July 19, 2013
I’m delighted to be back at my alma mater the University of Adelaide and to have this opportunity to give you my thinking as an indication of the Coalition’s thinking on Australia’s aid program and the role of aid for trade, particularly as I will be releasing in due course the Coalition’s formal foreign affairs and trade policies for the 2013 election. I just wish somebody had asked Penny when the election will be – Sportsbet has odds the 31st of August shortening so that could be the date!
The University of Adelaide and the Institute for International Trade play an important role in developing the specialist skills that are needed if emerging economies, particularly within our region, are to benefit from global economic growth.
The transfer of knowledge and expertise has been a crucial component of Australia’s aid program dating back to the original Colombo Plan. Under the leadership of Robert Menzies and his Foreign Minister, Percy Spender, Australia reached out to the region drawing in its best and brightest to study at universities including here at Adelaide University.
Over 30 years between 1950 and the 1980s over 40,000 of the best and brightest students in our region came to Australia to live here, to study here, to get to know Australia. In opening the window to further education and training, it was envisaged that these students would be better able to contribute to their nation’s development and that is of course what happened.
The alumni is proof of that and as I travel through the region I’m always struck by the number of people – Prime Ministers, former Prime Ministers, Cabinet Ministers, business leaders, community leaders who are alumni of Australia’s Colombo Plan.
For Australia, the Colombo Plan built a network of friendships and connections throughout the region.
And as an aside I should add that the Coalition, if elected, will establish a reverse New Colombo Plan, to give young Australians the opportunity to undertake studies at a University in our region with a corresponding internship or mentorship with a business operating in the host country – and this is a very grand and exciting initiative which we hope will become a right of passage over the years for Australian undergraduates.
We hope it will be a signature policy of a Coalition Government and see a landmark partnership between governments in host countries, students, universities, businesses, NGOs and of course the Australian Government. I’m very passionate about this. I believe that the transformative perspective from an individual, from an institutional, from a national, from a regional side is not to be underestimated.
In strengthening the trade policy knowledge and negotiating skills of officials from developing countries, the Institute for International Trade builds on this great tradition of knowledge transfer and exchange within the Australian aid program.
Australia is a generous nation. As a people, we stand ready to assist those who are in the greatest need. For example, in 2005, the Howard Government announced a $1 billion contribution to the Australia-Indonesia Partnership for Reconstruction and Development, in response to the Boxing Day Tsunami. It was “the single largest aid contribution ever made by Australia, focused on the long-term and founded in partnership”
More recently, Australia has provided much needed humanitarian support to the crises in the Horn of Africa and in the Middle East, particularly in Libya and Syria where thousands of people are fleeing the brutal civil war now raging inside their country.
The Coalition has and will continue to support a strong aid program that can help elevate poverty and lift the living standards of the most vulnerable overseas.
The Howard Government signed Australia up to the Millennium Development Goals and its ambitious targets in areas such primary education, child mortality and maternal health.
In 2005, Prime Minister Howard announced that Australia would double its aid contribution to $4 billion over five years.
At the last election, the Coalition proposed that the Australian aid program be given its own voice inside government through the creation of the position of Minister for International Development.
We also committed to the aid expenditure target of 0.5 per cent of gross national income (GNI) by 2015. Unfortunately, this bipartisan agreement was broken by the Gillard Government. The target date has since been pushed back in successive budgets to 2017-18, with responsibility for scaling up the aid program falling to future governments.
As the Rudd-Gillard-Rudd Government is now discovering, it is much easier to deliver on your promises when the nation’s finances are in surplus.
From the days of the Menzies Government and the Colombo Plan, the Coalition has demonstrated its commitment to sustainable economic development as a cornerstone of the Australian aid program.
In announcing the doubling of the Australian aid for example, Prime Minister Howard stressed the importance of trade liberalisation and private sector investment in overcoming entrenched poverty.
I have long believed that the goal of AusAID should be to promote economic growth in order that strong and sustainable societies can flourish independent of official development assistance from other countries.
As you are aware, there is an ongoing debate domestically and internationally about foreign aid and how best to lift living standards and what form of development assistance can have the greatest impact.
Undoubtedly there have been two specific major events worthy of note in the past sixty years that have seen massive numbers of people lifted out of poverty.
The first was the decision of the United States to support the reconstruction of Germany and Japan after the ravages of World War II, and other nations devastated by that conflict.
The Marshall Plan for Europe, and a related plan for Japan, was a visionary yet short-term investment to kick start economic development as a means of avoiding the economic depression that led to World War II in the first place.
The Plan saw Germany, other parts of Europe and Japan attain some of the highest living standards in the world within a few decades, an extraordinary outcome when you think about it that few in 1945 could have predicted would arise from the devastation of the War. Now admittedly the fundamentals including educated populations were there upon which to build.
More recently, the greatest achievement in human history in terms of lifting people out of poverty has occurred in China, where hundreds of millions of people have found prosperity after reforms that underpinned economic growth and fostered development.
The unleashing of human potential by the liberalisation of China’s economy has been the force that has driven this miracle of economic development. It is clear to me that economic development has far greater power to improve living standards and to alleviate human suffering on a large scale.
That is what makes the paralysis of the Doha Development Round of international trade liberalisation negotiations so disappointing, so frustrating. The Doha Round was intended to provide greater access to the markets of developed countries to drive greater business and economic development in developing nations.
I believe that every effort should be made to find a breakthrough, although there is little optimism about that occurring in the short term.
In the meantime The Coalition, if elected, will seek to build a network of bilateral and regional free trade agreements, as our competitor economies are doing.
FTAs with China, South Korea and Japan will be a first order priority for us.
The Coalition’s philosophical support for individual enterprise and private sector development as the backbone of economic growth makes us the natural partner of the Aid for Trade Initiative.
We were there at the launch of the Initiative at the World Trade Organisation Hong Kong Ministerial Conference in 2005. As Mark Vaile the Trade Minister at the time said, it was important that Australia “assist developing countries’ participation in the multilateral trading system to ensure they are able to take advantage of the outcomes of the Doha negotiations.”
Much of the Coalition’s focus centred on the potential development benefits from the liberalisation of international agricultural trade. The removal of trade distorting subsidies and barriers would allow developing countries to compete more effectively in global markets, improving their terms of trade and placing their economies on a more sustainable footing.
With the cows in the European Union receiving a subsidy of US $2.20 a day, Trade Minister Mark Vaile noted at the time, that the bovines earned more than 1.2 billion of the world’s poorest people.
Coalition support for the Aid for Trade Initiative followed steps already taken to open up Australia’s domestic market to least developed countries, through duty-free, quota-free access.
Since the 2005 Ministerial Conference, considerable support has been provided to build trade capacity and infrastructure in developing countries. The OECD reports that trade related aid commitments amount to $25-30 billion per year – around 30 per cent of total ODA. This has focused on four main categories – trade policy and regulation; building productive capacity; economic infrastructure spending, and trade-related structural adjustment.
The growth of international supply chains offer developing countries new opportunities to connect to, and benefit from, the global economy. With international trade increasingly based on trade in tasks, rather than trade in final products, developing countries can enter the supply chain at different stages, moving up the value chain as their economies develop.
In Samoa for example, they export automotive wire harnesses to Australia for use by Holden’s plant in Adelaide, valued at $16.3 million in 2012 under the South Pacific Region Trade and Economic Cooperation Agreement.
I have visited that wire harness plant in Samoa which employs around 2,000 workers and makes up around 20 per cent of the Samoan manufacturing sector’s total output. As I noted at the time of my visit it is one of the few countries in the South Pacific to have a trade surplus with Australia.
Similar stories are playing out around the world. 60 per cent of global trade is now in parts and components, according to the WTO. The extent to which countries are able to benefit from the growth in production networks depends on domestic regulation, transportation links and the skills base of its population amongst other factors. At present, least developed countries account for just over one per cent of global trade. There is obvious potential benefit for these nations from closer integration with the global economy.
Director-General of the WTO, Pascal Lamy has said the share of the global population living in absolute poverty fell from 43 per cent in 1990 to 21 per cent in 2010. To Lamy, it is no coincidence that this occurred at a time when trade barriers were reduced and WTO rules provided an increased level of certainty.
Should the Coalition be elected, Aid for Trade will be a flagship of the Australian aid program. Our commitment to supporting sustainable economic growth in developing countries will tie in closely with our focus on economic diplomacy as an overriding and primary focus of our foreign affairs and trade policy.
We will work with partner countries, particularly in the Pacific, to open up new trade opportunities and remove the external constraints that limit their participation in the global economy.
I have spoken on many occasions about my support for the Seasonal Worker Program. I believe this initiative should be strengthened to enable a greater number of Pacific Islanders in particular, to undertake seasonal work in Australia. The same applies for workers from PNG and Timor-Leste.
I recently returned from a visit to Dili, where I had the opportunity to meet with the President, the Prime Minister and other senior government ministers. Their country’s participation in Australia’s Seasonal Worker Program is taken very seriously with rigorous vetting of all participants.
Like other developing countries, Timor-Leste is looking for a hand up, not a hand out. In addition to providing participants with new skills, guest worker schemes have the benefit of increasing capital flows into developing economies.
According to Institute for International Trade here today, analysis on remittances at the sending and receiving ends shows that it “can have a significant impact on poverty alleviation in the Pacific and therefore assist in the achievement of the MDGs”.
A review quite recently of New Zealand’s Recognised Seasonal Employer program found that households that had a member participating in the scheme experienced increases in income and expenditure, a greater sense of subjective wellbeing and improved school attendance for their children.While significant challenges remain to expanding Australia’s Seasonal Worker Program, the potential benefits would make that effort worthwhile.
I believe the Coalition can also bring the vision and political will that is needed to conclude the Pacific Agreement for Closer Economic Relations, known as PACER Plus.I was critical of the Government’s failure to include reference to PACER Plus in its 2011 trade policy statement given its importance in encouraging sustainable economic growth and furthering regional integration.
We support the view of the Department of Foreign Affairs and Trade which reports that, “the negotiation of a new regional trade and economic agreement provides the long term opportunity to create jobs, enhance private sector growth, raise standards of living, and boost economic growth in Forum Island Countries”.
For all the talk of its benefits however, little tangible progress has been achieved. I think fresh thinking and genuine commitment may just be what is needed.I suggest that rather than push for an agreement encompassing all Pacific Island Forum countries at once, consideration should be given to signing a higher quality agreement with countries willing and able to do so.Once the benefits of closer economic engagement become clear, other countries that wish to opt-in to the agreement may do so.
This process would not only accommodate and recognise the various stages of development in the region, it would also ensure ownership of the reform process by allowing countries to determine the timing of their accession. Australia can of course provide the incentives that are needed to encourage countries to undertake difficult, but much needed reform.
If we are serious about regional integration, all options should be on the table including with countries such as Fiji who are such an important part of the Pacific.In regards to external constraints to overseas trade, the Coalition will continue to work with likeminded countries to promote multilateral trade reform.
At the 2010 election, the Coalition proposed to establish the position of Ambassador for Trade Reform to drive Australia’s efforts in this area.As a developed country, Australia must not lose sight of the importance of trade reform to developing economies. It should be viewed as a win-win situation. Greater two-way trade also offers opportunities for exports of Australian manufacturing and services.
Australia’s prosperity has been built on our open, export oriented economic model, heavily reliant upon our ability to trade with the rest of the world.With support and access to markets, many developing countries can develop a similar model for success. With our relatively small population on a large resource-rich continent, we are dependent on overseas demand for our exports to maintain our high standard of living.
Over the decades, Australia has exported huge amounts of commodities including wheat, wool, gold, iron ore, coal, nickel and gas, amongst many other products.In recent years there has been a growing emphasis on the export of services, including educational, legal, accounting and other professional services.Australia also has a vibrant and innovative manufacturing sector that seeks out niche markets across the globe.
The Coalition will also support efforts to build trade capacity within developing countries through strengthening regulatory and policy frameworks, supporting education and training through initiatives such as the Australia – Pacific Technical College and working with other donors to fund productivity enhancing infrastructure projects.
At a micro level, we will continue some Howard-era initiatives such as the Enterprise Challenge Fund from 2007 that provided small grants to local businesses that were having difficulty accessing the capital to undertake a viable commercial project. To qualify for assistance, these projects have to produce a tangible and significant benefit to a wider community.
On one of my earlier trips to Port Moresby, I had the opportunity to visit a small business that had received a grant under that Fund to purchase this most extraordinary piece of machinery from India. It was a piece of processing equipment for cocoa beans and herbs and spices and it looked like something out of a Doctor Who movie, it was a magnificent copper piece of machinery with bells and whistles and smoke coming out of it. Yet this small amount of assistance had enabled the owner to build up a successful export business selling coffee beans, vanilla beans and herbs and spices and its major market was gourmet food shops in Sydney.
The benefits of this businesses success have flowed back down its supply chains, boosting the incomes of hundreds of growers and their families that they support.
A mid-term review of this Fund in 2009 found that it has quote “attracted quality propositions, and has levered considerable co-investment commitments from private firms in support of a more pro-poor business focus.” I think that means it was a success and will pass any key performance benchmarks that I would establish to judge our aid program against.
Other initiatives at this level could include a business mentor program to enable local entrepreneurs to learn from the experiences and expertise of Australian small business owners.
Where possible, priority should be given to leveraging private sector investment to support economic growth and job creation. Ultimately, it will be economic growth not official development assistance that will determine how quickly a country makes the transition out of poverty.
A good example comes from Ernst & Young and I think Mark Nixon and Peter Latham are going to be here today. They have been working with developing countries to increase investment flows and private sector development. Its work with Madhya Pradesh, India’s second largest State, has produced impressive benefits focussing on skill development reforms in the business climate in the ease of doing business how to access credit.
Their work has included the conceptualisation, project structuring and the demand assessment of over 100 infrastructure projects worth more than US$18 billion. I understand that 28 projects are now under various stages of development.
Recently EY held a three day global investment road show, which I understand attracted about 2,200 investors from 15 countries.
I believe we could trial similar strategies to developing countries in our region, which require greater levels of foreign investment.
Given increased investment, the potential of countries such as Timor-Leste, PNG, Bougainville will be able to tap into for example, Asia’s expanding tourism market is immense.The Coalition will also continue Australia’s support for the Asian Development Bank (ADB) and the International Finance Corporation (IFC).
According to AusAID’s 2012 Multilateral Assessment, “IFC has a strong record on delivering results on poverty and sustainable development in line with its mandate. It reports that its work in the East Asia-Pacific region alone in 2010–11 was expected to support 72 000 jobs, reach 157 000 farmers and facilitate about US$12.3 billion in loans to micro, small and medium enterprises.” Both organisations have proven to be effective and efficient partners for Australia.
We must dare to dream of a world where aid is no longer needed. AusAID’s ultimate goal should be to do itself out of a job. You can only come close to such aspirations through sustainable economic growth. It has the capacity to lift the most vulnerable societies in the world out of poverty.
I hope that I have given you some understanding of the ideasbehind the Coalition’s policies and I believe that we have the political will to guide our foreign and trade policy along this path to a stronger and more prosperous Australia and a stronger and more prosperous region.
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