27 May 2008

Press Conference, Parliament House

Subjects: Australia-Chile Free Trade Agreement, Doha Round

MINISTER CREAN: This morning I spoke with my counterpart in Chile, Alejandro Foxley and I'm pleased to announce that we have concluded the negotiations on the Chile-Australia Free Trade Agreement. The formalities of signing it will take place in July when he visits this country, but this is a significant agreement. It's the most comprehensive Free Trade Agreement ever signed by Australia and it is an important signal and significant achievement for Australia's broader trade agenda.

When we came to office we were confronted with a number of free trade agreements in the pipeline. The one that presented itself with Chile presented us, in our view, with the ability to maximise the comprehensiveness of the approach, to underpin our commitment to the principles of multilateralism through a free trade agreement. And that's why we put the extra effort in and committed the resources, the political will, the involvement to bring this about.

I want to pay tribute to Virginia Greville and Trudy Witbreuk and the team that negotiated this. This was a truly a Herculean effort in the circumstances because it covers all areas of interest to us.

It's an agreement of the highest quality on goods. Tariffs on all existing trade will be removed by 2015 and tariffs covering 97 per cent of trade in both directions will be eliminated from day one, which we expect to be January of next year. On services and investment, this is an agreement that reflects WTO plus. It goes further than our commitments in the WTO, but importantly contains two significant mechanisms to capture in the future, any further advancements.

It includes a ratchet mechanism that locks in any liberalisation achieved within Chile on services and investment, and it includes a most favoured nation clause that would extend to Australia any liberalisation on services and investment that Chile grants to any new FTA partner. It's an agreement that gives on government procurement, greater certainty for Australians looking to participate in the Chilean Government's procurement market. And, it therefore is an agreement in terms of goods, services and investment that is the most comprehensive that this country has ever signed.

The economic relationship with Chile is strong and growing. Trade, two way trade, has recently achieved the $855 million mark, but significantly the investment relationship between our two countries is very substantial. Australia is the fourth largest investor into Chile, with foreign direct investment into that country worth around US$3 billion.

This isn't just an agreement significant in terms of the two way trade and the open market liberalisation. It sends a very strong signal to APEC and Chile is a very strong partner of ours in APEC, because we want to re-energise the APEC relationship. I'm attending next weekend, the APEC Trade Ministers meeting in Peru and will have the opportunity to talk to them about the significance of this agreement.

But interestingly, we also look to be developing over the next three years, an important reinvigoration of the APEC agenda. After the Peru meeting this year, the next three countries to host APEC are Singapore, Japan and the US. These have all been strong partners in APEC and we hope to develop the relationship over the longer term to strengthen the importance of APEC in driving further trade liberalisation.

Whatever it is that we achieve out of Doha, we want to build on in APEC and we want to build on again, through our bilateral relations. We want trade liberalisation to be run primarily, the primacy of focus at the multilateral level, but with the regional and bilateral arrangements to be the plusses for the WTO. And obviously the next month is going to be crucial in terms of where the Doha round goes.

The final point I would make is that this agreement also debunks what I understand is some of the rhetoric running around from our political opponents that say that we're not interested in free trade agreements. We always have been. Our point has always been to insist that free trade agreements have their place, that they have to be multilaterally consistent. They have to be enhancements of the multilateral round, not detractions from it. So this is a milestone agreement for this nation, interestingly the most comprehensive that was signed before this in terms of coverage of all sectors was the CER agreement with New Zealand that was signed 25 years ago when Labor first came to office in that period. So, this is an interesting bookend to what has been a pretty sparse interregnum. An interregnum that hasn't seen any multilateral advancements since the Uruguay round, hasn't seen any advancement in APEC beyond the Bogor declaration, both initiatives undertaken when Labor was in office. And so far as the free trade agreements are concerned, this agreement stands in contrast to that which the previous government signed with the US, significantly because it includes sugar. We were prepared to fight for the sugar growers of this country, even if our opponents weren't.

QUESTION: Minister, is there an agreement on FIRB and Chilean investments? Under say the US FTA, there was a link in American investment that would come under FIRB. Is that similar sort of agreement come into play with this one?

MINISTER CREAN: No. I think that we have maintained an ability to still have proposals come through the FIRB and that was because the Chileans required two modifications in terms of their investment regime.

One which went to - and this is technical Virginia [Greville can help] if you're interested - we'd be able to explain this to you. There's a decree law 600. This is a voluntary investment contract. They sought to have it all carved out. We've narrowed that which has been carved out. And secondly, in terms of their central bank restrictions on transfers, there's a constitutional requirement on their part that requires certain provisions. We have succeeded, in our view, in narrowing the extent to which that impacts upon us.

But as a consequence of it and to preserve Australia's discretion to end up denying investments through the FIRB, we've carved out pre-establishment treatment from the ISDS provisions of the FTA.

QUESTION: Mr Crean, will there be a net benefit to agriculture from the [inaudible]

MINISTER CREAN: There will be a net benefit to all sectors. And that is what we have driven this agenda for. That's why we're pursuing, aggressively, the Doha round and the regional architecture. The fact is in the last 50 years, world trade has grown three times faster than world output. The message in that is pretty clear. If a country wants to secure its economic future, it's got to engage with trade and it's got to continue to drive the path for liberalising the trade.

Interestingly in the last five to six years, the rate - the proportionate rate of world trade growth vis-à-vis output has slowed. And that's why it is so important to get that boost again to the world trade impact, the world trade multiplier, by a successful outcome in Doha. We haven’t simply focused on agriculture. Agriculture is important to improve market access. Agriculture, by the way, takes on a new importance now, because of the high world food prices and the issue of food security, particularly in developing countries. But this is an agreement that improves access for agriculture, it improves it for goods and it improves it for services.

QUESTION: Minister, will the winemakers - Australian winemakers be happy about this agreement?

MINISTER CREAN: The Australian winemakers will be very happy about this agreement.

QUESTION: How will that help them? I mean Chile is an emerging competitor in the rival wine market.

MINISTER CREAN: I don't think our winemakers have ever been worried about the competition. What they've been worried about is the market access. Now, of course, they have to compete with the Chilean imports, but that's what globalisation is, that's what market liberalisation is. We have to compete on the quality and we're confident that they can do that.

QUESTION: Mr Crean do you have a rough idea of the overall benefit to Australia from this, like a rough figure of how it will increase trade and which sectors - are we looking at the mining sector being sort of the biggest, biggest winner with its ability to invest [inaudible].

MINISTER CREAN: The mining sector will be a significant beneficiary of this, because of the investment liberalisations. As I said before, Australian direct investment into Chile - we're the fourth largest investor into that country, US$3 billion dollars, the majority of that is in mining. Obviously the mining sector today reflects, very much, what is the changing pattern of trade. It isn't just a question of either producing or extracting the product and exporting it any more. It's very much the direct investment into the country, to take advantage of their markets, develop their resources and take equity in it.

Foreign direct investment, out of the country, now is almost equivalent to foreign direct investment into the country and that has been a huge leap in terms of the direct investment out. This is the reason we've brought Invest Australia and the Global Opportunities program back into the Trade Portfolio, that was in an announcement made in the Budget. And it's why the Mortimer Review has been given a specific reference to advise us on policy prescriptions, to take account of this change in circumstance.

QUESTION: Mr Crean, has there been any development or movement along the release of negotiators that [inaudible] industrial or in relation to the ministerial meeting?

SIMON CREAN: There, interestingly enough, there was overnight the text that’s now come out on services too, so the three sectors now have texts out in the open.

We've expressed our concerns about two things recently. The US Farm Bill, but pleasingly the US President still exercised his veto over that bill. It hasn't mattered, because the Congress has gone ahead and passed it by the required majority. But I think the significant message is that the Administration is still looking for an outcome and obviously if there is a Doha outcome, the Congress is going to have to vote on that.

The second issue goes to the goods text, the NAMA text as you referred to it. This does raise some issues of concern. We want it to be an ambitious outcome, but there has, in the context of the text, been some, in our view, lessening of the potential for ambition for developing countries. In the end this is going to depend on where the negotiations go. You can't get an outcome unless there is ambition, you can't get ambition in agriculture without ambition in goods. And you can't get an outcome overall, in either of those two, unless there's a commitment in terms of services.

It probably means that there will be a ministerial meeting within the next month or so. But the next week, the next week to two weeks in Geneva to not only digest these texts, but to try and move forward and narrow the differences, will determine the precise timetable.

But interestingly enough APEC, next weekend, will provide an important opportunity for discussion amongst key trade ministers, as will the opportunity that presents itself at the OECD meeting the following week in Paris, to try and get that political will, that political injection to, not just drive the issue forward, but send a strong signal about how we might narrow the differences.

QUESTION: [Inaudible]

MINISTER CREAN: Yeah well, I mean I think there are timing issues associated with that, but there is still time to do it. There are difficulties, but it's still doable and I think that it's interesting, not just for the three texts that [have] come out and they've highlighted a number of differences - we're running into difficulties if you like, because we are making progress. Now that is not so much frustrating, that's important advances for us. But we've still got to try and close it and that will be hard. But in the wake of this, because obviously whilst this is an important reflection of our strategy, our approach in terms of FTAs for the future, by far the biggest benefits come, if we can close the Doha deal.

Doha won't be a perfect outcome. I'm not trying to pretend that, but if we get another round, we will get that boost which historically has lifted the rate of growth in world trade, vis-à-vis world output. But significantly it provides the platform around which we can move to further liberalisation through the regional architecture and through our continuing bilateral arrangements. That's the framework we want to bring about.

QUESTION: Minister, on free trading Cabinet submissions, how concerned are you that only six months into the Government, the cabinet is [inaudible] leaking?

MINISTER CREAN: The Cabinet appears to be leaking? I'm not sure that the Cabinet is leaking. But these are issues that obviously you'd prefer they didn't happen. I don't think it's any surprise that Cabinets, and particularly ours, Labor Cabinets - and I've been in a number of them, over a number of years - but there are differences of opinion. It's the robustness of the Cabinet process that resolves those differences. Importantly, it's not just the principle of cabinet solidarity, but the ensuring the documents don't leak is a very important part of that.

QUESTION: Should there be an inquiry into this leak?

MINISTER CREAN: Well that's a matter for the Prime Minister, in his consideration. But it is not in a government's interests, and I don't believe it's in the national interest for documents of Cabinet to be leaked. Cabinets are the most important decision making processes in the country. They have to involve commitment. They have to involve an honesty and they have to involve a rigour. People need to be confident that in expressing their views and then ultimately accepting the discipline, that their views and the circumstances in which they are argued, are not misrepresented. And they can be through selective leaking.

QUESTION: FuelWatch is the one scheme the Government has in the short-term, to try and help bring down fuel prices. Doesn't the leaking of this document blunt your political attack? Does it make FuelWatch…

MINISTER CREAN: I don't think it blunts the political attack at all. I think that FuelWatch, after robust debate, is still, and accepted by a significant number of, not just the Cabinet and the parliamentary party, but on the advice we had and Martin [Ferguson], I see today, has indicated he now accepts this position.

This is a mechanism that brings, importantly, scrutiny to petrol prices - better information. And based on the WA experience, has brought petrol prices down. Now I would have thought that is in the interests of advancing, of trying to give people information, make that information available and put pressure on the market to adjust accordingly. I think it's a good thing.

QUESTION: Have you reached your, your first free trade agreement being your most comprehensive - [inaudible] comprehensive, do you expect the same level of comprehensive agreement to be reached in with China and Japan?

MINISTER CREAN: I would like to think they could be with China and Japan. We've said, in relation to both of them and bear in mind it was Japan that was interested in developing the free trade agreement. The previous government responded to that, we've picked up the mantel. In the case of China, that's been a negotiation that's been stalled for the past three years. We've reactivated it. But in both cases we've said they have to be comprehensive, there can be no carve-outs. We’ve expressed the same in terms of the feasibility study with India and we've insisted with the ASEAN free trade agreement negotiations that they too be comprehensive.

Will they all be as good as the Chile one? I'd like to think they would but let's wait and see what comes out of the negotiations. What we've got to do is to use the framework and this will be our test in the end. One - that they're comprehensive, two - that they add to, they enhance what comes out of the Doha Round.

QUESTION: Do these agreements with particularly Third World countries inevitably lead to a flood of cheap imports of fruit and vegetables and other agricultural products that our farmers can't compete against?

MINISTER CREAN: No, I don't think they do. I mean, the argument about subsistence agriculture. By definition subsistence agriculture doesn't produce surpluses. The question is they need it, it's for their survival. Now I happen to think that our approach, as much as it is about trade liberalisation and freeing up, with developing countries we have the added obligation of the aid dimension, the capacity building, the technical cooperation. The assistance to them in improving the productivity of their land, that can only happen if those countries in turn embrace land reform. And so we've been urging the countries that we've been involved in negotiations with that what we've adopted as the twin pillars approach they equally have to consider in the context of their policy formulations.

There's not much point arguing for the improved market access if you're not competitive enough or productive enough to take advantage of that. So we will - and in the case of developing countries though, apart from the fact that they're nowhere near the same level of development as us, they do need that technical cooperation and support. But we've made a commitment to lift the aid effort, we will progressively do that, significantly in this region in the South Pacific, we're looking at a package of measures that goes to the trade and aid focus, this is the sort of technical cooperation that we should be working hand in glove with, as we are. And bear in mind we have a Parliamentary Secretary for Overseas Aid, we have a Foreign Minister active in this area and we've got the Parliamentary Secretary for Pacific Island Affairs. So I don't think that what we're talking about here poses a threat to them or to us. On the contrary it provides for significant advantage to all of them.

ENDS

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