19 February 2009
Interview with Fran Kelly, Radio National Breakfast
Subjects: Buy American, rise of protectionism, contract prices, FTA with China
KELLY: Well, Trade Minister Simon Crean joins us now. Minister, good morning.
CREAN: Good morning, Fran.
KELLY: Do you agree with Robert Reich that there are protectionist pressures building in America and around the world, and are you worried about that? Have you been having discussions with some of your overseas counterparts about this?
CREAN: Very worried, Fran. And let's just understand the basic point. Protecting jobs through protectionist mechanisms strangles job activity. That was the message out of the gate... Great Depression, the point that Robert Reich has just made.
But why does that happen? Because it invites retaliatory action. If we start - if America starts closing off its markets to steel, why doesn't Korea, Japan, all of those countries start closing off markets to America. It takes you in the downward spiral.
What are we doing to try and prevent that, Fran? One important pathway that can really nip this protectionism thrust more in the bud is to actually conclude this Doha Round.
Now, the World Trade Organization round, which is stalled, is a fundamental part to the economic recovery. Why is that? Because world trade grows faster than world output.
Historically, over the last 50 years, it's grown three times faster, and each time there's been a successful trade round, that multiplier has, in fact, expanded. So trade, itself, is a stimulus.
The second important reason why the WTO round is important to conclude is it will introduce a new set of disciplines that actually stop the protectionist measures. Now, the Buy America campaign has got some restrictions on it now because of the requirement to observe international treaty obligations, including our FTA. And so, that should mean that our steel producers won't be affected.
KELLY: That should mean. Are you confident? Have you spoken to the Americans directly about this and what assurances have you won?
CREAN: We've we've got the continuing assurances that our FTA obligations won't be breached, and we will hold them to that mark. But the point, Fran, is this, that it sends the wrong signal. It sends the signal, well, if I - if the US can do it, why can't we, and there are still loopholes within the WTO obligations.
A number of those loopholes will be closed if we can close the round, and that's why it's important that we conclude it.
KELLY: All right. Does the same philosophy about free trade apply to free investment? Should we be concerned here in Australia about Chinese investment in key commodity companies. As a general principle, should we support open investment by the Chinese or any other country?
CREAN: We support foreign investment. That is what has made this country strong, it's what's enabled it to expand its opportunities. It has to be done within a framework, a non-discriminatory framework.
As for China, the individual cases have to go through the specific processes, the Foreign Investment Review Board, et cetera. But this is one of the key issues that we've got on the table with China in our Free Trade Agreement.
Free trade shouldn't just be about goods, it's also got to be about services. It's got to be about investment flows. But we have limitations. Australians have limitations on what it can invest in in China. And we have said to China, okay, you want to talk about investment into our country. Let's sit down and have that discussion as part of a framework to sustain and grow both economies.
We understand that we're interdependent upon each other. Let's try and build the relationship. And that's no different than what we're doing today with Indonesia, in saying to them, our nearest neighbour, this is a trade relationship that has been underdone. We need to try and expand the opportunities. But not just expand them in terms of the goods we trade with each other, but the services and the investment as well.
KELLY: Minister, we're almost out of time, but can I just get your view. Are you concerned about the talks going on between our coal and iron ore producers, exporters at the moment, in China, a suggestion that we would - might have to face cuts of 30 to 50 per cent in the spot prices for these resources, which could have a dramatic effect on our GDP. Four per cent some are suggesting.
CREAN: Well, I think the spot prices in some markets are already reflecting that sort of a drop, and that's a reflection of where trade has got to in this. Trade has been a casualty of this global financial crisis, but it's not been the cause. It, in fact, can be part of the solution.
So far as the commercial interests are concerned, they have to be sorted out between the parties. That's what a market involves. But bear in mind, Fran, that last year we saw huge jumps in the prices and the volumes.
Take Japan alone, I think that our export earnings to Japan last year jumped from $30 billion to $50 billion. So even if, as newspapers are speculating, you saw a drop of $20 billion in exports, you'd still with Japan be back to the level we were just 12 months ago.
KELLY: Okay.
CREAN: I think we have to get this last incredible year of opportunity for Australia into perspective. Of course, the bigger issue is how do we make sure we get ourselves out of the global financial crisis quickly and trade, and the conclusion of the Doha Round is going to be a vital component of how quickly that happens.
KELLY: Well, good luck with it then, Minister. Thank you very much for joining us.
CREAN: Thanks Fran.
KELLY: Simon Crean is Trade Minister.
[ENDS]
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