APEC Business Breakfast

MR DOWNER: Well thanks, John, very much for that introduction. I think, going back, it's a full 120 years. Many of you, by the way, will really like this about The Bulletin: it's always been a great champion of an Australian republic. I don't know whether it still is, John, but it certainly used to be historically. In fact, it was one of its core beliefs in its very early days when a republic was nothing like as popular as it is today. So if you're interested in republics, at the end of the first week of September there will be many presidents of republics coming here to Sydney.

As far as the Canadian Consulate General is concerned, I just want to make this point: we, over the years have I think reconnected with Canada in ways that perhaps wasn't the case so much for quite some decades. We have reconnected with Canada, partly through APEC, but partly by I think a realisation, a realisation again of the common bonds of history we have and the common values but, very interestingly, the common experiences that Australia and Canada have.

Somebody once said that Canada was Australia on ice, which is an interesting description of Canada. I don't know how Canadians feel about that. Perhaps they feel that Australia is Canada in the sun. Either way, when you go to Canada, there's so much, of course, that is unfamiliar but so much in a social sense which is very familiar. When you think of the challenges that Canada faces, many of them are quite, almost identical. And the values in terms of, for example, their attitude to issues like education and health care, are very similar to our own. So it's quite an interesting relationship.

The Canadian Foreign Minister, Peter MacKay, was to come and spend a so-called home town visit with me in the weekend before APEC because I, last year, spent two days in Halifax, Nova Scotia with him and we're very good friends and I open up my cables, my computer and look at my cables this week and he's been moved to become the defence minister. So very disappointed in one respect but I'm sure the new foreign minister will be a wonderful person, so I look forward to seeing him.

Right, I'm really here to talk about APEC. I think the first thing to say about APEC is that in public life - it's interesting having John Hewson here actually, because he's somebody who has made such a big part of his life making these sorts of arguments - in public life, you are not just there to be an entertainer or a celebrity but you are there to promote ideas and try to implement those ideas. And the great ideas of this era, in the main, revolve around economics, and I think we have been very successful over the last few decades because of the strong adherence there's been in most countries in the Asia Pacific region, and of course beyond, to the notion of the liberal market.

But it is important to remember - and I say this in a very heartfelt way as a politician - it is very important to remember that in all of our communities, around APEC, this is not unique to Australia, it's true of Canada, it's true of the United States, it's true throughout Asia, there is a great deal of instinctive resistance to liberal markets. Instinctively people feel - first of all, they feel nationalistic and, secondly, people, I think, feel protectionist. So they have a view that a closed economy is likely to be a better economy because it's an economy where their jobs are protected by tariff barriers or non-tariff barriers.

You know, it's a terrible thing if Vegemite is bought by foreigners. People live in fear of property farms and the like being bought by foreigners and so on. And that argument has to be countered because clearly, if I may be dogmatic about it, that argument is utter nonsense, is absolute nonsense.

There is no doubt, to put it in its simplest form, that there has never been an economy which has failed which has been an open and liberal economy. On the other hand, there are not too many examples of successful closed economies or fairly closed economies. You only have to go back and look at the Soviet empire to see the lack of success of a closed economy. But I think the best example is a country which Australia would like to see in APEC but is not in APEC and is not going to join APEC soon because there isn't a consensus for it, and that is India.

During the 60s and the 70s when India ran the closed economy model, the Indian economy grew at about 2 per cent to 3 per cent a year. And I think you'd be familiar, I mean I'm sure you'd be familiar, with the substantial poverty that there was in India in those times. Compare that with modern India, the India of the more open economy and the increasingly open and more liberal economy; the India of a gradually deregulating economy and with a billion people that economy is growing at nearly 9 per cent per annum, which is of course massive for a country of a billion people.

I tell you these things - and you wonder why I'm talking about something that you feel is, you know, a fairly obviously public debate and one that we've had in this country over a long period of time - I'm telling you this because it's one of the key functions of APEC. One of the key functions of APEC is through a whole series of meetings - by the way, not just through what's sometimes called leaders' week, through the leaders' meetings at the end of the year or later in the year - but throughout the year, APEC is bringing together the governments, the officials, of 21 economies and operating according to the principle of how do we drive forward the liberal open market. How do we drive it forward in terms of trade? How do we drive it forward in terms of internal economic liberalization? And it creates, if you like, a norm which you can't under estimate. I don't think there's any way you could quantify this but I can tell you having, this will be the 12th APEC meeting I'll have been to, that sitting around and discussing with each other how to open up different types of markets, product markets, communications markets, all kinds of different markets, but that being the underlying theme of APEC, it is very important in terms of building momentum and countering the sorts of instinctive arguments that you get in the community.

The second thing I'd say about APEC is that, the fact of it bringing together, particularly since the APEC summit in Seattle, leaders of such significant countries to represent between 50 per cent and 60 per cent of global GDP once a year and having those leaders spend a couple of days together talking through the major issues of the region, including but not exclusively the sorts of issues I've been talking about. I don't think you can under estimate that. I think that is helping, over time and very gradually, to build a sense of community throughout the Asia Pacific region and, in my view, that is essentially a good thing.

The results are there. John Lehmann, in his introductory remarks, referred to - my figures are actually fractionally different, but referred to - I'm not sure which are right, I'll have to get my department to check - I have been advised, is what ministers always say, meaning the official has told me to say this, so if it's wrong, blame them. But it doesn't matter, the dimension is there. Since the creation of APEC in 1989 until today tariffs in APEC economies have fallen from around 17 per cent to around 5 per cent. Now, some of will you say, oh yeah, but that's nothing to do with APEC. I think I've made my case already. I think actually that's not just about APEC but that's had a lot to do with APEC.

I think APEC has really helped to drive that sort of process. If we could completely liberalise, within I suppose some practical limits, the economies of the APEC area, all 21 economies, beyond what they are already, that would add, according to the ANU, another $107 billion to the GDP of APEC. To put that into some perspective, that's the equivalent of the New Zealand economy. So that does constitute a very significant addition to the welfare of people within APEC.

And talking of welfare, that of course is a very key point. I'm very impressed with these campaigns you see from time to time "Make Poverty History" and people like Bob Geldof and Bono holding concerts and supporting, you know, the defeat of poverty. Personally, I think it's a wonderful thing that they do and it's laudable that they devote so much time to that cause.

But I tell you what is doing more to defeat poverty than anything else. It's the liberalisation of markets. And in APEC the exciting story is, above all, the decline of poverty. There has been a halving of poverty in the Asia Pacific region in the life of APEC. A halving of poverty. So if you think APEC is about a lot of people, you know, like us, in suits and things, sitting around having meetings and endless cups of coffee, you're partly right. But if you think about the consequences of what those meetings are, don't forget that one of the most important human consequences of those meetings is a reduction in poverty. And to think that poverty has halved, and there has been a doubling of living standards in APEC economies in the life APEC, that's an extraordinary thing.

So what are the challenges going to be for this year? Well, first and foremost, through the meetings we've been having during the year and here in Sydney during what we call leaders' week where the foreign and trade ministers meet, followed by the leaders' meetings over the weekend of the 8th and 9th of September, there will be a few key agendas: remember, very importantly, built around this theme of, or assumption of, the virtues of the liberal market.

First of all, we all were very concerned about the failure so far of the Doha Round of world trade negotiations and we hope that we'll be able to reach an agreement of the APEC economies which, after all, includes key WTO members like Japan, the United States of America and China. We hope we will be able to get an agreement to drive forward towards an effective conclusion to the Doha Round of WTO trade negotiations. I always say to people, a world free trade area, any economist will tell you a world free trade area is going to be better than a regional free trade area or bilateral free trade agreements. And there's no question of that.

Now, are we going to succeed? I think at APEC we will succeed in giving some momentum to this process of the Doha Round but there are some key countries and groups of countries not in APEC which still in this context remain something of a problem, and one of those is India, another Brazil and thirdly there's the European Union. So they're not at APEC. We are not going to get a breakthrough on the WTO at APEC but I think we can add some momentum to it.

Secondly, we will of course be focusing on continuing to liberalise trade in the Asia Pacific region. And I think there is a growing view within the APEC economies, within the APEC governments, that if the WTO is not going to succeed, if we are not going to get a credible conclusion to the Doha Round, and we might get a conclusion which is not really very credible, that's possible, but if we're not going to get a credible conclusion to the Doha Round then maybe we should look at a free trade area for the Asia Pacific region, a non-discriminatory free trade area. Now, I have no illusions about this being what, in diplomacy, is called aspirational. It can be done, but maybe not for many years. I mean, just trying to persuade the US Congress to agree to a free trade area which includes China, ie free trade between the United States and China in Congress's current fairly protectionist mood, I think is whistling in the wind. But, nevertheless, down the track in the next 10 or 20 years that might become more of a reality and, from Australia's point of view, there would be great benefits in there being eventually some sort of a free trade area for the Asia Pacific.

The third area where we will continue to drive forward is in energy security, and the fourth area, climate change. Of course these two things are related to each other. We certainly need to make sure, in a region which has some countries which are energy rich - and we're one of them - and some countries which have high rates of growth which are energy hungry, like China and of course, importantly, Korea and Japan, but there are others, there needs to be access to energy resources for those countries and there need to be good markets. And what we want to avoid in the APEC area is the building of cartels and special deals so that energy supplies are tied up for some, to the benefit maybe of some, but other countries, other economies, are excluded from those energy markets.

The consequence of that, as you would know, is that the energy markets themselves would not, in the end, be so efficient. That would have long-term implications for investment in those energy markets but, secondly, it could create quite considerable tensions in the region if countries in the region were denied effective access to energy resources. So this doesn't sound like the most exciting issue you've ever heard anybody talk about but I'm just making the point to you that it's an enormously important issue. Whatever sort of energy resources, that's a debate for another time, but whatever sort of energy resources are going to be used in the years ahead, there must be ready access to them through liberal markets. There must be. And that is absolutely crucial to understand. And APEC is a key tool for helping to achieve that, bearing in mind it comprises so many energy rich and energy poor countries.

Finally, this year we are making climate change a central part of APEC. And APEC is a fascinating case study in the whole, on the whole issue of climate change. You know, over the years, there's been quite a debate on this issue at different levels; you know, there's the debate that we have in western countries between climate change true believers and climate change skeptics, that's one thing. But there's a debate, there's been a debate around the world as well which goes along the lines that developed countries, because they've already achieved great prosperity, need to do a great deal to address climate change. Developing countries don't need to do anything because they're poor and their challenge is to lift people out of poverty.

Now, our argument is that you have a dual challenge here, which only a fool thinks is easy to resolve by the way, it's incredibly difficult to resolve. You have the challenge of lifting people out of poverty, and I've talked about that already, and you also have the challenge of doing that with lower levels of CO2 emissions in the interests of stabilising the climate. You've got to try to achieve those two things. You cannot do that if you exclude the world's what is now, today, the 16th of August 2007, the world's largest CO2 emitter, which is China, which has just overtaken the United States. You can't, by the way, do it if you exclude countries like Brazil and India and obviously the European Union and the United States itself.

So you have to find a method of bringing all of those countries together in trying to get them to agree to reductions in CO2 emissions, albeit over time. And APEC, whilst it is not the whole world, it's a very key part of the world. It is, after all, something like 60 per cent of total CO2 emissions, APEC. And a similar percentage, between 50 per cent and 60 per cent, of total GDP, global GDP. If we can start the process of getting some agreement for future directions on how international diplomacy will address climate change, I believe, by the way, that will be very important.

If APEC can agree to, if you like, a commitment by everybody, by all of the economies, to taking steps to address climate change, but if APEC has the intelligence, which I think it will have, to recognise that that has to be done in a differential way, different ways according to the circumstances of the economies and the rate of development in particular countries, then I think that is going to be an enormous step forward.

For some countries they can do a lot in the area of reforestation, for instance. Indonesia has 10 per cent of the world's forests. 20 per cent of CO2 emissions are generated annually by deforestation. So APEC can make - some APEC economies can make a big statement on this whole issue of slowing or stopping deforestation, developing sustainable forestry and investing in reforestation. APEC can, of course, do a lot in the technological area - clean coal technologies, renewables and so on - and make commitments from countries to address those issues.

And how can I finish this speech today without saying that APEC can also, I think, provide some momentum to improving the options for nuclear power, civil nuclear power, within the APEC region in the years ahead, so that we can get CO2 or almost CO2 free power generation and look for further ways of doing it.

So I, by the way, think this APEC meeting in Sydney can be a very important meeting, a very important meeting in continuing the drive towards liberalisation. A lot of people take it for granted. Before I came here this morning, while I was getting dressed I was watching an old friend of so many of ours on television, Pauline Hanson, and I was reminded listening to her - no disrespect to her - but I was reminded listening to her that there is still a constituency in this country for economic isolationism. There's still quite a big constituency. And that's Australia. Throughout the Asia Pacific region those constituencies are very strong and they are powerful vested interests and I think you'd all be familiar with some of them. APEC will continue to provide strong momentum for further liberalisation of markets. But this year, I think it is also going to play a very important role in helping to free up energy markets and make sure that there is a much better, more constructive, international approach to the issue of climate change which will play into the United Nations meeting on climate change which is to be held in Bali in December.

I'm sorry about all the disruptions that there will be to traffic. I mean, people will not like that. I understand that. I'm quite sympathetic with people; I know the frustrations as much as anybody else at being stuck in traffic from time to time. It's going to be physically a difficult time for Sydney but I make this point: we will have to put up with some days, all of us who will be in Sydney or who live in Sydney at that time, we will have to put up with some inconvenience.

But this is an opportunity to showcase our country which, as you can imagine, I think, is the greatest country in the world, to showcase our country to the world. It will bring the world, if you like, to Australia, front and centre, and it is a great opportunity for Australia once more to demonstrate that it is, as John Lehmann said in his introduction, not a small country or a remote country but a truly significant country in terms of international diplomacy and, at the end of the day, that will be very good for the people of Australia. Thank you very much.

MC: We thank the minister and we note that a full transcript of his speech will be on The Bulletin's website later today, www.thebulletin.com.au.

Now, I did promise 10 questions. I lied. We'd ask the wait staff to start serving the hot breakfast as we go, and we might take four questions just so we're on time for our Canadian friends. I think perhaps the first question from Andrew Forbes from The Bulletin magazine. There's a microphone coming around so just state your name and your title and I'm sure the minister can handle it from here.

QUESTION: I was wondering (inaudible) features you might be discussing with your Chinese counterparts regarding Chinese emissions at APEC?

MR DOWNER: Well, I think there are, as far as China is concerned, two areas where China is focused on addressing the issue of CO2 emissions. It is a terrific question because it gives me an opportunity to deal with this. Number one, reforestation: China is investing very heavily in reforestation and creating carbon sinks. Actually, I'm sure people don't know this, but China has - of all of the countries of the world, China has the largest reforestation program. Secondly, although the Chinese economy is going very fast - I mean it's about 11 or so per cent in the last year - China has developed energy intensity targets. Now, they missed their first target. In other words, they're trying to build much greater energy efficiency. China, I think I'm right in saying, has become the world's either largest or second largest energy consumer. Now, bearing in mind China probably has the sixth or seventh largest economy in the world, that tells you something about the enormous inefficiency of Chinese energy use. And the leadership - and I was in China in April, talked to the leadership quite a lot about this, they're very focused on this issue and they are investing very heavily in improving energy efficiency, energy intensity as they say, and they have set themselves quite a radical energy intensity target by 2010 - don't hold me to this, but I think it's a 20 per cent improvement in energy intensity by 2010.

So when people think China is not addressing this issue and not thinking about it, that's very definitely wrong. China is very focused on this issue. But the solutions that suit Germany and the UK, for example, given their rather special circumstances since 1990, are not solutions that are going to fit China. It has a completely different economic structure. It's at a totally different stage of economic development. It has issues that Britain and Germany haven't considered for hundreds of years.

And so if you want to make the diplomacy of climate change work you have to understand that there has to be a common, to use the phrase, a common but differential contribution to addressing the issue of climate change. A bunch of chanters in the street with slogans and things saying everybody's got to reduce CO2 emissions by 20 per cent by 2020 or something like that, it's fine, you can march around the street and abuse President Hu Jintao, or whoever it is. But it won't make any difference. It doesn't matter.

What matters is working with them in areas where they can actually realistically make a contribution. And I think, for us, the challenge here as Australians is to look for ways we can help China achieve not just greater energy intensity efficiency and therefore a reduction in time of CO2 emissions, but also helping them with reforestation.

QUESTION: Thank you.

QUESTION: Rebecca (inaudible) From The Bulletin. Look, I'm interested in your thoughts on how you think of the issues (inaudible) global tech markets and (inaudible) that are starting to be felt in Australia as well might impact on the government's election chances this year?

MR DOWNER: Well, thank you for that question. Let me say something about international markets. Now, I don't want to weigh in with predictions about what I think about the current upheaval in international financial markets and I have no idea how the public, in a political sense, will react to something like this several months down the track. But I would say this to people about the 2007 election and it sort of builds a bit on what I was saying earlier on in this speech, you know my view is that running - and I've been part of running a government for 11½ years - running a government is a pretty difficult and complex thing to do.

You can't always, unfortunately, be taking popular steps. For example, the deregulation and opening up of markets is, as I've told you, not popular always. I regret to say it is almost never popular. It is just very successful and very good policy. My view of the Australian electorate is that what ever may amuse them during a particular period of time and what ever may interest them during a particular period of time, and this includes me of course, at the end of the day, when it comes to casting a vote for a government you want a government which brings to the table wisdom, which brings to the table stability and you hope it will bring to the table a bit of relevant experience as well.

And I think when the next election actually comes, for all that there has been said in recent times, and particularly in an environment where we can't just take for granted our prosperity and it will go on for ever, people will, as they traditionally do, tend to gravitate towards stability and experience and wisdom of policy making.

We've had a lot of controversial policy decisions to make over the years but I think history shows that nearly all of them, not perhaps all of them but nearly all of them, have been very successful. And I think in an environment where people might be concerned that they could lose some of what they have gained, that is going to be an understandable consideration for people.

People could lose a lot of what they've gained in recent times: the massive reduction in unemployment, the improvements, on average, across the economy in living standards. These things cannot be taken for granted. We have to struggle to keep those things and to build on them. So those things will all be factors.

QUESTION: Hi, Melanie O'Connell from SBS. I just would like your comment on a report today in one of the papers that three Iraqi diplomatic families have been given asylum in Australia and just what message this sends to the country regarding the ongoing effort there?

MR DOWNER: Well, as I understand it, this is - well I do understand it, I'm familiar with what has happened here - these are matters that have been determined by the Immigration Department on the basis of the assessments that they've made of these people's applications to stay in Australia, and so those are processed in the normal way according to our existing laws and of course our obligations under 1951 United Nations Refugee Convention. I have not as the Foreign Minister and the Prime Minister hasn't interfered with those decisions.

They have been decisions made by the immigration officers who have assessed those applications. Well, I think we all know that the situation in Iraq is very difficult, and there's no doubting that, but I also know that we have to just continue with the very difficult and not always, frankly, very popular work of making sure that the country doesn't collapse. Because if it collapses, it's my judgment that not only will it make Darfur look like a minor fracas, I think the bloodshed in Iraq, without proper assistance from international security forces, would simply be horrific. And I really mean that.

I think it would be horrific. It would be a horror scene, way, way beyond what it already is and way beyond what has happened in Darfur. But, secondly, I worry very deeply, very deeply, about the implications for broader stability in the Middle East, the dangers of countries like Iran and Saudi Arabia, and Turkey, Syria, being drawn into a kind of a vortex in Iraq. I think that is a very, very high risk. And so I'm afraid it's one of those situations where I wish, I wish all my positions could be popular positions, particularly when you get to the end of the political cycle. But I think it is important, it is important that people understand what is at stake here.

I always say this to people: you may think it was a mistake to get rid of Saddam Hussein in the first place, and that's one argument, but of course that is only an argument now about history, but nevertheless you can make an argument either way there, but we are not confronted with that decision today. We are confronted with the decision about what to do next and what to do next, what we should not do, what we should not do is abandon the place altogether.

That people will find refuge in other parts of the world, Iraqis will find refuge in other parts of the world, is hardly surprising, given the very difficult security environment there is. In this particular case the personal circumstances of the people involved and the risks in relation to those people returning are obviously taken into consideration by the Immigration Department. It's not a decision that applies to all Iraqis generically, it's a decision that relates to the personal circumstances of these three people.