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Reporter: Is the Government prepared to compromise on the mining tax?

Mr Crean: The answer to that is that we are in discussions with the companies about the implementation and about the transition arrangements. We will not be compromising on the 40 per cent rate.

Reporter: Have there been concerns raised at senior level in China about the mining tax?

Mr Crean: The issue was raised at senior levels…it was a concern about what was considered to be the potential impact on the price of iron ore. A number of things that need to be said about that. First of all, this is a tax on profits, not on consumption. It therefore won’t affect price, because iron ore trades in a globally competitive market. Secondly, the issue of price, which we understand to be of vital importance to the Chinese economy, the Chinese Government are no longer seeking government intervention to affect price. But we do understand why price matters because of the strategic importance of steel to the Chinese economy and hence the cost of the input. Our point has been to make to the Chinese in response, first of all, the best way to get the price addressed in the medium-to-longer term is to get a better match between the demand for iron ore and the supply of it. Why is the price so high at the moment? It’s because demand outstrips supply, and China is a huge demand. So therefore we have got to increase the supply side of the equation. That’s why we are welcoming to investment, it’s why we have invested heavily in the infrastructure that clears the bottlenecks, and it’s why we have said to the Chinese that in the long term investment in expanded activity is the way forward. The tax itself will encourage greater investment, because the tax allows an immediate deduction for the costs of the investment. The company doesn’t have to wait to turn a profit. And the modeling that has been done in relation to this tax says that this will result in a six per cent increase in investment in the resource sector. That’s addressing the supply side of the equation. When we explain that in our discussions the Chinese were very interested. We’ve said to them that we should keep in touch, keep in dialogue about these issues going forward.

Reporter: I know about an agreement between Tianjin city and Melbourne city that was implemented last year. Are there any other cities that Australia and China plan to?

Mr Crean: One of the important things I have been doing on all of my visits here to China, is not just to go to Beijing and to Shanghai, but to visit the regions of China, to understand the diversity of those regions and look for the commercial opportunities going forward. On this visit, I have been to Tianjin. I have been to Qingdao. I have been to Jinan. And the opportunities in all of those cities are enormous, particularly in the services sector, in financial services, in education and vocational services, and importantly in green building, in the urban development of these cities. Why? Because all of these cities and these provinces are under pressure from the Chinese leadership to reduce their carbon footprint. They are under pressure, in terms of their jobs being on the line. This does help focus the mind. And so what we’ve been able to do is to say strengthening the Australian relationship can help in so many practical ways in which we can meet these challenges. So we have signed MOUs with four different provinces to date. In Shandong Province this week we have agreed to do an MOU with the Shandong Province. We have also signed city MOUs targeting particular sectors and areas of interest. We will continue to pursue what I call this second-track approach. It’s in addition to what we are doing with the free trade agreement, the framework for the nation, but it is a very successful strategy and it is very welcome by the local authorities.

Reporter: How much of a catalyst has the Expo been in initiating trade with China?

Mr Crean: We hope that the Expo does a number of things. Obviously it’s to put Australia more firmly on the map in a much more diversified way. Taking it beyond the narrowness of the trade exchange, even though this is huge volume and value to the Australian economy, the resource base. So branding, presenting that brand, presenting that diversification is terribly important. Secondly, we are seeking to use it as an interface in which there can be a better understanding as to how we can work together to meet the challenges that confront us. To see ourselves not as competitors, but as real opportunities in cooperation. In climate change, in energy, in clean energy, in manufacturing, in all of those spaces, China understands that as it develops it is going to have to increase its services sector. So our ability to assist them embrace a more competitive, innovative environment for that services sector. What trade comes out of it remains to be seen. But in the visit that I’ve been here, for example, we have held seminars with the green building sector. Very important interfacing and some important follow-up areas of cooperation have been struck. We had a seminar last night and a bit of dinner last night around financial services. Today we’ll be talking with the automotives sector. Over the six months going forward Australia will be using this pavilion to engage, to interact, to present what we have got to offer, but to convince it can be part of a win-win outcome for both nations.

Reporter: The Prime Minister is a fan of evidence-based policy. What measurable benefits are you hoping to get from the $20 million that’s been put into Building Brand Australia?

Mr Crean: To take to the rest of the world the diversity of what Australia has to offer the rest of the world. To present what we take for granted but the rest of the world doesn’t know - that whatever we put our minds to, and apply ourselves to, we produce a quality outcome. The international research on this says that the Australian brand is well understood by those who have been engaged with it, but it is not well enough known to the rest of the world. We don’t have to reinvent ourselves, we have to market ourselves better, and we have to market ourselves more than just quarries and farms and a nice place to come and have a holiday. It’s those things but it is much more, and we want the rest of the world to understand that Australia is not just a great place to visit for a holiday, but a great place to invest in, and a great place to do business in, a great place to establish a global or a regional headquarters. And when you look at that presentation you can see why we’re proud of what we’ve got to market, and we will market it extensively.

Reporter: But have you got benchmarks or targets, those sorts of things the PM is so fond of?

Mr Crean: The target is to expand Australia’s trading opportunities. We will do that in two ways. We will do it by opening markets, and that’s why the trade negotiations matter. But we’ll also do it by continuing to be at the cutting edge of innovation, creativity and responsiveness to the needs of overseas markets. We have the competitiveness and the capability. What we have to do is to market that. If we market that more effectively, the dividends and the benefits should show up for the nation.

Reporter: What is your evaluation of the Expo in Shanghai?

Mr Crean: I think the Shanghai Expo is a fantastic experience. I’ve been here all of yesterday, and I’m here all of today. While I have spent some time in this pavilion with our seminars and our business engagement, I have also walked around here. I’ve visited the pavilions of some of our other important trading partners, Japan, Korea, for example, India, Brazil. These are all part of the experience that is here. But it is a great tribute to China and to the city of Shanghai that they have been able to stage this event. The other thing that has struck me greatly about the presentations in all pavilions is the emphasis on sustainability, on green future, and on the youth and meeting the challenges of the youth. This is the space that China understands, as does the rest of the world, we need to focus much more attention on. And the fact that Australia is in the capacity to respond to that space, I think augers well for a strengthened relationship here and in Australia. The other thing, of course, the great thing about these expos is the bringing together of people. The people-to-people contact is essential. There is a lot of people-to-people contact between Australia and China. A lot of tourists. A lot of students. We need to facilitate much more of that, and so the next six months will see us doing it.

Reporter: Do you think the mining tax will set a benchmark for other countries, like Brazil?

Mr Crean: Well, look, the mining tax is not a different concept with what all other countries are doing. All other countries have some form of tax on their resource base. In essence what Australia is seeking to do is to apply the same sort of tax that applies off-shore, where the national government has responsibility, on-shore, where state governments have responsibility. But to get a better return for the nation from our natural resource base. That’s no different than what countries like Brazil, South Africa etc seek to do. The format will vary according to national conditions. We are not seeking to impose an additional tax on top of the state royalties. What we are seeking to do is to provide deductability to the companies for the state royalties, the state taxes that are already being made.

Reporter: You said that the aim of the activity is to expand trade opportunity in China. How much money will Australia invest in China?

Mr Crean: Well Australia’s investment in China has been increasing significantly. We would like to invest much more in China. This is going to be an important focus for the free trade agreement. When we talk trade between the two nations, it’s not just trade in goods, it’s trade in services, and it’s also investment flows between the two countries. The investment is going to determine the future. Our companies, which already have a strong presence here, want to invest more. But there are limitations, restrictions, regulations that prevent a number of those things happening. We are keen therefore to negotiate a framework that frees up some of those restrictions and encourages a two-way investment flow between our countries. Thank you.

Ends

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