Keynote Address to the 2017 Asia Pacific Regional Conference, Perth

Transcript
04 Nov 2017
Perth
Prime Minister
International and Trade, Economy and Finance

PRIME MINISTER:

Well thank you Mathias and can I just say right at the outset, how grateful I am for the extraordinary enthusiasm and leadership Mathias has brought to bringing the German-Australian relationship to the highest level it has ever seen.

The partnership with Maria Böhmer on the Australian-German Advisory Group, all of the developments which have flowed from that - and of course Lucy was a member of that group when she was Andrew's predecessor as President of the German Australian Chamber of Industry and Commerce - this has been a great exercise in really practical diplomacy. So right at the outset, let's say thank you to Mathias and Maria Böhmer.

[Applause]

Now, of course, we are in the presence of our principal guests, the President of the Federal Republic of Germany, Frank-Walter Steinmeier and his wife Elke Büdenbender. I want to thank them both for being here.

We have had some great contributions already in discussions with the President and the First Lady gave a terrific presentation at the breakfast this morning. I’m told there was, compared to Germany there was a larger percentage of men attending the Women's Breakfast.

[Laughter]

Well, there you go, that’s something. I am not sure what that means, but apparently it’s a good thing. I was worried that it might have created offence. But we also have present with us the Prime Minister of Timor-Leste as Mathias observed, Prime Minister Dr Mari Alkatiri and we made a great announcement last night. So many other distinguished ministers, members of Parliament, leaders of industry, distinguished guest, ambassadors, welcome to you all.

Now, President Steinmeier, leaders like yourself, Chancellor Angela Merkel and Helmut Kohl, who of course sadly passed away in June this year, have shaped united Germany as a powerful force for good in our world. You have done this through an unwavering commitment to the values of the open society; the values of freedom and mutual respect, underpinned by the rule of law. These are the values and the institutions that enable our collective security and prosperity.

But you also have the advantage of some very tall and broad shoulders on which to stand. It is 500 years ago this week, in fact, since Martin Luther protested the sale of indulgences which the Church had been presenting as tickets to heaven. He thereby risked his life to question the Church's monopoly on religious truth. Martin Luther's letter of 31 October 1517 and the 95 debating points attached to it, sparked the Reformation. Some argued that his spirit of autonomy and critical inquiry opened the door to the Industrial Revolution and the Enlightenment.

Now, you will be pleased to know that I will refrain from delivering 95 debating points on this hotly contested subject this morning. But I will invite you to take this moment to contemplate the foundations of our prosperity and our civilisation.

Of course, history does not travel in straight lines. It took 30 years of religious war for the powers and the principalities of Europe to respect each others’ sovereignty, to accept restraints in order to achieve bigger and better things with the Peace of Westphalia of 1648. This compact between nations in turn paved the way for the rules and the institutions which enabled ideas and enterprise to prosper.

Nobody has warned more eloquently than you have, President Steinmeier, that the Enlightenment project can turn in on itself to catastrophic effect, when we do not jealously guard the rules and the  institutions which protect our individual freedoms.

We have been witnessing the calling-into-doubt of the idea of open societies and liberal democracies, as you told a forum at the Bellevue Palace. We are realising that historic achievements can be lost when their foundations begin to crumble. Well said, profound words.

Now, in my address to the Shangri-La dialogue in Singapore recently, I talked about the central importance of the US-anchored, liberal rules-based order for regional security and stability. Today I want to talk about the liberal system of rules and institutions which underpin our regional economy

My message is that we cannot take any of it for granted. That is why we are pursuing market integration wherever we can do so, on the basis of strong, transparent rules, fair and open competition, predictable and non-discriminatory regulation. This is our framework for pursuing stability and prosperity, without ever compromising our autonomy.

Now, the reverberations from the fall of the Berlin Wall have been extraordinarily far-reaching. The collapse of the Soviet Union and its satellites, dealt a withering blow to the idea of central planning. This was the backdrop for the start of economic reform in India in 1991 and the restart of economic reform in China the following year. All of this gave impetus to the most complex trade negotiations ever attempted; the Uruguay Round which gave birth to the World Trade Organisation in 1995.

The improvement and extension of the liberal rules-based system to almost all corners of the Indo-Pacific ,has generated the greatest burst of economic growth, innovation and human advancement the world has ever seen.

Global trade has risen five-fold.

Foreign direct investment ten-fold in a quarter of a century.

GDP per capita has risen twenty-fold in both China and South Korea.

Expanding frontiers of knowledge, wealth and technology have driven literacy and life expectancy and reduced poverty, at a greater rate than ever before.

Australia has benefited as much as it has contributed. Real average Australian household income in 2016 was $8,448 higher than it would have been if Australia had not chosen the path of trade liberalisation in the 1980s, according to the Centre for International Economics. We have enjoyed a record-breaking 26 years of unbroken GDP growth and the regional momentum remains exceptionally strong. Our Treasury projects that Asia will account for two thirds of global economic growth out to 2030, even as growth in north-east Asia slows in comparative terms and China's working age population falls. That’s because the rest of the Indo-Pacific is only getting started.

The epicentre of opportunity is shifting closer to Australia within Asia.

India is now the world's fastest-growing major economy.

The people of Southeast Asia are connecting into the global marketplace and to each other like never before.

Bollywood sells twice as many cinema tickets as Hollywood.

Jakarta is now the world's most active city on Instagram Stories.

And while the number of Chinese visitors in Australia surged 10% last year and 13% from Japan, they rose 15% from India and 23% from Indonesia. That is why my Trade Minister Steven Ciobo, is proving to be every bit as energetic as his distinguished predecessor Andrew Robb, who is here with us today. Steven is doing everything that is humanly possible to complete a Comprehensive Economic Partnership with Indonesia by the end of the year. He is probing every opportunity to raise the level of ambition with India. He is negotiating a Free Trade Agreement with Hong Kong and has recently upgraded the one we already have with Singapore.

Australia's economic opportunities in the Indo-Pacific are creating new possibilities for our partnerships with Europe.

Let me give you an example. Most Australians know what Aldi, the discount German retailer, has done for household grocery bills. By the end of this year it will have 500 stores and 10,000 Australian workers, challenging the dominance of Woolworths and Coles. It’s a great example of how our openness to international competition and investment makes us better off. But what you may not know is that since March this year, Aldi has been using Australia as its launch-pad for selling to China. Aldi is taking advantage of our national brand, our reputation for clean, safe, quality produce, to supply Australian food, wine and infant formula directly to the Chinese e-commerce market. This means its stable of more than 1000 Australian suppliers and the thousands of Australian workers they employ, is set to expand, especially at the quality end of the market.

Now, Aldi's choice of Australia as the gateway to Asia says something about the brand power that can only come from transparent and well-regulated markets. It is exactly the kind of thing that Angela Merkel was foreshadowing when she described Australia as: “A partner in the Asia-Pacific region which shares our values, universal human and fundamental rights, as well as freedoms, democracy and the rule of law”.

It illustrates why Australia and the European Union have agreed to commence free trade negotiations early next year. Australia and the European Union are key partners in reinforcing the rules-based economic system.

We believe in it and the values that underwrite it.

The EU as a bloc is already our second largest trading partner and the largest source of foreign direct investment. Yet it is our only remaining major trading partner with which we don't have a Free Trade Agreement. We must seize the opportunity to achieve one.

Now, the momentum for growth and opportunity across the Indo-Pacific is enormous. However, to return to President Steinmeier’s words of caution, there is nothing inexorable about any of it. All of our impressive projections about the economic strength of the Indo-Pacific are only as good as their assumptions. The key assumption is that the rules-based economic system will continue to evolve and expand, much as it has since the fall of the Berlin Wall.

Continuing prosperity assumes we do not close our doors to the flow of people, capital, imports or ideas. That we don't turn in on ourselves, taking populist comfort in protectionism. That we don't forget the lessons of the 1930s.

Already, since the global financial crisis, global trade growth has slowed significantly, while investment flows have slumped. Global value chains that have been growing 4% a year have been contracting each year since 2011. Some of this is technological as more goods like software and movies are traded as services and advances in robotics and communications have enabled manufacturing to return to high wage economies.

But there is no mistaking that the global system is under stress. Its ability to advance trade liberalisation, contain protectionism and enforce international rules, faces greater challenges than at any time since the creation of the multilateral trading system in the 1940s.

The siren songs of populists, advocating protectionism as simple quick solutions, have gained considerable support. Moreover, there is a real risk that rising major power trade tensions - tensions between assertive state capitalism in China and populism in the United States - could undermine the stability of the World Trade Organisation's rules-based trading system and its all-important mechanisms for settling disputes.

You don't need a degree in economics to know that a world in which the rules-based economic system is weakened will be poorer for all of us. In such a world, “there is no place for industry, because the fruit thereof is uncertain,” to quote Thomas Hobbes.

If we are to maintain the dynamism and prosperity of the Indo-Pacific, then we have to reinforce the rules-based structure that has enabled it thus far. That's why in January, when the incoming US Administration signaled it would withdraw from the 12 member Trans Pacific Partnership, I spoke with the Prime Minister of Japan, Shinzo Abe, to ensure we were doing whatever could be done to keep it on foot.

Prime Minister Abe and I believe the TPP offers much more than market access. It promises greater transparency and a stronger rule of law, in a world which is dangerously short of both. The TPP creates rules of the road to match the new economic world we are living in. It aims at old hidden trade barriers like corruption and new ones like data protectionism. It works to level the playing field for non-state companies. It’s designed to defend and extend the freedom to explore, share and capitalise on new ideas.

Now at the beginning of this year, when anti-trade populism had reached a new high watermark, I was told that the task of securing a TPP was impossible in the absence of its largest backer, the United States. We had to persuade all members of the group to stick to their original commitments, to refrain from unpicking any parts of this complex deal, even without the attraction of US market access. But I believe the logic is compelling and I note that the pundits - even the gloomiest - are starting to come around.

What was previously “impossible” is now achievable and especially in the wake of Mr Abe's resounding re-election as Prime Minister of Japan.

Importantly, if we succeed in securing a TPP11, then it must be designed to enable the United States to dock back in when it is ready to do so. I personally remain confident about America's long-term interests and commitment, but we cannot afford to wait. Our aim is to create an open architecture that enables any country to join, including China, provided they are willing to meet its high standards.

As well is the TPP, we are pursuing several other deals that are designed to be component parts in a larger free trading system. We seek a trading system that draws the region together, rather than cleaves the part, with our key security partner on one side and key trading partner on the other.

It is this vision that is driving Australia's participation in negotiations for a Regional Comprehensive Economic Partnership – RCEP - a partnership centred in ASEAN that draws in India, China, Japan and Korea. A high-quality RCEP agreement would improve governance standards and spur reform in member countries. It would be consistent with the rules and principles that underpin our other regional agreements, including the TPP.

Next week I will travel to Da Nang in Vietnam for the APEC Leaders Summit. I will be there to advocate for the importance of open regional markets, the value of the rules-based multilateral trading system and the need to hold the line against protectionism.

Those are the values that APEC has embodied since it first convened in Canberra on the 7th of November 1989, two days before the Berlin Wall came down. In Da Nang, while it won't neglect the detail of the communique, the most powerful statement I can make for free trade is by signing a Free Trade Agreement with Peru. The Peru FTA is a first step towards a larger deal with a larger Pacific alliance which comprises the fastest-growing Latin American economies, in Chile, Colombia, Mexico and Peru. This in turn will be consistent with the all-important rule-making chapters of the TPP.

Now, there is a pattern here.

We are pursuing market integration on the basis of strong, transparent rules, fair and open competition, non-discriminatory regulation. They are the same principles that have worked so well for us at home. We’re building consistent and interlocking components, large and small, which could one day add up to something great.

Our long-term vision is a region-wide commitment which includes all the major economies.

That is the trade strategy I’ll be taking to the Summits. That’s how we are building on our historic contributions to APEC, the G20 and the World Trade Organisation. Whatever else might be said about the WTO, it remains the bedrock of a system which has helped deliver unprecedented prosperity and peace. Its’ dispute settlement mechanisms are critically important for constraining arbitrary and unfair behaviour by big countries against the small and Australia continues to provide leadership, creativity and perseverance in order to reinforce its authority and inject it with new life.

The bilateral and regional agreements that currently stand the best chance of driving improvements to the rules-based system are all grounded in the principles that are embedded in the WTO.

We will be applying this principles-based framework to all our economic diplomacy.

Like trade, cross-border infrastructure investment is an unambiguously good thing when it’s done right The regional demand is very clear. Now, China's Belt and Road Initiative has a role to play in meeting that demand. It’s also spurring healthy competition from Japan, India, the United States and others. Australia is not in the business of barracking for one strategic investment agenda over another. We’ll judge individual investment proposals by any country on the criteria of transparency, fairness, accountability and market need. We will firmly back Australian companies seeking to engage in international infrastructure projects on that basis.

Australia can best fulfil its potential in an open, inclusive and prosperous region in which the economic rights of states and individuals are respected; an Indo-Pacific that is open, prosperous and free.

The global rules-based system that ensures fairness but constrains large states from imposing arbitrary barriers and engaging in economic coercion against the small. We should not be afraid of policy ambition, at a time when the global economic system is fraying at the seams.

As the French President Emmanuel Macron recently put it: “Democracy needs to recover its ambition.”

Now, prosperity is a choice. Open markets do not happen by themselves. The default options are all bad.

We have to think harder about who we are, where we are going and how we’re going to get there.

I believe the answers are embedded in our national foundations; fairness, transparency and the rule of law.

These values, principles and institutions, give us the confidence and the credibility in the global competition for customers, capital and talent. Protecting individuals from the exercise of arbitrary state power is the way to sustain the market place of enterprise and ideas.

This is what my Party, the Liberal Party stands for. This is who I am.

This is how you enable healthy competition, generate growth and spread the benefits fairly to consumers. Just ask Aldi, as it invests in Australia and pushes into Asia.

The resurgence of populism throughout the world makes it even more important that we make the case - and make it eloquently and powerfully - for well regulated open markets.

This is how you build regional stability and a bulwark against coercion; prosperity, stability, autonomy.

You can see here how our economic and security interests are converging. This will be clear when we publish our Foreign Policy White Paper later this month. Australia is defending and extending the liberal, rules-based order by collaborating with willing partners from Germany to Indonesia, pushing for open markets, rejecting populism and protectionism and nailing our principles of economic freedom to the door.

Thank you very much.

[Applause]

[ENDS]