Former Minister for Trade
Australian Commonwealth Coat of Arms

Transcript of doorstop held at Mural Hall, Parliament House

Main topics: South Korea FTA talks, resources tax, Doha

Transcript, E&OE

25 May 2010

SIMON CREAN: Well there's a lot of engagement on the trade negotiation front at the moment. Today we commenced the fifth round of negotiations with Korea here in Canberra. These are negotiations on the Free Trade Agreement which are proceeding extremely positively and quickly. We are hopeful of a breakthrough in these, in this FTA sometime in the future. I can't give you a date, but we're very encouraged by the talks. Last week of course I was in China. The 15th round of negotiations with China recommence next month. And whilst that's been more difficult, we've had important progress in China in what I refer to as the second track approach — looking at regions, looking at sectors, and making progress on that front. Japan — we expect the 12th round of negotiations to commence after their mid-term elections. But I'll also be visiting Japan for the APEC meetings the week after next. China, Japan, Korea — these are all huge trading partners for Australia. We're all in surplus with them. What we want to do is to diversify the engagement with all of those countries beyond the traditional areas, and that's what the Free Trade Agreements are designed to achieve. Tomorrow, I head to the OECD meeting. This will be an important opportunity for us to engage at ministerial level for the first time since the stock take at officials level, in Doha, at the end of March. We will have an important opportunity for a meeting on Thursday morning, in the margins of the OECD meeting. And the purpose of that is to prepare the ground work for a further engagement of ministers in APEC in the lead up to the first of the two G20 meetings this year — the first in Toronto, the second in Seoul. The one in Seoul comes after the mid-term elections in the United States, so clearly we're looking to get momentum into the Doha Round, further progress on Doha, to enable a serious discussion about that at the end of the year. I was very pleased with the discussions I had in China last week. That trade relationship is going very strongly. There is a great desire to diversify the areas of activity, the Expo gave us a great showcase to engage in key sectors in that economy. And the interest in the regions and the cities that we visited in diversifying the economic relationship is very strong indeed.

QUESTION: What's the main problem with the South Korean negotiations? Is agriculture a problem here?

SIMON CREAN: We obviously are looking for important, improved market access in key areas of beef and dairy. There are sensitivities with agriculture with every economy that we face. But we believe that we can work through those differences. There are sensitivities also with automotive. But the fact is we trade both ways in terms of automotive full cars, completed cars, as well as componentry. Now that there is the challenge to car manufacturers everywhere to reassess their organisational base, the way in which they approach markets, the big demand for environmentally friendly cars, I think that there are important complementarities that we can tap into in that sensitive area. But clearly we're very keen as well with the Korean market to also focus strongly on the services sector. Korea is one of those countries that understands the importance of embracing and expanding their own services sector — and the reason for that is because they want to make that jump to a developed nation beyond the manufacturing sector sooner, and with the opportunity that presents itself within Asia, and the fastest growing region of the world, they're keen to embrace it. That happens to suit our agenda. How well it translates in terms of the negotiations, time will tell.

QUESTION: Will you be able to match the US FTA deal with South Korea on beef?

SIMON CREAN: Obviously we're looking for improved access. And let's understand, the US, they have not ratified the FTA as yet. Australia has a very strong presence with beef. They like Australian beef in Korea. It's well established in the market place. Improving access for it, dropping the tariff barriers is going to make us more competitive in what is already a well-established market.

QUESTION: Minister, there's obviously some concern in China about the impost of the mining tax. Do you hold any fears that that concern could perhaps creep in with the FTA negotiations.

SIMON CREAN: No, I'm absolutely convinced it won't creep in to the FTA negotiations. We of course want in the FTA negotiations to have a chapter on resource security. What China wants is security for their resource needs going forward. At no stage in any of the discussions was concern raised about this tax in terms of its impact on investment in Australia. The only time it was raised as a concern was in relation to a potential impact on price. I made it clear that tax will not put upward pressure on price. Why? Because it's a tax on profits. It's not a tax on consumption. In other words what's going to be reduced is the profit share and because these resources are traded in an international market it can't flow through in terms of price. Now they were reassured to hear that. They will continue to raise the issues, I've got no doubt. But when I also went on to explain and I must say I had no difficulty engaging the debate on this is China, I was quite happy to do it because the argument that this will be bad for investment isn't borne out. If you look at the structure of the tax it actually will encourage expansion of investment. Why is that? Because at the moment under the royalties regime, royalties have to be paid before any profit is achieved. The new arrangement is to take account of that fact, allow royalties to be a deduction but only apply the tax when a profit is turned. That's why Treasury modelling has indicated that what this will see is increased investment. Now, what does all that bring you to the conclusion of? If you're going to have increased investment in Australian mining you are going to be expanding supply. Why is price so high? Because demand outstrips supply. If in fact we're meeting the supply side of the equation by restructuring sensibly the tax base that applies to the mining sector that's got to be a good thing in the minds of the Chinese. That's why you haven't heard any threats from them despite what some people have argued about this being an impact on investment.

QUESTION: Minister is there much that the G20 trade ministers and APEC trade ministers can do on Doha given that we have these mid-terms elections in the US coming up?

SIMON CREAN: Elections are always going to complicate trade negotiations and when you've got 153 countries in the WTO that's problematic which ever way you look at it. But the answer to your question is yes and the reason for that is that the G20 understand the importance of concluding Doha because trade liberalisation and Doha represents more trade liberalisation, it is an economic stimulus, an economic stimulus that does not hit the budget. As the G20 leaders are grappling with strategies for sustainable economic growth, as they're being confronted with challenges about exit strategies, more fiscal stimulus et cetera, this is the stimulus that doesn't hurt the budget. That's why the G20 leaders want it. The Cairns Group leaders want it. I'm sure the APEC leaders will reaffirm their commitment to wanting it as will those attending the OECD meeting. The question therefore is how do we get it? But I think if we've got the reinforcement of political buy-in and we've got the focus of two meetings this year of the G20, one of which happens immediately after the mid-term election, if we can use the intervening meetings to build momentum to get the dynamic going to prepare the ground for the November meeting that will be a good achievement for us. I think we can get there.

QUESTION: It's clearly not self evident though is it if it's taking so long for other countries to come to the party?

SIMON CREAN: Well it's not taking countries long to come to the party. There is not one country that doesn't think we should conclude Doha. Not one. There are differences as to how you get there. There are views that there's enough on the table to do it. There are views that are contrary to that, that there needs to be more. But if there's got to be more, then those wanting more have got to give more. Now that's a balance argument that they have to assess that then has to be accepted by others. That is the — if you like, they're the moving parts that we've got to try and deal with at the moment. So what is self evident is people want it. What's not so clear is how to get there. Clearly there are ways to get there. Whether they're sufficient to get every one over the line that's not so clear at this stage but persistence and determination and preparedness to keep engaging around the issues requiring additional work et cetera to be done, that is important. But in the end it's the political will and what we've got to do is to try and narrow the differences because you can't put the complexity of the outstanding issues as they now stand on the table for the G20…but if you can narrow it, even if you haven't finalised every bit that's something that is worth considering by leaders. Those judgements need to be made at the appropriate time. But certainly what is self evident is the absolute desire to get this concluded — a realisation we have to get it concluded. Those two things are an important start. What we've got is the commitment, now what we need is the how. That's it? Okay, thank you very much.

ENDS

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