Address to the Canberra Chapter Agribusiness Association of Australia
By
David Spencer, Deputy Secretary
Department Of Foreign Affairs & Trade

Introduction
Historical Overview
Looking ahead for agriculture
Negotiating Environment
Shoring up domestic support
Public consultation and Outreach
Conclusion

Introduction
The topic of my address today "A New Round of Global Trade Negotiations" is a challenging one, especially since we have no guarantee that we will have a new round of global negotiations on international trade!

However, there are growing indications that the Seattle Ministerial Conference, to be held later this year, will launch a new round. It remains to be seen whether we will have a Millennium Round or a Seattle Round, but a round - however named - is more and more likely, not least because the United States has now come out in support of one. TOP

Historical Overview
Eight trade negotiating rounds over the past fifty years have transformed a protectionist post-war international trade environment to a much freer trading world, with industrial tariffs alone cut by an average of 90 per cent.

Through the development of contractual rules, international trade is much less vulnerable to economic shocks. Global merchandise trade has expanded dramatically, increasing fifteen-fold since 1960. This in turn has helped quadruple world economic production and more than double world per capita income.

The most recent round, the Uruguay Round, was the largest trade negotiation in history. There were five key outcomes.

• Agriculture was effectively brought under disciplines for the first time.
• Secondly, new rules were written on service trade and intellectual property.
• Thirdly, for the first time a large number of developing countries not only participated in the negotiations but also in the outcomes.
• Fourthly the Uruguay Round developed rules and agreements which strengthened the predictability of the-multilateral trading system, including though an enhanced dispute settlement process
• Finally, it led to the establishment of a much broader-based, stronger, and legally based, WTO.

For Australia, the Uruguay Round outcome for industrial and agricultural products was estimated by the Productivity Commission to add about $4.4 billion a year to real GDP

The benefits arising from the liberalization of service trade were equally as important. More than 8 out of every 10 jobs in Australia are now in the services sector. And the services Sector accounts for more than two thirds of our GDP and almost a quarter of Australia's total exports.

At the beginning of the Uruguay Round, in 1986-87, Australia's service trade amounted to $18.4 billion. A decade later, the figure had more than doubled to $47.1 billion at an annual growth rate of nine per cent. Such phenomenal growth sees many of our large banks now bigger than most of our resource companies, and tourism and education services provide more for us in export revenue than do most of our primary commodity exports.

The Uruguay Round negotiators recognized that, despite 7 years of hard work, the job was only partly done in some sectors. Accordingly, agreement to resume negotiations in some sectors was part of the overall package - the so-called "Built-in Agenda".

These mandated negotiations cover agriculture, services and aspects of intellectual property - and are scheduled to begin at the end of l999 / beginning of 2000. The commitment to resume agricultural negotiations was a big plus for Australia and a hard-fought outcome; one which the EU and the Japanese accepted reluctantly.

The Uruguay Round was successful in bringing about a fundamental change of direction for agriculture - not so much in terms of tariff reductions, but;

• by converting non-tariff barriers into transparent and negotiable tariffs;
• by putting ceilings on previously uncontrolled export subsidies, and achieving the first 36% cut to them;
• And by similarly disciplining uncontrolled production linked domestic subsidies.

However, agricultural trade remains today, five years after the implementation of the Uruguay Round agreements, the most distorted, protected and discriminatory of all trade sectors.

For example, in the case of Japanese rice, although the embargo was broken and this year 644,300 tones will be purchased by Japan, the recent tariffication has established prohibitive rates for any import growth. TOP

Looking ahead for agriculture
Clearly, stronger disciplines in several areas, combined with further tariff reductions and the elimination of non-tariff measures, will help the Australian agricultural sector. The challenge is before us, and our allies in the Cairns Group.

The EU and other countries such as Japan, Korea and Norway are making concerted efforts to boost the idea of the so-called 'multifunctionality' of agriculture.

This is an attempt to justify treating agriculture differently from other areas by claiming that agriculture serves non-economic and social policy aims. Examples include preservation of landscape and rural amenities and avoiding rural depopulation. We accept that these may be worthy political and social objectives but we do not accept that governments need to resort to trade measures to achieve them.

Australia is therefore actively resisting this latest attempt at thinly veiled protectionism.

We have also seen in the limited and disappointing nature of the European Union's Agenda 2000 CAP proposals, a foretaste of the negotiating posture that it will bring to the negotiations.

There were signs until fairly recently that internal budgetary pressures within the EU, pressure from consumers and environmentalists, new governments in Britain and Germany, and the need to make adjustments to accommodate enlargement, would lead to some fundamental reforms in tile CAP.

Regrettably EU Heads of Government at a meeting last month again missed the opportunity to make meaningful reforms. Unless the CAP is revisited in the context of new WTO negotiations it may be difficult to make much further progress on agricultural trade liberalization.

It will come as no surprise if I say that the balance of interests to advance reform in agricultural trade is not wholly in our favor. We have the Cairns Group as a committed force and the United States has been signaling for some time that it wants to see significant liberalization.

But even in the US there are those that need convincing. Indeed, despite the introduction two years ago of fundamental changes in US agricultural support policies, we now have a situation where overall support levels are as high or higher than they were before the changes. The Administration's decision on the ITC recommendation on lamb imports will be an important test of the US commitment to further liberalization.

There is also a large group of around 100 developing countries outside the Cairns Group. Most do have no logical economic interest in accepting the continued extensive distortion to world markets caused by the programs of the EU and of Japan or indeed in their own protected agriculture sector.

But they have not yet aligned themselves with the Cairns Group in support of liberalization and we will need to work to persuade them that their fears about food security will not be realized if agricultural and agrifood markets are liberalized and that where there are short-term disadvantages, their needs will not be ignored.

As leader of the Cairns Group, Australia has a special responsibility to keep up the fight - and this can be done only if we continue to have the strong and clear backing of our agriculture and agrifood sector. This is one area where Australian industry can provide particular support.

Agriculture is an international business with global trade in agricultural products amounting to more than $US6OO billion. The contacts that the industry has in different countries are the means by which we can work to make sure that the pro liberalization message is heard and used to moderate opposition to change.

One good example is the work by Graham Blight as the Trade Representative for Australian Agricultural Industries in advancing the pro-liberalizing message in international gatherings of industry groups. We will be looking to industry to continue this effort through the NFF- driven Cairns Group farm network; and through parallel efforts such as those by Mitch Hooke of the Australian Food and Grocery Council, through the International Alliance of Food Product Associations; and directly with agribusiness in the EU and the United States. Industry has an interest in doing all it can to encourage contacts in the United States to get involved. The United States must play a leading role if the negotiations are to succeed.

When the negotiations build up steam, we will need to work with those who share our goals to ensure maximum commitment by their Governments, as well as countering the anti-reform message.

Alliances can come from unexpected quarters. In our shared opposition to fishing subsidies, links are developing between the Australian Government and non-government groups (NGOs) who view fishing subsidies primarily as an environmental rather than a trade concern, linked to the depletion of fishing resources.

We need to be sophisticated in our approach to coalition building and think through broader linkages.

There are many signals suggesting that processed food and beverages are the major growth area of agribusiness in coming years. This sector will be a major objective for Australia as we gear progressively into the value adding strategy being pursued by both Australian industry and the Government. The "Supermarket to Asia" strategy is a clear manifestation of this imperative -improved market access being just one, albeit a very important, aspect of this program.

So Australian negotiators will be seeking outcomes, which leverage up the processing value-added sector, while providing benefits also at the basic commodity stage. We are already working with industry in identifying particular interests and developing strategies to achieve meaningful results.

These encompass both traditional negotiating techniques such as formula-based tariff reductions as well as looking at initiatives of a new kind such as targeted outcomes involving international coalitions. DFAT'S two market access facilitators for processed food and beverages and agriculture are well into these issues already

Another clear priority for Australia in the new round will be the inclusion of industrial products in the mainstream WTO agenda. Manufactured goods have been the fastest growing area of Australia's exports this decade (increasing by an average 10% per annum compared with 7.5% for total exports) but face some high tariffs, particularly in South East Asia. Some good work has already been done in APEC and its Accelerated Tariff Liberalization (ATL) program could be a helpful springboard to a full industrials agenda in the WTO

In a new round, another important focus for Australia will be to improve market access for service exports, particularly in key trading partners. TOP

Negotiating Environment
While the Built-in Agenda provides a good framework for negotiations, it contains gaps and lacks deadlines for completing negotiations. We, and other supporters of a new round, have been pressing for it to be supplemented by some other areas and packaged into a comprehensive round. This will maximize trade-offs and therefore potential gains for the broad range of participants.

But with the benefits come some potential challenges. Advances in agricultural liberalization will become linked with progress in other areas of the negotiation. Our negotiating partners may try to establish linkages in ways adverse to us. For example, the EU has often indicated it would like to see changes in the rules governing sanitary and phytosanitary measures - changes which we believe would have the aim of weakening these rules to our disadvantage as an exporter.

Issues such as genetically modified goods and state trading enterprises will raise a set of new questions. In some cases the negotiations could be directed at our own domestic arrangements.

Secondly, the introduction of new issues into the negotiations will bring complexities. "Civil society" issues - environment, trade and labour, culture and on - will have to be carefully handled.

Shoring up domestic support
In Australia, as in many other countries, we have seen signs of liberalization fatigue and globalization anxiety - so called "globaphobia".

The Government will continue its efforts to provide information, analysis and explanation on the benefits of trade liberalization. We need to remind ourselves that Australian agriculture stands in a strong position. We do after all, produce 5 times as much agricultural produce than a population of 18 million requires.

Trade negotiations are obviously a two way street. The more ambitious our own goals, the more the risk that others will seek to extract quid pro quos. This could mean easier access to our markets for some foreign products - not necessarily immediately, but over time as trade rules and comparative advantage are fully applied. Australia will still benefit overall.

If trade in agriculture increases_, our strong export orientation means much more Australian produce will be sold overseas (and as inputs to processed food exports) than foreign produce in Australia. The history of our dairy industry as it developed from an overprotected and over-regulated sector to today's highly competitive and export focused industry is instructive. But there will always be some sectors, which do not want liberalization and adjustment and can be vocal in their opposition. TOP

Public consultation and Outreach
Any consultation and broad understanding of the national interest are important. For the first time ever, the Government is seeking public submissions (by 1 May) to help refine our negotiating agenda. This fact has been well advertised in the national press, but I take this opportunity to strongly encourage you to put your views on this process to the government via the Department of Foreign Affairs and Trade.

The Government's views on a range of issues that others have floated - such as the links of trade with investment, with competition, or with labour, and government procurement - will be developed once the process of public consultation is complete.

At this stage, we believe the emphasis must be on key market access areas - agriculture₁ services and industrials - in order to maximize the chances for a short and successful round. We are aiming for a short (three-year) round, but if more complex issues are added completion in a three-year time frame will be very difficult. We hope to table in Geneva by July specific proposals for the mandate that will be put before the Seattle Ministerial.

The Government is working hard, in the WTO and bilaterally, to convince those countries that remain undecided about the merits of a round. Mr Fischer will launch in May a major study on the prospective economic benefits of a new round.

Let me also add that our efforts in the Department of Foreign Affairs and Trade are not confined to global trade rounds. We are negotiating for market access worth a potential $7 billion a year from over thirty countries, which are currently seeking membership of the WTO. These efforts are continuing even in advance of a new trade round.

Already some significant breakthroughs have been achieved with Taiwan, where in 1996 we won a deal to reduce discrimination in the beef tariff by nearly half and open the market to citrus, peaches, plums and to double our apple access. A lot more is in prospect when Taiwan becomes a member of the WTO. Similarly with China where we hope negotiations for China's entry to the WTO can be completed this year. The emerging outcomes, set out in two media releases issued last weekend by Mr Fischer, are very positive for Australia.

For example, China has offered to establish global access when it joins the WTO for 7.3 million tones of wheat, 2.6 million tones of rice and 743,000 tones of cotton. This access far exceeds current import levels.

Low tariffs would apply and the access levels would grow substantially over the following 5-year period. China has also offered to reduce tariffs dramatically. For example, beef and pork tariffs would be reduced to 12%, tariffs on a range of fruits to 10-12%, certain cheeses to 12% and wine to 20%. There are still important issues that need to be resolved in both bilateral and multilateral negotiations and we are working hard on this. But vast improvements in access for both commodities and processed products will be put in place and progressively improved over the next 5 years.

We also are making other strenuous efforts bilaterally and regionally to pursue our trade interests, but I regret I do not have the time today to discuss these. I simply make the point that the Government is committed to strong liberalization outcomes in all three paths. TOP

Conclusion
The international trading environment is very tough with real risks of increased protectionism. Yet these elements should provide us with added impetus to preparations for a new round. The figures at stake are huge. Global merchandise trade in 1997 was valued at $U55, 433 billion and services trade was valued at $1,357 billion.

Mr Fischer has emphasized that the capacity of Australian industry and Government to work together to create new jobs and to raise the living standards of all Australians depends vitally on increasing our national wealth through trade. The approach Australia takes to a new round will critically influence our future prosperity.