GLOBALISATION AND REGIONAL RENEWAL: COMPATIBLE OR MUTUALLY EXCLUSIVE?

Sinclair, Ian

All truths wait in all things, They neither hasten their own delivery nor resist it. Walt Whitman

The changing economy and regional Australia

Over the past two decades, Australia has witnessed marked changes in population, employment and educational opportunity. Some regions have declined, while others have experienced growth. The causes are diverse and far from consistent. As noted in a 1999 Productivity Commission report: `Globalisation, technological advances, government policy changes and other factors [have] placed added pressure on businesses and communities in some regions. Yet these same factors [have] resulted in employment growth in other regions.'

The population in New South Wales between 1986 and 1996 increased significantly but not uniformly. In coastal regions numbers grew by 13.3%, from 4.5 to 5.1 million, while inland the population grew by only 5%, from 840,000 to 880,000. In remote New South Wales, population fell by 4.6%, from 41,000 to 39,000. The ABS analysis of the 1991 and 1996 censuses with respect to non-metropolitan population in Australia notes that growth is concentrated in particular ecological areas:

* peri-urban areas surrounding major urban centres with significant commuter populations;

* attractive coastal localities, especially along the east, southeast and southwest coasts;

* some major regional centres;

* some mining and tourist destinations; and

* along some major roads such as the Hume Highway, and rivers.

Employment over the period grew by 16.9% in coastal regions, by 7.9% inland, but fell by 2.7% in remote New South Wales. Interestingly, the employment figures better the population number in each instance, probably reflecting the increase in female participation in the work force. Since 1996 these trends in population and employment appear to have accelerated as the impact of micro-economic reforms starts to be felt throughout the whole economy; while advances in information exchange, communications and technology bring new opportunities for economic development in both metropolitan and country regions.

In this same period domestic and export markets have expanded, with a more cost-effective operation of existing businesses and the development of many new businesses and services -- but often at a high social price for non-competitive enterprises and individuals.

The theory behind trade liberalisation, globalisation and the new economy may be understood and even accepted; yet adapting to change remains difficult. For country Australia the pressures are more intense than in the cities because of the progressive decline in rural incomes from traditional farming sources, aggravated by selling on open markets where price has no relationship to the cost of production.

A report released in 1999 by the National Institute of Economic and Industry Research identifies a growing concentration of wealth in Sydney and Melbourne. The assessment is based on the availability of 21st century jobs -- in accountancy, computers, engineering, finance, health, media, science and management. All are part of and hence competitive in a global trading environment. In contrast many formerly profitable rural industry sectors have languished or disappeared. In most smaller country towns, population and employment continue to decline and annual personal income in rural Australia remains far lower than in the cities. Banks closures, empty shops, vacant offices and unemployment remain a sad reality.

Indeed we may well ask how the rural sector can become part of the new economy. Or, more fundamentally: Is globalisation compatible with regional renewal?

Vinod Thomas, a vice-president of the World Bank writes (Economist 7 October 2000) of the centrality of growth in reducing poverty and suggests that what is needed is not merely `more growth but better growth'. Addressing the problems of the developing world, he identifies three difficulties in achieving equal trade opportunity:

* severe inequalities in investment in health and education;

* poor governance; and

* environmental quality.

These three apply equally to regional and rural Australia.

Health and education

The most serious problems facing country Australia go beyond personal finances and into people's homes, to health and education.

Research quoted by Dr Wendy Craik, the retiring CEO of the National Farmers' Federation (address to the NSW Farmers' Association Conference, July 1998) showed that in 1995 premature death rates were 32% higher for women living in remote Australia and 22% higher for men.

In regional areas, coronary heart disease was 14% higher for men and 15% higher for women; in remote areas the figure for women was 29%. Death rates from injury in regional centres for men were 22% higher while in the outback the injury figure climbs to 69% higher for men and 43% for women. Deaths of men from road accidents in remote areas were over 100% higher. Deaths from asthma in rural areas for both men and women were 25% higher and those for diabetes 118% higher for women and 88% higher for men. Yet both asthma and diabetes are treatable complaints.

These appalling statistics, while embracing all residents in country areas, reflect the major disadvantage suffered by indigenous Australians and dramatically illustrate the challenge in delivering total health care to sparsely populated remote communities.

A Committee I recently chaired assessed health services in smaller country towns in New South Wales. Challenges here included attracting and retaining younger professionals -- doctors, nurses, allied health practitioners -- and adapting the public hospital, always a local icon, to the efficient delivery of a modern health service. Caring adequately for the elderly in an ageing society is a fundamental task, especially given that the proportion of those over 55 in country towns exceeds that in the city.

As with health, so with education. There are marked disadvantages in the country. Most rural children can go to primary school while living at home; and even in remote communities they have access to the School of the Air. However, to attend secondary school many have to travel considerable distances by car or bus, or else stay in town or board. Almost all must leave home for a tertiary education, whether at TAFE or university. There are external courses, but internet links are usually slow and mail infrequent; and, in any case, for a young adult social interaction is most desirable.

In short, for a good many families, access to education is prejudiced by remoteness, cost and the range (and level) of subjects available. Participation rates for rural and remote residents in higher education are markedly lower than those for urban Australians. Yet education is essential if country people are to take advantage of technological change, benefit from the new economy and communities are to retain or attract the young back to the country.

One major factor affecting both health and education is access to telecommunications. As recognised in the Besley Report to the Federal Government, reliable telecommunications are the key to future productivity, keeping pace with new technologies and removing the barriers of distance. Telemedicine also significantly enhances the prospect of quality health care. In education, health and business, available bandwidth prejudices almost every country community. Community Service Obligations for Telstra are yet to meet the community requirements and public sensitivity is well reflected in the passion about Telstra's full privatisation. Without competitive and reliable communications in regional Australia, the objectives of reversing population drift and sustaining local employment in a globalised world will not be met.

Governance

The political consequences of this sense of frustration at the real and perceived disadvantages of country Australians have been apparent at the ballot box. The Victorian Coalition Government led by Jeff Kennett was defeated in rural electorates, One Nation has attracted significant country support and the increase in the number of independents in lower House and state and federal parliaments has been mainly from country electorates.

One Nation's policy includes a call to `maintain constant pressure on the Federal Government to resist economic rationalism and globalisation'. The question is how? And what are the alternatives? Slower economic reform and a retreat behind trade barriers will mean slower growth, lower productivity, fewer jobs and lower living standards for the whole community. One Nation calls for the Government to provide protection for primary and manufacturing industries through tariffs. For many export industries this would result in forced loss of the markets gained through trade liberalisation; and, as we are all to well aware, once you turn inwards and become defensive the debate so easily moves from economics and trade to immigration and race.

Gary White, the Westpac representative in Bangkok and President of the Australia-Thai Chamber of Commerce, addressed a Parliamentary delegation of which I was a member a few years ago. Speaking on the difficulties the Hanson movement added to commercial trade negotiations he said: `You don't have any moral high ground when you go into negotiations with someone like her behind you.'

The environment

In 1992 the UN Conference of Environment and Development (UNCED) meeting in Rio de Janeiro concluded with the Rio Declaration: a set of 27 non-binding principles to govern the economic and environmental actions of individuals and governments towards the goal of global sustainability. Within it, Agenda 21 set down some 300 pages of an action plan for governments to follow. To monitor their performance, the 1992 UN General Assembly established the Commission on Sustainable Development. And in Japan in December 1997, the Kyoto Protocols were adopted to prescribe a reduction in industrial emissions by the advanced economies of the world. There were, of course, disagreements over the detail of the Protocol and now President Bush has indicated that for his administration United States economic interests must come first. But if national politics require compromise and a long-term perspective, this is even more so on a global scale.

There is little need to set down here the difficulties in reducing global warming and carbon dioxide emissions; but mining and agriculture, the major industries of country Australia, place the greatest stress on the environment and the measures necessary to meet targets have financial and social consequences.

For rural sustainability the most significant environmental challenge is salinity. It comes in several forms:

* dryland salinity;

* irrigation salinity;

* urban salinity;

* river salinity; and

* industrial salinity.

The NSW Salinity Summit, held in Dubbo in March 2000, was told that the impact of salinity is increasingly serious. There are pressures on town water supplies, on buildings, roads, manufacturing and food processing industries and on high value enterprises such as irrigated and horticultural crops, as well as increasing pressure on arable land and inland river systems.

The annual cost in lost agricultural production in Australia is estimated by the Department of Industry, Science and Resources at $130 million and rising. In the south west of New South Wales alone, salinity damage annually to roads and highways is estimated to cost $9 million. Yet it was only in 2000 that salinity was addressed by comprehensive strategies at a federal and state government level.

The challenge all this poses has been well expressed by Marie Fox, the CEO of Volunteering Australia (Australian 18 October 2000): `We live in a time of great disconnect. The challenge is ... to find ways of reconnecting. We are too inclined ... to say: "Oh, we can't do that" or find reasons for not doing something.'

Trade liberalisation and new opportunities

How difficult, then, is the task of regional renewal in Australia, let alone that of achieving equal trade opportunity?

I will not canvass the tortuous course of international trade reform. Suffice it to say that with the endorsement of the Australian-initiated Cairns Group, a body of like-minded agricultural exporting countries, the Uruguay Round of Trade Negotiations was successfully concluded and the World Trade Organisation (WTO) established on 1 January 1995. Unlike its predecessor, GATT (the General Agreement on Tariffs and Trade), it includes agriculture within its trade rules. This dimension of globalisation is of enormous advantage to Australia.

One of the main objectives of the WTO is to help international trade in goods and services flow as freely as possible. The removal of trade barriers combined with improvements in international communications, technology and transportation has led to increasingly interdependent and trade-exposed economies. This has been accompanied by significant trans-national investment and capital flows.

Many in the export sector recognise the advantage of these initiatives. Others believe Australia is undertaking trade liberalisation faster than other nations to the detriment of local producers, contributing to the rural decline. They assert that removing trade barriers unilaterally gives overseas competitors with larger scale production an advantage and deprives producers of any `Australian made' price benefit.

These concerns are enhanced by the apprehension that the Americans and Europeans are powerful enough to ignore the trade sanctions available through the enforcement mechanisms of the WTO and the belief that their governments are more responsible to pressure from their farmers than any Australian government.

In spite of the problems, there has been significant reform in international trade since the formation of the WTO. Groups like the Cairns Group and the Asia Pacific Economic Council have helped to maintain the momentum. Yet further trade liberalisation will depend as much on the attitude of the new Bush Administration to world trade as on any international forum.

In looking at the actual and potential response of regional Australia, we might bear in mind the words of the former United States Ambassador to Australia, Genta Hawkins Holmes, who said at a conference in Canberra a few years ago: `If the benefits of (globalised) trade are so self-evident, why is there still resistance to it? Why the doubt and worries and the general sense of anxiety about the fundamental value of trade to our economies?'

She continued: `the answers are not always to do with economics ...'

Or to put it another, slightly different way: for economic progress, we sometimes have to think outside the economic square.

In the case of traditional rural industry, the WTO will remove the price distortions from production subsidies in import markets, and offer a major stimulus for exporters of agricultural goods and services. Growing crops and fattening livestock can be scaled to meet wider market opportunities for producing to contractual specifications for guaranteed returns. For producers, globalisation facilitates communication, computerisation, mechanisation, knowledge-based innovation and greater specialisation. This stimulates processes such as laser testing super fine wool fleeces in the woolshed and crushed grape maturation in stainless steel casks instead of traditional oak viticulture to reduce costs and supply products tailored to consumer demand.

In every State and Territory both producers and their communities gain significant benefit from alternative land and water use, resource development, new plant varieties -- temperate and tropical, organic and non-organic enhanced agriculture, viticulture, horticulture, aquaculture, large-scale mechanised mineral extraction and processing, sophisticated livestock production matched by better packaging, transport, handling and marketing. In western New South Wales and rural Queensland there has been the remarkable commercial success of the cotton industry. In the Hunter Valley, open-cut coal mining and the wine grape replace the dairy cow (but not the blood horse). In the semi-arid interior the strong-wool merino and bos taurus cattle decline as cotton and agriculture expand, while leisure and tourism take over from small-scale dairying, pig farming and marginal agriculture as in the New South Wales north coast and Queensland's Gold Coast. Bourke and Menendee provide the season's first table grapes into Asia and Moree offers pecan nuts from western plains sheep country to the discerning palates of the world.

But, as just noted, the traditional character of rural and regional areas is changing. Everywhere, tourism, eco-tourism, leisure, sport and the retirement industry foster new services oriented to changing public demand.

Highly successful events like Tamworth's Country and Western Festival and Gunnedah's Ag-quip are as much the product of developments in electronics and communications as they are venues for musicians and the marketing of agricultural machinery. Each has produced its own dynamics with spin-off new employment opportunities; for example, in purpose-built facilities and related industries such as hospitality and recording studios, and generated valuable international media focus.

Employment has increased across many occupational groups, including retail and wholesale trade, property and business, education, health and personal services. Elsewhere -- in electricity, gas and water, transport, agriculture and mining -employment has consistently decreased, with those losing their jobs and investments not always those benefiting from change. In this lies a major educational and social challenge.

Population and employment trends have been accentuated by migrant and refugee settlement patterns and lifestyle changes. High rise, medium density housing dominates urban landscapes, while personal mobility means many people from the capital cities have moved to the coast and to the country for a cleaner, more leisurely lifestyle, perceived to be `safer' and more environmentally friendly. Some retirees with redundancy packages have sold suburban homes and bought country properties at a significantly lower capital cost or moved into purpose-built retirement villages such as those on the central and far north coast of New South Wales.

Inland towns like Gilgandra have developed a retirement industry in aged hostels and nursing homes beyond local demand. Regional centres like the City of Armidale, conscious of the ageing population, foster a vigorous, not-for-profit aged service sector supplemented by facilities run by private enterprise. All generate significant new employment opportunities.

Food tastes and eating patterns have changed, reflected in the diversity of Australia's restaurants and fast food outlets. Food and meat processing employ more people and earn more export dollars. With regard to meat processing, it is relevant to note that, with a few minor exceptions, abattoirs and meat works today are located outside capital cities. Government and council controlled works such as those formerly in the Sydney suburb of Homebush, and in Gunnedah, Guyra, Tamworth, Dubbo and Wagga, have closed and their private sector replacements, whether in Dubbo, Tamworth, Inverell, Wallangarra, or elsewhere prosper, often in association with major cattle feed lots. The shift from densely populated areas has lowered transport costs and enhanced carcass quality by reducing animal handling before slaughter.

As the Economist survey on the new economy (September 23 2000) noted: `historically, the biggest gains from a new technology come not from its invention and production but from its exploitation'. Diversification is not only possible but desirable: on-farm stays, indigenous tourism, art displays, trade shows, musical performances, sporting events, theatrical productions. The field is limitless.

The role of government

For most of our post-Federation history, agricultural production has been supported by policies offering some price certainty against the volatility of world market fluctuations. Government assistance has included price-related intervention particularly through commodity-oriented marketing schemes, quantitative and tariff related protection against imports, input subsidies, natural disaster relief, tax concessions and rural adjustment. The aggregate level of support has not been high relative to other exporting nations and always considerably below Australia's principal competitors from Europe with the European Union's Common Agricultural Policy (CAP) and North America with the US Export Enhancement Program (EEP).

Even though more than 70% of Australia's farm produce is exported, there has been only a slow acceptance by many producers of the high cost of protectionist policies and a reluctant shift towards accepting the benefits of trade liberalisation in rural and regional Australia. Certainly these are tempered by the costs of adjusting to the changed trading environment. It is in dealing with these adjustment costs that government has a crucial role to play.

A good example of constructive revival is the pig industry. Until competition came from imports from Canada and Denmark in the late 1990s, consumer attitudes and levels of domestic production were the main determinants of product and price. The tariff reductions that were a condition of accession to the WTO and the resulting flood of imports initially had a significant negative impact, culminating in 1998 in the lowest prices for pork and bacon for more than 30 years.

Facing the reality of trade liberalisation, the pork industry established the Confederation of Australian Pork Exporters (CAPE) to strategically plan and manage export development. In contrast to the previous ad hoc strategies which had little regard to quality, the new body established a comprehensive marketing plan based on quality and labelling aiming to double 1999 exports to 20% of production by 2002.

A vigorous marketing drive led to significant export contracts with Japan and Singapore and it is assessed that the value of sales for 2000 will already meet the 2002 target. To assist in this industry transformation, the Federal Government provided the pork industry with $1.5 million to establish essential new alliances between producers, processors, retailers and exporters.

Underpinning trade liberalisation and globalisation is the economic principle of comparative advantage. Liberalising countries accept that they will prosper by taking advantage of their assets (natural, human, environmental, financial and technical), allowing the efficient production of goods and services and then trade these for goods and services produced more efficiently by other countries. As liberalisation proceeds, producers have access to more efficiently produced inputs, as well as more customers for their own products.

Trade liberalisation not only means new markets for exporters, but also that markets open up to those not previously involved in export. It also, of course, means more imports as well as more exports. This increases pressure on domestic companies, stimulating more efficient production and increasing price competition to the benefit of consumers. The efficient use of resources fosters economic growth which results in higher national income and improved living standards. Agricultural support policies, on the other hand, are costly to the countries applying them and reduce the benefits from enhanced global economic activity.

Conclusion

Regional renewal does not mean recreating the industries of 30 or 50 years ago in their former image. It means applying today's technology and finding new opportunities enjoying comparative advantage. The challenge is to reverse the population drift and job loss with communities working in concert to adapt and benefit from changed market and production circumstances. In facing the future, Martin Stewart-Weeks comments (Australian 18 October 2000): `the biggest fear is that we are losing our capacity for community even as we work out that we need it now more than ever.'

Yet communities, like markets, if static, stagnate. Globalisation offers the stimulus for positive change. Globalisation is irreversible because it makes sense. But, as with the computer, it should be our servant and not our master.

In the words of poet Leonard Mann:

 You see now Bill
 That country yonder, the promised land,
 Does not as yet exist.
 Because we have not reached it yet.
 We have reached the boundaries,
 We know now what the task is,
 We set ourselves for the achievement.

The Rt Hon. Ian Sinclair AC is a former Leader of the Federal National Party, senior Minister in numerous portfolios and Speaker of the House of Representatives.