17 April 2008
Doorstop interview, Australian Embassy, Beijing
Subjects: Australia China Free Trade Agreement, Doha Round, Tibet, Mortimer Review, iron ore pricing, Foreign Investment Review Guidelines
MINISTER CREAN: Well, we’ve had some excellent discussions today, and I must say that the breakthrough that was achieved by the Prime Minister last week with Wen Jiabao – the unfreezing of the stalled FTA talks – has not only had a significant impact, it has been acted on with a great determination to aim to conclude an FTA in a timely manner. We had very detailed discussions today, but in essence this was my first visit to China as Trade Minister, the first opportunity for a dialogue with Minister Chen and the first real opportunity for the negotiating teams to receive the message about the importance both leaderships and therefore both countries place on getting a successful conclusion.
We talked not about setting timelines, sorry, if you like deadlines, specific times, because we’ve been caught with those previously. But there’s nevertheless recognition of the importance of giving focus to the discussions and a framework, a roadmap, by which we proceed. There is a scheduled negotiation in June, but out of today’s discussions, the negotiators will meet in advance of that June meeting to not only map out the basis for that meeting, but there’s agreement to work towards additional meetings to the June meeting, of negotiators, before the end of the year.
The clear basis upon which we’re proceeding is that this is an FTA which is comprehensive, mutually beneficial and it aims to be ambitious. We’ve made that clear in terms of testing the political will of the Chinese leadership, and we’re satisfied they share that objective. This is not to say that the negotiations are going to be easy – there are sensitivities on both sides. We discussed a number of those today. There is a – as a result of today’s discussions, we do expect a revised tariff offer, and in the context of proceeding to deal with other aspects of the negotiations, whilst we recognise that some of the difficult areas might take time to resolve, that we should be aiming through the negotiations to try and post some early outcomes, some demonstrations, some practical demonstrations of the desire to conclude the FTA.
We had in all about four hours of discussions. In the bilateral context, obviously it covered more than the FTA, although it’s fair to say that the discussions on the FTA took up the bulk of the time. So that’s it, I’m looking forward to this progressing. From our point of view, we’re delighted that there’s a preparedness to advance these negotiations and I think of great significance is the fact that the visit of the Prime Minister last week has been enormously successful in not just unfreezing but sending the right sorts of signals as to how we can continue the thaw, to add substance to the more general commitment, and that we hope to be able to proceed and report at the appropriate time.
JOURNALIST: So what did you make of Chen Deming?
MINISTER CREAN: I liked him. Got on very well with him. I think first meetings are always difficult because you – and especially through translation it takes a while – but the fact that we were able to have some hard-nosed conversations in that and still proceed constructively, I think was an excellent sign. By the time we had the meeting of JMEC and we exchanged issues and discussed a whole range of other issues, over lunch it was a more informal discussion and a very friendly one. We had a very good dialogue about Doha, and the energy needs, particularly given his previous role on the NDRC.
JOURNALIST: What were the sticking points?
MINISTER CREAN: There’s a lot of sticking points. Of course we – if we’re to get an outcome we need a better offer on tariffs, we’ve indicated that, but I think that the New Zealand agreement is a good start. We’ve indicated that the New Zealand outcome is not in itself sufficient for us – ours is a differently structured economy, we need to take it further. On services we’ve previously tabled a large list of issues that we would like to see improvement on, both in terms of services and investment. There are a large number, no-one’s expecting that they’re going to be concluded overnight or by June or even subsequent meetings this year to June. But this is where I think the desire to try and achieve as some early outcomes, some practical demonstrations of progress being made. I think that there is – I came away encouraged that, even though the final process is still going to take us a bit of time, there is a real determination to continue to post progress.
JOURNALIST: What about on their side, what are their sticking points, if you like?
MINISTER CREAN: Well I don’t want to go to the detail of the negotiations, that’s best left. But I think it is true that in a number of areas where we had discussions there was not just some detailed exchanges, but there were good understandings as to where the problem areas were and even some helpful suggestions as to ways in which we could deal with the problems. It’s no-one’s desire to just deal with the easy stuff here, but it is to give structure, a timeline rather than a deadline, in terms of timetables, and we’ll proceed accordingly.
JOURNALIST: Could you just give us a general idea though of what they’re, like even the industries that they’re worried about?
MINISTER CREAN: Well look, you know the industries that they’re concerned about. They have issues with agriculture, they have eight hundred million farmers, but this is not just an issue for the bilateral relationship, this is an issue that we’re dealing with in the Doha round. Like India, it’s an issue with them as well, but I think the fact that the Doha talks are proceeding, that there’s been some encouraging progress there, these are issues that one way or the other that we’re going to have to address. The fact that we’re dealing with them in a multilateral context as well as a bilateral context I think helps us.
JOURNALIST: Minister, you talked about the pre-June meeting, could you say a little bit more about what the content of that meeting might be? Why do you call it a pre-June meeting, why not just call it another negotiating session?
MINISTER CREAN: It’s not a negotiating round. The negotiating round is structured and set for June. That’s always been in the pipeline, as you know. The problem has been until the unfreezing, that that – what we would have expected on past performance – wouldn’t have achieved terribly much. Now that there’s a desire to want to make progress, and by definition to make some progress out of June, there was seen to be sense in getting the negotiators to have something by way of an informal discussion, to plan for what June might be able to address, and where the subsequent meetings for the remainder of the year might go.
JOURNALIST: Has China got a bit more room to move given that food prices have been rising so fast?
MINISTER CREAN: They didn’t say that and we didn’t put it that way, but I think in general terms, there are two dynamics freeing up progress in Doha. One is the global economic uncertainty and the realisation in a global context that if we want to get some certainty back then here is an opportunity in uncertain times. What’s a signal of certainty we can give? A breakthrough in Doha would be just that. So that dynamic I think has been a fundamental driver of the progress that’s been made since Davos. The second dynamic which I think is helping us with movement on agriculture which is critical to any outcome from Doha – but there won’t be movement on agriculture unless there’s movement on goods, hence this whole timetable that’s aiming for what’s called the Horizontal process, scheduled for round about May now, there’s realisation that you can’t get ambition in agriculture unless there’s ambition in goods as well – but what’s helping the ambition in agriculture is the high food prices. That if ever you’re going to free up the subsidies, the best time to do it is when the producers aren’t under as much pressure. So ironically we’ve got one adverse circumstance driving the dynamic and one prosperity dimension driving another. With the bilateral arrangement I think it’s also important to note that if we can crack through in Doha in agriculture, if we take China, that context, plus what’s happened with New Zealand should help us in one of the difficult areas. Now, will it be sufficient? Don’t know, can’t tell. But at least if you try and think strategically about the way forward and the steps and what we’ve got going in our favour this year, compared to where we’ve been stalled in previous years, I think you’d have to say there are signs for some real hope out of this.
JOURNALIST: Minister did you get any sense at all from the Chinese today that there was any fall-out at all after the Prime Minister’s comments about Tibet and human rights abuses?
MINISTER CREAN: No, no fall-out at all in the context of these discussions. I don’t think we could have hoped for a better commitment within a week of the breakthrough, the unfreeze if you like. We did discuss Tibet, discussed it through a mechanism that I was responsible for initiating when I was the Leader of the Opposition, and that’s a Party to Party dialogue.
JOURNALIST: What was that?
MINISTER CREAN: Well we signed an agreement in 2006 between the two Parties, the Labor Party and the Communist Party of China, that provides a mechanism for engagement across a range of political issues, including human rights.
JOURNALIST: So you (inaudible) a different badge?
MINISTER CREAN: Different badge, and if you follow the debate that surrounded the Labor Party’s trade – the Labor Party’s conference decision on trade, I resisted having the labour rights clause included in the Free Trade Agreement, arguing that the more appropriate mechanism was one that we had actively pursued and succeeded in getting. That’s the appropriate mechanism for those discussions and that’s where we had them.
JOURNALIST: So using that mechanism, what did you say?
MINISTER CREAN: Well, let’s say, we raised the issues, and we raised them in a similar vein to the way in which the Prime Minister did.
JOURNALIST: What, that there are human rights abuses in Tibet?
MINISTER CREAN: Well, I’m not going to go into the detail, I’ll just say it was the opportunity to raise with my visit, as we’ve undertaken to do, to raise the human rights issues, but through the appropriate forum. I think that the decoupling of that from the trade talks is itself significant.
JOURNALIST: What did they say then when you raised it?
MINISTER CREAN: Well, that’s for our discussions. I think that they are fully aware of our concerns. The question now is how that’s responded to, and of course that’s a matter entirely for them.
JOURNALIST: Minister, just so that we get this right, you expect the Chinese to come back with a better offer on tariffs in the next couple months before the June negotiations, is that right?
MINISTER CREAN: No, no, no, no, no. Not before the June negotiations. The negotiations are scheduled for June, we’re expecting them to come back and they’re not the only negotiations that we’ve agreed to undertake. There will be further negotiations this year. We’re expecting them, in the light of last week’s breakthrough, today’s discussions, the further work in advance of the June meeting, whether it’s the June meeting or a subsequent meeting, we’re expecting them to come forward with a revised tariff offer.
JOURNALIST: Are you talking agriculture (inaudible)?
MINISTER CREAN: It’s goods, it’s not just agriculture.
JOURNALIST: But it includes agriculture?
MINISTER CREAN: It includes agriculture. But of course, our issue is much wider than agriculture and goods. You know, the whole nature of trade has changed these days, the investment flows is a big issue. They’ve got issues with us in terms of investment, we have with them. This is what we have to work our way through.
JOURNALIST: What are those issues?
MINISTER CREAN: Well, access, essentially, they go to access. I mean, what’s changed in trade is that no longer – in the past, countries used to produce goods and or services and export them to another country. Now increasingly what’s happening is that people rather than trading the goods are making the investment direct into the country. That raises – it starts to open up this whole question of the behind the border issues, the non-tariff barriers, and that’s where this whole argument of trade is really evolving to as well. On the investment front, quite apart from the bilateral relations, it’s a major focus that I’ve asked David Mortimer and John Edwards with the review to have a look at what are the implications of this, how does Austrade, how do trade policy settings work to encourage the freer flow of investment, what do we need to face up to, what sorts of issues do we need to be arguing for in the context of trade negotiations. What we want to do is take trade policy away from just a negotiating framework between countries to a reform international competitiveness domestic agenda too.
JOURNALIST: Mr Crean, would the Chinese side like to be exempted from foreign investment review board decisions to the same extent that the US is under the US FTA?
MINISTER CREAN: They didn’t put that proposition to us today. I mean that’s really the question of where these things might go in detail, but it certainly isn’t where it went today. But the investment issues – it’s in our interests to be engaging the investment issues but if we’re going to engage them and argue for improved access, then it’s reasonable that they’ll be seeking something themselves. That’s what reciprocity involves in these negotiations. I mean, we’ve relied on foreign investment to build our economic base. The Labor Party has always had a very strong view about the importance of foreign investment, so we want to encourage it but we also want to encourage a framework in which our businesses that hitherto didn’t much involve themselves in investment out of the country are now increasingly doing it. Direct investment out of Australia now equals direct investment into Australia. That is a very significant change in the trade dynamic. And interestingly enough, in this report that I was due to launch the other day with Diplomat magazine, that its surveys have found the reason for that investment occurring isn’t the cheap labour question, which is what some people have argued, but it’s access to big domestic markets and to global supply chains. So we have to, in the trade negotiations, be developing a framework that is conducive to and supportive of that.
JOURNALIST: Minister, can you say something about iron ore and BHP and Rio?
MINISTER CREAN: The issue of iron ore came up in the JMEC meeting. But I think it’s fair to say that, after the discussions and the concerns being raised, there was acceptance of that fact that the issues have to be resolved commercially.
JOURNALIST: So did they specifically say they were concerned about BHP’s takeover bid for Rio?
MINISTER CREAN: No.
JOURNALIST: Or anything about the supply of iron ore? Were they concerned?
MINISTER CREAN: What they want is – obviously there’s concern about the increase in prices because they’ve got a concern about inflation. But it’s not just resources that are driving that inflationary pressure, food significantly is as well. We’ve said, we’ve made it clear that we’re not going to interfere in the market on price, but we are prepared as part of the bilateral relationship to look at considerations that go to the question of reliability over the long term in terms of supply, so long as that does not impact on the market determining the price. That’s a matter that we’ve left with them, they will consider it and we’ll see where they go with it.
JOURNALIST: Did you express concern vis-à-vis the coordinated effort to block some Australian iron ore on the spot market?
MINISTER CREAN: Yes I raised the concern about the import licences and reinforced our very strong view that they had to be applied – given that they’re a mechanism available to the Chinese government, which they say is for avoiding port congestion –we’ve reinforced very strongly the importance of the application of those import licences being consistent with their WTO obligations. Now we have no evidence that they are being applied in an inconsistent manner to that, but that’s a point that we’ve raised with the companies. I’ve spoken to both Rio and BHP and said that if they’ve got any evidence that they should inform us accordingly, they haven’t but we’ve registered the point in today’s meeting.
JOURNALIST: But they still exist, the problems?
MINISTER CREAN: Well, I haven’t – what, you’ve got evidence in recent times that they still exist?
JOURNALIST: No, not in the last couple of weeks.
MINISTER CREAN: Because we haven’t and the companies knew we were coming up, I met with both BHP and Rio in the week before I came up and we had a good discussion with them about these issues, but it wasn’t – I’ve got no evidence that – I’ve got no information that goes to that evidentiary point.
JOURNALIST: So your understanding is that there’s no immediate problem right now?
MINISTER CREAN: That’s right.
JOURNALIST: Minister, the New Zealand deal that you referred to, (inaudible) that this is positive for us and do we have a view on how comprehensive that deal has been?
MINISTER CREAN: There’s no doubt that it’s a positive and I’ve said on the record that New Zealand are to be congratulated for concluding this. I think it helps us because it has resulted in some improved market access in agriculture that I think has been a constant sticking point in our bilateral relationship. Our only point about the New Zealand deal is that, while we welcome it, it’s a good deal, we congratulate them, for us, it’s a good start but it’s nowhere near as comprehensive as we want ours to be. We have a more developed services economy, we have less of an economic base reliant on agriculture than they do. We’ve got a lot of interests and a developed actual bilateral relationship through all sectors: agriculture, commodities, goods and services. What we want to do is to deepen that, and that’s why we’re insisting that it has to be a much more comprehensive outcome, and they accept that. They’ve acknowledged even without prompting in today’s discussions that, whilst they’ve done the agreement with New Zealand, they understand that we want a more comprehensive outcome than the New Zealand one.
JOURNALIST: Was labour discussed on either side? Movement of people?
MINISTER CREAN: Yes, that issue came up in the JMEC meeting, but we have through the 457 visa class, the ability to – because it suits in our circumstances with the skills shortages – the ability to have people movements to address those skills. But as you know the Immigration Minister is looking at a whole range of these issues, these aren’t just trade-related issues and I think it’s fundamental to understand, we apply a non-discriminatory immigration program. We won’t be trading away that immigration program in the context of a trade agreement, but to the extent to which the application of that – the flexibilities associated with it – become an issue, they can be on the table for discussion.
JOURNALIST: Can I just revisit the spot market issue again? Did the response that the licensing system is about congestion, was that an explanation for why BHP or Rio might have had troubles?
MINISTER CREAN: No, I think that the issue that – they simply argued the right for the steel mills in the structuring of their activities and as part of the negotiations to have access to what is an importing licensing regime. All I did was to reinforce the fact that however that’s applied, it can’t be applied in a way that is inconsistent with market access and impediments to contracts that have been entered into. Now, who knows what’s driving this, there’s a whole lot of issues going on because the contracts are up for renewal. They were due to be concluded, the twelve months ran out in April, here we are and they still haven’t concluded them. The issues associated with what the price marker is between Japan and Brazil, there’s the issue of freight differential, there’s a whole lot of issues. We’re not here to negotiate price, that’s a commercial matter but there’s a whole of issues at play and we haven’t had any evidence from the companies that they’re being denied the ability to import in a way recently that’s hampering their activities or in a way that’s inconsistent with WTO obligations.
ENDS
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