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

by leave—I remind the House that during the election campaign Labor made a commitment that if elected to govern we would undertake a comprehensive review of all existing trade policies and programs, a review that would be aimed at positioning exporters and the nation to take maximum advantage of the ongoing resources boom but, more importantly, to develop the full export potential of all sectors of the economy, including agriculture, industrial goods and services.

I am pleased to announce to the parliament today the details of that review.

The review is essential because the previous government squandered the opportunity provided by the resources boom to position Australia for a sustainable economic future.

I remind the House also that under the last Labor government we got the trade and economic policy mix right.

We opened up the economy, we floated the Australian dollar, we cut tariffs, we deregulated the financial sector, we introduced wage restraint through the accord and we also locked in, through that accord mechanism, the low inflation and low interest rate environment that until recently has been experienced in this country. We introduced national superannuation, the greatest intergenerational policy reform of this country in retirement income reform, we developed national competition policy, significant cuts to company and personal tax and greater independence of the Reserve Bank.

All of those measures, which are integrated components aimed at improving our export performance amongst other things, achieved strong productivity growth in the 1980s and 1990s. In fact, as a result of the deregulated wages system and enterprise bargaining that we introduced under the accord, this country experienced the greatest step-up in productivity in the history of this country. What we did through that mechanism by linking wages to productivity, linking it to enterprise and linking it to our export sector contributed much to the double-digit growth in Australia’s exports and to lowering inflation.

In contrast—because this is the whole point of those opposite who say that they presided over good export growth under their watch—under the last six years of the Howard government, despite a resources boom, total export revenues grew at an annual average rate of only 5.8 per cent compared with 10.7 per cent in the 18 years following the float of the dollar in 1983. Goods exports grew at an average annual rate of 6.4 per cent compared with an average growth of 10.3 per cent since 1983. Service exports grew at about a third of the long-term average, and manufacturing exports collapsed under the government in the last six years, growing only three per cent compared with 13 per cent since 1983.

What did all this result in? It resulted in a trade deficit for more than five consecutive years and a trade deficit for the December quarter 2007—their parting gift as they went out of office, rejected by the Australian public—of $6.9 billion, which is the worst quarterly trade deficit on record. It resulted in 69 consecutive months of goods and services trade deficits; a current account deficit at record levels, around six per cent of GDP; soaring foreign debt of $554 billion in 2006-07; and net exports making a positive contribution to Australia’s economic growth in only two of the 11 years that that government was in office.

Contrast that with when Labor was in office for 13 years. Net exports made a positive contribution to growth in 10 of those 13 years without the resources boom compared with the Howard government’s failure with a resources boom. Despite the strongest growth in the world economy in more than 20 years, the value of Australian exports actually slowed under the Howard government, particularly in recent years. Export values grew by four per cent in 2007 compared with 18 per cent in 2006 and 15 per cent in 2005.

That is the appalling trade performance that we inherited—the trade performance bequeathed by the Howard government to this nation.

The former government believed that it could coast along on a resources wave. It squandered the opportunity presented by that resources boom. It failed to invest in the drivers of economic growth, in particular in skills, innovation and infrastructure.

It failed to develop an integrated trade and economic policy to secure our future beyond the resources boom.

It is a sorry story and, like so much of the Howard legacy, a squandered opportunity.

It is time to take action to restore Australia’s trade performance to ensure it once again becomes a contributor to economic growth and sustains us beyond the resources boom.

The Rudd government is committed to a new trade policy to restore Australia’s level of productivity, international competitiveness and export growth. This will be achieved in the context of the twin pillars approach for sustainable economic growth—that is, trade liberalisation at the border to be complemented by economic reform behind the border to maximise opportunities for our export sector.

In this House on Monday in response to a question I outlined why the first pillar is so important—that is the pursuit of trade liberalisation at the border via the WTO Doha development round.

It is because over the past five years—and without a Doha conclusion—world trade has grown at twice the rate of growth in world output.

The message is clear: if we can get growth in world markets through the trade liberalisation agenda we will create the environment for sustained economic growth.

That is important not only for Australia but for the international economy.

We are at a time when there is considerable uncertainty about the direction of the global economy.

However, a successful outcome to the Doha development round—and I repeat what I said on Monday that it will be terribly difficult but, in my judgement, it is doable—will provide a much needed confidence boost and help to restore some certainty to the current uncertain outlook.

Labor will seek to complement trade liberalisation gains derived from the multilateral process at the regional level via APEC, ASEAN Plus Six and other fora that may arise—that we refer to as WTO Plus.

At the bilateral level comprehensive FTAs can then enhance the liberalisation measures further—that is, WTO Plus Plus.

So the Rudd Labor government has recalibrated Australia’s trade liberalisation policy back to where it should be for this middle sized country.

The Howard government, when it was in office, reversed the order. It put its eggs in the basket of free trade agreements. It put all its eggs in the basket of the FTAs, squandering the opportunity to achieve substantial gains for Australian industry by making a real commitment to the Doha round. By way of interpolation, I hear that the Leader of the National Party involved sold out his constituency by agreeing to sugar being excluded from the US-Australia Free Trade Agreement. What sort of negotiating ineptness was that! The previous government also squandered the opportunity provided by Australia’s unique position, as chair of the Cairns Group, to be front and centre in the world trade talks. Instead, it was prepared to take a back seat and let others squeeze Australia out.

So this government will make the Doha negotiations our central trade priority—as they should be—but complemented at the regional and bilateral level by the other liberalisation fora.

It will be through this framework that we will achieve the best commercial outcomes for Australia’s agriculture, industrial goods sector and services sectors.

The second pillar to which I refer is trade liberalisation behind the border.

There is no point in getting market access if you are not competitive and productive enough to take advantage of it.

This is where the trade policy review will play such an important role.  

The review represents the government’s determination to develop an integrated approach to trade policy and ensure it is part of the broader economic policy settings.  

That is education, skills training, industry, innovation infrastructure and IT policy are all critical in complementing our trade policy to ensure that behind our border we are maximising the gains from trade liberalisation and taking full advantage of the access at the border.  

We must aim for all arms of policy to work together to drive productivity growth, enhance our level of international competitiveness and improve our export performance.

This is vital to ensure our trade performance once again becomes a strong contributor to Australia’s economic performance—a positive contributor also to sustaining our economic growth beyond the resources boom.

The government wants the review to assess the challenges and develop a strategic, whole-of-government approach to advancing Australia’s international economic and commercial interests.

The review will bear in mind the government’s desire to optimise the overall economic performance of the Australian economy through productivity gains and deeper integration of the Australian economy and business with the global economy.

I am delighted that Mr David Mortimer AO, Chair of Leighton Holdings and Australia Post, has agreed to chair the review.

Mr Mortimer has a strong record of achievement in business and is ideally suited to lead the review.

I am also delighted that Dr John Edwards, Chief Economist of HSBC Australia, will work with David Mortimer on the review.  

Dr Edwards has worked and written extensively on economic and trade policy issues including on ways and measures required to improve.

The review will examine export policy and programs across all government portfolios and agencies and their linkages to state and territory programs. It will cover goods, services and investment.

The review will make an assessment of the challenges and opportunities currently facing Australian exporters and international business. In making this assessment, the review will examine:

(a)

Australia’s export performance over the past two decades, identifying factors that are inhibiting export performance, domestic productivity, productive investment flows and international competitiveness;

(b)

the extent to which Australia’s trade policies adequately reflect Australia’s interests in the contemporary global economy; and

(c)

the coverage, coherence and effectiveness of current trade development services and programs, and the extent to which they adequately address the needs of exporters, importers and investors.

The review will make recommendations on any of the issues identified, including:

(a)

measures required to improve export performance, including the relationship with domestic policy settings and productivity-enhancing policies;

(b)

measures which will improve the capacity of new and existing exporters to expand their export base and take optimal advantage of the expansion and evolution in international trade and investment;

(c)

measures to encourage more small businesses to begin exporting or to expand their export operations;

(d)

measures to promote an improved services export performance, including financial services;

(e)

policies and programs that will promote high value added exports, enhanced levels of productivity and improved international competitiveness;

(f)

measures to expand market access opportunities for Australian exporters of goods and services; and

(g)

measures to promote a more concerted and coordinated national approach to lifting export performance.

Under existing legislation, the government is required to initiate a review of the Export Market Development Grants (EMDG) Scheme by 2010.

Given the integral role of the EMDG scheme in the current mix of export policies and programs, I am proposing that the EMDG review be brought forward and be undertaken as part of this broader review.

The overall review will consult widely with stakeholders and will be calling for public submissions.

The secretariat supporting the review panel will be based in the Department of Foreign Affairs and Trade.

Given the whole-of-government approach that the review will be taking, the secretariat will draw on expertise from other government departments.

The review will be completed by 31 August 2008 as outlined in the terms of reference.

A separate research project on Australia’s approach to free trade agreements will be undertaken in parallel with the export policies and programs review, and its results will be incorporated in the review’s final report.

This research will analyse Australia’s most recent free trade agreements (FTAs) to assess their net benefits and include a comparative analysis of Australia’s FTAs with those concluded by other countries.

The research will ensure that any future FTAs strengthen the WTO multilateral trade system, including through the development of benchmarks for any future agreements Australia may negotiate, and will provide greater benefits for Australian exporters.

The research on FTAs will be conducted under the leadership of a reference group of experts, specifically:

• Professor Kym Anderson, Professor of Economics at the University of Adelaide;
• Dr Andrew Stoler, Executive Director of the Institute for International Trade;
• Peter Gallagher, Managing Director of Inquit, and formerly CEO of the Australian Dairy Council; and
• Dr Nicholas Gruen, CEO of Lateral Economics.

I said at the outset that the previous government bequeathed to Australia what may well be Australia’s worst trade performance ever recorded for an Australian government, a trading performance where net exports detracted from economic growth for nine of their 11½ years.

And that was at a time of historically high levels of global economic growth and a resources boom driven in large part by China and India.

It is a sad indictment of the Howard years that despite some of the most propitious times in recent history they were not able to get our trading performance onto a more sustainable footing.

Once again, it takes a Labor government to provide the strategic injection and framework to maximise the global opportunities for Australian business.

The review will build on the twin-pillars approach to sustainable economic growth.

And it will provide advice on the development of a comprehensive, integrated approach to trade and economic policy that Australia now needs for the 21st century. I commend the statement to the House. I seek leave to move a motion in relation to the statement.

Leave granted.

I move:

That so much of the standing orders be suspended as would prevent the Member for Groom speaking for a period not exceeding 19 minutes.

Question agreed to.

See this speech in context