Craig Emerson (Rankin, Australian Labor Party, Shadow Minister for Service Economy, Small Business and Independent Contractors) Share this | Hansard source

I second the amendment. The Export Finance and Insurance Corporation Amendment Bill 2006 implements the recommendations of the Uhrig report, which improved the management and corporate governance of EFIC. On that basis and on the basis of broader community support for this legislation, Labor is happy to endorse and vote in favour of the bill. Our overriding concern is that this legislation, as important as it is, will not in fact go very far in improving Australia’s trade performance. It is for that reason that the member for Hotham has moved a second reading amendment which does not decline to give the bill a second reading but at the same time asks the House to note that the bill will do little to correct Australia’s trade balance, which has been in deficit for a record 57 consecutive months. A trade deficit of $11.7 billion was recorded in 2006, which is contributing to a current account deficit of $54 billion and to a record $0.5 trillion foreign debt. The amendment calls on the government to take all necessary measures to address these failures.

These are very big numbers. Fifty-seven consecutive trade deficits is a record, and a very undistinguished record, on Australia’s part. That we have had such a succession of trade deficits, most of which have occurred during the best mineral prices and terms of trade in 30 years, is no mean feat. It is hard to imagine. If you look around at other countries of the world which are major exporters of mineral commodities, most, if not all of those, are in surplus, but here we are in deficit and there are very few signs of things improving. You could imagine that the recovery was truly just around the corner and say, ‘Well, it has been bad, but things are getting better.’ Indeed, Treasury documents, if you care to peruse them, over the past five years have consistently said that the recovery in export volumes is just around the corner and that literally next financial year the volumes will recover in response to the high prices—the best prices in 30 years. But it is just not happening and we must ask why.

The Minister for Trade said that it is because of ships being lined up in ports like Newcastle—my goodness! For a start, not a lot of iron ore comes out of Newcastle. Most of that comes out of Western Australia. But I am sure that the minister would have an excuse, no doubt laid at the feet of the Western Australian government, of a local council or of a regulatory authority, but which has nothing to do with the government. It is never the government’s fault.

If you look at the litany of explanations, which are really excuses for our appalling trade performance, you see that they started with claims that there was this world economic slowdown. There was a slowdown for a while, but then the world economy took off. It was zooming ahead, but it did not stop the government saying that our export performance had slumped because of the world economic slowdown. Then along came SARS—in many ways for the government a blessing in terms of another excuse: ‘It’s SARS, that is why our trade deficit is so bad.’ Then it was bird flu. Then of course it was international terrorism—but it is never the government’s fault!

The opposition leader talks about the blame game. This government is expert at the blame game because when things are going badly it blames everyone and everything but itself, and when things are going better it claims all credit. It claims all the credit for the strong economic growth that has occurred in Australia over the last 15 years, even though the government has actually been in place for 10½ years. It has claimed all of that credit, despite the fact that it was a consequence of a productivity boom created by the economic reform program of the Hawke and Keating governments which unleashed a decade of record productivity growth in Australia.

But what has happened since the year 2000? This reform-lazy government has allowed productivity growth to slump and in the last three months for which data is available—that is, the three months to September of last year—productivity growth was not zero; it was minus 1.5 per cent in one three-month period, and that came on the heels of minus 0.2 per cent in the previous three months. Yet we had the Treasurer in the parliament on 1 November crowing about productivity growth being at or marginally ahead of the previous productivity cycle. So the only person in the country who is happy with Australia’s productivity performance is the Treasurer of the country—which is a pretty bad situation, because he is the one who should be doing something about it. But he does not even acknowledge that a problem exists. It is because of that poor productivity growth that our competitiveness in international markets has deteriorated so dramatically, and that has been reflected in the performance of our manufacturing and services and indeed our resources exports.

In volume terms, under the previous Labor government, over the period 1983-96, manufactured exports grew by nearly 13 per cent, but in the period of this government up to 2005 they grew by just over five per cent per annum. So there was a drop from almost 13 per cent to just over five per cent per annum. If you look at services exports, you see that the story is similar. Under the previous Labor government, service export volumes increased by more than nine per cent, but under this government they increased by only around 2½ per cent. If we now go to resources—the area where we should be doing really well on export volumes in response to the best prices in 30 years—we see that export volumes of resources under the previous Labor government grew by 6½ per cent and under this government they grew by less than four per cent. So what is going on; what is going wrong?

A lot is going wrong, and it is not helped by the Treasurer believing that there is no problem with productivity growth in this country and the trade minister getting up in parliament chortling about our wonderful trade performance. If they both believe everything is going magnificently then we will never get the policies put in place under this government to remedy these structural weaknesses in the Australian economy. That is why it will require the election of a Rudd Labor government in order to deal with the structural weaknesses in the Australian economy.

We do rely substantially on the export of resources from this country, not only agricultural resources but mineral resources. I was very disturbed last night when watching Lateline to see the Australian of the Year say that we should already have ceased exporting coal from this country. He said that we should already have ceased exporting coal—not that we should phase it out over time but that it should have ceased already because it is wrong to export coal from Australia.

In responding to the greenhouse challenge we need a mix of policy responses, but at the heart of those responses has to be a clean coal future for this country. We cannot simply rely on generating power in Australia by solar and other renewable sources. Nor should we be saying to the rest of the world that it is wrong to generate electricity from coal. We should be investing in and supporting the development of clean coal technologies. We are sitting on a coal seam that extends from the Bowen Basin in Queensland through to the Latrobe Valley in Victoria, and the Australian of the Year is saying that we should not be developing those resources, exporting them and giving developing countries an opportunity to go along the economic development path that wealthier countries have followed. I hope the Prime Minister does not associate himself with the remarks of Professor Tim Flannery, as the Australian of the Year, as he associated himself with Professor Flannery when he was made Australian of the Year, because these remarks are irresponsible. They are a recipe for massive job losses in Australia and a recipe for economic dislocation in this country and around the world. That is the truth of the matter whether people like it or not.

I have been talking about resource exports, but let us look at services exports. I compared the figures from 1983 through to 1996 with figures from 1996 through to 2005. If we update those a little all the way to September 2006—that is, the period of the Howard government up to September of last year—we will see that the growth in the volume of services exports was 3½ per cent per annum and for the same period of the previous Labor government it was more than 10 per cent per annum. Everywhere we look, the volume of our exports has deteriorated under this government. I need to acknowledge that there is one exception: rural exports. I need to correct myself there; they too have declined. I thought I was going to be able to say something good about the government’s export performance, but I have disappointed myself. I was trying to give credit where credit was due, but no credit is due. Rural export volumes increased by four per cent under the previous Labor government but by 1.2 per cent under this government. Of course, the government will claim that that is all due to the drought, but there are other problems as well.

What has the government sought to do in relation to our international competitiveness and access for our rural producers, service exporters and manufactured exporters to international markets? It has essentially given up on multilateral trade liberalisation. You have to doubt whether the government has ever been committed to multilateral trade liberalisation, because again it took the previous Labor government to kick-start the Uruguay Round of multilateral trade negotiations, which produced real outcomes, including for agriculture. Were they ideal outcomes? No, but they were real outcomes and there was meaningful progress. What have we had since the completion of the Uruguay Round in terms of multilateral trade negotiation? Nothing. What outcomes have we had? None. One of the reasons, as Jagdish Bhagwati has pointed out, has been this spaghetti bowl of preferential trade deals which have proliferated in the last few years. Australia, once a proud contributor to multilateral trade negotiations, now is very much in there with these preferential, discriminatory trade deals. We were told that these trade deals were going to unleash wonderful benefits for Australia and that is why the government was going down the preferential bilateral trade deals path. By ‘preferential’ I mean giving preference to one country while discriminating against all other countries. That is what a preferential trade deal is and that is the sort of deal this government likes to strike.

There was a very long and controversial debate about the Australia-US Free Trade Agreement and whether that would have merit. We were told, on the basis of consulting reports, that it would unleash enormous benefits for Australia. Let us have a look at what the outcome has been so far. In the first two years of the Australia-US Free Trade Agreement, Australia’s merchandise trade deficit with the United States has actually increased by 30 per cent—a great deal. ‘Come here—strike a deal,’ says Mr Howard to the President of the United States, and they agree to negotiate and fast-track an Australia-US Free Trade Agreement that so far has led to an increase in Australia’s trade deficit with the United States of 30 per cent.

The consultant’s report that the government paraded all around the country and all around the world said that in fact the main benefit would occur by liberalising the Foreign Investment Review Board processes so that there would be a lot more American foreign investment in Australia. The report said this was worth billions and billions of dollars to Australia and this is what was really going to drive the economic benefits of that trade deal. What has happened? In the time since that trade agreement came into force, what has US investment in Australia risen by? Nothing. US investment has fallen.

This big liberalisation program was going to lead to all of this American foreign investment coming into Australia, and in the first two years it has fallen. I will not be churlish and say that that therefore proves that there will never be any benefits from such deals for Australia. But you would have to say that the early days are not encouraging.

We will look now at the Singapore-Australia Free Trade Agreement. It came into effect in mid-2003. Our trade balance with Singapore has gone from a surplus of $165 million to a deficit of more than $7½ billion. So the early days are not very happy days there either. Now let us have a look at the Thailand-Australia Free Trade Agreement. Since that deal came into effect in early 2004, Australia’s merchandise trade deficit has increased from $700 million to $2 billion.

These are very discouraging figures. It shows the folly of putting all of your eggs into the basket of bilateral trade deal negotiations, especially those preferential deals. It is true that the previous Labor government, while it was negotiating and pushing for multilateral trade liberalisation, was also negotiating bilateral trade deals, obviously, with individual countries. But it did so with countries like Japan, Korea and China, not on the basis of seeking preferential access to those markets but simply wanting an opportunity to compete—that is, the then Australian Labor government asked those countries in the negotiations not to provide a special deal for Australia but to open up the market to competition from exporters around the world, one of which would be Australia. That is what we asked for and that is what we got. So there is merit in having a dual process of multilateral trade negotiations and bilateral trade negotiations where the bilateral trade negotiations are not preferential and are non-discriminatory. But that has not been the approach of this government. That is why our export performance has been so disappointing.

Services export is a completely forgotten area for this government. There has been no strategy put in place to boost Australia’s services exports. Some of our service exporters, such as in the financial services area, are starting to make real gains, sometimes with the help of some trade officials—I acknowledge that. But as to strategy, services contribute 80 per cent of Australia’s gross domestic product and yet contribute such a small proportion of our exports.

Increasingly with globalisation, more and more services are traded services, so it is not good enough to say services are overwhelmingly non-traded goods and therefore there is no point in trying to encourage and support the export of services. Increasingly they are traded goods and other services such as shipping and insurance, which, by definition, are traded goods. But where is the strategy? Where is the government sitting down with service exporters and saying to them, ‘We want to help open up access to service markets in other countries?’ Services exports must be an integral part of any trade strategy, but they have not been because this government has been slothful on economic reform. It has been slothful in terms of our trade performance, and as a consequence we now have a very big foreign debt of half a trillion dollars, which is to this government’s eternal shame.

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