Guardian Australia Politics Podcast

  • Transcript, E&OE
Subjects: Australia-China trade relationship, Chinese investment in Australia, CPTPP membership, Australia-EU free trade agreement, ISDS provisions.

Daniel Hurst, host: Hi. I'm Daniel Hurst, Guardian Australia's foreign affairs and defence correspondent. Today on Australian Politics, we're joined in the podcave by the Minister for Trade, Don Farrell. Senator Farrell is back in Australia after travelling to Beijing late last week to meet with China's Commerce Minister. Now, this was the first time an Australian Minister for Trade had visited China since 2019. Listeners might remember that during the Morrison government, the Chinese government rolled out a series of hefty tariffs, bans and other restrictions on billions of dollars worth of Australian exports and stopped high level dialogue for about two years. When I recorded this interview with the Minister on Tuesday, the talks in China didn't appear to produce any immediate breakthroughs. However, on Thursday, China's Ambassador announced that China would resume imports of Australian timber. In this conversation, we discussed stabilising Australia's trade with China and the push for a free trade agreement with the European Union.

Minister, thanks for joining us.

Minister for Trade, Don Farrell:  Thanks, Daniel.

Daniel Hurst: So, could you take us inside the room in Beijing once the cameras leave, after the opening remarks; is it quite a rigid exchange? Is it hard to build up rapport when you have to stop for interpretation?

Minister for Trade: Well, not really, to be honest with you. The translation was instant translation, so there was no stopping as we spoke. Then the translators translated into Chinese as the Minister replied, then of course, we could completely understand one another. So, it was actually quite an easy way of communicating.

Daniel Hurst: Did you feel you built up that rapport?

Minister for Trade: Look, I think we established a good relationship. It was certainly a warm meeting. It was a very candid meeting. The Chinese government made it clear what their concerns about Australia's position was, and I obviously made it very clear what our concerns about the trade impediments that continue to cause problems for a variety of Australian businesses were.

Daniel Hurst: You said candid. You're obviously an experienced negotiator. What's your assessment of what the Chinese government wants out of this trade stabilisation process?

Minister for Trade: I think that's what we both want. We want to stabilise the relationship. We've talked down the language that the previous government was using. We have this paradoxical relationship with China. On the one hand, they're by far our largest trading partner. We do more trade with them than we do with Japan, Korea, the United States, the United Kingdom and Germany put together, and yet we have these trade impediments in things like barley, things like wine, things like crayfish meat. So, my job is to stabilise that relationship, get those products back onto the kitchen tables of Chinese consumers, and ensure that the Australian businesses that provide wonderful food and wine get an opportunity.

Daniel Hurst: One of the things at the height of the diplomatic tensions that the Chinese government continued to say to Australia was, you need to decide whether China's rise is a threat or an opportunity. Where do you see it?

Minister for Trade: I don't think that comes into the trade debate. We're talking about Australian food and wine going into China, getting into the hands of the Chinese consumers. We can have that debate as we always had. We've always been selling iron ore, natural gas, all of these other products to China. In fact, one of the interesting things that I discovered when doing a tour of a Chinese supermarket, was just how many Australian products actually are sold into the Chinese market. Dairy products, beer, cleaning products - and I'm told cosmetics is going to be the next big thing that Australia will be selling into the Chinese market. So, my focus has to be on the trade issue. That's certainly the focus of the Trade Minister, and that's how I'd like to deal with it.

Daniel Hurst: China's commerce Minister, Minister Wang, in his opening remarks, raised issues about Chinese investors and businesses being treated, as he says, without discrimination or treated fairly. Did you have a response to that in the meeting?

Minister for Trade: Yeah, look, and we don't treat Chinese investors any differently from those of any other country. I was able to point out some 270 Chinese commercial investments were approved in the last financial year, totalling $4.8 billion. Not only that, there was another couple of thousand real estate investments. So, the reality is that Chinese investors have very little issues with investing in Australia. As we were speaking, we met a company that had made a $2 billion investment in an iron ore project in Western Australia, Western Ridge. So, I don't believe the Chinese government should have any concerns about the way in which we treat their applications for investment. We do it the same for China as we would do with any other country. Of course, if we think that there are reasons why we shouldn't approve an investment, then we make those decisions. But we make those decisions based on our national interest and our national security, and every country does that, including China.

Daniel Hurst: I know you're not the responsible Minister for this, but I'm thinking of high profile things like the ban on TikTok, on government devices, the review into the Port of Darwin, those sorts of things. China has also raised Australian anti-dumping measures on certain Chinese products. Have you given any ground on Australia's own antidumping measures?

Minister for Trade: No, we haven't given any ground on any issue. Let's look at barley, okay? We lost over a billion dollars worth of trade per annum in barley. We were providing very high quality barley to the Chinese market, particularly for use in their beer making industries. That application had been proceeding through the World Trade Organisation. It was on the cusp of a decision being handed down. We took a decision that we would pause that application to give China an opportunity to review the tariff. The tariff on barley is about 80 per cent, a very significant tariff. So, we took a strategic decision which I think demonstrated goodwill toward the Chinese government, and we're hopeful that the process that has now started on the Chinese side to review that tariff, will result in the lifting of that tariff. All the indications from our embassy staff, from the people who were involved in this application, was that it was going well, and we hopefully will get the result we want in a short space of time.

Daniel Hurst: That report was actually due to be handed to the Australian government and to the Chinese government a week or so before that decision was announced and then it was going to be made public a few weeks later. So, have we let China off the hook by sparing them a negative ruling?

Minister for Trade: I don't believe so, Daniel. The process had already taken a couple of years. Even if that decision was handed down and handed down in our favour, it's potentially another couple of years before you get a final determination of the issue. What we've done is truncated that whole process.

Daniel Hurst: That's because there could have been appeals and so forth?

Minister for Trade: There could have been appeals and challenges. They have a range of other legal options to delay the process. What we've done is truncated that whole process of perhaps two years of waiting, to a three month period. I think that's a sensible thing to do in the circumstance and it hopefully gets us the result that we want for Australian barley producers in a much quicker time than it might have been if we'd continued with the World Trade Organisation dispute. More importantly, I think, what I've said to Minister Wang is that we believe that the process that we've set up in respect of barley can also apply to wine. Now, wine has been very badly affected as a result of the bans, whereas barley, they have found other markets, albeit not at the premium price that we were getting in China. But of course, there's been a couple of billion dollars worth of sales lost in the wine industry that haven't been replaced by other markets. As you know, of course, we are encouraging Australian businesses to diversify. We've got a new free trade agreement with India, we've got one with the United Kingdom, we hope soon to get one with the European Union. I'm off later next week to talk to the Americans about reengaging economically in our region. So, sure, we want to stabilise our relationship with China, we want to get our products back into the Chinese market, but for the longer term, we're looking at a trade diversification policy.

Daniel Hurst: And we might get into that a little bit shortly. But on the barley process that's been set up, what happens if at the end of the process, they come back with, say, a 40 per cent tariff rather than 80 per cent?

Minister for Trade: We'll renew our application. That's the understanding -

Daniel Hurst: So if it's not zero, not zero -

Minister for Trade: We want a return to what was the case prior to the implementation of these tariffs. We've made this very clear to the Chinese, that if that result isn't achieved as a result of this process of review, then we're going to renew our application in the World Trade Organisation.

Daniel Hurst: Has to be fully gone, and you're confident that would be a finding in Australia's favour?

Minister for Trade: Oh, look, I think there's very little doubt about that, and I suspect one of the reasons why the Chinese have agreed to go down this path is because they probably think the same thing. So, look, it showed goodwill on our part, but it also showed goodwill on the part of the Chinese that they were prepared to fast track the reconsideration of these issues.

Daniel Hurst: Now, you brought a bottle of wine from your family vineyard?

Minister for Trade: Yeah.

Daniel Hurst: How was that received?

Minister for Trade: That was very well received, and I indicated to the Minister that he would be most welcome to come to Australia for a reciprocal visit. He tells me he had been to Sydney and Melbourne, so I said, look, you're missing out on Adelaide, so come to Adelaide. Of course we've got the Foreign Minister there, I'm there, and the Shadow Foreign Minister is also based in Adelaide, so it would be a great opportunity. If, as a result of that, he gets a chance to visit some of the wonderful vineyards, including those in the Clare Valley, that's going to be terrific too.

Daniel Hurst: And your family vineyard just sells locally to Australia? It doesn't have any exports, does it?

Minister for Trade: No exports, no.

Daniel Hurst: Okay. Now, do you think that China will ever be admitted to the CPTPP trade pact?

Minister for Trade: There's a process involved with the CPTPP. We are currently dealing with the issue of the accession of the United Kingdom. That was a long and relatively slow process. We're coming to the endgame in that process and there's been tentative agreement that the United Kingdom should and can join that group. We've set out, a range of parameters for the consideration by all of the countries currently in that as to how we might proceed. I guess the significant feature of the CPTPP is that any new applicants must be approved by all of the current members of the CPTPP. It's a very long name, isn't it?

Daniel Hurst: I think they added the C and the P after the US pulled out.

Minister for Trade: That's right, that's right.

Daniel Hurst: Rejig it.

Minister for Trade: So, obviously China can make an application and any consideration would be on the basis of precedents that have been set down as a result of the United Kingdom's accession.

Daniel Hurst: Did the Minister raise whether Australia might be open to Taiwan entering this?

Minister for Trade: No, he didn't raise that.

Daniel Hurst: And he didn't give any commitments on that either?

Minister for Trade: No, that wasn't the subject of discussion. He certainly raised that they would like to accede to the CPTPP and I gave him the answer I've just given you.

Daniel Hurst: Two more on China before we move to the broader trade diversification agenda. I think I'm interested that before you went to China, you said you didn't want to just go there for the sake of it, you wanted outcomes. Would it have been better to hold off until there were some more concrete outcomes? Like, what would you say to exporters who might be impatient to see progress?

Minister for Trade: Well, I don't think we built up expectations that we were going to resolve all of our outstanding trade differences. The reality is that those trade differences didn't occur overnight and unfortunately, they're not going to be resolved overnight. What we did achieve with this meeting was a pathway for the resolution of all of the outstanding disputes. We are reinvigorating our Free Trade Agreement and the provisions for processing dispute applications under the auspices of the Free Trade Agreement. So, I'm confident that what we've brought back to Australia is a series of processes which, if we follow through with them, and if there's goodwill on the part of both Australia and China, that we can resolve all of those outstanding impediments. But, look, it's a slow process. You've got to persevere, and you've got to be persistent.

Daniel Hurst: What does the Australian government and Austrade tell Australian businesses if they ask about the risks of doing business in China?

Minister for Trade: As I said before, China is our largest trading partner. One of the things that was marked during the course of my visit last week was the fact that it was 50 years to the month when Australia's first Trade Minister went to China. We've been dealing with the Chinese for all of that period of time, and the reason why they're our largest trading partner is that we've built that trading relationship up. Austrade, DFAT - all of our authorities up there have got a great understanding of the China market. We just want to stabilise that relationship right now and we want to get back to doing what we think we do best, which is provide wonderful food, wonderful wine into the China market.

Daniel Hurst: Before you went to China, you had a call with your European counterpart, and I understand you confirmed that things were on track for a deal by mid-year. What are the sticking points that you're trying to work through?

Minister for Trade: They're the ones that we've had right from the start, Daniel. From our point of view, we want significant agricultural access to the European markets. Europe represents a group of nations, 450 million people, an economy of $23 trillion. So, this is a really big potential market for Australia. So, we want, for instance, access for our meat products, our sheep products, our dairy products. So, all of the things that we think we produce, high quality produce in Australia, we want access into the European market. Well what do they want? Well, they're pretty well known, the GIs.

Daniel Hurst: They want the geographical indicators, the Feta and Prosecco.

Minister for Trade: Prosecco. What are some of the others? Parmigiano Reggiano… and, of course, they want the removal of our luxury car tax. Those are the sticking points.

Daniel Hurst: Are we going to have to give ground on those geographical names in order to get a deal? Do you think a deal is impossible without us giving that up?

Minister for Trade: Look, that's the $64 question, Daniel, and I wish I had the final answer to that. No, I've made it very clear that after World War II, Australia accepted lots of European migrants into this country. They bought their culture, they bought their families, but they also brought their food and their wine, and they've replicated that food and wine in Australia to the benefit all of Australian consumers. It just doesn't represent a commercial interest for them, it represents a personal connection to their homeland. So, all of the producers of these sorts of food feel very attached to the products and to the names. I've tried to explain that every time I speak to my European colleagues. I did it last week when I spoke at the Europe Day event here at the Canberra Hyatt Hotel. There's a deep personal connection of those European migrants with these products and I've tried to explain to the Europeans just how important and how difficult it is to give those things up.

Daniel Hurst: But you're not ruling out giving that up if there's substantial market access?

Minister for Trade: Ultimately, we want a deal. If we're serious about trade diversification, then we need to ensure that we have a variety of free trade agreements, but we haven't made any concessions in respect of these products, and let's see how the negotiations go.

Daniel Hurst: Now, I know you have to rush to get a flight shortly, so the last issue I wanted to ask you about is possibly an issue seen as quite a wonky one, but investor state dispute settlement, ISDS, it's quite contentious, and it's an important issue within the Labor Party because unions and sections of the Labor Party are quite opposed to these provisions in trade deals. What is Labor's policy on this. So, you're not doing any more deals with ISDS now?

Minister for Trade: That's correct.

Daniel Hurst: What about existing deals that have that amendment?

Minister for Trade: If there are existing free trade agreements that have those provisions in them, we're not seeking to overturn them, of course, because they're currently legal obligations that we have. We took this policy to the last election. Why did we do that? Well, we see these provisions as significantly impacting on our ability to make proper decisions in our national interest. To give you an example, the big tobacco companies used these provisions to try and overturn our ban on plain paper packaging. They weren't ultimately successful, but it was a very, very expensive process. We've got Clive Palmer using one of these provisions to overturn some decisions that have been made by government. We don't think they're appropriate for free trade agreements, and in the new agreements that we're discussing at the moment - the European Free Trade Agreement, the Europeans have not asked for these provisions. In the Indo-Pacific Economic Framework discussions, which I'm going to Detroit for next week, they also have not been asked for.

Daniel Hurst: And I think we've decided Australia, New Zealand and the UK as part of the UK joining the CPTPP to not apply ISDS as part of that.

Minister for Trade: Correct.

Daniel Hurst: Why have we felt comfortable doing that with the UK?

Minister for Trade: Look, I think they feel the same threat to their own national interest as we do, and look, at the end of the day, if you've got those sorts of disputes, you don't really want to end up in the courts. They've got a problem with some decision that we've made, then they should talk to us about it.

Daniel Hurst: Trade Minister Don Farrell, thank you very much for speaking with us.

Minister for Trade: No worries, Daniel. Thanks very much.

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