Former Minister for Trade
Australian Commonwealth Coat of Arms

31 January 2009

Press Conference - World Economic Forum in Davos

Simon Crean: Trade Ministers had a very good discussion today. There's no doubt that the global financial crisis has had a huge impact on trade flows. But the important thing coming from the meeting is the very strong view is that trade is not part of the problem, trade is part of the solution. Trade is a stimulus. It's a stimulus because it has a multiplier effect on domestic activity. So in the context of the global economy being called upon to coordinate its fiscal stimulus then we are very strongly of the view that the impact of that fiscal stimulus will be diminished unless we also conclude the Doha Round.

The G20 called on Trade Ministers to meet last December to work towards concluding the Round. That didn't happen. But what has emerged from today is a new resolve to find a mechanism, before the G20, to have input to the G20 meeting. To have an input that reinforces the stimulus factor in trade to reinforce the multiplier effect. We also see some other very worrying trends. We've talked about the call by the G20 Leaders not to revert to protectionism but we have seen signs of very worrying trends as part of the so-called fiscal domestic stimuluses that result in trade distorting activities.  The EC and dairy I raised, as well as the Buy America campaign. So concluding the Doha Round isn't just important to be part of the stimulus mechanism, it's also fundamental to ensuring that the call to stop the reversion to protectionism actually eventuates.

The other dimension that we had a long discussion about today was the tradefinance issues because clearly the other impact of the global financial crisis is in turn having an impact on some restrictions in certain countries to access trade finance. Now trade finance is one of the least risk activities in the world yet it's caught up in the overall liquidity aspects. We need to continue to monitor that and we need to, importantly, inject into the discussions about solutions to global liquidity issues, the specific dimension of trade finance. So the purpose of the meeting, which I think was a really good outcome in the end, was to not just call for the conclusion to Doha in its own right, but to understand the fundamental importance of concluding Doha to enhancing the stimulus packages and to doing a better job at stopping the reversions to protectionism that are starting to emerge.

Tasker: Was there a bigger sense of urgency to conclude Doha and was there any mention of a timetable?

Crean: There's obviously a sense of urgency. But there's also the realisation that we have an important event that is going to be significant in shaping the move forward, and that is the further meeting of the G20 on April the second. We need to have input into that. It can't just be just Finance Minsters injecting into that equation, it also has to be Trade Ministers and Pascal Lamy has had very productive discussions with Gordon Brown, where Gordon Brown wants the WTO and the Trade Ministers to have that input.

The issue for us is engagement with the new Obama Administration and how quickly we can do that, given their confirmation processes. So, whilst we haven't set a specific time for another meeting there is a very strong view that what we need to do, if we can, is have that meeting in advance of the G20 meeting in April.

Murray: What did the US say about steel?

Crean: Interestingly, we raised this issue and were assured by the USTR that they are actively looking at the proposals that have come from the Congress as to their WTO compliance. They also accept that this sends some ... that they can understand why we are arguing so strongly it sends a wrong signal. Now, there have been some encouraging signs emerge over night about the White House's view about this. We've registered our concerns, they've clearly resonated and we're hopeful that common sense will prevail in relation to it.

Tasker: And on dairy subsidies [inaudible]?

Crean: Yes. Very strong discussion with Catherine Ashton. We are going to continue to discuss the detail and the implications of this with the EC. We've registered very strongly our concern, not that they aren't WTO compliant they can argue that till the cows come home, so to speak, given it's a dairy export subsidy, but the truth is it sends the wrong signal and this point was underscored in our discussions today. And I think what both of these examples highlight is what's going to happen if we don't conclude the Doha Round. It's not just that you lose the stimulus impact, you go backwards. You do go back to things that might be legal on the face of them, but are against the spirit of where we're trying to head. So, if we're of a view, collectively about how to go forward we have to use every opportunity to put peer pressure on countries under the name of fiscal stimulus or domestic support or whatever that what they're not doing is doing a reversionary factor on what has seen and been a major contributor to world economic activity over the last few decades.

Tasker: So you're still hopeful that it can be concluded?

Crean: The Round? I am always hopeful that the Round can be concluded. What will ensure it's not concluded is when we drop the ball in terms of persisting and energizing the opportunities to advance it but what came from today's discussion was a very clear desire to move forward and a very strong signal that in gauging the process to try and conclude the Round we have to move forward from where we got in July, not going back to renegotiate it, and whilst that's not a formal position, the working assumption is that we start from the texts that emerged, developed out of July, and emerged following the G20 Leaders meeting. They themselves have been an advance.  You've heard me talk on previous occasions of the fact that we're eighty percent there. We have to bridge the other twenty percent. The new texts in December have gone some of the way to bridging that other twenty percent. We've got to keep up that work program but we can only do that if the working assumption is we proceed forward, and that was a very clear signal again out of today's meeting.

Murray: Japan has announced it's going to announce a seventeen billion dollar aid package for poor Asian countries... what's Australia doing?

Crean: Well, we obviously welcome that announcement by Japan because it's a very early indication by an important country and aid contributor in response to the IMF call the other day that as part of the global response we shouldn't be moving backwards on aid. Aid for trade is a vital ingredient. The two dimensions of trade are firstly opening up markets for the stimulus and the multiplier effect. The second is ensuring that countries are competitive enough and productive enough to take advantage of the market opportunities so that they can actually compete. That won't happen unless we are committed to putting money into aid programs that help that competitiveness and help that productive activity. Money into infrastructure, into skills development, into innovation and the like. So we welcome the Japanese program. We have indicated in our first budget last year when we got in, the commitment to lift the proportion of aid from GDP and we will continue to play a very strong role in that regard.

Tasker: Just one more thing on South Korea, the free trade agreement?

Crean: Yes, we've had discussions with my counterpart we are at the point, both countries, of taking the next steps to formally approve proceeding to negotiate the FTA. We're aiming for discussions at Ministerial and hopefully Head of Government level over the next couple of months but this too has been a very important development here today that in the midst of all the problems of stalled trade talks etc we are seeing a commitment with one of our strongest trading partners to advance the bilateral arrangement.

Murray: Just finally, the IMF has said that Australia is heading towards recession, this really puts even more pressure on the government to get its stimulus package right, to get all these other measures right?

Crean: Well I think .. I haven't seen the figures, but there's no doubt that the global downtown is more severe than had previously been forecast we've been hearing that all week here. That will impact upon Australia. All of the other fundamentals, so far as Australia is concerned are in good shape, strong budget surpluses, strong employment growth up until now, strong trade surpluses, healthy banking system. Our problem is that we, like everyone else, are being impacted by the global downturn. So therefore, whilst we have to take steps domestically to stimulate domestic economic activity, we have to be part of the global solution, and that's what I've been here for this week. It's not only going to benefit the Australian economy, it will benefit the global economy. That until we understand the fundamental importance of trade being part of the stimulus, not just a marginal issue that's out there, and it would be nice to have Doha concluded, the better for global recovery. Trade is not part of the problem. Whatever the other problems are, trade isn't part of it. But trade is being impacted. More importantly, trade can be a vital part of the solution, and that's what we've been on about this week.

ENDS

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