CNBC interview

  • Transcript, E&OE
Subjects: China trade, China relations, EUFTA, Company tax cuts.
19 June 2018

MATTHEW TAYLOR: Steve Ciobo is Australia's Minister for Trade, Tourism and Investment, and he's joining us from Canberra this morning. Steve, great to chat to you, as always. Thanks very much for joining us. Those talks formally kicking off yesterday. How did they go?

STEVEN CIOBO: Well, it was a great launch. It was a launch of, of course, a potential new trade deal between the European Union and Australia. A critical market for Australia, our second largest trading partner. A market worth roughly A$23 trillion, so it was a very big market for Australia and a chance for us to reset, in many respects, our trade investment relationship with the Europeans. Something that we haven't had the opportunity to do for a number of decades.

MATTHEW TAYLOR: What have been the challenges, I guess, over previous years with having a free trade deal or closer stronger trade ties with the Euro zone?

STEVEN CIOBO: Well, we only have the opportunity to revisit sort of the whole comprehensive nature of the relationship every now and then. This is something we've been working on for a number of years to make this happen, so now we've launched free trade agreement negotiations with the European Union. If we can agree, between us, on a high quality, comprehensive trade deal, one that will help to drive strong investment flows and good trade flows, both in terms of goods and services, between Australia and the European Union, then that's gonna produce win-win outcomes good for economic growth, good for jobs. And that's a positive, of course, for both the EU and Australia.

MATTHEW TAYLOR: What sectors in Australia stand to benefit the most? Is it on the agriculture side? Is it on the resources side? What are the early discussions, I guess, suggesting would benefit Australia?

STEVEN CIOBO: Well, certainly, I think it's fair to say that there's two areas of interest. One is in relation to agricultural products, where traditionally over the past several decades, Australia has faced very significant barriers in accessing the European market. And that's something that we expect to be at the core of being able to do this deal. But then there's the broader issue, which is just an opportunity to revisit what we can do in terms of trade and investment more generally. And that's a host of new opportunities, especially in relation to services. Australia and Europe, of course, have highly developed economies, very strong services sectors in both the EU and Australia, so let's maximize the potential for both the EU and Australia to be able to do a lot of business with each other on the services side.

MATTHEW TAYLOR: Okay, like education and the like, I know we already have a strong relationship with parts of Asia on things like education.

STEVEN CIOBO: Absolutely. Education, financial services, just to name two. I mean, there are of course, a whole multitude of others including professional services like architecture, like potentially law, like health services, et cetera. All of these play a critical role, in fact, can be part of doing a good, high quality, comprehensive trade deal because you know, these are industries where there traditionally has been high levels of competition anyway. So they're sort of immune to increased competition, and what we'll be doing for both the European Union and Australia in relation to services, is giving them more opportunity to play on a bigger market, and that's good for both.

MATTHEW TAYLOR: What's the timeline on this? When are you hoping, I guess, to formalize things a step further than what they've just been? And when do you hope to get some sort of agreement, I guess, signed?

STEVEN CIOBO: Well, the very first round of negotiations will be in about two weeks in Brussels, but we will continue to have discussions over the months ahead. Now I'm not gonna predict an end date on this, we certainly don't want it to take forever, obviously, but we want to be able to make sure we get a high quality deal. And there's always a trade-off in the core, between the length of time and the quality of the deal, so we want to move efficiently and effectively towards reaching an agreement. But we also want it to be a good quality deal.

MATTHEW TAYLOR: Okay, let's switch pace now. Of course, just in the last few days, we've seen that the Trump Administration has imposed new tariffs on about $50 billion of Chinese product. That sparked retaliation from China moving closer to, I guess, a trade war rather than just trade spat. What's been your message to both sides, I guess, of this showdown?

STEVEN CIOBO: Well, Australia's a free trading nation. We recognise that free trade, liberalised trade investment, is good for economic growth and it's good for jobs. In fact, Australia's economic track record demonstrates the value of liberalised trade and investment to boosting economic growth and jobs in Australia. With respect to the US and China, of course, we urge caution and where there are disputes we'd encourage both the US and China to go to the WTO, which is, of course, the international arbiter on these matters and try to resolve them through there. There's no doubt that every time we see tariffs imposed and then retaliatory tariffs and that's what we're seeing now, with the US imposing tariffs and then reactions from China, the European Union, Canada, Mexico and others. All that's doing is creating barriers to trade and if there's low levels of trade, there will be less economic growth. Full stop.

MATTHEW TAYLOR: Citi is warning that, one of their main top China economists, that a trade war with the US could hit 1.6 million Chinese jobs and reduce China's GDP by 0.4 percentage points. With China being a significant trading partner of Australia, that's gotta worry the Government?

STEVEN CIOBO: Well, I mean, look, there are a number of permutations and combinations in terms of what could happen. The simple fact is though, if we see a slowdown in global growth, that's not good for anybody. That it clearly is, you know, a negative in terms of economic growth and jobs around the world. So that's the reason why we urge a high degree of caution, we encourage countries to take these disputes to the WTO, and not to impose tariffs because imposition of tariffs simply means that you're imposing on the community a new tax burden. That's all it is, it's a tax burden that's imposed on consumers who then have to pay more, industry has to pay more and they pass those costs on to consumers. They all end up paying more to pay for these tariffs and that's not good for anybody.

MATTHEW TAYLOR: Let's talk about the TPP because I think the last time we spoke we had raised the prospect of the US considering joining the TPP at some point down the track. President Trump said that he would take a look at it, that the deal might have to be a little bit better, but with the escalation in trade tensions, you'd have to think that the prospect of the US joining the TPP is a pretty distant one now?

STEVEN CIOBO: Well, Australia adopted the view that we thought the TPP-11 was absolutely worth pursuing, and obviously, the other eleven, the other ten countries did as well. So the eleven of us collectively formed the view that we want to engage in more trade, we want to have liberalised investment, we recognise that by doing that we're gonna boost each of our economies. So that's what our focus was. In terms of the United States, we were disappointed but we weren't surprised when the US decided to withdraw from the TPP. Now, whether they come back to the table or not, who knows? Time will tell. We've certainly left plenty of opportunity and avenues for the US to come back to the table. But in the interim, the eleven of us will get on and keep on with boosting trade and boosting investment because we know it's good for our economies and it's good for jobs in our local, in our countries.

MATTHEW TAYLOR: Wanna turn briefly, Steve, before we let you go, to Aussie politics. The final sitting weeks before the long winter break. The Government trying to get its income and corporate tax package passed by the Parliament. Do you think you'll be able to get it across the line?

STEVEN CIOBO: Well, certainly hope so. We're working for that outcome. This is part of the Government's comprehensive tax reform plan. We wanna provide more incentive for Australians to be aspirational, and, of course, we're seeking to deliver on that through income tax cuts. We're also looking to flatten out our tax structure over time so that the vast bulk of Australians only end up paying 32.5 cents in the dollar tax. We're also looking to make our corporate tax rate more competitive against OECD competitor countries, which is another key plank in our tax reform plan. So all of this going before the Parliament, and we wanna make sure that we can produce the kind of reform of our tax system that's required to keep Australia competitive into the future.

MATTHEW TAYLOR: We're out of time, Steve. Appreciate you joining us this morning to talk about all those issues.

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