia and the European Union have worked very closely together to promote not just sectoral liberalisation in international trade, but also a new millennium round of trade negotiations under the auspices of the world trade organisation. I know my colleague, the Australian Minister for Trade, Mr Fischer and Sir Leon Brittan in particular, have worked very closely together in promoting this cause. For Australia and the European Union, the last few months have been a very good period, because we now have the United States supporting a new global round and Japan supports a global round, so with a bit of luck, between us over the next few months we'll be able to get the support of the key developing countries in the WTO and that global round will get under way before too long.

That will be an achievement of Australia / European Union cooperation amongst other things and it is a forum where we, from our perspective and the European Union, from its perspective will be able to take forward, inter alia, the agricultural trade agenda and we hope that great progress will be made there.

There have been so many changes in Europe, as I mentioned earlier, in recent years, that it's those changes themselves which have also helped to broaden the dimension of the relationship between Australia and the Union. We have, of course, watched - as the rest of the world has watched - the exciting moment of the introduction of the Euro and the creation of what is described - I'm not sure I like this expression very much but - what is described by the media as 'Euroland'. This establishment of the Euro means a lot of things in terms of international relations and it means a lot of things to Europe itself. Far be it from me to analyse all of that, excepting to make one point and that is, that the creation of the Euro gives the European Union a much more significant role to play in the development of the international financial architecture. From our perspective as an Asia-Pacific country, it gives the European Union potentially a more important role to play in dealing with regional and well as global economic problems such as the Asian Economic Crisis. We have been, over the last few days, particularly concentrating the minds of European Union Ministers and Officials, on the role that Europe can play, as well as Australia, the United States and Japan, in helping to resolve the problems of the Asian Economic Crisis and the level of cooperation there, I think, is potentially very great.

The Asian Economic Crisis still does need more attention and more work. When I was in Davos last weekend I was a little surprised by the positive mood there was in Davos amongst European and American presenters about the recovery of Asian economies. We in Australia take a more sanguine view. We think 1999 is going to be a difficult year for Asian Economies. Certainly there have been improvements in Korea and Thailand, but the Japanese economy is not likely to come out of recession early in 1999 and indeed, its economy may contract by around half a percent during the course of this year. We are also very conscious of the fact that the Chinese economy is going through a difficult period as they restructure their state-owned enterprises, as they deal with the restructuring of their banking sector, and as they deal with the contagion effect of the broader Asian Economic Crisis. In our neighbour and friend, Indonesia, there is no doubt that this year is going to be an absolutely key year in the history of an independent Indonesia. I often say to people that in fifty years' time they will remember three key years in Indonesia's evolution: 1949 when Indonesia finally completely gained its independence, with the strong support of Australia let me say, in 1965 when the Soekarno regime was replaced by the Soeharto regime, and they will remember 1999 because in June 1999, Indonesia will hold its first in many years, its first free, fair and democratic elections. If these democratic elections work, if they are successful, if violence is kept to a minimum, if the administration of the elections is properly conducted, then you will have the world's fourth most populous country becoming a genuine liberal democracy. That will be an exciting thing, not just for the Indonesians themselves and for their friends and neighbours, but that will be an exciting thing for the world.

The European Union has been sometimes quite focussed on Indonesia. They have been focussed, for example, on human rights issues in Indonesia: they have been focussed on the transitions that have been going on in Indonesia. I only make this point: that it is very important, given the support of Europe for the principles of democracy in Indonesia, that when the time comes and when Indonesia is on the threshold of a great democratic revolution, the European Union is there helping Indonesia at that difficult time. We will do all we can to help. I know the Americans are doing a great deal and I know the Japanese are and it is important that the European Union does as well. I came to this point through a discussion about the Asian Economic Crisis and a lot of European firms and a lot of European banks have considerable interests and exposure in Indonesia and if these elections are successful, if Indonesia flourishes as one of the great democracies of the world, that will be tremendously good for the Indonesian economy and for those European businesses that have an investment and an association with Indonesia.

So Europe has a vested interest to help Indonesia through this difficult period and of course, more broadly speaking, now that Euroland has been created and Europe has a much bigger role in international financial architecture than ever before, Europe really has a responsibility to play a considerable role, as it has indeed been doing, in addressing the Asian financial crisis. I acknowledge, for example, the establishment of the Asem Trust Fund, the work that the European Union economies have done for the W and the World Bank and we look forward to a solid contribution also from the European Union to helping Indonesia at this critical time.

The creation of the single market in Europe, the creation of the Euro, the integration of Europe in the way that has occurred has, I think, by any standards it has been a remarkable thing. It's not too tactless for a Foreign Minister to remind all of you that during the course of this century, Australians have on two occasions, come to Europe and given their lives in internal European wars which, of course, have spread way beyond Europe but which in any case, had their genesis within Europe. So we have a very significant interest in the European Union succeeding, in the experiment of Europe being the success that it is clearly becoming and we really have been delighted to see the changes that have taken place.

I mentioned how the creation of Euroland gives the European Union a much more important role to play in international financial architecture. So too has the creation of the single market and the improvement in the single market and the cooperation between in that case, the fifteen economies of Europe have meant that as an economic partner, the European Union is all the more important to Australia. By one definition, the European Union is Australia's largest economic partner if you take into account both trade and investment, so it is of vast importance to us economically. There are around 173 billion dollars' worth of European Union investment in Australia and indeed, it is worth noting that between 1996 and 1997, there was a 34 percent increase in EU investment in Australia. So the European Union, as it itself grows and strengthens, is clearly showing a much greater interest in Australia and there is a great deal of Australian investment in the European Union. Some people in Australia take a sort of inward-looking, nationalistic view and have some opposition - or a great deal of opposition in their cases - to foreign investment and it is worth those people remembering that the European Union creates something like 300,000 jobs in Australia.

We have also seen big growth in our trade with the European Union. During the Asian Economic Crisis, we have had to make some significant adjustments to our trade flows and Australian businesses have turned out to be extraordinarily versatile and their versatility has been demonstrated by the very big increase in our exports to the European Union over the last couple of years.

On the other side of the ledger, it is fair to say that we promote Australia as a very good base for the European Union in the Asia-Pacific region. Yes, the Asian economies are going through a difficult period at the moment, but it is worth remembering that in time, Asia will get back onto the path of growth. It will get back onto a faster path of growth, and Asia will be more transparent more accountable, more democratic than it has ever been before. So you will have emerging in time, a new, stronger Asia which will offer enormous potential for European investors and economic partners more broadly.

Australia does represent a very solid base for European business in the Asia-Pacific region. We obviously have a very stable and democratic system of government. As I often remind people - and few would know this - Australia is something like the third or fourth oldest, continuously operating democracy on earth and we, along with New Zealand by the way, were the first people ever to give women the vote. Not that it's much to boast about that we didn't give them the vote until 1894, but it's even less for others to boast about that they gave them the vote a good deal later. I hope, by the way, they're very grateful for that.

But it is a very stable and democratic base: our system of governance is a highly accountable system and we have what you would call in financial circles, very mature markets, very sophisticated financial markets and Australia is something like the world's fourth most plugged-in hi-tech society in terms of things like internet use, personal computers and the like. So it is a fantastic base for the Asia-Pacific region for European companies.

It is also worth my while concluding with the point that the Australian economy could only be described as the strongman of the Asia-Pacific region. We have seen many of our export markets of course, diminish substantially because of the Asian economic crisis and I mentioned earlier, in the context of our trade with the European Union, that our businesses have shown great versatility and they have been, frankly, significantly assisted by the fact that in Australia we have a very strong commitment to the liberal market model. For example, we have a floating exchange rate and so when our exports to East Asia were hit by the Asian economic crisis, there was a market adjustment - not a government or a central bank adjustment -to our exchange rate and that of course, gave us a more competitive edge in markets such as the European Union, the United States, the Middle East and so on. We have seen the Australian economy, despite the Asian economic crisis, grow at one of the fastest rates of any economy in the world. During the last calendar year, 1998, our economy will have grown by somewhere in the vicinity of a bit over 4 percent. The final figures have not come out yet, but between 4 and 4 and a half percent. We have seen interest rates and inflation in Australia go down to the lowest levels they've been in three decades. We've at long last seen our very high unemployment rate start to drop, although our unemployment rate - perhaps this isn't the right way of putting it to a European audience, but our unemployment rate is still far too high at 7 and a half percent and we have to get that down further.

I mentioned that we have achieved these things because of a very strong commitment in Australia to the liberal market economic model. We've introduced greater flexibility into our labour market, because we know that you will never get unemployment down unless you have a flexible labour market. We have exercised what could only be described as something close to an extraordinary level of fiscal responsibility. I was discussing this question yesterday with the President of the New European Central Bank and we were reflecting on the fact that the Maastricht criteria require that public sector debt as a percentage of GDP should be below 60 percent and, in Australia's case, we have now got public sector debt as a proportion of GDP down to 17 percent. If it often needs to be said that we meet the Maastricht criteria, I can only say to you that we massively exceed the Maastricht criteria.

Finally, whilst we accept that our taxation system is not one of the most modern and effective in the world: it was introduced, after all, during the great depression, our Taxation system over the next year is going to be completely reconstructed, so that we have a 10 percent VAT right across the board in our economy, with the only exemptions being in areas like health services and educational services (and one or two others), but with very, very few exemptions. We will significantly reduce our rate of personal income tax so that more than 80 percent of Australians will pay no more than the highest marginal rate of 30 cents in the dollar.

We do all of these things, and I can tell you politically, they are not easy to do, because we know that in the age of globalisation, our economy has to be competitive. We've got to make sure we're competitive as compared to the economies, or the economy, of the European Union and of the United States and of our Asian partners. We have no alternative but to make these types of reforms which we have made to ensure that we get effective rates of economic growth and we can address all the social problems that advanced industrialised societies have, which you're familiar with and we're familiar with, and we are succeeding in doing that.

So let me conclude by saying I am really very optimistic about the relationship between Australia and the European Union. As I said at the beginning of my remarks, I used to live here in Brussels and work here with the Commission and the permanent representations and the like, the European Parliament. I was here indeed at the time when the first ever direct elections to the European Parliament took place and spent a good deal of time travelling from Brussels down to Strasbourg to sit through sessions of the European Parliament, being a young and enthusiastic budding politician at the time. Probably not everybody would want to go down to Strasbourg every month and listen to the European Parliament, but I did and, thank you, I'm sure James will appreciate this, I enjoyed it very much.

Since that time we have, as I've said, broadened the relationship, strengthened the relationship, developed a much more sophisticated and constructive relationship with the European Union. I think Sir Leon Brittan, as the Commissioner responsible for Australia and I would both agree that the relationship between Australia and the European Union is better now than it's been at any time since 1973 - even better than when I was here. So I would like to thank the European Union for its commitment to the relationship with Australia, that way around and say that we have enjoyed very much working with the Commission, with the Parliament, with the other institutions of the EU, in strengthening that relationship. In the years ahead, I know that we can do still better with each other as we cooperate in the areas of financial and trade reform and evolution and we work together also on a range of political issues, so thank you very much.

---

Copyright Commonwealth of Australia | Disclaimer | Privacy