30 September 2009
Interview on CNBC, Squawk Australia program
Subject: Trade with China, Chinese investment, Doha.
KAREN TSO: Minister, great to have you with us today. Tell us, we're casting back over the course of the past 60 years. How would you describe how the Australia-China relationship has evolved?
SIMON CREAN: Well it's just gone from strength to strength Karen, and I think the other thing about it is the interdependency between the two economies. China, obviously important so far as Australia is concerned for its resources; Australia to China, because of a market when they went through that huge surge in exports. But the other interesting thing over the last five or six years has been the importance of the growth of investment between the two countries, so it's not just a trade in goods anymore. Increasingly it's trade in services, but also investment flows.
KAREN TSO: Well let’s pick up on that point. There are many concerns about foreign investment from China on both sides of the wall. One of Australia's richest men today, Clive Palmer condemning the Government's foreign investment rules as racist, saying it's skewed against Chinese companies. What would you say to those comments?
SIMON CREAN: Well I'd say that was a ridiculous proposition. They're certainly not racist. Absolutely not racist. I don't know how anyone can come to that view...
KAREN TSO: ...Mr Palmer is pointing out that China holds $1.8 trillion in cash reserves, US banks have none. Despite China holding the dough, every investment it makes in Australian must be approved. And by the Government, American can invest up to $950 million without any approval.
SIMON CREAN: America's got the higher threshold because of a free trade agreement and because they paid for it in a free trade agreement.
Clearly it's an issue potentially on the table in our free trade agreement with China that hasn't been concluded. But so far as investment generally is concerned, Australia welcomes foreign investment, it runs a non-discriminatory policy. There have been huge investment approvals given to Chinese investment, particularly over the course of the last couple of years.
Now of course any large investment is required to go through a national interest test. That applies to every country. It is not discriminatory against China and I think Mr Palmer ought to get his facts right.
SRI JEGARAJAH: Minister, how badly would you say relations between China and Australia have been soured by the detention of the Rio Tinto employees in China?
SIMON CREAN: Well it's a separate issue and it's one that we are pursuing, obviously as a consular case. He's been charged in accordance with the law of China. It has to run its course. We've been making all sorts of representations for his wellbeing, his welfare, his access to legal rights, to lawyers etc.
But so far as the broader economic relationship, it has not been impacted. The economic relationship, the investment relationship, goes from strength to strength.
Just on the question of investment though, just going back to that point, I think it's important to understand that in the case of investment it's not just investment by China into Australia. Australia has many interests in investing and expanding its investment opportunities into China. Investment, therefore, is a two way street. And this is why it is so important to ensure that as we go forward to develop the free trade agreement with China, we do understand the importance, not just of the movement of goods, but opening up opportunities for services, and, importantly, for that two way street in investment.
KAREN TSO: Just switching gears a little bit minister. There have of course been a huge trade spat between China and the United State on tyre issues, some really arguing the case that the US is basing this on Labor unions overseas.
When we come back to the Australian point of view, are you facing any pressure from unions here or manufacturers to take a more protectionist stance right now? Because other countries are doing the same.
SIMON CREAN: No, I think that the trade union movement in Australia is very realistic about the importance that trade is to the Australian economy. One in five jobs is trade related and it's not just exports. Obviously a lot of those jobs are also dependent on the movement of goods into the country and their processing within the country, their value adding within the country.
So Australia has accepted the argument for a couple of decades now.... the importance of trade liberalisation and we've conducted studies that show that trade liberalisation has not just increased the nation's production, but it has increased living standards up to $3,700 a year for the average family.
So trade, therefore, is vitally important to Australia and reverting down the course of protectionism in the name of protecting jobs is counter-productive. Of course, it's important that we look to other avenues to protect jobs and to grow job opportunities.
Now as for the tyre dispute between the US and China, this is a very unfortunate development, but unfortunately it's an entitled development...
SRI JEGARAJAH: Minister, if I can just jump in here quickly. If I can just jump in here quickly. Just turning to the bigger picture view on global trade. From your perspective, what needs to be done to get the stalled Doha trade talks back on track and what's at stake for Australia?
SIMON CREAN: Continuing reinforcement of the political will and importantly, we got that at the Pittsburgh Summit last week. A recognition that there's still bilateral issues between the US and China, in particular, that need to be progressed and progressed expeditiously, so we welcome that recognition. What's now got to happen is the translation of that political will into constructive dialogue and conclusion.
And obviously movement to conclude the agriculture and the NAMA negotiations, but also to move forward on services. Now we have a road map to do that. We have a political will to do it. What we've got to do is to translate that in the next couple of months.
But if we can do that then we will conclude Doha and that will be a great economic stimulus for the global economy.
KAREN TSO: Minister, just more local on the Australian dollar, key on the minds of exporters, we're talking this morning as to whether it can get to parity with the US dollar. How should exporters be approaching the currency issue?
SIMON CREAN: I think they have to be realistic about where the dollar goes, since we've floated it - and that's now over a two decade year argument. The fact is, commodity prices do tend to drive our dollar up when they're high. The way you can address that is to diversify the supply operations, increase production in Australia, open up other reserves in the rest of the world where Australia has a competitive advantage because it is one of the most efficient extractors in the world, so it's the services dimension of our commodity base, not just the commodity itself.
But of course the higher dollar does make it harder to export, but on the other hand, the imported components which we convert, value add, which is really what trade is about as well, they become cheaper. So, there's swings and roundabouts in terms of this...Australia, needs to positively look forward to the developing world, has an abundance of demand for energy, for food security and for educational services. Australia is in the box seat to provide those...
KAREN TSO: Which is great to hear for our exporters. Minister, I must leave it there. We're just out of time. Thank you so much for joining us today. Always great to speak with you, Trade Minister, Simon Crean.
ENDS
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