Speech

Hong Kong, 3 August 2006

Australia's Hong Kong Advantage: Maximising the Potential

Thank you Alan Johnson, Consul-General, The Hon Dr David Li, Executive Councillor, AustCham Board, Distinguished guests, Ladies and gentlemen.

It is a great pleasure to be here today, and not just because AustCham Hong Kong is one of the great success stories of Australia and globalisation.

But for a more specific reason.

I want to talk about why Hong Kong is, to adapt a phrase from Michael Enright, one of Australia's great advantages in pursuing our burgeoning relationship with China.

The relationship we have with Hong Kong - through both business and government - is a tremendous asset for Australia.

The Australian Government is working to maximise its potential.

And my visit today is part of that effort.

I will be talking to Chief Executive Donald Tsang, Chief Secretary Rafael Hui and Mr Li Ka-shing about our mutual economic interests, as well as developments in mainland China and the wider region.

They will doubtless want to know about our Free Trade Agreement negotiations with the mainland, and I'll give you an update on that in a minute.

But first let me outline why Hong Kong has become Australia's advantage in China.

It's because Australia has a powerful advantage in Hong Kong - AustCham and the 10 other associations in the Support Australia Group.

You have created a vibrant network that makes sure that Australia is always at the forefront of Hong Kong decision-makers' minds - whether in government or business.

Ministerial visitors like me benefit directly from your work - for which I thank you.

I commend, too, your work in helping Australian businesses come to grips with an ever-changing market.

Australian businesses are voting for you with their wallets - last year's 10 per cent growth to a corporate membership of 1000 is truly impressive.

Your new AustCham Chapter in Macau is an important step forward.

And this afternoon I will be hearing the Macau business story first hand from Australian companies after my meeting with Edmund Ho.

Of course, Australia's relationship with Hong Kong is not simply about business, though it is fair to say that commerce is its lifeblood.

Rather, Australia relates to Hong Kong in a whole range of ways, through daily human contacts at all levels.

The 90,000 Australians of Hong Kong origin are highly skilled and successful contributors to many facets of national life, including government and the arts.

More than 21,000 students from Hong Kong are enriching our people-to-people links for the long-term future.

And more than half a million tourists from Australia visited Hong Kong last year, taking home a better understanding of the dynamism and creativity of this remarkable society.

The Australian and Hong Kong governments work assiduously to support and foster this relationship.

For example, the Governor-General and my colleagues Mark Vaile, Warren Truss and Fran Bailey visited here last year.

Tony Abbott and Philip Ruddock were here in June and July this year.

In the other direction, Australia has recently hosted visits by Finance Secretary Henry Tang and Health Secretary Dr York Chow - and Ambrose Lee, the Secretary for Security, will be travelling to Canberra next week.

I've got to say that we find it very rewarding to work with the Hong Kong government.

And that's for the same reason that AustCham members find this city such a business-friendly location - Hong Kong's liberal values and strong institutions.

Hong Kong is a success story in large part because its citizens and businesses have unrestricted access to information from anywhere in the world, an independent judiciary that protects them and makes contracts enforceable, and a high standard of governance that provides certainty for investors - both domestic and foreign.

If AustCham and the Australian community are Australia's advantage in Hong Kong, then Hong Kong's own fundamental advantage is its values and institutions.

It has proven this by repeatedly overcoming the challenge of social and economic change, including the economic re-emergence of mainland China and the impact of globalisation.

But change will continue, and I believe that Hong Kong's institutions will need to keep pace with it.

The drafters of the Basic Law recognised this when they specified universal suffrage as the "ultimate aim" of democratic reform.

Hong Kong has already widened its franchise since July 1997, and the Commission on Strategic Development is considering next steps.

I wish the CSD well in its deliberations and encourage the Hong Kong and Central Governments to work together to bring forward as soon as practicable the Basic Law's goal of universal suffrage with the "one country, two systems" framework.

I offer this thought: history shows that achieving long-term stability and prosperity needs a government that is responsive to the aspirations of its people.

Liberalism has been the hallmark of the world's most dynamic and innovative societies.

Let me now turn to what the Australian Government is doing to help business people overseas.

At home, we are continuing the economic reform drive to make Australia's economy still more competitive internationally.

The Government has made the big changes that every economist knows need to be made - sound tax policy, flexible labour markets, competition at home and openness to the world.

In 2005, Australia's 30,000 exporters achieved their highest sales ever - A$176.7 billion.

To sustain this performance in an increasingly competitive world, the Government is committed to pressing on with further reforms.

Internationally, the Government's highest priority is to free up global trade through an ambitious outcome in the WTO Doha Round.

Hong Kong did a magnificent job to keep the Round moving at the ministerial conference held here last December.

Since then, however, the inability to move forward - on agriculture in particular - has effectively brought the Round to a grinding halt.

I hope that WTO members will use this current hiatus to reflect on their positions and return to the negotiations with the flexibility needed to bring the Round to a conclusion.

The global community, especially the developing world, cannot afford to forgo the benefits that a successful Doha Round will bring.

I am of course very disappointed with what has happened in the WTO.

But it does underline the importance of the decision we made some years ago to begin a process of negotiating bilateral and regional free trade agreements.

We already have two agreements with ASEAN countries - Singapore and Thailand - and we are negotiating a third - with Malaysia.

These negotiations are going ahead quite well.

We are negotiating a much more complex agreement with ASEAN as a whole, which we hope to conclude in 2007.

And we are due to complete a joint feasibility study with Japan later this year.

As a region, I think we will be looking increasingly to each other for trade liberalisation.

It is important to keep up the level of ambition and effort in the WTO, but if you want faster results than you can achieve at the global level, then you have to work at the bilateral and regional level.

That is what we are doing.

As countries of the region now work up the new architecture of the East Asia Summit, it is not inconceivable that in ten or 20 years we could have a web of agreements in place that would effectively create a free trade area encompassing all of East Asia - from New Zealand and Australia right through South East Asia and North Asia and across to India.

That brings me to our current negotiations on a free trade agreement with China.

The negotiations take place against a backdrop of a booming trade relationship.

The heart of it is the well-known complementarity between Australian resources and Chinese manufacturing.

Last year, our goods exports grew nearly 50 per cent to more than A$16 billion, and more than two-thirds of that was resources.

But trade in services is showing strong growth, too.

Australians have set up operations in China in the fields of telecommunications, banking and insurance, accounting, architecture, construction, transportation, freight and logistics.

So we have started FTA negotiations, not because Australia is not doing well in China, but because we want to maximise the potential.

We need to tackle some of China's most difficult trade restrictions, notably in agriculture, services and investment.

So how are the negotiations going?

Premier Wen's visit to Australia in April - and his agreement with Mr Howard that both sides should aim to achieve breakthroughs in the next one to two years - put new energy into the talks.

A month later in Beijing, the fifth round of negotiations made useful progress.

We agreed on important parts of the FTA structure, discussing 15 chapters including intellectual property, services, rules of origin and customs procedures, and standards for goods.

China agreed that the FTA will cover government procurement and that investment will be discussed in more detail at the next round of talks, in September.

Easing restrictions on investment, particularly by Australian services companies, is one of our main goals.

Government purchasing in China is enormous, so better access for Australian firms will be important.

Since most AustCham members are in the services sector, you will be glad to know that services are a key focus in our negotiations.

It is a sensitive area for China and the going will be tough.

Australia wants results in a wide range of industries, including professional services, construction, banking and insurance, education, telecommunications, freight logistics and mining.

We will be working on these and other services industries to secure outcomes that go beyond China's WTO accession commitments.

Looking ahead in the negotiations, both sides plan to exchange market access offers in goods and agriculture in September and to begin negotiations on services and investment before the end of this year.

I want to assure you that an FTA with China is not an end in itself.

We will negotiate for as long as it takes to achieve real business outcomes in terms of new access to the China market.

Any agreement must be balanced and it must deliver gains for Australian business across the board.

The Chinese side has accepted that an agreement must be a single undertaking - that is, no major sector is to be excluded and no sectoral negotiation is to be agreed until everything in the FTA is agreed.

I would like to take this opportunity to thank AustCham and the Australian business community here for contributing to our negotiating team's understanding of the environment for Australians doing business with the mainland.

The negotiations will continue for some time yet, and I hope you will continue providing as much information as possible about the barriers you face.

Conclusion

Let me wind up now with a look further ahead.

The next ten years will be an exciting time for Australians, whether they are at home or overseas.

Economic change in China, and elsewhere in Asia, will reshape the region, leading to increased economic integration and liberalised economic systems.

Australia will continue to provide the resources and energy to fuel Asia's growth.

But we will also increasingly provide intellectual fuel for the region's development, just as so many people from the region have fuelled Australia's development in the past.

In that respect, one of our most important national assets will be Australians overseas.

As Prime Minister Howard said in March, the Australian diaspora, now more than a million strong, is helping all Australians to benefit from global economic change.

And of course AustCham, as well as the wider Australian community in Hong Kong, will be a major supplier of that intellectual fuel, not just to China, but to Hong Kong's wider region.

You will truly be Australia's Hong Kong advantage.

Thank you.

ENDS