Transcript - E&OE
27 August 2009
Interview: APAC Viewpoint program with Laurie Wilson
Topics: India, Doha, Protectionism, China, Iron Ore Prices, Stern Hu, Shanghai Expo 2010
COMPERE: Hello, and welcome to another edition of Viewpoint. While
diplomatic relations between Australia and China have been strained of
late, there appears to have been little or no impact on the trade
relationship between the two countries. Despite concerns amongst the
business community, Trade Minister Simon Crean is confident of concluding
a free trade agreement with the Chinese.
In terms of Australia's economic recovery, he also points to the
continuing growth in exports to China and is equally upbeat about the
prospects for Australian exporters in other emerging economies, such as
India and the ASEAN nations.
Despite the global economic downturn, Australia actually recorded a trade
surplus last year, in fact a record trade surplus which is something many
people might not be aware of. How important is trade to Australia's
economic recovery and, indeed where do you see future trade growth coming
from?
SIMON CREAN: It's essential to sustaining our economic recovery going
forward. It's been very important in helping us get through the global
financial crisis, but it's essential to our future and the reason for
that is pretty simple. We're a nation of 22 million people. You can't
just produce for yourselves and sustain an economic base. We have to
engage with rest of the world. That's why for the last three decades huge
effort has been put in to try to open markets, but to make ourselves
competitive and productive within the country so that we can get into
those markets.
I think that the opportunities going forward are enormous. They're
enormous because the rest of the world needs support in terms of growing
food supplies and energy. Australia has those in abundance, but it's not
just the commodities. It's the services that relate to them and it's also
the great skill and adaptability of the Australian economy. This is a
clear Australian brand but we've got to promote it much better in the
rest of the world. For that we need markets to open, but we have to be
much more aggressive in grabbing the market share.
COMPERE: Well obviously, much of our growth has been driven by China,
but you're now increasingly focussing on India as a market. Indeed,
you're about to visit India. How important do you see India being to
Australia's future trade growth?
SIMON CREAN: It's huge. I mean you look at it: it's 1.1 billion
people. It's a very diversified economy. It's not just agriculture. It's
got a strong manufacturing base and it's big in services. It's also a
great democracy and it is an economy which is now reaching out to the
rest of the world. Our trade relationship with India has been underdone
for a long time.
Interestingly at the moment, it's our fastest growing market in both
goods and services, but off a low base. So we have to engage much more
strongly with them. I'm going there for two reasons. One is to advance
the bilateral relationship in the lead up to our PM's visit there later
this year, but secondly and really importantly at the moment, is India
are prepared now to play a very constructive role in trying to bring the
Doha Round to a conclusion.
India was one of the problem countries when the talks broke down last
July. The fact that we've got new engagement by India on the multilateral
front, the Doha Round, I think is a very important signal about their
desire to engage. If we get that part of it right, it produces a much
better platform to build and strengthen the bilateral relationship.
COMPERE: There's a meeting of trade ministers in India prior to the next
G20 meeting in Pittsburgh. Are you genuinely positive about the prospects
of reviving the Doha Round?
SIMON CREAN: I am but you know I'm an optimist, but we won't do it
unless we can continue driving the political will to achieve it. Getting
a conclusion is there in technical terms. What we've got to do is to get
the political will driving the conclusion now. We've had some very
important meetings over the last couple of months to develop that
momentum, first in Bali, then in Paris, then in Singapore.
Delhi is the next part of that equation. We have as ministers given a
general instruction to our trade negotiators to narrow the gaps, identify
much better the areas for difference for ministers to resolve.
The general direction has been important because we've got movement in
Geneva, but not enough. I'm hopeful that out of Delhi what we can get is
more specific instructions to trade negotiators. If we can get them
meeting around a greater or more specific activity in the lead up to
Pittsburgh, it is possible we can go with a positive report to leaders of
the G20. Why is that important? Because the G20 leaders said in London,
get this fixed.
We remain ready, we as leaders, remain ready to assist in the conclusion.
That political will, that engagement at the highest level is terribly
important if we can narrow the differences. So I'm optimistic but not
starry eyed about it and have been working very actively to try and make
sure that we get a structure and a momentum of political will to close
the Round. If we do it will be terrific, and if you think about the G20,
Laurie, the G20 is now saying as a key part of global recovery, trade is
crucial to global recovery.
Why? Because trade is an economic stimulus. Trade historically has grown
three times faster than world output. Any country that wants to secure
its economic future has to engage in trade. The G20 leaders know it's
fundamental to the stimulus. It's our task to try and strengthen and give
confidence to that stimulus by concluding the Round.
COMPERE: How important is it that in the wake of the global financial
crisis, the flight to protectionism wasn't nearly as bad as many people
had feared? Do you see that as a positive sign?
SIMON CREAN: I do, and I think it is a very important reflection of
why having a rules based system in place and strengthening those rules is
so important going forward. This is the other reason why world leaders
want Doha concluded. Concluding Doha is also the most effective insurance
against the spread of protectionism. But I think we have won the argument
in the main against protectionism. We didn't see what most feared out of
this global financial crisis, the rush to it.
We've seen examples of it they're worrying and we have to try and address
them, and we will but there hasn't been the turning in on ourselves, the
belief that the way to protect jobs is to revert to protectionism. We
need to protect jobs but we can do that in more effective ways by
developing the growth model. Protectionism strangles the growth model.
COMPERE: Going back to your earlier comments about India, about it being
our fastest growing market, but off a low base, what specific areas of
export do you see as having real potential looking ahead in future years?
SIMON CREAN: I think food processing. I think energy, because they are
hugely dependant on that. I think the services sector and India is, as I
said, a very diversified economy. What I don't think is appreciated
enough between both economies I suppose is the diversity of each other's
economy, and I'm very keen that apart from developing the government to
government relationship, we get a much better business to business
relationship.
I'm a great believer in the fact that advancing trade is the combination
of G to G and B to B. The trick for us if we're clever enough at it is to
join the dots and to get a constant engagement, reinforcement, of the
commercial interests, identifying the barriers to entry, governments
responding to that, but governments in turn understanding where they see
their futures and really urging businesses to become more competitive, to
understand the opportunities that are out there through more liberalised
markets. I want to see that sort of relationship developed in relation to
India.
COMPERE: Of course, China remains that key global driver of economic
growth, and a very important key trading partner for Australia. We've
recently seen the $50 billion natural gas deal, the North-West Shelf
Gorgon deal with China. Despite the diplomatic difficulties that the two
countries are going through at the moment, it doesn't seem that our trade
relations have been particularly hampered.
SIMON CREAN: It hasn't and it won't be because it's too important to
both economies. We are too interdependent on each other that we can't
afford to let it be hampered.
Now, there are things that can be done to strengthen it and that's why
we're trying to get an FTA with China. It's been frustrating in its
process, even before these recent diplomatic incidents, but I think the
key in terms of China is that it has up until now been heavily dependent
upon exports for its growth.
Global financial crisis has hit it in a big way, but what's emerging in
China is that as a consequence of that growth, there's now a large
increase in living standards within the nation which is capable of
generating its own domestic economy, because they're so big, one and a
half billion people. And if you look at the challenge of the urbanisation
of China, this is an economy that is, they told me when I was last over
there, is going to have to build 400 million new homes over the next two
decades.
Think of it. Think of what that involves, not just in the construction
phase, but the fitting out, the servicing. As people move from
subsistence agriculture into urban development, this is going to be
massive in terms of its implications. That's why Australia has to be in
this space. They do need energy, but they need clean energy. And the
important thing as well about the Gorgon commitment, is this is the first
time that China has really for many - since the Woodside deal, has been
prepared to commit to long-term contracts.
We've now got long-term contracts in energy, always had them with Japan
but we've now got them with China, with India. Hopefully, we can get them
with Korea. We've got them with Malaysia now. So Australia will become a
global-energy superpower and the fact that we've got gas which is cleaner
fuel and we're developing it with the smartest technology in the world
that also is addressing the challenge of climate change means we're not
just exporting a cleaner fuel, we're exporting a cleaner capacity and a
know-how by which we can extract and sell that energy source.
That will attract a premium, but it's these markets, India, China, Asia
as a whole, it's these markets that are going to be huge demanders of
these sorts of - not just commodities, but I want us to be positioned in
solving those problems about how they develop their urbanisation
challenge. We can be in there with smart building, with clever product
design, with building construction materials that are combination of
energy efficient, that are a competitive but long lasting quality
product. This is the space we've also got to position ourselves in.
COMPERE: On a less positive note, we're facing a sharp, potentially
sharp, reduction in iron ore prices. When do you see those negotiations
being completed and, indeed, are you concerned about the possible impact
on our trade performance of a reduction in iron ore prices?
SIMON CREAN: See I think you've got to put this in perspective,
Laurie. It is the reduction off last year, but last year was the biggest
spike in history. It was gargantuan.
COMPERE: It obviously helped push that record trade surplus.
SIMON CREAN: Well it helped push the record trade surplus and it did it
in value terms. What we'd been suffering from in the lead up to that was
because as a nation we hadn't invested sufficiently in our infrastructure
and our skill base. We had capacity constraints as the world was coming
strongly in demand. Now, what's therefore being reflected is this
mismatch between supply and demand, and that came to a head last year.
It's come off in part, mostly because demand has reduced, not in China
and not in other parts of Asia, but generally speaking it's reduced.
The challenge for us is to expand supply to meet it. If supply expands, I
think going forward we'll get much more predictability in terms of the
pricing structure, but even with the drop in prices, there's still not
much, in fact if you look at them in terms of the trend rate it's still a
continuing trend off where it was going up until 2007.
Importantly though, over the last - during the global financial crisis,
the last six months or so, whilst values have dropped, volumes have gone
up. And the reason volumes have gone up is because all of the economies
within our region are being urged to invest, to undertake their own
fiscal stimulus.
What are they investing in? Infrastructure. What's that require? Demand
for our resource base.
So it's not just China that's seeing this increase in volume, it's the
Koreas, the Japans, the ASEAN economies because they're all investing in
infrastructure.
COMPERE: The Stern Hu case, while we're talking about China and iron
ore, much has been said about that, but it does send a sober message does
it not to Australian businessmen doing business with countries like China
where the legal system is quite different to our own?
SIMON CREAN: That's true. It will send that message and business - the
business community is watching it carefully, but the truth is the
business community also has to understand that when it operates in a
country it does have to conform with the laws of the land. We expect that
of business people that come to our country.
Now charges have now been laid against Stern Hu. The legal process is
continuing. We would like it be more expedited. We would like it to be
more open. We would like it to be more transparent. But it has to run its
course.
And if the allegations against him stand up in court, he has to accept
the penalty. But the difficulty we've got at the moment is that up until
recently we're operating in an environment in which very little
information was there and that's when you get all sorts of speculation. I
don't mind dealing with the facts - I hate dealing with the speculation.
And whilst we will try and establish the facts a lot better, I think we
have to see it as it is: as a consular case. The legal system has to run
its course. And we will continue to say to the Chinese we want the access
that he's entitled to, we want to ensure his welfare, his wellbeing, we
want to make sure his family has access to him, that he gets legal
representation.
[Parliament bell rings]
More bells ringing here, Laurie. This is the parliament in action so -
this is the Government in action, we'll keep working through it.
So having said that, it's an issue that we will pursue, but I'm convinced
that it has not been an issue that is impacting on our economic and our
trade relations.
COMPERE: Now, the Chinese economy is now being tipped to grow possibly
by 9 per cent - a fair bit more than was being forecast even a few months
ago.
You're taking more of a regional focus in terms of trade promotion in
China. I mean, witness the recent motor vehicle deals that you announced
in Anhui, the Hubei provinces. Does this reflect a change in our
trade strategy?
SIMON CREAN: It's the deepening of our trade strategy. I've said before
that I'm frustrated with the slowness in terms of the free trade
agreement negotiations. I believe there's a political will to conclude
it. I think that there is a real problem inter-agency within China which
only they can resolve. When they do, I think the FTA will move forward.
But rather than be frustrated by that and simply say, well, we've just
got to wait until something happens, I was amazed when I started to go
out into the regions, and I've been to China six times now in the last 15
months, but I don't just go to Beijing and Shanghai. I want to see what's
happening in the rest of the country.
But the more you go out there you just see these growth potentials. That
urban development issue that I talked of before, I found that in Huhan. I
found it in Wuhan. We signed MOUs. We said, "let's get better cooperation
between the types of skills, the capability here in Australia and what
you require".
Very positive response to that. The same in agri. business. The same in
autos. China is now the largest automotive market in the world and it's
become the largest manufacturer of cars. It's got a huge market, but it
hasn't got all of the automotive capability.
Australia on the other hand is one of the few countries in the world that
can take a car from design to the show floor, but it hasn't got a big
market.
Now, what we've therefore got to be creative about is understanding their
gaps, where we can fill those gaps in a way that builds greater
cooperation. We can do that on so many fronts. And the Expo in Shanghai
next year I believe will give us a great opportunity to showcase those
fronts.
I talked before about the Australian brand, its comparative advantage in
so many different ways. Its - most of it off its skill not, and it's not
only off its resource and its agriculture base. It's off its smarts, the
ability to do things cleverly, to adapt to be creative.
We've got to promote this a lot more. We've got to strengthen that brand
and promote it. And Shanghai will give us a huge opportunity in that fast
growing market of the world, not just to showcase it in China and the
diversity of what we have to offer and the importance to them in terms of
their economic development, we can showcase it to the world as well.
COMPERE: Well, some people might say that - I think we're spending
something like $80-plus million on the Expo next year, some people might
say gee that's a lot of money in a market where we're doing very well
anyway. You obviously do take a different view to that?
SIMON CREAN: I do because we can do better. It's my point about going
for market share. We are the only developed country in the world to have
avoided a technical recession, we are the fastest growing developed
economy in the world and we are trading effectively into the fastest
growing region in the world.
Our opportunity, because we have got growth, is to go for market share.
And that's why we have to position ourselves a lot better, but not just
in the traditional areas. We've got to look for those opportunities, not
just in terms of what we've got to offer, but understanding better what
countries like China and Vietnam and Indonesia and Cambodia and Thailand
- all of them going through their own development phases - what they
need, what we can bring to the table, how we can help them in a cooperate
way.
We've convinced them of the argument to open their markets, not as
quickly as we would like but nevertheless they're embracing
liberalisation. We've now got to work with them to ensure that they can
become competitive and productive to themselves participate in trade.
That's where we can play a huge role.
And if you look at what we've done in Asia, despite the global financial
crisis, despite the failure to conclude Doha, we've concluded a free
trade agreement with ASEAN, 600 million people.
This is - and two-way trade already with ASEAN that's $80 billion a year.
It's bigger than China, it's bigger than the US, it's bigger than Japan.
Now that we've got markets opening up and the challenge of how do we
respond coming out of the global financial crisis, how do we become more
efficient in a global sense in meeting the challenges going forward,
there is huge opportunity in ASEAN.
But also if you look at the Asian region as a whole, ASEAN hasn't just
signed a trade agreement with Australia and New Zealand, it's signed it
with four other countries: China, India, Japan and Korea.
And the other important development over a couple of weekends ago in
Bangkok was the agreement now - now that we've got ASEAN plus six ones
how do we get convergence amongst the six ones? How do we really build
greater economic integration within the region, a region of three billion
people, a region of combined GDP of close to $17 trillion?
This is huge and this is Australia, a 22 million country with a huge
opportunity to go into these markets and on a win-win basis. That's what
we've got to establish. We've got a framework to do it. We now just have
to have the will and strengthen our capacity to do it. That's why we have
to be investing in things like skills, in research, in innovation, in
infrastructure. It's why we need to be pushing the boundaries. Having
opened markets and got into borders, we've almost got to become
borderless in the region. And that means opening up better logistics and
communications so that goods and services flow much more freely across
borders.
It's not just a question of breaking down the borders, it's re-forming
behind the borders and it's moving more efficiently across the borders.
That's the challenge for us and that's the agenda that I want to see us
driving. We certainly will be approaching it from the Australian
perspective but we've got to take this message, we've got to promote that
in terms of the region and then I think the rest of the world will take
note.
COMPERE: In terms of the free trade agreement you just referred to with
ASEAN and the potential to expand that to the other major economies
around the region, where does that leave the free trade agreement with
China itself?
You'd be aware that many in the business sector are saying that that FTA
really is now dead.
SIMON CREAN: That's not the view I get from the business community and I
would argue very strongly that it's not dead. I think if we get Doha
concluded, what's been holding us up with China is essentially
agriculture. It's holding up the FTA with Japan too by the way.
If we can get a better framework out of Doha that actually deals with a
lot of the agricultural issues and then start to talk about the areas of
other opportunity in services, in manufactures, I think we've got a
different frame of mind.
I think the difficulty with the FTAs, Laurie, is done on their own
they're very hard, but done off the back of a successful global agreement
- and think about it, if we've got Doha up and we've got the regional
architecture that I've just talked about that's the better context in
which we go and close the bilateral deal. It's that cascade effect.
You've got to have the primacy of focus at the multilateral level, then
the regional level, then the FTA.
I think the problem with the previous government is they reversed that
order and that's what - we've inherited it, we will continue to pursue
it, but we're trying to put the…we're trying to recalibrate the equation
to better ensure our capacity to close the deal.
COMPERE: Finally, you've now served as a senior minister in three Labor
Governments - the Hawke Government, the Keating Government and now of
course the Rudd Government. You are in fact the longest serving Labor
Minister still in Government.
Despite the long years in Opposition, you must have fulfilled many or
most of your ambitions. What still remains in politics for Simon Crean?
SIMON CREAN: Well, the first point I'd make is that I'm following in a
very good tradition because my father was in the other Labor Government,
the Whitlam Government.
So it's a long tradition of commitment by us and I think it says a lot
about what's in the genes and everything.
What's the ambition? It's to close Doha. It's to get that regional
architecture up in place. It's to position Australia so that it can stand
proud in the world, it can continue to punch above its weight, and secure
its economic future and understand why trade is so important. Not just
what we export, but what we take in as imports, convert and sell back out
to the rest of the world.
That's my ambition. That's what I want to conclude and that's what I'll
hang around to do.
COMPERE: Well, let's hope you get to retire at some stage. It could take
some time.
Simon Crean, let's conclude on that note. Thanks very much for your time
today. Thanks very much for talking to us on Viewpoint.
SIMON CREAN: My pleasure, Laurie.
[ENDS]
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