Speech
at the Australian APEC Studies Centre conference on 'The
Impact of an Australian-United States Free Trade Agreement: Foreign
Policy Challenges and Economic Opportunities'
Canberra, 29 August 2002
The Strategic Importance of a Free Trade Agreement to Australia-United
States Relations
Introduction
Ladies and gentlemen
It is a great pleasure to speak to you today and set out the Government's
perspectives on the proposal for a Free Trade Agreement with the United
States.
I am especially pleased to report to you that the proposal is gaining
support on both sides of the Pacific within the US Administration
and Congress, and is backed strongly by the Australian and US business
communities.
I don't need to tell you that it also has the strong support of the
Australian government - an FTA with the United States is now a major
policy objective for the Government.
An FTA would fulfil extensive commercial as well as long term strategic
interests for Australia.
And, because of the sheer size and reach of the United States, it
also would realise spin-off benefits far and beyond the actual text
of the agreement.
I am much encouraged by the recent passage of Trade Promotion Authority
in the United States Congress.
It is very welcome, and reflects the hard work and commitment of
the US Administration to an ambitious trade liberalisation agenda.
TPA itself also has important strategic benefits: I see it as an
important plank in reasserting the value of economic integration and
openness - the process of globalisation itself.
Recently, at the Australian American Leadership dialogue in Washington
DC, US Trade Representative Bob Zoellick set out the case for an FTA
in one of the most impressive speeches I have heard by a US official
– and an especially important one, given that it was delivered by
the US Trade Representative.
Bob referred to recent great epochs of globalisation – at both the
beginning and the end of the last century – and the wrenching periods
of economic stagnation and depression, and political strife and war
in between.
He pointed out that in the earlier period of globalisation – where
international trade accounted for a greater percentage of global GDP
than it does today - Australia's commercial and cultural ties were
overwhelmingly with Britain.
And he contrasted that period, of course, with today, when our ties
are highly diverse, and global in reach.
Those ties reflect a much changed international environment, as well
as a much changed country – culturally, economically and structurally.
They reflect our interests in strong ties in the Asia Pacific and
beyond - with countries of particular significance – in order to cement
our future prosperity and a stable environment.
And they reflect our interests in leading the cause of liberalising
trade and investment – opening markets for our goods and services
– through initiatives in the WTO, regionally, and bilaterally.
Australia is a significant country.
We are a leading player in the region, and an active and a respected
player globally.
We are the world's 14th largest economy, and the fastest
growing in the OECD.
Our GDP is nearly that of that of the ASEAN countries put together
– a region of more than 500 million people.
Moreover, we are an industrialised, liberal, western democracy, with
mature institutions, respect for the rule of law and the protection
of private property rights.
We are the sixth oldest uninterrupted democracy, and known and admired
the world over for our political stability, our economic success and
social cohesion.
I say these things not to boast – but to point out that we should
not be reticent about our strengths and our capacities, or about projecting
them in our dealings with the United States or other parts of the
world.
They are strengths, I strongly believe, that helped us to win the
LNG deal with China, and can do the same in negotiating an FTA with
the United States.
Bob Zoellick has stated – eloquently – a number of the arguments
for an FTA being put forward on both sides of the Pacific.
They bear contemplating.
First, there would be straightforward economic gains.
Many of these are set out in a report by the Centre for Independent
Economics at ANU, which, amongst other things, estimates a possible
$4 billion net gain per annum to Australia's GDP from an FTA.
Second, there would be a very significant 'head turning' effect from
an FTA in attracting investment, with subsequent gains in employment
and productivity.
Third, an FTA would result in greater business integration, as Australian
and US companies realise synergies in innovation, research and development,
material sourcing, product development, marketing and – especially
– in information technology.
On this point, let me say that it is vital that we tie ourselves
into the opportunities that are inherent in the US business system
– a system for which change is a constant theme.
Of the Fortune 500 companies listed in 1956, only 65 remain today.
The others have been acquired, fallen by the wayside, or simply not
kept up.
If we want to succeed, we need to be part of that dynamism.
Fourth, an FTA could be an important factor in what Bob Zoellick
has coined “competitive liberalisation”, whereby what we do bilaterally
has an important 'demonstration effect', ratcheting up other trade
negotiations, in particular at the WTO, but also regionally.
Fifth, an FTA would help engender a broader appreciation – in both
countries – of the bilateral security alliance and the manner in which
ANZUS, together with the web of US alliances in the region, helps
to underpin the stability and prosperity of East Asia and the Pacific.
This last point is important – and one on which I will expand further.
Namely, an FTA would be an opportunity to render our economic relationship
with the United States on the same sort of footing as our political
relationship, which is expressed overwhelmingly – and highly successfully
- through our security alliance.
It has often been said that our trade and economic relations lack
the maturity and depth of our political and security relations – especially
in terms of a structure to guide and manage potential problems, and
actual disputes once they arise.
An FTA offers the opportunity to put in place the kind of structures
that can help avoid such disputes in the first place – in particular
by raising our profile, by engendering a greater appreciation of Australian
interests in places such as the US Congress, and by generating closer
economic integration.
So a proposal for something as important as a Free Trade Agreement
with the United States deserves vigorous and thorough debate – a contest,
here in Australia, that has begun, and continues here at this conference.
It is important today that I address some of the early concerns about
our proposal.
An FTA and the WTO
Some critics have suggested that negotiating an FTA with the United
States – and likewise with our other trading partners such as Singapore
or Thailand - will detract from the Doha Round of multilateral trade
negotiations underway at the World Trade Organisation.
They argue, firstly, that it will divert scarce negotiating resources
and, secondly, that it risks creating bilateral commitments that are
at odds with our commitments made at the WTO.
These arguments are wrong.
We have ensured there are adequate negotiating resources to negotiate
at the WTO, and our bilateral agreements.
It is in both US and Australian interests for any FTA to be comprehensive,
and thereby entirely consistent with our WTO obligations and commitments.
Otherwise we risk the proliferation of third party FTAs that are not
WTO consistent.
It is also in both US and Australian strategic interests, as Bob
Zoellick set out in his policy of “competitive liberalisation”, that
what we do in an FTA helps drive the WTO negotiations, as well as
what we do in, for example, APEC.
There is an important opportunity here to 'raise the bar', if you
will, not just bilaterally, but regionally and multilaterally.
The argument about diverting attention from the WTO round, frankly
speaking, also assumes that the WTO round will succeed. Obviously,
our hope is that it will.
But we have no such guarantee: try as we might, we have to be prepared
for the contingency that the round falls short, or takes much longer
than an FTA negotiation.
Agriculture
The second broad criticism of the proposed FTA has been in relation
to agriculture.
Critics suggest that we will get nowhere on agriculture given the
extent of vested interests in the US, the recent passage of an egregious
US Farm Bill, and the sort of demands the US is likely to make on
us.
I would not for a moment seek to deny the sensitivity and difficulty
agriculture will pose in negotiating an FTA with the United States.
Nor is the United States under any illusion about the extent of our
distaste for the US Farm Bill, the disruptive export enhancement and
food aid programs, or the blatantly protectionist regimes already
in place, such as quota regimes on sugar, beef, and dairy products.
But we need to recognise that – despite our difficulties – we share
fundamental strategic interests with the United States in our push
to reform agriculture through the WTO negotiations – much more so
than we do with the other major players, including the European Union
and Japan.
These interests have been realised in the successful mandate for
the negotiations, and in the very encouraging US proposal for agricultural
reform made last month.
We also need to recognise that, for agriculture, an FTA negotiation
is a means of achieving three ends:
- One, negotiating better access to the world's biggest and most
dynamic market, by removing or lessening barriers to Australian
goods.
- Two, ensuring that our current levels of access are maintained,
and protected.
- And three, preventing any deterioration in our competitive position
vis-ŕ-vis other parties to preferential trade agreements with the
United States – including the prospective Free Trade Area of the
Americas.
This last point is very important.
We cannot afford to have others gaining additional access, through
their own agreements with the United States, at our expense.
A Free Trade Agreement is the best means of preventing this from
happening
That agriculture will be difficult is not under question.
But for the reasons I have just set out, it is no reason simply not
to try. It is not an argument to walk away from negotiating an FTA
and to leave the status quo in place.
National sovereignty and public policy
A third broad criticism is the suggestion an FTA negotiation will
simply result in us losing the family farm – of whittling away our
sovereignty and having to cast aside particular public policy instruments.
Some of these concerns are rooted in an uninformed view that trade
liberalisation undermines public policy and is an affront to national
sovereignty per se.
I guess that would be true if we wanted to close our borders completely
and maintain some sort of autarkic economic and dictatorial political
regime.
Other concerns more realistically emanate from a calculation that
the United States will seek to put on the table any number of items
about which they have expressed concerns – such as through their section
301 trade remedy regime.
I think we should expect that they will do just that – just as we
will list our own set of items for negotiation with the United States.
That is part and parcel of the opening shots of any negotiation.
The government, however, is not about to negotiate away carefully
built public goods that protect our sovereignty and are overwhelmingly
in the interests of Australian consumers and workers.
The United States and East Asia
The final broad criticism – more predictable and less intellectually
honest in my view – is that pursuing a Free Trade Agreement with the
United States detracts from our relations with our immediate region:
- that somehow we are snubbing East Asia in order to cosy up to North
America.
This line of reasoning is myopic – and it ignores the facts.
The criticism ignores the fact that the United States is the engine
house of the global economy, and the world's pre-eminent power.
In 1980 – when Paul Kennedy was writing about the decline of US power
- the United States accounted for 25 percent of global GDP. Today
that figure is 34 percent.
In research and development, the United States spent $265 billion
in 2000, more than Japan, Germany, The UK and France combined.
US military expenditure is six times the next largest national defence
budget, that of Russia, and nearly ten times that of China.
It is equivalent to our total GDP.
In fact, the increase in the US defence budget announced after September
11 last year was larger than the total UK defence budget.
The criticism ignores the fact that the United States is now, by
some definitions, our largest trading partner, and the largest foreign
investor in Australia, with a substantial trade surplus.
US firms in Australia, including Coca Cola, GM, Ford, Campbells,
Philip Morris, NRG Energy, Duke Energy and Con-agra employ nearly
300,000 people.
Given our size, we also are not an insignificant player in the United
States. Australia ranks 15th as an export market for US
goods, and 11th as an export market for US services.
Australian companies are the eighth largest foreign owner of US assets,
employing around 85,000 American workers.
They are leaders in broadcasting, mining, shopping malls, real estate
management, construction, building materials and steel manufacturing.
The criticism ignores the fact that the United States is the principal
player in the latest wave of globalisation - driving international
economic integration, technological innovation and growth in international
trade and investment.
Critics of the FTA proposal on the grounds that it somehow divorces
our regional interests from our global interests therefore neglect
also the third market opportunities – investment, joint ventures,
strategic partnerships – that an FTA with the US would offer Australian
firms in the region.
They seem to assume that East Asia somehow is not linked to the US
– or the Australian – economies, and that East Asian economies are
not participants in – indeed, key beneficiaries of – the great wave
of globalisation over the turn of this new century.
The knee jerk reaction to what we do with the United States as detracting
from our regional commitments - is, quite frankly, a paternalistic
and simplistic view of East Asia itself and of our relationships in
the region.
The recent successful bid by the Australian-led consortium to supply
LNG to China is a standout example of just why the view is so empty.
It is an extraordinarily significant deal.
The North West Shelf venture will supply between $700 million and
$1 billion of LNG to Guangdong province for power generation every
year for 25 years.
The project will lead to significant infrastructure development on
the Burrup Peninsula and employment for thousands of Australians,
not to mention large royalties to the Australian tax system.
Most significantly, the deal represents an enormous step in developing
a long term energy partnership between Australia, as a stable and
reliable source of energy, and China as a large and growing customer.
It is, in trade and economic terms, strategically important
because it has big implications for energy security in East Asia,
and because it represents a further step in the integration of regional
economies – helping to underpin regional stability and prosperity,
and therefore also the prosperity of Australia.
Both the ALNG deal and the prospective FTA with the United States
demonstrate that the government's foreign and trade policy priorities
are designed to serve not only our immediate political or economic
interests, but also our long term strategic interests – that is, the
continued stability and prosperity of our region, and therefore also
of our own country.
Both initiatives are testament to the fact that we don't have to
choose between one region and the next, and the fact that we can 'walk
and chew gum' at the same time.
These initiatives, with both China and the United States, can help
put behind us, for good, the often arid and sterile debate in this
country about our place in the world.
Indeed, I strongly suspect that both initiatives are the envy of
many players in the region, who recognise the strategic gains – economic
and political - that are to be had from such partnerships.
Conclusion
In the end, the biggest single benefit of an FTA with the United
States - a nation with which we already hold strong historical, cultural,
and political ties - is still closer integration with the world's
most powerful and influential economy.
It is an integration that does not mean that we lose sovereignty
or give away part of our wealth.
It is an integration, rather, that helps unlock our potential and
realises not just direct commercial gains but serious competitive
and strategic advantage, in the United States, in our region, and
globally.
Much has happened in recent years to challenge the hard won global
consensus for free trade and open markets as a principal means of
human advancement.
Today, there is no greater challenge for government ministers such
as myself than to explain to a sceptical and reluctant public that
trade and economic liberalisation is the simplest and most direct
path to continued economic prosperity – and therefore also to our
security.
That same challenge is before you – in considering the benefits a
Free Trade Agreement with the United States has to offer Australians
– to join a renewed effort and re-establish a global consensus for
openness, accountability and innovation: in essence, for liberal capitalism.
I wish you every success with your conference, and I look forward
to the prospect of negotiations for a Free Trade Agreement with the
United States, and all that they will bring Australia.
Thank you.
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Thursday, 29-Aug-2002 13:46:36 EST
Local Date:
Sunday, 07-Sep-2008 16:21:21 EST
