4 March 2009
Joint press conference with WTO Director-General Pascal Lamy
SIMON CREAN: Thank you. Sounds like the longest celebration I've ever had.
PASCAL LAMY: [Laughs]
SIMON CREAN: All right. Well we're here to answer the questions that you couldn't ask us in there. So fire away.
QUESTION: [Inaudible question]
SIMON CREAN: Well we haven't had any indication from the US Trade Representative because that's subject to the confirmation process and that's I think scheduled for the beginning of next week. Until such time as that confirmation process goes through, the ability to engage my counterpart we haven't been able to proceed down the path of.
Position of [indistinct] and agriculture's no different than it was the position last December. This is a matter that we continue to need to deal with in the context of both the Congress and the Administration. But significantly, the US had signed up to the position that we got to in July, and from which we're trying to move forward.
Now the truth is there are still matters to be resolved. But what we're trying to do is to get back to an engagement that builds on the existing texts and that requires a parallel track approach.
Work at the technical level - and there was important work at the technical level between July and December - and that's reflected in a new set of texts.
There's also the engagement at the political level. That's been stalled in part because of this transition period in the United States. But what was significant last year at the same time these concerns were being raised, was that the combined leadership of the G20 committed very strongly to the importance of concluding the Round.
It's that momentum that we've got to build into the London summit. It's that momentum obviously that we've got to engage the new US President in as well.
QUESTION: But how…
PASCAL LAMY: On the same ... sorry, on the same topic, a) I confirm that we don't have any position of the US and we won't get that before some time. Second, on the Farm Bureau, I mean, the Farm Bureau has always had to balance the sort of interest of the two thirds of the US farming system that's looking for market access, and the one thirds that's looking for keeping the subsidies.
And we know that at the end of the day there will be less subsidies and more market access. And that's where the crucial balance lies. What you see in what's appeared of a bilateral policy in the piece they've just tabled to Congress two days ago is this observation which I think is factually correct, which is that at this stage of the negotiations in agriculture, the US know what they pay in terms of reduction in subsidies. Overall [indistinct], product specific caps, so this is clear. They know what they have to offer in terms of market access. What they don't know is exactly what they get in return, notably because of special products in developing countries and these [indistinct] are closed.
And this is a factually correct statement. Now then the question is what's the consequence you draw from that? And my strong advice, and this will be no surprise to anybody including to Simon, is that my strong advice is that if we want to move this forward, we have to take it from where we are. And where we are, are the December texts by the two chairmen of those two main negotiating [indistinct]. Sorry.
QUESTION: [Inaudible question]
SIMON CREAN: Well I think the important thing is the momentum and the leadership engagement. It was not just a direction to us as ministers to meet which didn't happen, but it was the preparedness to remain engaged to conclude the Round. I think what's going to be an important signal is the extent to which - with the deterioration in the global economic equation - the importance of trade as part of the overall solution. And bear in mind, Doha as a stimulus in comparative terms to what the G20 has to face up to - in terms of the financial sector and all of the problems there - it's been referred to as low-hanging fruit.
It's still very difficult to conclude, but in comparative terms it's there to be plucked because we're 80 per cent of the way there, we know the issues that have to be resolved, but we know that they won't be resolved without the injection of the political will. But we significantly have the framework now to inject that political will.
What we didn't have in December was the new government of the US in place. It's still not finalised. It's the factual dimension of this that we have to deal with. Timetables. As much as we'd like to set them, we have to deal with time, with realities.
So I remain optimistic. I know that Pascal does as well. But simply because we did get to where we got to in July, we know that the others are potentially overcomeable but it won't happen without the political will. What we've got to do is to raise the level of that political engagement. We've commenced that process in a significant way. We've now got to build on it. And that opportunity presents itself within four weeks and that's what we've been talking with the PM about, quite apart from the discussions we've had ourselves.
QUESTION: [Inaudible question]
PASCAL LAMY: First, the negotiations are not closed. They are going on at technical level in - across the whole agenda - in Geneva. But I recognise that, you know, what's brewing down there is not that user friendly, especially for you, because it's very complex and these experts usually are not entitled to take the risk to talk to the media.
So when will we go to a more media friendly frame of the negotiation? At the moment we're - I will make a judgement, and I'm not the only one to do that, I share this with a number of colleagues - that bringing 20 ministers around the table in Geneva can be conducive to crossing this sort of pre-final hurdle. And that the odds that it works are above 60 per cent.
That's roughly the sort of [indistinct] I have in mind, which is why I did it in July and I did not do it in December. And I think I have to be rather transparent on why. When can I do that for sure? Not in the coming weeks. Not least, because we don't have a US administration up and running on trade and it might be finest, and well still take some time. Plus Indian elections, the results of which will be clear by mid-May. So it's not the coming weeks.
What I hope, what I hope is that before the summer break there will be a window of opportunity to bring them back to this [indistinct] it being understood that what remains to be coped with is a small portion of the big list we had to cope with last July. A large part of that is already stabilised, so normally with a bit more political energy on a smaller number of topics, normally it should work.
This being said, Simon can afford to be optimistic. I cannot, because I cannot afford to be pessimistic and if you're pessimistic you also have to see the other side of the coin. So I remain activistic[sic].
QUESTION: [Inaudible question]
SIMON CREAN: We've been monitoring this question and so far, through EFIC, the Export Finance Insurance Corporation, that - then I'm again seeing them this evening, I'm going back to Sydney for a meeting with them - we'd been monitoring this impact here in Australia, and so far it is not having major impact on us.
Nevertheless, the fact remains that if liquidity availability and credit flows are constricting because of the broader global financial crisis, this has the ability to impact on trade flows. We can't ignore that. And Pascal has been very active at the WTO level, and I'll let him elaborate on this point, in terms of - and he also comes from a background in the bank of understanding the importance of this - being very active in trying to coordinate this at the global level. EFIC, of course, has been making an important contribution.
Interestingly enough, trade finance is one of those things that is the least risky of financing options, yet it runs the risk of getting caught up in the broader global financial crisis.
So in one way we're not just monitoring the exercise, we're also highlighting the fact that in dealing with the solution to the global financial crisis, the rest of the countries, at the Finance Ministers' level, can not either afford to ignore the trade implications.
Now a number of options have been talked about, because the countries that are going to get impacted mostly in terms of this are the developing countries. What we've got to do is to look at it as a global initiative and that's what Pascal has been working very actively on.
PASCAL LAMY: Oh, I'm - I've had a meeting with EFIC on Monday when I was in Sydney, precisely to try and assess their own diagnosis and view on this situation. Overall, we had in November a problem with risk premiums rocketing and liquidity drying. I'll have another meeting of all this crowd in - on the 18 March in Geneva.
My feeling at this stage is that the sort of risk part is stabilising, but we still have a big problem on the liquidity side. And, of course, you know it's - if Chinese exporter cannot find 90 days letter of credit, the export just doesn't take place.
My feeling is that here in Australia it maybe less of a problem than elsewhere. Why? Probably because the financial system has been relatively more preserved than in other areas and prudent. Let's touch a bit of wood if there's any wood around.
But the ability of the Australian financial system to provide trade finance is probably less constrained than in other areas which, again, is good news.
This being said, EFIC, as part of the Berne Union, is ready to try and work on a few of these new ideas which we've tabled, together with the World Bank president, on the idea of creating liquidity pools, notably in this region.
QUESTION: Where will the money come from?
PASCAL LAMY: Liquidity pool - you know, you've got a number of countries in this region who have substantial reserves. And putting liquidity for a revolving goods collateralised short-term Letter of Credit system, it's just lending on a revolving basis with a fee that offsets the cost of liquidity. It's probably the most un-toxic financial product you can find on the market, is trade finance. It's simple, revolving, short-term, collateralised. What more do you want if you're a banker [laughs].
QUESTION: [Indistinct] for Landline, which is a rural program for the ABC. And I'm just interested in your view on what happens if the next Round [indistinct]. And what does it mean for agriculture in countries like Australia that do believe in free trade [indistinct]?
PASCAL LAMY: Look, if the Round was not to succeed, that would mean for Australia that for the moment the only discipline in terms of market access or in terms of subsidies are the ones stemming from the Uruguay Round dating from 1995. And that's true. It's a huge ceiling for trade distorting subsidies in US, EU, Japan.
It's important entitlements for export subsidies, and it's important tariff protection, with some tariff peaks, which were at the time accepted as a compromise in the negotiations.
So the whole reduction of all this would not be available to a country like Australia who in agriculture is a net winner, whichever academic number you can look at. There can be a discussion whether it's a huge net winner, a middle net winner, or a small net winner, but it is a net winner. That wouldn't be available.
QUESTION: Yesterday an official from the European Commission denied that what we have done with dairy export subsidies was actually [indistinct] existing mechanisms. When you talk about there being little evidence of [indistinct] so far, [indistinct] fairly narrow or fairly broad view of what constitutes [indistinct]?
PASCAL LAMY: Look at our list and make up your own mind on whether or not we take a broad view or a narrow view. My sense is that we do it seriously. We track all significant trade policy changes in our 153 members. And as Russia is a member of the G20, we even add Russia to this for the same price.
Now, this EC dairy export subsidy was spotted five-on-five in the list we published in January. So it was part of what we signalled as a worrying development.
QUESTION: Mr Crean, can you just clarify, would Australia contribute to [indistinct]?
SIMON CREAN: Well, again, this is ongoing discussions that we have had. What we have said is that we stand ready to take steps at home if the tightening occurs and we want to play a constructive role in terms of any solutions coming forward, or requests for solutions coming forward from the WTO. That's an ongoing discussion.
QUESTION: So it's possible [indistinct]?
SIMON CREAN: Well, let's see how the discussions go.
Now, we're going to take one more question and then we both have to go because I think we're both very pressed.
QUESTION: I just wanted to ask what sort of institutional framework do you have in mind? Is this something that will just be a one-off informal kind of arrangement between those with money and those who need it? Or is it - does it need to be some more formal mechanism?
PASCAL LAMY: WTO has no jurisdiction at all on trade finance. We have no mandate. It's not really in our core business. It just happens that because of the economic crisis and because of the huge potential impact of drying up of trade finance, notably for emerging countries, they've asked us to sort of play a convening role, which is why we've juxtaposed multilateral financial institutions [indistinct] banks and commercial banks - what remains of commercial banks - worldwide to try and see how improving the interface between these three groups we can ease the situation.
So it's a sort of, you know, good office facilitating. There's nothing like, you know, building a sort of house in stone. No, it's a sort of tent-like exercise. If it results in more trade finance available, fine.
And, by the way, it has already resulted in regional development banks, Asian development banks, EBRD, African Development Bank, stepping up vigorously. And the World Bank has sort of multiplied by five its lines of guarantee since a year, which I think is a reasonable reaction and a good result for the time we've been spending on this. I hope more to come in mid-March so that we can present the result of this and maybe get a bit more momentum from the G20 in April.
SIMON CREAN: Okay, thank you very much.
PASCAL LAMY: Thanks.
[ENDS]
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