2 June 2008
Interview – Australian Financial Review, Newark
Subjects: Talks with the US Trade Ambassador, FTAs, WTO
JOURNALIST: Now having the meeting with the US Trade Ambassador, what sort of progress have you been making?
MR CREAN: Well, this is my first meeting as Trade Minister to have the assessment, the update of the USFTA. We did that today and there are a number of issues that obviously mattered on the bilateral front. Our concern with the Farm Bill, our concern with elements of that farm bill particularly aspects to do with dairy and sugar still remain a concern to us. Our concern about what’s happened with the pork producers support mechanisms.
So we’ve had a good discussion about how we can advance the bilateral relationship. That would have been a normal conversation. The good thing out of it today is that we’ve agreed to broaden the nature of the bilateral relationship. To develop it under the umbrella of “AUSMINTT” - Australia US Ministerial Trade Talks. The freshness of the approach, if you like. To use the strengths of the bilateral relationship, even though there are issues unresolved in that, to use the strengths of the bilateral relationship to look forward to how we can develop a strategic approach in the regional architecture. APEC, in particular. And our approaches to Doha.
Now we’ve just come from the meeting of APEC in Peru. So Susan and I have spent the last five days together and we’re going to spend the next three days together – including in Paris at the OECD. But I think that there are a whole range of issues that the nature of our relationship can really help advance. Just take APEC – Australia hosted APEC last year, Peru is hosting it this year. But for the three years beyond this there are Singapore, Japan and the US. All three were original members with us in APEC, all strong supporters in the past of APEC; we’ve got to try and reinvigorate that relationship. There are a number of economic integration issues that APEC is tackling – the concept of the free trade agreement for the Asia Pacific, the concept of model clauses, chapters, model chapters to be developed in relation to what should structure future FTAs in the region. An investment facilitation agenda for the region. Australia is hosting a structural reform meeting in August under the APEC umbrella. How can we work together to really push the agendas on those sorts of issues? And of course, very much the shared objective of concluding the Doha Round this year.
So this was a much broader conversation than has been the case in the past. It’s a broader agenda that we under the new Labor Government are committed to and we want to strengthen. We want to use the strength of our long established relationship with the US to really take it to another level. So I’m very happy with the discussions we’ve had here today. They go beyond simply looking at the relationships within the FTA.
JOURNALIST: The FTA, is it three years old?
MR CREAN: Yeah, well it was, it was 2004.
JOURNALIST: If you look at that, obviously that was implemented by the previous Government but do you see that has actually been a good thing, a success?
MR CREAN: Well, obviously trade continues to grow between the two countries and we were critical of aspects of it at the time. But the fact is it’s an agreement that’s been entered into. It’s signed. We honour it, we’re not seeking to change it. What we’re seeking to do is to build off it. But not just in the bilateral relationship. What we want to do is broaden the agenda based on the strength of the relationship and based on building a stronger relationship. And we think the relationship will become stronger by engaging on a broader front.
JOURNALIST: How strong do you think the relationship is, in terms of the new government and obviously things are a bit blurred with the domestic political situation here?
MR CREAN: No, I think it’s a very strong relationship with the existing Administration. The Congress passed the Farm Bill but the Administration vetoed it. The Administration is strongly committed to the Doha Round. That’s an agenda we share and have been working closely to try and develop the way forward on.
The Administration is keen to re-engage within the APEC region and is supportive of trying to move towards an …(inaudible). They’re all relationships, they’re all issues, they’re all agendas that not only have we welcomed but more importantly we’ve sought to develop a partnership with to drive forward. We were responsible, the last Labor Government for setting up APEC. APEC was set up to be an enhancement of the Uruguay Round. That’s the unfinished business. Concluding another round and enhancing it through the regional structures. The US is going to be a critical component in that. We’re not going to advance that cause if we simply engage through the level of the FTA.
JOURNALIST: But in this current environment, I think you’ve spoken about this before when there was heightened concern about a surge in energy prices and things like that. Is it going to be a major setback to free trade?
CREAN: Well, it can if people revert to protectionist tendencies. That’s always a setback to free trade. But in many senses the challenge on food is the real opportunity to open up. There’s never a better time to reduce agricultural subsidies and market support mechanisms than when growers are receiving record high prices. We’ve got to make sure people see the path to food security and for that matter energy security not through closing markets or restricting markets or thinking you can do it on your own. But by engaging markets and liberalising them. That has to take a number of different levels.
But the biggest gains are going to come through liberalising at the multilateral level. Those gains can then be built upon through regional and bilateral structures but only if they add to those multilateral liberalisations not detract from them. So they have to be WTO plus and genuinely WTO plus. Now there are a number of mechanisms by which you can do the WTO pluses. You can do it regionally, you can do it in clusters, you can do it in FTAs, you can do it in FTAs that are docking mechanisms. You can deal with existing FTAs that build out as regional groupings. There’s a whole range of structures that one can embark upon but you’ve got to have the common rule, the common commitment. That I believe we have with the US. That’s the strength of the relationship that we want to develop with them and not just for the bilateral issues.
JOURNALIST: Is there any attempt at this stage..(inaudible)…. to figure out what their attitudes might be?
MR CREAN: You see I think you get this structure right I think it’s going to be a structure that will transcend the political debate. If it’s a good structure it will be embraced. Susan Schwab has had a long involvement in many of these areas. It’s important to try and lock in what we can now and build on it for whoever the new administration is.
We can’t ignore the politics of the day or the politicking that goes on in election years. They’re issues that will always complicate any round of negotiations, be that at the multilateral or the bilateral level. But you can’t stand still for the electoral cycle. This is a dynamic that we’ve got to build the lasting and enduring relationship for. And that’s what I’ve sought to do as a result of today’s meeting.
JOURNALIST: Talk about issues like food prices and energy but the exchange rate is a big political issue in America as well like with the US dollar. Does that change the way that they talk to you about some of these issues?
MR CREAN: No, not really. I think that we’re both sophisticated economies so we know that the markets set exchange rates in the same way that they set oil prices. Governments are not good at interfering with markets. When they do it creates a whole set of new problems. The Labor Party not only learned that lesson, it embraced it and led in the 80s on that.
We’re not going to revert back and so it isn’t a question of how you try and deal with changing exchange rates, it’s how you liberalise and free up global markets. Because in trade, if you look at trade, world trade has grown three times faster than the world output over the last 50 years. Each WTO round has given world trade a boost. In the last five years, despite one of the longest periods of economic prosperity, the rate of world trade has grown only around twice as fast as world output.
We need another boost. Doha can give that boost. Not exchange rates, not protectionist measures but a new round that seeks to continue down the successful path which is market liberalisation. We won’t get total market liberalisation because of the complexity of the round. 151 countries, development, dimensions, etc, etc, developed, developing countries. But each round produces the boost. We can give it another boost at a time at which the world needs it - global uncertainty, high oil prices, high food prices. What we therefore have to do is to not only conclude the Round, but build a platform off which the other structures can be driven forward as enhancements not detractors. That’s what the agenda’s all about.
JOURNALIST: Are there specific industry issues, you talked about sugar, dairy and pork.
MR CREAN: They are all priorities but I mean the previous government sold us out on sugar so we can’t undo that. But we’ll continue to push for it bilaterally but also importantly multilaterally because if we can get improvements in market access then there will be avenues in those sorts of products. We’ve also got to make sure that decisions that are taken internally are WTO consistent. That’s what the advantage of a rules based system is all about. So we’ll continue to deal with these bilateral issues, that’s the fundamental purpose of this meeting on an annual basis that we have. The significance of this meeting is that we’ve sought to take it further, we’ve got an agreement to take it further. We’ve got an agreement to broaden it and I’m delighted that we have.
JOURNALIST: I think you talked about other FTAs, India and other places. Are there other things happening there in the short term?
MR CREAN: We’ve just done the one with Chile, as you know. And that is a model FTA. That has been widely applauded because it’s comprehensive. No caveats and has important locked in mechanisms so that if liberalisations are made even internally or with other countries they automatically attract to each other. (Inaudible)… Before within the APEC agenda we’re seeking to develop a code, a model sort of FTA. The Chile Australia FTA is a good example of that, it’s the first one that’s been signed under the Rudd Labor Government. And interestingly it coincides with the anniversary, the 25th Anniversary of the last one signed by a Labor Government, the CER with New Zealand Government, which is also a model FTA. I think both of these stamp the sort of direction we want to achieve in bilateral relationships to be enhancements of the multilateral round. Now we’ve got discussions with India, we’ve got them with China, we’ve got them with Japan. We’ve just had a recent feasibility study with Korea. So yes, we’ll be pursuing bilateral arrangements but we’ll be pursuing them in the framework that I’ve just outlined.
JOURNALIST: Do you think that things are more urgent given that commodity prices are very high therefore (inaudible)..?
MR CREAN: What’s urgent in terms of commodity prices being high is the need to successfully conclude the Doha Round. And what’s also essential is that countries don’t see the solution to dealing with food shortages by introducing restrictions on exports. There has been a tendency in some countries to do that and we’ve got to resist that. It’s easier to show the way if we’ve got the liberalisation of markets. Liberalisation of markets provides for improvements in productivity, improvements in market opportunities, diversification, more choices for importers. There’s a whole range of advantages and by far the biggest gains come if we can get the breakthrough in the Doha Round.
JOURNALIST: And have you had the view that maybe fair trade would actually take some of the pressure off [inaudible] prices?
MR CREAN: I’ve got no doubt that freer trade will take the pressure off and part of the log jam associated with freer trade or getting the breakthrough, is people giving up certain arrangements. But the best time to give up some of the arrangements is when they can afford it. I think the significance of all this is to broaden the relationship, that is it.
ENDS
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