Speech before the Los Angeles World Affairs Council on April 2, 2001:

Michael J. Thawley
Ambassador of Australia to the United States

Mr Curtis Mack, Mr Bruce Karatz, Mr Allan Rocher, Australia’s Consul-General in Los Angeles, International Circle members and other distinguished members of the Los Angeles World Affairs Council:

In the past few years Australia has enjoyed something of a golden era.  Our economy has not been stronger in the past 30 years.  The important role we play in the Asia-Pacific region has been underlined by the support we gave to the Asian economies laid waste by the currency crisis of 1997 and 1998, and by our readiness to take the lead in restoring stability in East Timor.  Then we welcomed the world to Sydney for the 2000 Olympics. 

This year, 2001, is in some respects an even bigger year for Australia.  It is the centenary of our federation when the original six quite separate and jealous colonies formed a nation and made us a geo-political exception – an island continent that is also a nation and one of only a handful in the world along with the United States to be a democracy throughout its modern life. 

Can one imagine how different our part of the world might look if this were not the case?  It is one of the features that make Australia a rock of stability in an uncertain part of the world. 

That thought is relevant to another event we celebrate this year.  That is the 50^th anniversary of the Australian-U.S. alliance under the ANZUS Treaty, signed in San Francisco in September 1951.  This is an alliance that has always worked. 

Australia is the only country to have sent combat forces alongside U.S. forces in every one of the five major wars in the 20^th century, beginning with the First World War.  Not many people know that, when US forces first played a major combat role in the First World War, it was under the Australian command of our most famous general, General Monash.  The battle took place at Le Hamel in France on 4 July 1918. 

The Australian-U.S. alliance plays a crucial role in helping maintain stability in the Asia-Pacific region.  It does so partly because of the fact that it has always worked, and so is credible.  Most recently, it worked when the United States provided us with the logistic and other help we needed in East Timor. 

This help had significance beyond East Timor.  It was important also for the credibility of U.S. engagement elsewhere in the Asia-Pacific region that the United States alliance with Australia be seen to work effectively.  That is because there is no country in Asia which has more in common with the United States than Australia – our shared history as defenders of freedom and liberty, our shared political ideals and social values, and our shared sense of justice. 

I could talk more about these issues but I want to take the opportunity to mention the main mission that I am engaged on at present.  That is a proposal by the Australian government that Australia and the United States negotiate a bilateral free-trade agreement. 

This is relevant to what I have been saying because a free-trade agreement between us would indeed serve a geo-political purpose by strengthening our alliance and stability in Asia.  But there are other important reasons why Australia has made this suggestion. 

First, it would give a new burst of energy to our already healthy bilateral economic relationship.  Second, we see it as making a valuable contribution towards the aim, that Australia and the United States share, of strengthening the international trading system and generating momentum towards freer trade. 

If one is going to contemplate a free-trade agreement, it is logical that one would want to do it with a strong, well-managed and open economy.  The Australian economy is all of these things. 

With an average annual growth rate of over 3.5 per cent, Australia has grown faster than the United States in the decade to 2000.  Australia has also had a lower rate of inflation during the same period.

Most remarkable has been Australia’s growth in productivity.  This emerged from a study completed last year by the Federal Reserve Bank.  Wanting to identify the precise factors that underpinned the great improvement in US productivity in recent years, it compared the U.S. experience with that of other countries.  It found that one other country had consistently done better in every period it examined during the past decade, and that was Australia. 

It also makes sense to negotiate an agreement with a partner like Australia that has similar political institutions and social values.  Issues like labour and environmental standards will not be political obstacles in Congress to an agreement. 

The commercial links between us are strong.  Australia has a very open market and is a major importer from the United States.  You have a trade surplus with Australia – in fact, not only is it one of the few you have, it is also your second largest.  This makes me a relatively welcome guest when I go to talk with Congressmen about trade issues. 

A free-trade agreement would not only aim to bring down tariffs.  It would aim to facilitate investment flows and finance market links, and this is where I personally think the biggest overall gains would occur. 

It is no surprise that the United States is the single largest foreign direct investor in Australia.  But it comes as a surprise to many Americans – and Australians for that matter - that Australia is a major investor in the United States.  We are the eighth largest holder of foreign assets in the United States. 

Australian companies are often leaders in their fields either by size or the technology or innovations they bring.  There are many examples in California – such as Lend Lease-Bovis, the largest real estate investment manager and commercial mortgage broker in the United States, James Hardie, the largest manufacturer of fibre cement for construction, Westfield, the largest shopping center developer in California, and Look Smart, the internet search engine. 

The strong links are also reflected in the role of American CEOs in Australia and Australian CEOs in the United States.  It surely is extraordinary that apart from a major media proprietor, Rupert Murdoch, and the head of the World Bank, Jim Wolfensohn, the heads of three of America’s corporate icons – Douglas Daft at Coca Cola, Jac Nasser at Ford and Geoff Bible at Philip Morris – should be Australian. 

A free-trade agreement would also improve access to professional services.  It would prompt closer engagement with governments for businesses on a wide range of tax, regulatory, standards and other issues that affect commerce. 

The overall aim would be to ensure that our business communities could in effect regard the other country as a safe and natural extension of their own economy for purposes of business and investment. 

I am occasionally asked: what about agriculture?  This is a serious issue for Australia.  We are an agricultural free trader and our agricultural exports face big barriers in the U.S. market. 

My answer is that agriculture would have to be on the table for negotiation along with everything else.  We are not naïve about the political obstacles.  But the impressive increases in agricultural trade achieved by the United States and Mexico under NAFTA show that it ought to be possible to devise an outcome that ensures that both sides can increase their agricultural exports. 

Moreover, a significant increase in cross investment in agriculture is also likely under a free-trade agreement, and this will bring great benefits in efficiency, quality and increased market opportunities. 

But there is a broader common interest that both Australia and the United States share as agricultural exporters, and that is finding ways of opening up markets, especially in Europe, Japan and Korea, and of persuading others not to adopt protectionist policies. 

  The U.S. budget can afford, in a way that Australia cannot, enormous financial support for its farmers, but at the end of the day the only sustainable long-term solution to the problems of the farming industry is to reform the world’s agricultural trade so that farmers from both Australia and the United States can export to open markets.  If Australia and the United States can devise a way of freeing up agricultural trade between themselves, they would in effect be establishing a model for negotiations in a global round and the impact would be substantial. 

  In other words, we would want a free-trade agreement between us to be comprehensive and to be the most open possible.  We would see an agreement as establishing benchmarks, or raising the bar, in a way which would help ratchet up the quality of other bilateral and regional agreements that the United States might undertake. 

  Such an trade agreement would help with efforts to start a new global trade round. 

  President Bush has come into office with a clear commitment to advancing free trade.  He has said that he wants a global trade round that includes agriculture in a single undertaking. 

  This is a commitment which we regard as especially important, because without U.S. leadership a new global round will remain out of reach. 

  We also think that the administration’s commitment to develop a trade strategy with Congress’s support and to obtaining a trade promotion authority is crucial.  Without that negotiating authority, the United States will have less credibility around the world on trade issues, and its partners will be more hesitant because they know they risk two sets of negotiations – one with the administration and a second with Congress.

  We ought to be  concerned about the prospects for international trade.  In many respects the situation is more difficult than before the beginning of the Uruguay Round.  Despite the strong growth in the U.S. economy, and despite the fact that the value of U.S. trade now equals 26 per cent of the United States GDP, the attitudes of a number of important parts of the political establishment and community remained sceptical about trade liberalisation. 

  With a slowing economy, trade deficits have greater salience, and that scepticism might turn to hostility.  Politicians will soon be campaigning for the 2002 Congressional elections against the background of public doubt about the benefits of globalisation. 

  In Europe, enlargement and integration are preoccupations which can easily crowd out interest in liberalising trade.  Bilateral trade disputes with the United States are more immediate and burning political issues than the launch of a new global trade round. 

  In Asia, the economic downturn has undermined the self-confidence that marked the early years of APEC and the establishment of the ASEAN free trade area.  Feeling that they got little out of the Uruguay Round, developing countries in Asia are suspicious about the objectives of developed countries.  They are cynical about the motives behind the U.S. emphasis on labour and environment standards, seeing them as thinly disguised protectionism.

  All this takes place in Asia against the backdrop of dramatic – if not traumatic – change.  There is not a country from the north of Asia to the south, from Japan to Indonesia, that is not going through political, economic and social changes of a historic dimension. 

  n these circumstances, getting the free-trade show back on the road is vital.  It is vital to show countries that the benefits from free trade are real.  Otherwise, the risk is that countries return to the default position – which is protectionist.  The consequences of that for political stability within countries and for the stability of the region could be incalculable.

  The new U.S. administration has outlined a free trade strategy combining bilateral and regional agreements and a global trade round under the WTO.  We agree that these approaches can be mutually reinforcing.  We cannot think of a country with which the United States could achieve a more comprehensive or better quality bilateral free-trade agreement than Australia.  Nor an agreement which could make a more valuable contribution to creating the pressures and incentives necessary to build the momentum for a new global round.  And at the end of the day, it is a new global round which offers the best prospects for the greatest gains by the biggest number of countries. 

  Australia takes the administration at its word that it is serious about free trade.  We have made an offer.  We are ready to work with the United States on a free-trade agenda.