Australia and the United States : Old Friends and New Priorities

Speech by the Hon Alexander Downer MP, Minister for Foreign Affairs, to the American Chamber of Commerce

Sydney, 5 August 1999

(Check Against Delivery)


Introduction

I am delighted to have this opportunity to address the American Chamber of Commerce in Sydney, and I want to thank you for the invitation.

AmCham makes an important and often unrecognised contribution to our trade and investment relationship with the United States - our second most important trading partner, after Japan.

Over the last three years, the Australian Government has been giving all the help it can to Australian firms looking to export.
First, by creating a positive economic environment of robust growth and historically low inflation and interest rates in which they can perform their best ; second, by prising open markets for Australian products; and third, by helping promote Australian products overseas wherever we can.

This practical and results-oriented approach has yielded dividends in Australia's much improved export performance to the United States in recent years - comparing 1998 with 1994, for example, Australia's overall exports to the US have increased by a remarkable 82 percent.

I don't need to remind you that Australia-US trade relations have featured prominently in the headlines recently - and with good reason. The US decision on 7 July to impose unjustified safeguard barriers to the importation of Australian and New Zealand lamb sparked deep disappointment and dismay across the Australian community, and not just at the government and industry level. I was reminded of the genuine strength of feeling about the decision in a meeting I held in Adelaide a few weeks ago.

I want re-emphasise what I said publicly in Singapore last week after I met with US Secretary of State, Madeleine Albright. The US barriers on our lamb are not justified by the facts ; are unfair to Australian and New Zealand exporters who have had no assistance from Government and who were playing by the rules of the game; and are founded in hypocrisy in that they strike against the credibility of American rhetoric about free trade.

I will talk more shortly about the lamb dispute, and the importance of Australian and American leadership on the regional and global trade liberalisation agenda, but I want to begin with several broader comments about why the Australia-US relationship is more important than ever at a time when East Asia is undergoing historic economic and political changes.

The Australia-US Alliance : Shared Values and Strategic Interests

The United States and Australia are both optimistic and open societies where individuals and institutions are benefiting from expanded opportunities to harness the powerful forces of globalisation.

The United States enters the next century as the biggest economy, the strongest military power and the primary source of innovation in the industries of the future. Australia enters the next century with the most flexible and competitive economy it has ever had, and with a strong and confident sense of its international role in the Asia Pacific and beyond.

Together, Australia and the US have forged a powerful partnership which should never be taken for granted. It is built on a remarkable continuity of commitment and shared values stretching across the decades, and on an equally remarkable record of results-oriented cooperation. The people-to-people ties, for example, are extensive and wide-ranging - with over 600,000 business visitors and tourists travelling between Australia and the US each year.

Shared strategic interests are the bedrock of the Australia-US alliance. The two countries have a have a long history of close defence and security cooperation, with Australian and American forces serving alongside one another in both World Wars, Korea, Vietnam, the Gulf War, and Somalia.

Almost fifty years since it was signed, the ANZUS Treaty symbolises and formalises this close alignment of strategic interests with the US. It also provides a framework for practical cooperation in areas such as intelligence, defence technologies, and logistics and support arrangements.

ANZUS continues to serve as an effective deterrent against attack on Australia, and makes an important contribution to stability in our region. With this is mind, the Howard Government has - since its election in 1996 - worked for a thorough revitalisation of our alliance with the United States, and I rate the successful attainment of that goal as one of our major foreign policy achievements.

Australia and the United States see most regional and global security issues in similar terms, but Australia always brings its own distinctive perspective and insight to the table - for example, on key regional issues such as the future of Indonesia and East Timor, stability on the Korean peninsula and the importance of engagement with China.

As a result, the real strength of the Australia-US partnership lies in its ability to deliver practical strategies and solutions to regional and global problems - solutions which are more widely acceptable and successful than either country could achieve alone.

This fact has been brought home to me very acutely in the way Australia and the United States have acted since the onset of the Asian economic crisis. Australia's value as a regional partner has been enhanced greatly by our leadership in efforts to combat the fallout from the region's economic crisis, including the momentous political changes that some countries are facing. And one of the clearest lessons the economic crisis has produced is that comprehensive US engagement in the Asia Pacific is more important than ever. There is a broad consensus on this fact among the vast majority of countries in the region.
That is why Australia regards the continuation of bilateral US security commitments to regional states - and in particular the forward deployment of US forces in Japan and Korea - as being crucial to stability in the Asia Pacific region. And we are actively encouraging a continuing constructive US role in the development of multilateral consultations and exchanges on security issues within the region, including the ASEAN Regional Forum (ARF) which met last week in Singapore.
Let me also say, that there has been a long record of strong co-operation between Australia and the United States on the East Timor issue. We have worked closely at all times, regularly exchanging views and perceptions at ministerial and departmental level as events have unfolded, especially in recent months as the ballot planned for 30 August has approached.

We have worked hand in glove to advance the issues involved in this detailed process. Last week at our meeting in Singapore, I held detailed discussions with Madeleine Albright on developments concerning East Timor. Such has been our co-operation that I nearly choked on my breakfast last Saturday in Dili of all places when I read a report claiming there were deep and dark differences between us. That was news to me. It was, I must say, news to all those in Australia closely involved in playing our part to resolve an issue which has vexed Australian foreign policy for nearly 25 years.

Trade and Investment Relations - Growing Stronger

The shared strategic interests and values I have just outlined are underpinned by the dynamic trade and investment links between Australia and the United States. The figures are impressive. Australia's total exports to the United States increased by 34 percent ($6.3 billion to $8.5 billion) in 1998 compared with 1997. Exports of elaborately transformed manufactures (ETMs) have been among Australia's strongest performers - the US is now Australia's second largest market for ETMs. The United States is also the largest source of Australian imports (valued at $21.6 billion in 1998).

Consistent with our close cultural and historical links, Australia's investment relationship with the US continues to be one of our deepest and strongest. The US is the second largest recipient of Australian investment and Australia's largest sources of investment. More than that, US investment in Australia is diversifying, with significant growth in the manufacturing and financial services sectors which have led the way in attracting US firms to establish regional headquarters (RHQs) in Australia.

US companies looking to trade, invest or establish operations in the Asia Pacific are increasingly recognising the practical benefits that come from developing a long term relationship with Australia. No fewer than 125 US firms have established RHQs in Australia since 1993, employing more than 15,000 people and investing $3.7 billion.

I am pleased to say that the Howard Government has revitalised the process of bilateral trade and investment consultations with the United States - known as the Trade and Investment Framework Agreement (TIFA). Successful TIFA senior officials and Ministerial-level meetings were held in May this year in Washington, led by the then Trade Minister Tim Fischer. These meetings provided a valuable opportunity to discuss key market access issues, to address existing barriers to our trade and investment, and to discuss developments in the region.

But much more work remains to be done before the full potential of the trade and investment relationship is made a reality on both sides of the Pacific.
Australia continues to carry a substantial trade deficit with the US ($13.1 billion in 1998) which - when measured as a proportion of GDP - is much greater than US trade deficits with Japan or China. The low level of complementarity between the two economies is not the only reason for this trade imbalance. While general access to US markets is liberal by international standards, there are several important areas where access continues to be denied, heavily restricted or constrained by regulatory and legal impediments.

These restraints range from the Civil War-vintage 'Jones Act' which stifles the export of Australian catamaran ferries, to significant limitations on sugar and dairy products. In particular, US farm support programs continue to have a negative impact on Australia's exports to the US and other countries.

The Importance of Trade Liberalisation

Of course, trade disputes between Australia and the United States are neither new nor unprecedented in the history of the relationship - in fact, they pre-date the ANZUS Treaty by several decades.

During the 1930s, for example, Australia appealed unsuccessfully to the United States to redress its large trade imbalance with Australia. After 1945, Australia repeatedly protested to Washington about US restrictions on goods such as dairy products, wool, beef and grain. More recently, the passage of the US Export Enhancement Act in 1985 raised bilateral trade tensions to new levels and set the scene for an extensive and unfinished debate between the two countries on the wisdom of subsidising agricultural exports.

But it is also important to remember that Australia and the US can boast an equally significant history of shared endeavour in the regional and global trade policy arena. The two countries have been in the vanguard of recent efforts to encourage freer and fairer trade, particularly in encouraging countries in East Asia to resist protectionist pressures and not turn the clock back on the greater openness that has been won over the past decade.

The dynamic US economy and open market have been a valuable source of support to countries suffering from the Asian economic crisis. The Asia Pacific as a whole has surpassed Western Europe to become the largest regional trading partner for the United States. The US remains the leading export market for the Philippines, Singapore and Thailand, for example, and is the second largest export market for Malaysia and Indonesia. More broadly, the US economy has been the major driving force for global growth. During the 1990s, the US has taken nearly half of the growth in developing country exports to the industrial world - USD 210 billion in new exports between 1991 and 1997, compared to USD 135 billion for the EU and USD 64 billion for Japan.

Australia and the United States must continue to pursue, bilaterally and through APEC and the WTO, the objective of fairer and freer trade, and create a more resilient constituency for that objective in the region and beyond. But as I have said before, to provide effective and persuasive leadership Australia and the US must be able to say to countries, "Do as I say, and do as I do".

That is why the Australian Government believes the US lamb decision sent a particularly negative message on Washington's commitment to trade liberalisation. The world is looking to the US for leadership in the run-up to the WTO ministerial meeting in Seattle.

In our region, if countries had opted for popular short-term solutions similar to the US lamb decision, it is likely that East Asia's economic difficulties would be considerably worse than they are today.

Protecting and Advancing Australia's National Interests

The Prime Minister made clear Australia's condemnation of the US lamb decision during his talks with President Clinton in Washington last month. Former Trade Minister Tim Fischer and his successor Mark Vaile have underscored Australia's deep disappointment and anger.

I had an opportunity to raise the matter again during my meeting with Secretary of State Albright in Singapore last week. I should also say, however, that - throughout the course of the lamb dispute, as with other trade differences with the United States - the Howard Government has followed the long-standing, policy of not linking the alliance's defence and security arrangements as `negotiating coin' with our bilateral trade concerns and objectives.

This well-established `non-linkage' policy has attracted strong support from across the Australian community for many decades. The reasons behind it are no less compelling today than they were at the height of the Cold War because they go to the heart of our foreign and trade policy - protecting and advancing Australia's national interests.

Linking trade and security would neither advance Australia's trade objectives with the United States nor protect our security and wider national interests. Rather, it would undermine Australia's security, weaken US strategic engagement in the region and place at unacceptable risk one of Australia's most valuable national assets which has stood the test of time - a genuinely close relationship with the United States which continues to offer tangible benefits to Australia and reflects the deepest values held by Australians across the generations.

Conclusion

I want to conclude by emphasising that the Howard Government will always ensure that Australia has a strong, confident and independent voice in our foreign and trade policies.

That is why we will continue to pursue our trade and other interests vigorously and unapologetically with the United States - not only in the lamb dispute but across the board in our bilateral, regional and global agenda. At the same time, we will never lose sight of the over-riding importance of the Australia-US alliance and the indispensable contribution it makes to our security and the region.

The impressive dynamism of Australia-US trade and investment relations is no accident. It has come about as the result of deliberate effort and hard work by individuals, businesses and institutions on both sides of the Pacific over many years. AmCham can be very proud of the part it has played in this endeavour, and I wish you well in your future work and activities.

ENDS


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