Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | Hansard source

Where is the failure of this government in terms of the infrastructure and the skill base, Minister? You have been in charge for over 10 years and you want to blame someone else. Why do you not accept responsibility and recognise what is capable of being done if you have a comprehensive strategy for dealing with it?

It is important to distinguish between the growth in the price of exports and the growth in the volume of exports. That is value versus volume. The value of resource exports has grown by 9.2 per cent over the past five years. That is because of the resources boom. But the ABS measure of export volumes—the growth in value is 9.2 per cent but this is the growth in volumes, which strips out the impact of prices—shows that the volume of resource exports has grown by just 1.1 per cent per annum. I note that in his piece in the Age last Thursday the minister made no mention of the growth in volumes of exports—and why would you, with such an appalling achievement in the biggest and longest resources boom that we have experienced in a long time?

Despite the resources boom, the volume of our resource exports has failed to fire. Our failure to respond adequately to the resources boom by increasing the volume in exports is due in part to that infrastructure bottleneck and the failure of the government to take appropriate action to deal with it. It is due to the failure of the government to deal effectively with skill shortages and its failure to keep the momentum going in research and development in this country. Under its policies we have seen research and development grow at half the rate of that of our competitors. That is why this country is currently wasting its opportunities.

There is no guarantee that the boom in resources will continue forever. Every other resources boom in Australia’s history has come to an abrupt end. The simple economics of a boom in resource prices are that every resource-rich country is attempting to increase its output. While Australia has so far been unsuccessful—and I have just highlighted that problem—other countries have not. You only have to look at the huge growth in China’s volume, also that of India. There are already signs that resource prices have peaked. Access Economics, the IMF and ABARE have all indicated that the prices for Australia’s resource exports are likely to fall.

While we hope that Australia does not experience the kinds of commodities busts it has seen in the past, we have to remain aware of numerous forecasts that commodity prices will not maintain the heights we saw at the beginning of this year. The fact is we have been lucky to experience the boom in resource prices over the past three years. The boom in prices has cushioned the impact of poor export performances in manufacturing, services and resources. But Australia has to be more than just the lucky country; we need to be a productive country, a country that does not rely on resource exports alone but has a broad export base that includes manufactures and services. Australia simply must produce more goods and services that the world wants to buy. Australia’s manufacturing and services industries must have a future; they must become competitive and productive again. That will underpin, if we achieve it, sustained export growth, as was experienced in the eighties and the early nineties.

Consider this, Mr Deputy Speaker: between 1990 and 1998, Australia’s productivity level, benchmarked against the United States, climbed from 78 per cent to 85 per cent, but by 2005 it had slumped back to 79 per cent. Those productivity gains that we drove have now been dissipated. Productivity has effectively flatlined in the past two years. The most recent national accounts, released in December, showed that productivity actually fell 1½ per cent in the December quarter. So getting productivity growth back on track is the key to making Australia competitive again and putting our trade accounts back in the black.

Australia’s trade policies are making the situation worse rather than better. The government’s preoccupation with free trade agreements was because they were supposed to build trade. Labor supports the notion of free trade agreements but at the end of the chain and on the basis of strengthening the multilateral round—the WTO—through regional arrangements and then using the free trade agreements to build again.

That is what we did to get a successful outcome in the Uruguay Round. Labor took the issue to APEC, secured the Bogor Declaration and then sought to build on that through free trade agreements. The problem with this government is that it has reversed the order. It has really made the lead come from the free trade agreements. We have seen the consequences of those free trade agreements. All of the bilateral free trade agreements the government has signed on behalf of Australia over the past three years have seen our trade balance with those countries worsen.

It is now two years since Australia’s bilateral free trade agreements with Thailand and the United States came into effect. Over those two years, Australia’s exports to the United States have averaged an annual growth of just three per cent, while imports have averaged nine per cent. As a result of the first two years of the Australia-United States Free Trade Agreement, Australia’s merchandise trade deficit with the US increased by 30 per cent, from $11 billion to $14 billion.

Australia’s exports to the US have grown just $500 million over the two full years of the operation of this free trade agreement. It is a long way short of the $3 billion per annum that this government was asserting would be the benefit to the nation. Through a study the government commissioned, it argued that we would also get large gains from increased investment flows between the two countries; however, the figures show that US investment in Australia has fallen since the agreement came into effect. In 2005, US investment in Australia fell by $32 billion.

A number of key sectors in the economy were left out of that agreement. Sugar is the classic example. There was a dud deal in respect of the yarn forward proposal and also the agreement to allow the US to extend their copyright. There was no consistency in what the government sought from that trade agreement. I do not doubt that some very good work was put into looking at what we should have achieved but, in the end, the government wanted a political trophy rather than a strategic outcome that secured the basis of our trade with the United States.

In respect of the services sector, there was no mutual recognition of Australian financial market qualifications. US qualified licence brokers are automatically recognised by Australia and are able to trade in Australia. However, Australian brokers must go through an onerous process with the US Securities and Exchange Commission to be allowed to operate in the United States. What sort of reciprocity is that? The government hails the agreement as its great step forward, but the agreements have worsened the trade perspective between the two countries.

Bilateral trade deals are a very poor second cousin to multilateral or regional agreements. Bilateral agreements can lead to trade diversion rather than trade creation—that is, we merely end up trading with the bilateral free trade partner because they offer us preferential tariffs, when the cheaper and more efficient product could be sourced from a third country which cannot compete with those preferential tariffs. It is also not possible to negotiate the removal of domestic industry-wide subsidies or export subsidies in bilateral agreements. That is why we have to ensure that we get the outcome out of Doha.

Bilateral agreements also divert attention and resources for multilateral and regional negotiations. Australia is essentially participating in a trade arms race in the region, with each country rushing into bilateral agreements lest they be undercut by the other. No wonder David Spencer, our ambassador to APEC, stated last month that countries in the regions do not have the resources to devote to multilateral agreements while there are a burgeoning number of bilateral agreements. We must pursue as a guiding force a trade policy that gives our exporters access to all markets—not just to individual markets.

At the same time as reducing protection on imports, we have to support programs that encourage exports. Exports are our future, but naturally they have not been Australia’s culture beyond the commodities groups. We believe in multilateral agreements first, regional free trade agreements second and bilateral agreements third. We also believe that there is another side to free trade, and that is having integrated trade industry and trade promotion policies. We do not believe in negotiating the opening of markets only to leave our exporters to hang in the breeze. Instead, we believe in supporting industry to take advantage of greater access to opportunities through import and export programs. EFIC is one of them. There is also the Export Market Development Grants Scheme and two other programs that existed when we were in office: the International Trade Enhancement Scheme, which I introduced in 1990, when I was Minister for Science and Technology, and the Innovative Agricultural Marketing Program, which I was responsible for when I was Minister for Primary Industries and Energy.

These programs generated support for projects which had the potential to generate export earnings. They financed export market entry and expansion and the development of significant new markets. They were implemented as a result of the Hughes review, which the Hawke government commissioned. Our economy, which had for so long been protected and insular, was recognising the real opportunities resulting from globalisation, but we needed assistance to move in that direction. ITES financed up to 50 per cent of project expenditure, up to $2.25 million. An evaluation in 1994 of that program found that it was a significant factor in encouraging firms to expand their exports. Every ITES dollar spent up to that date had produced $18 in net exports in return, yet both of these programs—ITES and the Innovative Agricultural Marketing Program, which was more modest but terribly important in getting our food industry into those markets—were abolished by the government when it came to office. I believe that these programs need to be considered again. We need to understand that these programs were important drivers of export growth. As part of Labor’s comprehensive approach, it will reassess those programs, including the underspend this government has overseen in the Export Market Development Grants Scheme.

In terms of where we go from here, a golden opportunity presents itself to this government this year, as we are hosting APEC. This gives us an enormous opportunity in terms of input to the agenda as well as the type of meetings we have. About a year and a half ago I foreshadowed what I saw as Australia’s role in APEC this year in a report I presented to the parliament as part of a study trip I undertook. A couple of recommendations that were made were, firstly, that we need to look at how APEC can drive a successful outcome from the Doha Round in the same way as the Bogor Declaration complemented the Uruguay Round. I do not believe this will be a wasted effort because, if Doha falls over, APEC becomes the next-best multilateral option for this country. It has countries in it with which we can talk. We should be using APEC to drive Doha and, in the event that it falls over, to be the fallback.

On the back of that, we also need to pay a lot of attention to strengthening the guidelines that were established at the Santiago meeting to give consistency to free trade agreements and to make them consistent with the multilateral framework. The second important thing that I think we need to do as a matter of urgency is to see it as not just trade liberalisation but capital flow enhancement. We need to learn the lessons of the Asian economic crisis, argue for better governance provisions and better openness for capital flows. For this reason, I believe the economic ministers have to play a stronger role in APEC. I would like to see Australia insisting on the economic ministers, not just the foreign and trade ministers, playing an important part in the lead-up to important APEC meetings. This is a golden opportunity. It should not be passed up. The government’s woeful trade performance is a sorry indictment on their record. We believe that it can be done better and when we win office we will do those things. (Time expired)

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