Speech
Keynote address at the Australian Davos Connection Leadership
Retreat
Hayman Island, 8 September 2002
Trade Influences: Where Next?
It is a great pleasure to be with you at the Australian Davos connection
retreat here on Hayman Island.
I have been asked to present to you today some perspectives on 'trade
influences, where next?'.
It gives me the opportunity to reflect on some key developments,
both globally and for Australia, and what they might mean - in particular:
- Globalisation and the increased complexity and depth of the global
trade agenda, especially with a new round of multilateral trade
negotiations under way at the World Trade Organisation;
- The trend to preferential trade arrangements at the regional and
sub-regional level, including our own proposals for Free Trade Agreements
in our region, and with the United States, and;
- The role of governments, business, and other leaders in civil
society in convincing an often sceptical public that trade and investment
liberalisation is overwhelmingly in their interest.
Globalisation and global markets
Globalisation has been defined as "the process of increasing interconnectedness
between societies such that events in one part of the world more and
more have effects on peoples and societies far away".
I like this definition because it captures something of the complexity
and all-pervasive nature of the process.
Globalisation itself is not new - the share of trade
in world GDP was as high in 1900 as it is today.
Indeed, the World Bank has identified three phases of globalisation
from 1870 to World War I, from World War II to around 1980, and
from 1980 to the present.
What is new is the pace, reach and depth of globalisation
driven by two factors.
The first fundamental driver was the development after World War
II of the Bretton Woods system.
This system facilitated and made more predictable trade and financial
exchanges between countries.
The second driver has been rapid and far reaching technological innovation.
Containerised shipping and air cargo services, for example, have
delivered huge economies of scale in producing and distributing goods
for truly global markets.
Likewise, the much vaunted and extraordinary advances in information
and communications technology - the so-called dot.com era has extended
the pace and reach of globalisation.
It is important to recognise contrary to what we are sometimes
led to believe that this most recent wave of technological change
did not usher in globalisation per se.
The upsurge in anti-globalisation protests of the last few years
has triggered a confused - and confusing - debate about the impacts
of the closer interconnectedness of economies.
And yet what is clear is that the most engaged and
open economies have had the greatest success in lifting their peoples
out of poverty and improving performance on key social measures of
well-being.
Interestingly, the second phase of globalisation identified by the
World Bank - from around 1950 to 1980 - was restricted in the main
to OECD countries.
The exceptions were some initially very poor economies in East Asia
Hong Kong, Korea, Singapore and Taiwan - that progressively lowering
trade barriers, and then reaped the rewards in very high growth levels.
The rest of the developing world adopted statist, inward-looking
development policies.
They were unwilling to lower their barriers, and in the main, they
failed to keep pace with growth in OECD countries and the likes of
Korea.
The third globalisation phase identified by the World Bank was very
different, principally because many developing countries especially
in East Asia - joined the ranks as 'new globalisers'.
They rejected protectionism for trade liberalisation and opened up
to foreign investment, enabling access to foreign savings, technology
and links with the global economy.
Over the past 30 years, East Asia's rapid economic development has
reduced poverty levels dramatically and provided the foundations for
emerging democracies in the region.
East Asia's success is a persuasive, and still enduring, case for
the benefits of globalisation and with it, liberalising trade and
investment.
Recent key events in East Asia - including banking and financial
crises are not a "failure" of globalisation.
Rather, those events have underlined the importance of getting not
just the economic fundamentals right, but also strengthening the rule
of law, tackling corruption, educating populations, improving public
health and investing in more efficient infrastructure.
The lesson is that globalisation makes demands on our political institutions
and our social and welfare policies as well as our economic management.
Right now, there are opportunities to address a recent lull in efforts
to liberalise trade and investment further, and deepen the benefits
of globalisation.
Much of this lull has been ascribed to renewed protectionist sentiment
in the United States, in Europe and in Japan, as well as in our
region as a result of the recent economic and financial shocks.
We should get on with, and conclude successfully and on time
the Doha Round of multilateral trade negotiations launched at the
WTO ministerial meeting last November.
The Doha Round rightly emphasises trade and investment rights and
opportunities for developing countries.
If we do not open our markets comprehensively to developing countries,
then they will walk away justifiably - from our best opportunity
yet to ensure open and non-discriminatory global trade.
Reforms to trade in agriculture an area of comparative advantage
not only for Australia but for very many developing countries - is
the key to a successful Doha Round outcome.
Without an outcome on agriculture, there will be no outcome for the
Doha round.
Of course, the round also presents opportunities to deliver significant
market access gains in services and industrial products.
Preferential trade: 'competitive liberalisation'?
A particular trend of the past decade has been the growth of preferential
trade arrangements which by definition discriminate against non-parties
at the regional and sub-regional level.
Much of the origins of this trend can be found in the example set
by the European experiment in the post World War II era the Marshall
Plan, the European Coal and Steel Community and the European Economic
Community, and now a fully fledged European Union.
Not only has much of Europe been transformed into a single market,
with a common currency, but we are now seeing an emerging single voice
on foreign, defence and security policy.
With the consolidation of the European Union and its various preferential
arrangements with EU candidate states and countries in North Africa,
the significance of this development can only grow.
NAFTA and the host of agreements being negotiated in the Americas
in particular the Free Trade Area of the Americas - are the stand-out
examples of the trend to preferential trade in the Western hemisphere.
As in Europe, of course, the motive and rationale of these agreements
are as much strategic as they are directly commercial in nature
in the case of the FTAA to consolidate market economics and democratic
development as well as to open up huge potential markets.
Legitimate fears have long been held about the impact of such arrangements
on multilateral trade negotiations, and on the rules and disciplines
for international trade the so-called "spaghetti bowl" effect of
competing and overlapping rules of origin.
Australia has a strong interest in transparent global rules for international
trade which is why we have so long been an active player in the
multilateral trading system.
After all, we are a significant global trader with a strong and
diverse export base, and markets across the world. Since 1996/97,
for example, the value of our merchandise exports to China and the
United States have more than doubled to $7.8 billion and $12 billion
respectively in 2001/02. Exports to Europe over the same period also
grew strongly, by nearly 70%, to $15.6 billion.
But, as a global player, we cannot ignore the simple fact of widespread
interest in preferential trade arrangements that can deliver results
faster, and deeper, than can the multilateral system.
Nor can we ignore the potentially positive effects of preferential
arrangements on the WTO and other trade and investment regimes such
as APEC in what US Trade Representative Bob Zoellick has coined
"competitive liberalisation".
Our proposal for a Free Trade Agreement with the United States has
garnered much support on both sides of the Pacific, including from
the business community, as well as some criticism.
A little over a week ago I outlined some key arguments for an FTA,
including the straightforward economic gains (estimated by one think
tank to be $4 billion per annum for Australia), a significant 'head
turning' effect in attracting investment, and greater integration
between our business communities.
I also highlighted the role of a FTA in "competitive liberalisation"
of trade and investment globally, and the opportunity an FTA presents
to render our economic relations with the United States on a similar
footing to our political relations.
These last two points are as important as the other, intrinsic, benefits
inherent in an FTA with the United States.
Ultimately, of course, the WTO and the trade access, rules and disciplines
we negotiate at the global level are the main game.
Neither Australia not the United States have an interest in negotiating
an FTA that is neither comprehensive, nor complements our WTO commitments.
But an FTA still could have a salutary effect, by demonstrating what
is possible, and thereby 'raising the bar' for WTO (and other) negotiations.
This could be particularly important should the WTO negotiations
stall, or fail to realise the ambitions we have for the round, including
in agriculture.
It has often been said that our trade and economic relations with
the United States 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.
In my speech on 29 August, I also addressed some of the main criticisms
of the FTA proposal.
I said that we have ensured there are adequate negotiating resources
to negotiate both at the WTO, and bilaterally.
I said that, for agriculture, an FTA negotiation would be a means
of hopefully negotiating better access, certainly ensuring current
levels of access are maintained, and definitely preventing any deterioration
in our competitive position vis-เ-vis other parties to preferential
trade agreements with the United States.
I said that the Government was not about to negotiate away carefully
built public goods that protect our sovereignty and are overwhelmingly
in our interests, for the sake of an agreement with the United States.
And, finally, I said that the knee jerk reaction unfortunately
so common-place in Australia - to what we do with the United States
as detracting from our regional commitments was a paternalistic and
simplistic view of East Asia itself and of our relationships in the
region.
The political economy of liberalising trade
One of the great paradoxes of the latest wave of globalisation
and the prosperity it has brought with it has been an accompanying
wave of public uncertainty and opposition.
We saw this reflected, most graphically, at the WTO Ministerial meeting
in Seattle in 1998, at the World Economic Forum meetings in Melbourne
in 1999, and, tragically, at the G8 meetings in Genoa in 2001.
Much of the noise and drama was at the instigation of a spectrum
of radical groups opposed to open markets and free trade in essence,
to liberal capitalism.
We need to acknowledge that anxiety about trade and investment liberalisation
goes beyond the fringe, to consumers and workers who fear the pace
and depth of change, and the impacts of that change on employment,
on incomes, on the environment, and on social services.
And we need to acknowledge that governments, business groups and
other sectors of civil society must 'step up to the plate', in American
parlance, in advocating the benefits of trade and investment liberalisation
whilst supporting public policy instruments that assist in the ensuing
adjustment, as has been done here in Australia.
One of the greatest challenges for government ministers such as myself
is to persuade 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 all of us - to join a renewed effort
to re-establish a global consensus for openness, accountability and
innovation: in essence, for liberal capitalism, and not against
it.
Only then can we truly expect to make inroads into the claims of
those who would have it otherwise, be they (charitably) misguided
youth or more fundamental agents of an agenda that is profoundly anti-consumer
and anti-worker, and which will work against our prosperity and security.
The successful launch of the Doha round of multilateral trade negotiations
focusing on development - is a start.
Developing countries are the best allies of a push for trade liberalisation
because it is through the voice of developing countries and meaningful
concessions to their trade interests on the part of developed countries
that real progress in reducing global poverty and encouraging sustainable
development will be made.
Likewise, we have seen the beginnings of an awakening by key non-government
organisations such as Oxfam and the World Wildlife Fund about
the environmental and developmental damage of agricultural and fisheries
subsidies in developed countries, on developing countries.
We need to build on these links and develop coalitions with developing
countries and the more forward thinking elements of civil society
that can support us.
Australia is in an ideal position to do just this and it will be
a central plank of our negotiating and public diplomacy effort through
the WTO round, as well as in other negotiations in which our interests
are at stake.
I look forward to the panel discussion, and to your questions.
Thank you.
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Monday, 09-Sep-2002 14:24:40 EST
Local Date:
Sunday, 05-Jul-2009 01:46:22 EST
