Craig Emerson (Rankin, Australian Labor Party) Share this | Hansard source

It is sometimes said that debate on legislation in this parliament is stage managed and entirely predictable, but we have just heard a contribution from my colleague the member for Fraser, as a former Minister for Trade, which presents a compelling case that the Australian Trade Commission Legislation Amendment Bill 2006 before us tonight should not have entered this parliament. I am persuaded by the arguments of my colleague. I do not have anywhere near the experience that he has had as a trade minister in face-to-face dealings with Austrade, but it certainly stands to reason that a board of Austrade, comprising very busy people who are otherwise financially independent and professional in their work, would bring a value to the whole exercise of the duties of Austrade that with the passage of this bill will be lost. That is a great pity, but I do take comfort in joining with the member for Fraser in the observation that this is an initiative of the government of the day, which does have the numbers in both the House of Representatives and the Senate, which can easily be undone by an incoming Labor government. I am sure my colleague will be arguing for that to happen and he has certainly presented a strong case as to why it should be undone.

But, given that the government does have a majority in both houses and to some very considerable extent has a right to govern, subject to parliamentary scrutiny, we will not be opposing this legislation. We will support it, but so too do I strongly support the second reading amendment moved by the shadow minister for foreign affairs and trade which notes that the bill itself will do very little to correct Australia’s trade balance, which has been in deficit now for 48 months—four years. Just in the last calendar year of 2005, trade deficits totalled more than $18 billion. We have experienced in this country a current account deficit of more than $55 billion, and that too is feeding successively into our foreign debt, which is fast approaching $500 billion or half a trillion dollars. It is not so often in Australian economic language that we talk about trillions of dollars and it does seem to be ironic that the most common expression of that number in this parliament relates to the size of our foreign debt, which is fast approaching half a trillion dollars.

If this government has a trade strategy, it is a very well kept secret. It appears to me that it is a shambles and that our trade performance is suffering as a consequence, yet every year at budget time the government says that the recovery in our export performance is just around the corner. So I want to have a look at the budget forecasts of our trade performance and the actual performance of the relevant years. In 2001-02, the budget forecast for export growth was five per cent. The outcome for that year was minus 1.5 per cent. In 2002-03, the budget forecast for export growth was six per cent—not to be deterred by the very bad error that was made in the previous budget papers. Yet again the outcome was minus 0.5 per cent. With the government forecasting that the export recovery was just around the corner, another six per cent was forecast in 2003-04 and the outcome was 1.6 per cent. Not to be outdone, as the government became bolder and bolder in its predictions that the recovery in Australia’s exports was just around the corner, in 2004-05 the government lifted its forecast of export growth to eight per cent and the outcome was 2.5 per cent. In 2005-06, the government said, ‘The export recovery is just around the corner,’ and forecast a growth in our exports of seven per cent, and the outcome was two per cent.

In total, over the last five years export growth has been overforecast by more than 5.5 per cent. This is a huge forecasting error, yet the government, persisting with this rosy view that the recovery in exports is just around the corner, in the 2006-07 budget is forecasting export growth of seven per cent. In the last five years the government has massively overestimated export growth and, in so doing, has come up with a multiplicity of excuses. At first it was the world economic slowdown. You have to go back to 2000 to be talking about a world economic slowdown, because world growth has been around four to five per cent through much of this forecasting period. So, far from Australia struggling in a sluggish world economy to sell its exports, the world economy has been screaming out for imports and Australia has failed to come up to the mark.

Then there was the SARS virus and that apparently was responsible for our poor export performance. Then there was the bird flu. That was responsible for our poor export performance. The Minister for Trade, who has joined us here, has invoked every possible excuse for Australia’s poor export performance. When there is an improvement in value terms, the minister claims credit, as if he engineered the economic miracle that is occurring in China—as if he, by going to China, has given them advice and said to the Chinese authorities, ‘This is how you grow your economy; make it grow at 10 per cent per annum and then I’ll go back to Australia, bob up in the Australian parliament and claim the credit.’ The trade minister claims credit for the price increases but never takes the responsibility for the sluggish and often negative growth in the volume of our exports. There is now an ever so slight recovery in the volume of our exports, but that has been held back by infrastructure bottlenecks and, again, the government is saying that that is a problem not of its making but a problem of the states. So it is time for the trade minister and the Howard government to articulate a coordinated, coherent trade policy.

I want to go back in Australia’s history and talk about the folly of the approach that this government has taken, which is the folly of pursuing preferential trade deals. During the Great Depression the government of the day increased tariffs, with a beggar-thy-neighbour approach to economic management, and began a policy of preferential trade deals. By preferential trade deals I mean doing a deal with another country, or a region, to the exclusion of countries that are not party to that agreement. Then it got worse, with the Lyons government entering into preferential trade deals. It is reasonable to conclude that the exclusion of countries like Japan from these trade deals, through the Commonwealth arrangements, was one contributing factor to the Second World War. Far-sighted people understood that restricting trade and entering into discriminatory arrangements was not in Australia’s national interest or the world’s interest. So after the Second World War these far-sighted people got together and created the General Agreement on Tariffs and Trade, which evolved over time into the World Trade Organisation. The founding principle of the General Agreement on Tariffs and Trade was the principle of non-discrimination: if you entered into an arrangement with one country to reduce your barriers to protection then those same arrangements would apply to all other countries.

But since 1990 there has been a massive proliferation of preferential trade deals, such that this principle of nondiscrimination, called the ‘most favoured nation’ principle, is now the exception rather than the rule. This is a tragedy not only for countries like Australia, which are independently wealthy in their own right, but for the developing countries of the world that are being locked out of trading opportunities by rich countries getting together and forming preferential trading arrangements to exclude developing countries. This is folly.

I know the trade minister says, with some legitimacy, that pursuing the Doha Round of multilateral trade negotiations on a non-discriminatory basis is very hard work. There are entrenched interests that do not want to see that global trade round succeed. There are interests around the world that do not believe in trade liberalisation. But that does not mean we give up; it does not mean that we become distracted and enter into preferential trade deals. It means that we have to work harder to harness the value and power of the Cairns Group of fair trading nations to achieve more through multilateral trade forums than is being achieved at the moment.

This is a time, again, for Australia to show genuine leadership in trade negotiations and to put our credentials on the table. This occurred during the Hawke and Keating era, when we liberalised our trading arrangements to the benefit of the Australian people but provided structural assistance to those who were adversely affected. We repositioned Australian manufacturing so that it could be competitive not just in the narrow, fragmented domestic market but in the tough international markets where we needed to get costs down, get quality up to be able to compete and were able to compete. But the tragedy for Australia is that this government has returned Australia to a farm and a quarry. We know that by 48 successive trade deficits.

At a time when mineral prices are the highest in at least 30 and perhaps 50 years, Australia, as one of the most resource rich countries in the world, is running trade deficits. Very few, if any, other countries that are resource rich are running a trade deficit. We have run 48 of them in a row. We have had in the last couple of years a current account deficit that has passed seven per cent of gross domestic product. Compare that with the time when Paul Keating warned of the dangers of Australia becoming a banana republic because it was overly reliant on primary commodity exports. The current account deficit at that time was 6.2 per cent of GDP. In the recent past we have hit more than seven per cent of GDP. There does not seem to be the improvement in prospects that the government continues to forecast, and that is because it has failed to continue the process of diversifying the Australian export base.

That is where Austrade comes in. As my colleague the member for Fraser pointed out, the expertise in the board of Austrade is precisely in the areas that we need it: services exports and exports of elaborately transformed, sophisticated manufactured goods. We must not give up on this sector. Australia has strong advantages in these areas, but with the high exchange rate caused by the resources boom they are not as competitive as they were before. That means we must redouble our efforts to ensure a strong, viable, growing, export oriented manufacturing sector, but that is not occurring. We must not allow a situation to continue where the government is saying: ‘We’ve got a resources boom. That has an impact on the exchange rate. Sooner or later the exchange rate will fall and then some other sector of the economy will pick up the slack.’ If we lose the engineering base of this country, if we lose the skills base of this country, then it will not be two, three or five years before we regain that—it will be 20 years.

The member for Macarthur is at the table. I have visited his electorate, and in the Macarthur area there is a large number of small export oriented manufacturing operations—very inspiring outfits—but they too would be suffering under the high exchange rate and the lack of interest of this government in the future of those manufacturing enterprises. They are all struggling because of the lack of a coherent trade policy, and a coherent trade policy is what this country desperately needs.

The growth in exports of sophisticated manufactured goods has tapered off badly under this government after enormous growth under the previous Labor government. The House of Representatives Standing Committee on Economics, Finance and Public Administration has just agreed to a major inquiry into the future of Australian manufacturing and services industries, entitled ‘Beyond the resources boom’. That is what we need to be concentrating on—retaining that skills base rather than letting it go. It is falling away all the time. Why can’t Australia be a great supplier of manufactured goods to the factories of China? Why can’t we supply the equipment, as Germany did after the Second World War, to go into factories? Why can’t Australia become a centre of engineering excellence? They are exactly the sort of businesses that I visited in the area of Macarthur: small manufacturing businesses producing one, two or three units of very high value which are then used to create more manufactured goods.

When we think of the automotive industry, we think of Australia producing 70,000 or 100,000 vehicles going into a tough export market. What about, on top of that, thinking about producing components to go into two million vehicles? Why can’t Australia become not necessarily simply a supplier of completed automobiles to the rest of the world, but a supplier of the electronics, the brakes or the steering columns—other areas that require high skills and innovation—and produce those not just for our cars but for the world car? China will be producing automobiles very soon in massive numbers, which will provide enormous competition against Australian finished automobiles. But will China have the capacity to produce the high-quality components for those cars?

Let us think ahead. Let us think progressively about the future of Australian manufacturing. Let us as a parliament think about the future of Australian manufacturing. That is why I am encouraged that the House of Representatives economics committee has agreed to this inquiry, ‘Beyond the resources boom’. I hope that business organisations, trade unions and local chambers of commerce, including those in the area of Macarthur, all contribute to that inquiry. I will be asking the inquiry to visit those areas so that we are not just sitting behind a table while others tell us their stories, but actually visiting their factories.

But the problem is that this government is fixated on a resources boom that cannot last forever. We need to prepare for the period beyond the resources boom. The board of Austrade is well equipped to do that. The board of Austrade deserves the support of the Australian parliament. The board of Austrade does not deserve to be abolished, and that is what this minister is doing. He did not put out the press release. Obviously he does not agree with the cabinet decision to abolish that board, which is a great shame, and I would love to hear from him the real reasons that this board is being abolished, because it cannot be in Australia’s national interest.

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