SPEECH TO THE PERTH USASIA CENTRE
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[Acknowledgements]
The Perth USAsia Centre is WA’s premier international relations think tank. In a nation whose foreign policy tends to be dominated by the view from Canberra, Sydney and Melbourne, the Centre occupies an important space in ensuring the view from the West is considered in national strategic conversations.
It has led the way in the development of the Indo-Pacific concept and demonstrating the power of proximity that Western Australia holds with our neighbours to our north and northwest.
I am very proud to have been actively involved with the very first In The Zone conference hosted by UWA in 2009, which opened a national conversation about our preeminent location, sharing the same time zone with 60 percent of the world’s population.
Here in our Indian Ocean capital, we are in a dynamic region, made up of the nations which hold the greatest promise for economic growth in the 21st Century.
Before I was elected, it was my privilege to work on all of the In The Zone conferences at UWA, and then to establish and help lead the Perth USAsia Centre in its first few years. It is just short of ten years since US Secretary of State, Hillary Clinton visited WA alongside Kim Beazley and Stephen Smith.
His Excellency Kim Beazley is now our WA Governor, but then was Australia’s Ambassador to the US (and was previously one of my predecessors as Member for Brand).
Stephen Smith of course was the Minister for Defence at the time, and remains a good friend and mentor.
Secretary Clinton, Ambassador Beazley and Minister Smith announced the establishment of the Perth USAsia Centre during that visit. I am very proud of what the Centre has achieved in the intervening decade, and it has been a delight to see it go from strength to strength.
And it’s a testament to the University’s commitment to its enduring mission – to advance the prosperity and welfare of the people of Western Australia – that they continue to support the articulation of WA voices and perspectives in national debates. Not only through their support of the Perth USAsia Centre, but also through the UWA Defence Institute, and the UWA Public Policy Institute.
In case you can’t tell, I’m a proud alumna of UWA – both as a graduate and a former university staff member.
So thank you for having me; I always feel at home when I’m on the beautiful Crawley campus.
Friends, my two portfolios are Trade and Resources. There is, in my view, a great deal of complementarity between the two; the bulk of our resources are exported, and our resources exporters are important ballast in our trading relationships.
One of the important things that the dual portfolios have afforded me is a much wider view of the economic opportunities currently facing our nation.
We are at a turning point in the global economy. A period of flux and change. There are great risks, great challenges, and great shifts in how the world works, and in how goods and services flow across international borders.
Australia is facing a choice: shape the future, or be shaped by it.
Anthony Albanese and I are of one mind: Australia must step confidently into the future, and seize the opportunities that are presenting themselves.
Now. At this moment.
To do that, we need to diversify both the products we export, and the markets that we export to.
Liberal failures
Now, it will be very apparent to all of you that we are in the pointy end of an election campaign. I know of at least one person in the room that is relatively new to Australian citizenship and looking forward to participating in our great democratic process.
I hope that all others that may have participated, like me – in many elections – will be as enthusiastic as our new citizens for the opportunity an election provides.
So as elections are all about politics and policy, I do hope you will forgive me for getting a bit political before I turn to policy
The COVID-19 global pandemic, supply chain volatility and Chinese trade sanctions have exposed the growing risks for Australian exporters, jobs and prosperity.
Today, now in 2022, Australia’s exports are more concentrated in a single market – China – than they have ever been.
Despite their rhetoric, Scott Morrison and the Liberals have dropped the ball on trade diversification and have no plan to support Australian exporters and jobs that have been hit by recent trade sanctions.
Australian wine and barley and lobsters and coal were all hit by Chinese sanctions.
This economic coercion underlines that we should always seek to avoid over-reliance on any single market – to minimise the risks faced by Australian exporters and to safeguard the hundreds of thousands of Australians whose jobs depend on trade.
For the crayfishers, these sanctions hit really hard. Many lobster exporters have resorted to so called ‘grey’ export arrangements, which bring with them high risk and diminished returns.
Coal exporters, too, have had to apply workarounds. A combination of weather events in China and spiking global energy demand has left most coal exporters feeling a little more confident.
Barley exporters producing premium malt-grade grains have had to take stockfeed prices for their harvest. Alternative markets have been found, but they are not paying the same prices, and many farmers have since planted different crops. We wait to see the effects on global grain prices and trade flows as Ukraine, because of the Russian invasion, looks unable to have a grain crop this European season.
After decades of effort in developing the market, Australian wine exporters had to once again put their shoulder to the wheel to redirect China-bound products to other markets. The most promising has been the UK wine market, and the recently-signed Australia-UK Free Trade Agreement will lower tariffs on Australian wines sold there, although there will be up to a ten year wait for the full effect to come through.
However, there is a sting in that tail.
While tariffs are lowered for Australian wine exporters in the Australia-UK FTA, the UK Government looks set to increase domestic taxes on wines, which will have a disproportional impact on Australian wines. The proposed new UK wine tax will be charged by alcohol percentage.
Australian wines are naturally higher in alcohol than European wines because of our sunnier and drier climate, so this will put them at a competitive disadvantage. And this mere months after the Australia UK FTA was signed.
More than one-third of Australian wine exports are sold to the UK, making it Australia’s number one export market following the China trade sanctions.
If implemented, these duty changes will mean an estimated, debilitating 11% tax increase on Australian wine exports to the UK.
Worse still, Senate Estimates hearings late last year revealed that Australian Government negotiators knew that the UK was looking to increase its taxes on Aussie red wine at least a month before the trade agreement was signed.
Yet it was full steam ahead for the Morrison Government, despite being aware that the new domestic tax system will hurt Australian wine growers significantly more than the tariff reduction would help.
Just like everything Scott Morrison does, signing the UK free trade deal was more about being seen to do something than the actual outcome.
The same, it seems, with the Indonesia-Australia Comprehensive Economic Partnership Agreement. IA-CEPA was signed three years ago, and since then has mostly just gathered dust. There has been very little effort made by the Morrison Government in developing our trading relationship with our nearest neighbour.
It’s as though they have a blind spot when it comes to our near abroad.
One of my Labor predecessors in the Trade portfolio, Stephen Smith, used to talk about the fact that everyone saw the rise of China, but too few appreciated the rise of India, of Indonesia and the ASEAN economies combined.
Indonesia is set to be the fourth largest economy in the world – behind the US, China and India – within two decades. IA-CEPA is a great foundation, but the fact that the relationship has languished since it was signed is both cynical and stupid.
And, frankly, unforgivable.
The Liberals’ approach to international trading relationships is set-and-forget: they’re all about the photo opportunity at the trade deal signing ceremony, but have failed in doing any of the follow up.
The follow up to the signing ceremony is the implementation of the agreement itself: making it actually work for exporting businesses. This is where the hard graft of international trade lies.
The fact is, Scott Morrison likes to talk a big game on trade diversification, but his record is one of abject failure.
And never has the economy needed an energetic approach to trade policy more than now.
Headwinds
Economic coercion is not the only trade challenge Australia faces.
The COVID-19 global pandemic hit global supply chains hard, and we are now in the third year of acute constraints in international logistics.
The reduction in passenger air travel since the start of the pandemic caused real problems with trade in perishable goods, such as fresh foods and cut flowers.
But sea and surface logistics, too, are severely constrained.
Domestically, in recent months, COVID absences from work slowed down the movement of goods and led to shortages of basic goods from supermarket shelves. A flood in South Australia cut of the main freight rail line between WA and the eastern states for more than two weeks.
But even before the pandemic, and the flood, Australia has had a shortage of truck drivers. The importance of the road freight industry and the truck drivers themselves are outrageously underestimated. We become more aware of our fragile supply chains during a crisis, but any truckie will tell you, there is generational challenge facing the industry, and therefore each of us.
Internationally, there are shortages of shipping containers, ships, and mariners to crew them. The international shipping squeeze means firms can no longer rely on just-in-time supply chain models, so more goods are being warehoused for longer, causing a shortage of warehouse space in many places. Ports are straining to work through backlogs. And we haven’t even got to the flow on effects of the Ever Given getting wedged in the Suez Canal!
It’s a mess.
Each element of constraint will have a different timeframe for correction. And each delay, each additional day at sea, each additional day in a warehouse, adds to the cost of goods to consumers.
Meanwhile, Russia’s invasion of Ukraine has also had a dramatic impact on global movement of goods. Energy prices have spiked. This in part is due to changes in supply of Russian gas to Europe, and movements in Europe to use alternative energy sources (including coal and LNG).
For the most part, Australia’s energy exports are contracted many years in advance. But the flow on effects of the invasion are global in their reach, and are impacting Australia’s export of LNG and coal to north Asia.
Similarly, the price of other relevant commodities linked with Russia and Ukraine – including wheat and corn – will have an impact on food prices, and food security, particularly in the Middle East.
There’s a bit going on.
Opportunities and challenges.
And we are ready and raring to go.
Ready to seize the opportunities, and face the challenges head on.
Labor’s plan
Facing these challenges will require a national effort to not only secure new markets for our exports, but a transformative domestic economic agenda.
An agenda which enables Australia to produce different goods and services to export to the world.
On Sunday, Labor launched our campaign here in Perth – the first time any major party has launched its campaign here since the Second World War. Unfortunately, I was isolating with COVID, and was very sorry to miss this moment.
At the launch, Anthony Albanese announced a new $1b Value Adding in Resources Fund, to support new resources processing projects in Australia.
Australia’s resource and energy export earnings are expected to reach a record $425 billion in 2021–22. Our traditional mining industry has delivered prosperity to the nation and jobs and livelihoods for Australians all over the nation. Currently, most of these resources are processed overseas.
This Fund will help us process Australia’s mineral resources in Australia, capturing more value for our economy and creating jobs here.
The extraordinary global demand for Australia’s rare earths and critical minerals presents an unmissable opportunity to develop a new resources industry, alongside our traditional base, and expand our mining science technology capabilities.
Well, you would think it is an unmissable opportunity but, the truth is, we have missed such opportunities before.
In the midst of World War 2, critical minerals were in demand for different reasons than they are today. Tantalum and beryllium were strategic minerals for the US in the early 1940s. And in 2022, they remain so.[1]
As it happened, Lady Deborah Vernon Hackett – the wife and widow of this institution’s great benefactor, Sir John Winthrop Hackett – owned the Wodgina Mine, in the Pilbara, which had a global monopoly on the production of high-grade tantalite for the production of tantalum, and the very light, extraordinarily hard mineral ore, beryl, that could be transformed into the highly desirable beryllium.
For many years, Lady Hackett had sought investment from London to develop a processing facility in Welshpool for these critical minerals. Before investment was forthcoming, the times overtook her.
Instead of processing these minerals here, 18 tons were airlifted from the Pilbara to the US. And in the US, this Western Australian ore produced the “entire requirements of the Allied nations for refined tantalum.”
Later in 1942, beryl from the Wodgina Mine was shipped from the Pilbara to New York – but only in 70 ton lots, in case the shipment was attacked on its voyage. It was a vital, dread cargo required for Allied armaments, and they had to ensure the entire stockpile would not be lost.
The circumstances of the 1940s and the story of the Wodgina Mine are clearly very different to the circumstances of the critical minerals industry today.
But the strategic imperative of critical minerals remains.
Like Lady Hackett, we hope for the advanced processing of critical minerals – processing that spins dirt into high value products – to take place in Australia.
We know this will require international economic partnerships and strong investment of financial and intellectual capital into Australia.
The story of the Wodgina Mine is a salutary lesson: if we don’t grab opportunities, they can be lost easily, as circumstances become urgent and geostrategic issues press hard.
The role of governments in this sector will be very important and there is no time to waste.
Labor’s $1b Value Adding in Resources Fund will ensure we grasp hold of the opportunities ahead with both hands.
The Value Adding in Resources Fund is part of the $15b National Reconstruction Fund, designed to create secure jobs for Australian workers, drive regional economic development, boost our sovereign capability and diversify the nation’s economy.
We need our economy to be more complex in what it produces for export and therefore more resilient, and better prepared to face the challenges of the future.
And we have already announced a suite of policies to augment this economic transformation.
Labor’s Future Made in Australia plan will support an economic transition to use the levers of government support local industrial development. And the associated skills package – including 465,000 fee free TAFE places for in-demand skills – will ensure Australian workers are able to take their place in the jobs of the future.
Labor’s Powering Australia policy sets out a clear pathway to reduce our nation’s carbon emissions by 43% by 2030, and to net zero by 2050. No longer will Australia be an international pariah at climate change summits.
Under the plan, Labor will protect the competitiveness of Emissions Intensive Trade Exposed industries by ensuring they will not face a greater constraint than their competitors.
We will also allocate up to $3 billion from Labor’s National Reconstruction Fund to invest in green metals (such as steel, alumina and aluminium); clean energy component manufacturing; hydrogen electrolysers and fuel switching; agricultural methane reduction and waste reduction.
An Albanese Labor Government will provide direct financial support for measures that improve energy efficiency within existing industries, and develop new industries in Regional Australia, through a new Powering the Regions Fund.
This is not a small target strategy: Labor has a big vision for a better future.
The vision is for Australians to make more things here, and to sell them to the world.
This requires a national effort to not only secure new markets for our exports but a transformative domestic economic agenda which enables Australia to produce different goods and services to export to the world
Only Labor has a clear plan to diversify both the products Australia exports and the nations we export to. An Albanese Labor Government will reconnect Australia to its region, and do the work needed to get our trading relationships back on track.
Trade Diversification Plan
I’m pleased this morning to announce today Labor’s Trade Diversification Plan. The plan has four main pillars:
The first pillar is an Export Market and Product Diversification Strategy, which will involve a whole-of-government approach to revigorate our engagement with the emerging markets of the Indo-Pacific and identifying emerging areas of potential Australian export strength, such as digital health and financial services.
The Strategy includes early ministerial visits to Indonesia, India, Japan, Korea, Malaysia, Singapore and Vietnam.
Government must be able to work better internally to manage our trade relations.
So an Albanese Labor Government will establish a cross-sectoral Trade 2040 Taskforce, bringing together all relevant agencies, industry and experts, and reporting to key ministers. The Trade 2040 Taskforce will seek to identify areas of Australian strength that are currently underdeveloped for export markets, and develop strategies for maximising export potential.
A focus of the Taskforce will be to determine how to unlock Australia’s services sector for greater export opportunities. With many of our trading partners, education is a great starting point.
A whole of government approach to trade diversification means it is the job of every Minister in the government to look at their portfolio and ask themselves ‘what can I do to help diversify the exports of Australia? What can the industry I represent as Minister bring to the world?’
If a government takes this approach to trade diversification, we open up possibilities beyond the traditional (and very important) resources and agriculture sector, to areas of great Australian capability such as health services, digital services; financial services for funds under management; science and innovation; advanced manufacturing and robotics.
And while resources exports will remain the backbone of the economy for many, many years, opening up non-resource sector opportunities and building greater service sector engagement with Asia could add $275b to the Australian economy.[2]
This is an opportunity Australia simply cannot pass up. A future Labor Government will not let Australia miss this chance.
We will also institute a Ministerial-level Technical Barriers to Trade working group, with in initial focus on resolving biosecurity barriers for Australian exports.
Often, work to resolve technical barriers either falls into the gaps between Government departments, or gets put in the too-hard basket. Did you know, that it is possible to export avocados from Western Australia to Japan, but not from Queensland or New South Wales? We should fix that.
Scott Morrison and his ministers hate taking responsibility; Labor knows that sometimes it takes the Minister to work with her colleagues to resolve issues that the Department alone cannot fix.
Labor will also conduct an urgent internal review of the Export Market Development Grants. The Government’s recent changes to the EMDG has made a formerly very successful grant program increasingly unpredictable and, from many reports, utterly unusable for emerging exporters. We are committed to engaging meaningfully with exporters to make the system work again.
The second pillar is a renewed focus on building economic ties with India.
India is a democracy of 1.4 billion people, just across the Indian Ocean from Perth. We would be foolish not to prioritise the development of a trading relationship with this vital and burgeoning market.
Labor in Government will, of course, continue the work on trade cooperation. We saw the early harvest agreement signed just before the election was called, and I was pleased to meet with Indian trade minister Goyal during his visit to Perth in April.
That said, in Opposition we have had limited visibility of the state of negotiations between the Morrison Government and the Indian Government.
Nevertheless, Labor is committed to commissioning a post-pandemic update of the 2018 India Economy Strategy conducted by Peter Varghese.
Labor will also seek to institute an annual India-Australia Economic Dialogue between each nation’s Trade Minister and Treasurer.
A key missing piece of the relationship with India is limited India literacy in the business community – but from a language and culture point of view.
An Albanese Labor Government will create a pilot in-country Indian language study program, modelled on the successful Australian Consortium of In-Country Indonesian Studies (ACICIS), which is based here at UWA, and I acknowledge the Consortium director, Liam Prince, in the audience today.
I would note ACICIS nearly collapsed due to the neglect of the current Liberal Government, who had to be dragged to the table to assist this successful 28-year-old program through the extraordinary challenges of COVID-19.
Labor will also work with industry to develop an Industry India Literacy and Capability Program, using best practice principles to upskill Australian businesses.
The third pillar is revitalising our trade relationship with Indonesia, following the Liberals’ neglect since signing the IA-CEPA deal.
An Albanese Labor Government will also seek to establish an economic 2+2 ministerial dialogue with Indonesia. The annual Economic Ministerial Dialogue will be augmented by a +1 set of ministers from each side, changing each year based on discussion priorities.
For example, we might include infrastructure ministers one year – to bring Australian expertise to the grand challenge of building the new Indonesian Capital of Nusantara in East Kalimantan, a province on the island of Borneo. A remarkable vision and one Australia and Indonesia can work on together.
Similarly, dialogue between our respective health ministers is also vitally important so that we can work together on bringing Australia’s expertise in digital health services across its rural and remote areas to the challenging geography of Indonesia and its thousands of islands.
Labor in Government will activate the joint Australian-Indonesian Trade in Goods, Trade in Services, Investment and Economic Cooperation committees in Chapter 18 of IA-CEPA, but on which the Liberal Government has taken no action.
I would also like to raise the profile of the IA-CEPA Katalis Economic Cooperation Program, to reboot people-to-people and business-to-business links, post-COVID.
Importantly, Labor will continue its support of the ACICIS program, to enhance Indonesia literacy amongst Australian students. A program vital to our people-to-people relationships with our nearest and very important neighbour.
Finally, the fourth pillar of Labor’s Trade Diversification Plan seeks to include our trading partners in multilateral economic fora.
In the face of rising economic coercion, we must work to strengthen the global rules-based trade system and hold countries that break these rules to account.
More than ever, we need effective and inclusive multinational fora to enable nations to come together, in the good times and in the bad.
In that context, it is important for Australia to engage fully within rich tapestry of regional architecture in the Indo-Pacific. Australia has acceded to the Regional Comprehensive Economic Partnership (RCEP), which I have previously described as an ambitious ‘ASEAN and Friends’ treaty organisation.
And Australia worked with other regional partners and in particular, Japan, to establish the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) after the original TPP stalled.
The United States’ new Indo-Pacific Economic Framework initiative has been welcomed as a mechanism by which the US can meaningfully re-engage with our region.
The Indo-Pacific Economic Framework’s values-based approach has identified a free and open, connected, prosperous, secure and resilient Indo-Pacific as the guiding principles, which are values Labor can agree with.
To that end, Labor will support the accession of Indonesia, Thailand and Korea to the CPTPP. We will work to cooperate with the US on the Indo-Pacific Economic Framework, and encourage their participation in other regional fora, such as the CPTPP. Labor will also support India’s membership of APEC and RCEP, if it wishes to join.
Conclusion
Friends, in just over two weeks Australians will choose a future. They have a real choice between a worldview that faces the future with confidence, or one that cowers from the world in fear.
I want to be part of an Australia that seeks to act upon our world, not just merely react to it.
I want to be part of an Australia that plays to its strengths, rather than blaming others for its weaknesses.
I want to be part of an Australia that seizes opportunities as they present themselves, not one that tries to resist the inevitability of change.
And I want to be part of an Australia that values and invests in its relations with its neighbours near and far.
Labor wants to build a better future for all Australians. Don’t you?
ENDS.
[1] https://www.federalregister.gov/documents/2022/02/24/2022-04027/2022-final-list-of-critical-minerals
[2] AsiaLink (2012) National Strategy for an Asia-capable workforce; AsiaLink (2020) Winning in Asia ‘Creating Long-term value’
