19 February 2009
Joint press conference with the Indonesian Minister for Trade, Dr Mari Pangestu
Subjects: Bilateral trade and investment between Australia and Indonesia; Protectionism; China FTA
SIMON CREAN: Well, thank you for coming. We've had a very productive meeting today not just as ministers but also our engagement with the business communities from both countries.
We have resolved today to continue to strengthen the basis of the economic relationship between our two countries. The fact remains that as significant as the Indonesian economy is within the ASEAN group our particular trade relationship with Indonesia is underdone and there is recognised, not just at the government to government level but also at the business to business level the need to strengthen that relationship, build it and diversify it.
We have agreed that the most effective way forward in terms of strengthening the economic relationship is through advancing the FTA in conjunction with consideration of investment facilitation and capacity building.
So the way we intend going forward, at least recommending to our respective governments as the way going forward, to strengthen the economic relationship, is not just in the traditional FTA model but an expanded version that incorporates investment facilitation not just barriers to products and services but also a recognition that if we're to create the environment in which Indonesia can maximise its potential then we need to focus our aid program much more effectively into the capacity building of that nation.
So I'm delighted with the outcome of today's discussions. Mari and I have built a very strong relationship, I think, over the course of the last 13 to 14 months. My very first visit overseas was to Jakarta on the way to the Bali climate change conference. It attested to the importance of the economic relationship but, significantly, it was us starting the groundwork as to where we saw the feasibility study may be eventually taking us.
Twelve months down the track I'm delighted that because the feasibility study has demonstrated that there are worthwhile benefits to both economies in pursuing an FTA that both of us see that as the sensible way forward.
We've had, over that period of time - this is now our 12th meeting, Mari, not just within our respective countries but we have spent time together in the multilateral fora both at the Doha - in the Doha context as well as the AANZFTA, the free trade agreement with ASEAN.
So both of us understand the importance of the bilateral relationship being an enhancement of whatever it is we achieve at the multilateral level and not only am I delighted therefore at the positive determination to go forward but, indeed, to get the sequence right. Our commitment to still trying to conclude Doha, our signing next week of the ASEAN free trade agreement and now proceeding to build on that through the expanded economic commitment between our two countries.
I invite Mari to also address you and then we'll take the questions and the first question in the reverse host order can come from the Indonesian media.
MARI PANGESTU: Thank you, Simon. It's a great pleasure to be back in Australia again, to attend the eighth Australia-Indonesia trade ministers' meeting.
I would like to echo what Simon has already emphasised, that we've had a very successful meeting with some very concrete outcomes and progress on the way forward. We have had a lot of very good meetings in the last few years in relationship to the TMM as well as the trade and investment framework that was developed in 2005 as part of the comprehensive partnership between the two countries.
So it has been a step by step process leading to where we are today and I'm very pleased that what we have achieve today is twofold. The value of having a TMM as part of a trade and investment framework has been to provide a forum where we address specific bilateral issues and not just address them but try to find a solution, including inputs from the business sector so the lunchtime business-government dialogue was also useful in providing input.
But secondly, as a parallel process that's been going on both actually on the bilateral and the regional front, we have talked about how to really have a more comprehensive partnership in a more defined framework and I think we've come a long way in defining that framework with the experts group that was formed to provide recommendations to us and as part of the experts group there was the joint feasibility study on the Indonesia-Australia free trade agreement which was also completed and reported to us at this meeting where it was clear that there were clear benefits for us going further in developing a comprehensive free trade agreement which is the new era of free trade agreements, not the old era where you're just talking about market access.
It's more than that. In the new era of comprehensive economic partnerships we always talk about trade, investment, liberalisation and facilitation and capacity building, especially when you have partners who are at different levels of development.
So the capacity building is very important to ensure that there are clear benefits from the greater market access and greater investment opportunities that are - that lead to a win-win outcome for both sides and I'm glad to say that we are like-minded on this fundamental framework.
So, as Simon has mentioned, we will be recommending to our governments that we should proceed and start the process of considering formalising a comprehensive economic partnership agreement with the recommendations that have been made from the joint study as well as the expert group which identified those various areas and comprehensive meaning in the new era of goods/services investment as well as movement of professional labour and also other areas that are not now normally part of the comprehensive economic partnership agreement where capacity building, once again, will be a key component but as this process starts we do not stop the current process which is already ongoing.
There is already a current process where Indonesia is the major recipient of Australian aid and we hope that this aid will be in parallel, be developed into the investment taskforce that we have created to develop further cooperation especially in the agriculture sector so that in parallel as we are developing this more formal process of the economic partnership agreement we will also be continuing to develop the capacity building that is already an ongoing process of our very strong bilateral partnership.
That's what I would like to add to what Simon has already informed you and probably just to add that I just counted that if we have met 12 months over the 13 months, that means we're meeting each other every month.
CREAN: Every month.
PANGESTU: And we're actually meeting each other next week to cement the Australia - the ASEAN-Australia-New Zealand FTA. Thank you.
CREAN: Okay, so questions. First to the Indonesian press.
QUESTION: [Indistinct question]
PANGESTU: The challenges, I think there are challenges and opportunities, actually. I think the challenges are obviously one of the things that I think was noted during lunch was that, okay, we note that there's been growth and progress but given the proximity and given the strong relationship between the two countries, a lot of people felt that the growth should be higher, the potential has not been totally realised and part of that has been investment opportunities, investment issues, improving investment climate so the Indonesian side has noted some of these issues and it's part of our whole process of improving the investment climate as part of the economic reform package.
So I think we have been able to explain that there are opportunities there that are possible and I think the important - most important thing is to identify - to have a good government-business dialogue as well as business to business relationship and networking.
So the dialogue today and the business meeting tomorrow, plus the conference tomorrow, they are all intended to address this.
On the ASEAN-Australia-New Zealand FTA - I'm just trying to give you some figures but maybe I can give it to you a little later - basically in the way we negotiate anything including ASEAN-Australia-New Zealand, every country has their sensitive sectors and the way to deal with sensitive sectors is normally timeline that you - and especially for the more developed - developing member in the agreement, we're normally given a much longer timeline to comply to the market access opening up and for Indonesia, for instance, the sensitive sectors of dairy and beef, that's been put to the last part of the agreement which is between 2017 and 2020 and that's combined and complemented with capacity building.
So what do you do between now and 2017 is important and that's exactly the parallel process of capacity building that I mentioned earlier. There is already agreement between Australia and Indonesia as well as between Indonesia and New Zealand to have a concrete program of capacity building in the agriculture sector as well as we have created an investment task force that will again focus on the agriculture sector. What will be important is to have complementarity between trade investment and capacity building so that there will be a win-win outcome and, you know, we have this time and we are planning to ensure that the sensitive issues are being addressed adequately.
QUESTION: I'd love to know what Australia exports to Indonesia and what Indonesia exports to Australia.
CREAN: Obviously we've got - our largest - essentially our largest export is beef and live cattle. There's the agricultural base, there's the services base, education services are big as is the presence of our financial services sector in the economy.
So far as the imports are concerned, a lot of textiles, for example.
But I think, to put it in perspective, the ASEAN free trade agreement that we are going to sign next week, ASEAN, as a collection of countries, is Australia's largest trading partner. For us it's worth $80 billion yet Indonesia which is the largest economy with ASEAN only has a two-way trade arrangement with Australia of $10 billion.
That's why we're saying that the relationship is underdone. It's also true that in the case of the Indonesian economy they are a diversified economy, 40 per cent of their economic base is the services sector and it's also true that in terms of developing their resource base the question of investment is just as important for the resources sector as it is for the banking sectors.
That's why the nature of the arrangement that we have committed to go down the path of is a comprehensive one, one that covers not just the product market and the tariff barriers but the services sector, the investment flows and all of the inherent non-tariff barriers that go with it.
A final point I would make, and it's really to underscore what Mari has already said, the way you deal with the sensitivities country to country is to first of all acknowledge that different stages of development in countries require different solutions, different approaches to the solution.
And in the case of dealing with that, just as with the ASEAN free trade agreement where we've got a timetable that differently pitches the trade liberalisation agenda, dependent upon the country's level of development, that has to be an underpinning direction to go in as does the capacity building itself.
Because there isn't much point liberalising markets if economies aren't productive enough or competitive enough to get into them and in the case of developing countries we do have to focus on the capacity building such that they do become competitive and productive, that they can take advantage in a liberalised market to maximise their potential and that's what this commitment is that we've undertaken.
QUESTION: What does Australia hope to import from Indonesia?
CREAN: I think it's wrong to - I think what we're trying to do is to create the framework in which businesses see the opportunities for complementarity. It's not for us to determine what the particular import or export is. The market will determine that and commercial interests will determine it.
Our task is to create a framework that's conducive to encouraging it but working in tandem with the business sector in identifying those opportunities.
QUESTION: During the current global economic crisis, and this is a question for Mari Pangestu as well, how important is it for countries like Australia and Indonesia to resist the temptation to go down the protectionist path and shutting off markets?
CREAN: It's absolutely essential and this is what we're resolved to do. Trade protectionism in the name of protecting jobs strangles jobs and protectionism, no matter how it's dressed up or sold, invites retaliatory action. It sends you on the downward spiral.
We've approached it on the basis that says that trade liberalisation is vital to helping us solve the problems of the global financial crisis because trade is a multiplier of domestic activity. Over the last 50 years world trade has grown three times faster than world output and each time there's been a successful WTO round that multiplier has increased.
So trade is, in fact, a stimulus and if, in fact, countries are being urged to take coordinated action at home to adapt a fiscal stimulus, we diminish the significance of that stimulus unless we also enhance the multiplier. That's why we are so committed to trying to find the solution in terms of concluding Doha but the other reason is important too. You can carry as many resolutions as you like that says we shouldn't allow protectionism, unless you've got disciplines that prevent it they will emerge. They will emerge as people get frustrated with the process of inaction.
So one of the most effective mechanisms for stopping the spread of protectionism is also to conclude the round because by concluding the round you introduce a new level of discipline and just keep in mind the only way we've been able to get the US administration to get effective pullback from the Buy America campaign, is by getting them to accept that they have to honour their trade obligations.
They are rules-based, they have to meet them. What we want to do is to strengthen those rules and that's why the twin impact, trade as a stimulus and new disciplines against protectionism, is the vital reason why concluding Doha has to be part of the solution to the global economic crisis.
PANGESTU: Can I - I want to respond to your question very briefly.
We are like-minded in believing that getting - continuing to have trade and investment flow is definitely the solution to getting out of the crisis, and that completion of Doha is a very - is probably the key - most important key to ensuring that you create the right kind of inv… trade climate for there to be less protectionism being - coming out of the system as we are seeing today.
So, I think we're like-minded on that, and that's why - part of the reason why we meet so often and also have a lot of phone conversations because I think we're both very committed to ensuring that outcome.
But, in parallel, you should also pursue other avenues, such as what we are doing now on the bilateral front, as well as on the regional front, to continue to have a process of increased market opening up and investment facilitation.
And here is exactly where, again, the capacity building complements very much that process. We see this whole linkage between trade investment and capacity building as very much a counter - cyclical process that will help us get out of the crisis faster rather than slower.
It's about new markets; it's about identifying new production base from which to produce, not just for bilaterals. So, in - I think, in addition to your question earlier - you know, when you look at the bil… increasing the bilateral trade and investment, it's not just bilateral, it's increasing the complementarities between us, making us win-win, complementary, to not just service the Australian market or Indonesian market. It's wider than that. It's regional and even can be global, right. And that's exactly the sort of win-win outcomes that we are looking for.
If you just leave it to business to business, at this - you know, and we're talking about the crisis climate that we're in, if you just leave it to business to business right now, you know, and under normal circumstances, that would happen, as long as you nationally create the right kind of investment climate. But, in fact, with this kind of current crisis, I think the capacity building will, in fact, complement and push better the investment - the naturally complementary trade and investment linkages that are there.
QUESTION: Minister Pangestu, are you uncomfortable with some of the protectionist sentiments that are emerging in Indonesia at the moment, buy local campaign, that public servants being told to buy local, the reluctance to reduce tariffs on parts, on [indistinct] car parts and the new restrictions on foreign imports?
And secondly, I was just wondering if you could detail what specifically are the investment hurdles that Indonesia is considering lowering, is that removing the negative list or what are you talking about there?
PANGESTU: For the record, there is no decree on buy local. That there was a - perhaps, inaccurate reporting which has already been corrected with - in a newspaper yesterday, I think.
So just to allay your fears, there is no decree and there's no government move to impose such policies. All countries do this. We - what we do is we are trying - we are promoting local products, but in a promotional sense, okay.
What was your second question? The - on the tariffs. There has been no increase in tariffs. There has been calls for it. But to date, we have not increased any tariffs. So - and we are still planning to fulfil our commitments, both in the multilateral, as well as in the regional commitments.
On the investment front, what we are going to do very soon is to announce the revisions of the negative list, which will make it much clearer on various issues which have been of concern for investors, such as the grandfather clause. That maybe something that's very technical, but basically, it's to ensure existing investors of how to interpret the past policy in relationship to the new policies. And there are other things in there that will make things much more transparent, much more certain, and much, much clearer in many ways. So, we will be issuing that very soon.
QUESTION: Mr Crean, can I ask you, should…
CREAN: Hang on, there's a question up the back first.
QUESTION: [Indistinct] to conclude this agreement [indistinct]? How many more meetings do you have to have before you complete it?
CREAN: Well that's, if I can say, a predictable question…
PANGESTU: [Laughs]
CREAN: … and one that we always refuse to answer. I think, once you try and set deadlines, that becomes the issue.
I think both of us though understand what is important, is for it to start. The fact is, we won't sign anything unless both sides are satisfied with what they're signing, and that is the ultimate protection.
But unless we commence the process, and determine what it is we're trying to achieve, and the inter-operability of these issues of the trade barriers, the trade facilitation issues and the capacity building, that dynamic itself will produce its own momentum.
We'll determine pretty quickly whether there are issues that can be resolved. Some will take time; some are very technical, and we shouldn't kid ourselves about that. But trade agreements are not something that you can conclude overnight. But what we have to do, and where you need to start, is both sides want to go down the path. We've got that. We have to have our own consultations internally. We're doing that. And we've got to start the process. That's the significance of today's announcement.
QUESTION: Mr Crean, what are your particular concerns about market access for Australia into Indonesia?
CREAN: Well, I think that what we've - we've had the opportunity with Indonesia, as we have with every ASEAN country, to essentially signal where we would like to go in terms of market access. We would like all of the markets opened, be they product or services markets.
Now, we know that that's not going to be the case because there are sensitive sectors. We will only overcome the sensitivity if we address the capacity building argument properly.
You can't solve the market access question in isolation of doing those other things. And I think that this is the - if you like, the quality, the dimension, in terms of the relationship, that not only have we come to understand, by dealing with countries at different stages of their economic development, but we accept the intrinsic truth of it. You can't, sort of, keep urging them to drop barriers if they're not in a position, having dropped them, to really compete in them.
So, what we are really trying to do here is to signal that - and what I think it's important for those of you who report on this to understand, is it's not just the traditional FTA approach. It's more comprehensive, because we've got a better understanding, through the constant dialogue that we've had, not just of the opportunities, but of the sensitivities. And I think the most important message we can convey, is that given that matrix of complexity, our determination is to try and pursue, to the utmost potential, the opportunities. Not hide behind the problems.
QUESTION: Minister Crean, can I ask you to expand on your comments on China this morning [indistinct] free trade…
CREAN: Well, hang on, can we just finish the Indonesia [laughs] related - Australia Indonesia-related questions, and then I'll deal with that question.
Now, was there another one here on this?
QUESTION: I was asking about China too.
PANGESTU: [Laughs]
CREAN: All right. Well then…
QUESTION: Thank you very much, Minister. Just wondering if you could expand on your comments this morning on the China investment and the prerequisites that there will have to be a free trade agreement before you approve the Chinalco investment [indistinct]?
CREAN: Oh, it's never been a prerequisite. Every individual case has to be considered in terms of the processes that are in place and the national interest test.
The point I make, is that in this period of global financial uncertainty, and the fundamental integrated nature of economies, that the sensible thing to be doing now is not just looking at issues in isolation and treating them one by one, but looking at the framework that is facilitative of investment. Just as we've come to the decision, in terms of the Australia-Indonesia relationship that investment has to be the key - has to be a key component of any expanded economic relationship, we hold that view very strongly in relation to China. And the only other point that I would make in relation to China, is we have accepted, in terms of the discussions we've already had to date with the Chinese Government, that we are prepared to talk about a new framework for investment, but it's got to be a two-way street. It's not just about China's interests in Australia, it's also Australia's investment interests in China.
QUESTION: So, getting better access from Australian firms in China should be a prerequisite for an approval of these [indistinct]?
CREAN: No, I haven't said that at all. I've said that the individual cases must stand and fall in their own right with the existing processes in place. It has to be considered - the proposition you talk about has to be considered through the FIRB process, and the Treasurer has to make a decision in the national interest.
What I'm saying though, is that just as Australia and Indonesia have understood the importance of investment and investment flows, and the framework for investment between our two counties, that's what we would like to also be the case - see as developed with China.
QUESTION: On that investment issue, do you see within the Indonesian-Australian relationship that investment all being in one direction from Australia and Indonesia, or is there any prospect of coming back in the other direction…
CREAN: Absolutely. It's got to be a two - we're totally consistent with this, it's a two-way street. You see, investment is the new trade. Trade is no longer just about producing goods and shipping them. Trade is also fundamentally about services and it's also investment flows. And why is that? Because investment becomes a critical determinant of your ability to either access global supply chains or access bigger domestic markets.
That's why investment is so crucially important. But investment barriers are different to a tariff barrier, because countries have their own sovereign dimension about who they want to allow in and how they want their own industries to develop. They're the issues that we do need to talk through.
QUESTION: Have there been extra meetings organised with Chinese officials or your counterpart since the Chinalco deal was announced in order to discuss the new investment [indistinct]?
CREAN: No, the - we've had a series of meetings, quite apart from this recent investment proposal, to try and advance the framework in the context of the FTA. There have not been urgent meetings as a result of that proposal to try and advance it.
Okay, thank you very much.
PANGESTU: Thank you.
[ENDS]
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