17 June 2009
Subjects: Rio-BHP discussions, China FTA, NSW government trade policy, PACER Plus negotiations, US dairy subsidies, Doha round.
QUESTION: Do you share Chinese concerns about an Australian iron ore export monopoly forming as a result of talks between Rio and BHP?
SIMON CREAN: No I don't and I think it's important to understand that the proposal that Rio and BHP have entered is to share facilities and to try and get efficiency and therefore costs down from those shared facilities. They will still operate as separate marketing arms. They will therefore be competitors and so there won't be any lessening of competition, and this is a message that I've conveyed to the Chinese Ambassador, and I think that when the details of the proposal emerges, there will be acceptance of that.
QUESTION: Does Rio's abandoning of Chinalco bid clear the way for the FTA with China to restart negotiations?
SIMON CREAN: They were never connected but the reopening of the FTA with China is fundamentally now in China's hands at the political level. I had a discussion on the weekend with Minister Chen Deming essentially about how to progress the Doha round, but he did ask if on my next visit I would be visiting Beijing. I've indicated that... prepared to do that if we can get the correct political signal that China is prepared to engage. I don't think there is any point at this stage in continuing negotiations at the official level because they've run to a standstill. It needs the political will injected. I've conveyed that to China and I hope they respond accordingly.
QUESTION: So they're still stalled then?
SIMON CREAN: They're not, well...
QUESTION: Bogged down? Moving slowly?
SIMON CREAN: Certainly they're not moving as fast as we would like at this stage, although they have made important progress since last April. I think it is - I'm convinced that the political will exists on China's part to want to conclude an FTA with us. It's in their interests to do so and it's in our interests for it to do so. It reflects the growing interdependency between our two economies. That being said though, the issue for China now is to coordinate the different agencies within China that have competing views and interests and sensitivities. That's something we can't do for China.
We can continue to engage with China but China has to undertake that co-ordinating role. Now they've committed to do that and I think it's a question of waiting for them to have completed that process. In the meantime, the talks are not moving but I wouldn't say that they're - that the talks have collapsed. That's not the correct depiction. But we're not prepared to move to the next stage of negotiations at the official level until we get the new political signal.
QUESTION: Have you got some bridge building to do after Rio's appalling corporate behaviour?
SIMON CREAN: Well the Government doesn't in my view. I'm not too sure what the fallout is between Chinalco and Rio, but I think it has been an eye-opener for the Chinese and their state-owned enterprises to understand that these are issues that are not just questions of national interest and foreign investment review board considerations, they also involve important considerations by shareholders, and I actually think it's going to be an important learning curve for China. I mean the state-owned enterprises have one shareholder, important as that is, and we've got to understand the significance of that relationship and treat it in a mature way in our dealings with China.
The Minmetals exercise is a good example of where we've been able to accommodate the investment, including by a state owned enterprise, but at the same time the Chinese business community, state-owned enterprise or otherwise, needs to understand the important role that shareholders play in these sorts of plays, and it was the shareholders' reaction that fundamentally was - saw Rio go off and cut another set of arrangements.
So I think we'll just have to wait and see what the final wash up is but what I do know is that China does accept that we never connected the FTA with the Chinalco deal, nor did they, and they do accept that the Australian Government was genuinely trying to work through the national interest test and the conditionality attaching to the deal between Chinalco and Rio and that there was no decision on the Government's part that saw the failure of that proposal.
QUESTION: Minister are you concerned about the New South Wales Government's "Buy Australia" policy?
SIMON CREAN: I'm very concerned about it and we're seeking further details as to what it actually means, but it is a misguided policy from what I understand it to be. It essentially is putting a tariff of up to 25 per cent on government purchases. Now apart from the fact that that would seem to increase the cost to government, it is also moving in the direction of protectionism and it will invite retaliatory action by our trading partners. Already we have had significant queries by the EU and the US as to what this means. Now it's done, as I understand it, in the name of protecting jobs. It will in fact have the exact opposite result.
I released a report a couple of weeks ago that showed the importance of trade to Australia's economic growth and to its job opportunities. One in five jobs in Australia is trade related. If we go down a path that invites retaliatory trade action, it will in fact cost jobs. And the other point that I would make is that under free trade agreements, we seek access to other countries' government procurement markets. What sort of a signal are we sending if we're restricting ours by effectively a 25 per cent tariff, but still expecting access to theirs?
QUESTION: And will you be speaking to the New South Wales Government about your concerns?
SIMON CREAN: Of course we will. I've written to the Premier already expressing concerns based on the newspaper reports and we will continue to have further discussions with them. But this is a flawed policy. This is a policy that, in the name of protecting jobs, will have the opposite result.
And by the way, it is completely contrary to everything that Australia has been arguing for along with other G20 leaders that what we can't do in the current global economic crisis is to revert to protectionism. This is a bad signal to the rest of the world and we have to counter that bad signal.
QUESTION: Are there any indications though that they will reconsider the policy?
SIMON CREAN: Let's wait and see how the issue plays out.
QUESTION: Minister, can you just outline your upcoming Pacific trade talks, specifically agricultural trade?
SIMON CREAN: Well we want an agreement to commence the PACER Plus negotiations, and PACER Plus isn't just about trade liberalisation. PACER Plus recognises the fundamental fact that, for developing countries, opening markets itself is not sufficient. You've got to build their capacity to be competitive and productive enough to get into those markets.
Now we've made a concerted commitment and effort to increase our aid but to target it as a mechanism of aid for trade, to build the infrastructure, to build the skills base, to build the capacity for countries to take advantage of new liberalisation.
I've had extensive dialogue with my ministerial counterparts within the region along with Bob McMullan and Stephen Smith and other ministers. We've had extensive discussions over the last twelve months to address concerns that countries have.
This is not about Australia or New Zealand trying to swamp their markets. We don't need access as such to their markets for our economic future. But what they do need for their economic future is a more sustainable economic base and PACER Plus can provide the basis for securing that economic base.
QUESTION: That is the concern from Pacific countries, that Australia/New Zealand is trying to be the big bully over this. So how do you plan to convince these countries that that's not the case?
SIMON CREAN: Well I think we've done a good job in convincing them that that's not the case. I've heard those criticisms. I reject them. But I'm prepared to meet with NGOs, business communities, all those sorts of things, not just with government. This is the process of trying to get a better understanding as to what's involved here.
And after all, we're only asking countries to commence negotiations, not to conclude them. Conclusion will be a function of how successful the negotiations are. They don't have to conclude if they're not satisfied with them. But until they commence how do they know what we're really negotiating about?
QUESTION: Minister, have you had much reply to your complaints about the US dairy subsidies?
SIMON CREAN: Well we've raised that again - with the EU - with the US and I will raise it with the EU when I'm up there next week. The US fully understands our concerns. Their argument is that they've had to do it in retaliation to the EC which we said would happen and why we attacked the EC decision from the beginning.
What we've said to the US is we want them to engage with the EU to end this tit for tat protectionism. In the meantime, we'll continue to have discussions with them to ensure that whatever is done, as best it can, does not impact on the non-subsidisers because this is the unfairness of the circumstances.
Australia is an efficient dairy producing industry as is New Zealand. It doesn't have to rely on any subsidies but it can't as effectively compete when it's got these barriers and these trade distorting measures put in place. We will continue to maintain the pressure.
But the most effective mechanism to end this tit for tat protectionism, specifically in dairy, is to conclude the Doha round because under the Doha round export subsidies are outlawed and there is agreement to outlaw them.
What we've got to do is to conclude the rest of the agreement, that's why the meeting in Bali last week was so important in re-injecting political will to resolve, engagement with the US and with India, two previous protagonists. I think this was a significant breakthrough.
We've got the opportunity to meet again on the sidelines of the OECD meetings next week. What we want to do is to try and build progress towards concluding the Doha round.
QUESTION: At the risk of sounding a little trite, though, I mean what's your sense of protectionism at the moment? I mean the G20 was saying that the world couldn't, in the wake of the financial crisis, see a move towards protectionism. Nonetheless it seems to be happening. I mean we've seen buy Australian campaigns here this week. I mean what's your sense at the moment?
SIMON CREAN: Well my sense is that if we don't solve the global economic crisis, and trade liberalisation is a crucial element of that solution, then we will see more of the reversion to protectionism. I think it's the inevitable consequences of country insecurity believing security lies in protecting jobs.
The fallacy in the argument is they believe protecting jobs is reverting to protectionism and that is a flawed argument - the point I made before in terms of the New South Wales decision. What, therefore, we've got to do is to persist and give confidence that the Doha round is not just within our grasp - it needs to be concluded. And I think so long as there is confidence that we can make progress there we will be able to hold back some of these tendencies. I think we've been pretty successful to date and part of the reason we have been successful is that there are sanctions and there are disciplines through the rules based system that is the WTO that prevents countries doing certain sorts of things.
The US, for example, can't apply its US FTA in the way in which it wanted to because it has to have regard to its international trade obligations. So a rules based system is important in stopping the spread of protectionism. The trouble is we need to strengthen the rules and we will only strengthen the rules if we conclude Doha.
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