Sky News, AM Agenda

  • Transcript, E&OE
Subjects: Free Trade Agreement with Hong Kong; Belt and Road Forum; Budget 2017.
16 May 2017

KIERAN GILBERT: Minister as a Member of Cabinet. First of all, reaction to that story. Thisinformation apparently not even shared between the White House and the USallies, let alone with the Russians. What do you make of that story thismorning?

STEVEN CIOBO: Well Kieran,you'll understand I'm simply not going to buy into it. This is something that'sonly in its very early stages. Let's just see what happens in the US. I'm notgoing to start providing gratuitous commentary from Australia's perspective.

KIERAN GILBERT: As I said, you're in Hong Kong to launch those Free Trade negotiations. As Iunderstand it, Hong Kong's already got zero tariffs, so what are you actuallyhoping to achieve here?

STEVEN CIOBO: They do in termsof goods trade, but the real story in modern economies like Australia, Kieran,is about services. Four-fifths basically. 75 per cent, 76 per cent of theAustralian economy is built on services and yet there are only about 22 percent of our exports. We've got terrific opportunity to be able to boost ourservices exports. We've got such a creative peoples. We've got tremendousopportunity around health services, architectural services, legal services,design, a whole range of different areas. I want to make sure that, like HongKong, which is a very services focused economy as well, that we can put ourbest foot forward with what is our eighth largest export market.

KIERAN GILBERT: It is quite a big trading partner as you point out; eighth largest. It's aheavy focus of our services industry as you mentioned in terms of education andother things. But what are you hoping to do in terms of locking in thetreatment of these particular companies, our services industry? What sort ofthings do you want locked in that they can't remove that sort of treatment intothe future?

STEVEN CIOBO: Well lookthere's a number of benefits that could flow if we can successfully negotiate acomprehensive free trade agreement. I want to make sure that it's a very modernagreement. Services, as I said, is a key part of it, but it's also looking atopportunities around the digital economy. Increasingly, we can see Australiahas got some real excellence when it comes to the digital economy and we alsowant to make sure that we lock in place zero tariffs on goods. We'll be able toachieve that through a well negotiated free trade agreement. Each of theseinitiatives can work in conjunction with each other to make sure we canmaximise Australia's national interest. The other key point Kieran is that whenit comes to trade agreements, they're about producing win-win outcomes. It'snot about one side winning and one side losing. I'm very confident that HongKong, given its significance for Australia, and given the way in whichhistorically Australia and Hong Kong have had such a good trading relationship,that we can really maximise potential here.

KIERAN GILBERT: Given that history, which goes back many years, you would think that this wouldbe an easier FTA to secure say, compared to others like Indonesia or India?

STEVEN CIOBO: They all havetheir challenges Kieran. I'm not sure any of them are easy, but we'll workthrough it calmly, methodically. We'll work through it to make sure we canmaximise the best potential outcomes for Australia. As I said, I think there'sreal opportunities for collaboration. There's some very broad and deep capitalpools in Hong Kong. Capital pools that together with Australian knowledge andexpertise, especially around for example, the provision of infrastructure. I'mvery confident we'll be able to do some great things together that's going toyield good outcomes for Australia and good outcomes for Hong Kong.

KIERAN GILBERT: And what sort of time frame are you looking at to get that done and dusted?

STEVEN CIOBO: Well, I'mhopeful that we'll be able to do it fairly efficiently. Our approach going intothis, Kieran, is to look and try to negotiate as comprehensive an FTA aspossible over the next 12 months or thereabouts. If we can do it a little morequickly than that, that would be fantastic.

KIERAN GILBERT: You've spent a couple of days in China. You're at the Beijing Belt and RoadForum on China's initiative to revive the Silk Road, but in a modern context.USD 150 billion that the Chinese are going to spend in terms of infrastructureon that One Belt, One Road idea. Is this something that you think is morestrategic from China or just as much a strategic play than it is economic?

STEVEN CIOBO: I don't reallythink it's for me to provide commentary on what China's strategy is. What I cantalk about is what China has said. China has made it clear that from theirperspective, this is about maximising opportunities to engage in the modernworld around the old Silk and Maritime routes. That makes sense. Obviously,China like Australia, recognises that trade is absolutely crucial to drivingeconomic growth. President Xi in his opening remarks at the conference made itvery clear that China wants to engage in trade and wants to engage ininvestment around the world. And you know, that's the same thing that I try todo and that Australia's doing. We've seen the benefits of flow to theAustralian economy and by enhancing economic growth in Australia we're able tohelp drive job growth in Australia. So our ability to engage with China, to engagemore broadly with the world, to be able to harness some of the initiatives inthe BRI, that is the Belt Road Initiative, all bode very well for a strongerand more resilient economic future for Australia, which means better jobs forAustralians as well.

KIERAN GILBERT: Given the economic argument out of Washington recently and concerns aboutglobalisation and free trade, does this provide an opportunity for the Chineseto step up in terms of leadership in this space, on free trade, by their rolein this One Belt, One Road initiative?

STEVEN CIOBO: President Xi'smade now on two important international occasions very significant speechesaround the importance of trade. That's a sentiment that I share. It's asentiment that I think anybody who recognises that the past three, four, fivedecades, the big increases that we've seen in living standards, the bigincreases that we've seen in terms of economic opportunity, these have beendelivered not solely because of trade but in very large measure because oftrade investment opportunities. Now, we must continue – especially in a lowgrowth environment – we must continue to engage in opportunities to be able todrive investment, and to drive trade, both services and goods. It's absolutelyfundamental to making sure that the Australian economy can reach its fulleconomic potential. Kieran, you know, we've got to do that, if we're going toget job opportunities for Australians and indeed for the next generation ofAustralians.

KIERAN GILBERT: Whatdo you say to those with concerns about that strategic component of the Chineseambition, though, that has been discussed at length in relation to not justthis particular initiative, the One Belt, One Road, but the regional economicpartnership, the Asia Infrastructure Bank, there are a whole range of ways thatthe Chinese are spreading their influence. Do you worry at all? What do you sayto those with concerns about the strategic implications of that growth?

STEVEN CIOBO: You know, there'sa whole industry up there that's all built on analysing strategy here andanalysing strategy there, Kieran. I'm frankly not going to buy into it. WhatI'm going to focus on is pursuing Australia's national interest. I think that'swhat voters expect of the Government. I think it's consistent with our policyapproach.

KIERAN GILBERT: The Westpac CFO has just turned to domestic politics for a moment now. TheWestpac CFO's expressed concerns about the impact of the bank levy onmultinational foreign banks operating in Australia and the bank levy againstour five largest banks would put them at a competitive disadvantage compared tosome of those multinationals from offshore who are operating here. Should thegovernment look at that?

STEVEN CIOBO: No, Kieran, thefact is that what the bank levy does is really two key things. One is it, ofcourse, helps us return back to a stronger and more sustainable fiscalposition. That's really important, all Australians recognise that we must getthe budget back into surplus so we can start paying down the absolute mountainof debt that Labor left behind. The second thing that it does, Kieran, is itencourages banks to use Australian deposits. By using Australian deposits,they'll have over time the ability to reduce their liabilities under the banklevy and that just means that we have a more resilient banking sector inAustralia as well.

KIERAN GILBERT: Soyou don't think that's a concern if the local big banks are put at adisadvantage in that sense to multinationals who are operating here? You don'tthink that's something the Government should consider?

STEVEN CIOBO: I think it's thewrong characterisation. If I was the banks I'd probably be arguing that as wellbecause they're trying to do whatever they can of course to argue that theydon't want this to happen. We've taken this decision because it's an importantpart of bringing our budget back into a more sustainable and long term fiscalsurplus. That's important, but let's be clear, Australians know the big fourretail banks out there have the best footprint in Australia, that's whoAustralians want to bank with. And as I said, if anything, what the bank levydoes is make sure that we provide maximum incentive for Australian banks to useAustralian deposits. That's going to over time reduce their liabilities so Ithink it's actually going to do the exact opposite to what the banks aresaying, which is make Australian banks more responsive and more demanding whenit comes to actually wanting more Australian depositors.

KIERAN GILBERT: Finally,our last question does to the comments of Dr. Ken Henry and the financialreview today in The Australian. He's made some remarks that this takes policyback to the 70s or 80s, that the Government should have been up front and notpretended there's some magic pudding that this can't be borne by customers orshareholders. He says it will be.

STEVEN CIOBO: Well, look, wethink that the banks have a social license when it comes to the provision ofbanking services across the Australian economy and concurrent with that sociallicense is their requirement to play their role when it comes to making surethat Australia's budget position is sustainable over the medium to long term.That's what we're asking of them to do here. Ken Henry, he's made an importantcontribution to Australian policy debate over many years. But let's also makeit clear, Kieran, he's not infallible. This is the guy who, under the firstiteration of the mining tax that he drew up, would have seen Australiantaxpayers refunding coal miners and iron ore miners over the past couple ofyears if that policy had gone in. So, it's not that his approach is infallible.Of course, we're always mindful and respectful of the different points of viewthat people make but ultimately we've taken a decision here that represents thebest interests of the Australian people.

KIERAN GILBERT: Okay. Steve Ciobo, Trade Minister in Hong Kong.Talk to you soon. Appreciate it.

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