Address to the China-Australia Chamber of Commerce Craig Emerson - Shadow Minister for Innovation, Industry and Trade

Speech

Transcript - Beijing, China - 28 February 2003

At the early stages of the unfolding economic miracle of China's modernisation, entrepreneurs from around the world flocked here. Many looked for quick, easy returns. They were mesmerised by the sheer scale of this emerging market and its vast potential.

Now, more than a decade and a half later, those businesspeople who made a commitment to the long haul are the survivors. They are wiser, leaner and more nimble for the experience. Many are now starting to make reasonable returns.

We all recognise and applaud your tenacity and the contribution you make to Australia's prosperity and China's economic modernisation.

China is a tough market. All your competition is here. And the government regulatory framework changes and adapts as the market expands and evolves. Businesses need to keep up with these changes.

In no country are good government-to-government relations and genuine friendship at the political leadership level more important to the successful pursuit of business interests than they are in China. The term "old friend of China" is no mere platitude.

China and Australia have been good friends and close partners in the modernisation of our economies. Official figures released a week ago confirmed a little-noticed event: last year China[1] surpassed the United States as Australia's second largest merchandise export market.

China, too, has become the fastest-growing market for Australian tourism – our biggest export industry. China is Australia's largest source of overseas fee-paying students. And at a time when global competition for highly-educated migrants has become fierce, China has become the fifth largest source of skilled migrants for Australia.

The momentum China's economic modernisation has given to East Asian growth has been a valuable additional source of Australian prosperity and jobs, for East Asia as a whole buys 55 percent of Australian merchandise exports.

Although less important to China in a purely economic sense, Australia has been there, at each vital stage, of China opening its doors to modernisation.

The Whitlam Labor Government was one of the first Western governments to recognise the People's Republic of China.

China's first development cooperation agreement with a developed country was with Australia, under the Prime Ministership of Malcolm Fraser.

China's first overseas investments were in an Australian aluminium smelter and an iron ore mine, during the early Labor years.

And during the modernisation of the 1980s the Chinese leaders of reform at that time and Prime Minister Bob Hawke took an intense personal interest in each other's reform initiatives.

The good reputation Australia and Australian businesses enjoy in China is due in no small part to high-level diplomacy at the leadership level dating back 30 years.

I am afraid it has to be said that the earlier intensity of high-level diplomacy between our two countries has not been maintained in recent years.

The easing off in our high-level political relations with China is inimical to the interests of Australian business and through it, Australian jobs and incomes.

The LNG gas contract is highly valuable and most welcome. But it is not proof positive that all is well in the Australia-China relationship. It was finally secured through the hard work of the Gallop Government in Western Australia, the commercial partners and the Prime Minister's direct involvement.

But you are not all seeking $25 billion contracts (as welcome as they would be). You need the most positive business environment based on an Australia-China political relationship that is constantly replenished and nurtured.

Labor recognises this reality and like you, Labor is in the China relationship for the long haul.

Our leader, Simon Crean, visited China last year and took the initiative to open a new and important dialogue between China and Australia. Although opposition parties should visit countries of major significance, the importance of Simon's visit was that he raised this contact to a formal and ongoing level.

Our delegation is evidence of the substance in his commitment. It comprises our Deputy Leader, almost one-quarter of the Shadow Cabinet, one-fifth of the Shadow Ministry, a former Trade Minister with great depth of experience in China, our Party Secretary and a leading academic and good friend of China.

Our delegation is a further step towards re-energising political contact in the Australia-China relationship, a demonstration of the commitment of a Crean Labor government to this valuable partnership.

The loss of Australian diplomatic focus on China and East Asia at the leadership level may be showing up in Australia's deteriorating trade performance.

Last year Australia experienced its largest fall in exports since Melbourne hosted the Olympics in 1956. We did especially badly in East Asia – as the region surged forward by 6.7 per cent, Australian merchandise exports to the region slipped backward. So much for a slowdown in global economic growth as an explanation for Australia's deteriorating export performance.

The Australian drought is also used as an excuse, but it is not the explanation.

In last three months of last year, Australia's non-agricultural merchandise exports to East Asia fell by five per cent compared with the previous quarter, greater than the four per cent fall in total merchandise exports to the region.

Though Australia's merchandise exports to China have continued to grow, it has been at progressively slower rates. Last year's growth of 10 per cent was down from 26 per cent in 2001, which was slower than the 47 per cent growth achieved in 2000.

Average annual compound growth in Australia's merchandise exports to China over the six years to 2002 was 15 per cent, slower than that of the preceding six years when growth averaged 20 per cent. Consequently, Australia's share of China's imports fell from 2.5 per cent in 1996 to 2.1 per cent last year.

It used to be said that Australia punched above its weight in China. Now we punch at our weight, or maybe a bit below.

Worse may lie ahead, as the full effects of the drought bear down on our exports and as the Australian dollar continues its rise.

Australia must lift its political and trade effort in East Asia if these alarming trends are to be halted.

In the Labor tradition, our trade policy must return to the principle of non-discrimination.

During the Labor years of bilateral negotiations on market opening with China and other East Asian countries, neither party sought preferential access – just an opportunity to compete openly.

Indeed, other than completing a preferential trade deal with New Zealand initiated by the Fraser Government, Labor never pursued discriminatory trade deals.

Labor's non-discriminatory bilateral deals were consistent with our vigorous pursuit of liberalising global markets through the Uruguay round of multilateral trade negotiations.

How times have changed for Australian trade policy and, in Labor's view, for the worse.

Preferential bilateral and regional trade negotiations are all the rage, with the United States, Japan and Australia leading the charge. Some sensitivity has arisen around my description of these proposed deals as being discriminatory. This is a term used by the Director-General of the World Trade Organization, Australia's Foreign Minister and academics worldwide. For that is what these negotiations seek to do – to favour parties to the deal and to discriminate against countries not party to the deal.

Neither Australia's nor East Asia's interests would be served by the formation of an East Asian trading bloc in response to these discriminatory deals. Australia would lose, since it is not proposed that Australia would be a member of an East Asian bloc, our biggest export market. And East Asia would lose, since its future economic prosperity depends crucially on trade with the rest of the world.

Professor Ross Garnaut, a former Ambassador to China, rang the alarm bells last year, when he said on the 30^th anniversary of Australia-China diplomatic relations:

"China was reluctant and late to enter the Western Pacific enthusiasm for small-group free trade areas. Senior Chinese officials reiterate China's central interest in global trade, but feel constrained by the political momentum behind discriminatory blocs in Japan, the United States, Australia and elsewhere in the Asia Pacific…

Australia, for its part, has been enthusiastically seeking a free trade area with the United States, which would discriminate against its economically more important partners in East Asia…

The end result of continuing naively down the paths upon which Australia and, with more reluctance, China have carelessly trod, would be eventually membership of different blocs, within a greatly weakened multilateral trading system".

Rather than constituting "competitive liberalisation", as claimed in the Australian Government's recent White Paper on foreign affairs and trade, discriminatory trade deals threaten the entire global trading system.

An independent report commissioned by Australian government agencies cautions that the proposed US-Australia free trade agreement would invite Chinese and Japanese retaliation against Australian beef and wool exports. It warns that China and Japan could be "greatly irritated" by Australia giving preferential treatment to US clothing and car manufacturers.

A Labor government would re-energise Australia's relations with East Asia in general and China in particular. We would do so in the Labor tradition of non-discrimination: any progress Labor achieved in further opening up markets in East Asia would be for an opportunity to compete openly.

Labor does not accept the role for Australia identified in the white paper, as a manager of US-China relations. We are no-one's deputy sheriff.

Through 30 years of diplomacy at the highest political level Australia has earned the reputation of an "old friend of China". Labor confirms our friendship with China, begun by Gough Whitlam, strengthened and deepened by Bob Hawke and Paul Keating and now re-energised by Simon Crean and our visiting delegation.

Through our revitalisation of the political relationship with China, Labor seeks to make life a little easier for you, the long-haul carriers of the Australian flag in China. And as you carry the flag forward on behalf of the Australian business community you can be confident in the knowledge that a Crean Labor Government will be right there beside you.

[1] The Mainland plus the Special Administrative area of Hong Kong