24 March 2009
Interview - Sky News PM Agenda
Subjects: WTO forecast on exports slump, Doha, FTA talks with China, Chinalco
DAVID SPEERS: Hello, I'm David Speers. Welcome to PM Agenda. When Kevin Rudd meets Barack Obama in the Oval Office later tonight our time, there's bound to be much furious agreements about how to solve the global economic crisis.
As the Prime Minister touched down in Washington, the Bush Administration was unveiling the latest details of its latest effort to tackle this financial mess.
It's $100 billion US of taxpayers money, public money, coupled with private investment to buy up to $1 trillion worth of the so-called toxic assets which are clogging the financial system.
BARACK OBAMA: There is still great fragility in the financial systems, but we think that we are moving in the right direction.
DAVID SPEERS: The plan has gone down very well in the markets. In the United States, the market closed up more than six per cent. It's also gone down well in Australia, which closed up only marginally by less than one per cent, but it's also won praise from Prime Minister Kevin Rudd. He's been talking about this problem of the toxic assets on the bank balance sheets for some time. For months, in fact.
He says it's the core of this whole problem.
KEVIN RUDD: To conclude, however, core focus of this visit - to reaffirm this alliance - core focus of this visit to begin this new and important chapter in the Australia-US relationship. And a core focus of this visit is to deal with a challenge facing all of us around the world right now - concrete action on the economy, concrete action on jobs.
Progress is achieved there and in London, then that's important for jobs in Australia as well.
DAVID SPEERS: But the two leaders won't necessarily see eye to eye on everything. There's the tricky issue of Afghanistan. NATO commanders want Australia to send in more troops. Kevin Rudd says there's no blank cheque as far as Australia's commitments in Afghanistan goes. And, more directly relevant to the economic crisis, there's the sensitive issue of free trade.
President Obama is so far refusing to budge on the generous US farm tariffs propping up the US farm sector - and these tariffs are standing in the way of a final conclusion of the world trade talks, the Doha round of talks.
Well the Prime Minister, it seems, will be delivering a message to President Obama on the need to conclude these talks. I spoke a short while ago to the Trade Minister Simon Crean.
Simon Crean, thank you for your time. The World Trade Organization has forecast a sharp drop, a collapse in world trade of nine per cent this year. That's worse than the IMF and others have been talking about. What will this mean for Australia?
SIMON CREAN: Well it's a dramatic message and it highlights, on the eve of the G20 meeting, the fundamental importance, amongst other things, of concluding the Doha round. What these figures demostrate is the multiplier that trade is in growth going in reverse, so that where you've got negative growth globally, the impact on exports is much greater. What does that mean? It means if we're going to give added benefit to the various domestic stimulus packages, we've got to also work on the multiplier.
That's trade. And that is why we've got to conclude the Doha round.
DAVID SPEERS: We're a pretty trade exposed country, Australia, and if our trading partners - China and Japan in particular - are going down to the extent the WTO is talking about, are you saying that we are now necessarily going into recession in Australia?
SIMON CREAN: No, I'm not saying that, because I think Australia has some important cushions. We'll have to wait for the official figures to see what they reveal. But interestingly, in the figures, it's the developed countries that are taking the biggest hit on exports. Developing countries have not dropped by as much.
Fortunately for Australia, we're in this unique position where we've repositioned the direction of our trade to focus much more on Asia. We've done that over the last 20 years. Asia and the ASEAN region, and China, and India - they're all forecast to continue growing. The extent to which they've put in the stimulus packages into infrastructure, that's obviously of benefit to our resources industry.
Now are we immune from the downturn? No.
Will we be impacted? Yes.
But we are also in a stronger position than most. Now how well we take advantage of that is going to be a combination of two things: one, further trade liberalisation. That's why Doha is important for us. It's why the recently-signed ASEAN Free Trade Agreement will be important for us. We're in a position in which we can try and get market share in what is still a growing segment of the world.
DAVID SPEERS: How much responsibility does the Obama Administration hold for the failure to finalise this Doha round? Because the President is still refusing to budge on these farm tariffs for the American farmers - the subsidies that they currently enjoy.
SIMON CREAN: Well if we don't get Doha up, we will have the US farm bill. It's as simple as that. If we get Doha up, there are going to be important reductions - significant reductions - in that level of support.
DAVID SPEERS: But are you disappointed with Barack Obama's approach so far?
SIMON CREAN: Well he's...I think we will know the answer to that when we see what the US has to say at the G20. Clearly, we're trying to ensure that the G20 becomes another focal point for concluding Doha.
Now it's got many other things on its plate - the financial architecture, the dealing with the toxic debts, the how you get liquidity and lending back into the system.
Particularly important for trade finance.
But if the Obama Administration wants to stop the trend to protectionism - which it's called for - another important reason as to why it should sign up in Doha, because Doha is new insurance against protectionism.
DAVID SPEERS: And is this the message that you think the Prime Minister will be delivering directly to the President in his talks in Washington?
SIMON CREAN: Yes, I've got no doubt that he will be delivering that message, amongst others. This is something that we pushed for very strongly in Washington last year…
DAVID SPEERS: So he'll be saying cut your farm tariffs.
SIMON CREAN: No, he'll be saying conclude Doha. Conclude Doha. Because Doha contains the disciplines in a global context in which there will be reductions in farm support, not just in Europe - not just in the US, but in Europe as well.
But you know, Doha is more than just agricultural access.
It's also the question of product markets, manufactured goods, services, a whole range of issues that are there to produce the stimulus. Understand this, David. Trade is the stimulus. The reason we have to conclude Doha, is because we need all the stimulus we can get to secure the economic future globally, and importantly, for own nation.
DAVID SPEERS: Now you're off to China tomorrow, for some important talks there. I want to talk about a couple of things. The Free Trade Agreement that was talked about, between Australia and China, seems to have stalled. Why is that?
SIMON CREAN: Well I wouldn't say stalled. I'd say that it hasn't moved as quickly in the last three months as we would have liked, but bear in mind it was only last April that we unfroze the FTA, because nothing had happened, literally, for three years under the previous government.
So, we've had three rounds of negotiations. We're not there yet. And, of course, the global markets have…
DAVID SPEERS: What's the sticking point? What's the problem?
SIMON CREAN: Well, there's still the agricultural access. ...There's also the question of investment framework, from our point of view.
There are some issues that the Chinese want to address on the question of investment. We say fine. Let's use the FTA to develop a new framework, because investment is important for us outward, as much as the question of what comes in, in terms of developing our productive base. It's a two-way street…
DAVID SPEERS: Is…
SIMON CREAN: …and you need a new framework to set the parameters for it.
DAVID SPEERS: Is Australia willing to budge, at all, on its foreign investment rules? Because this is a concern for China.
SIMON CREAN: ...I think what I'm talking about is not.....The foreign investment rules through the FIRB are there. Any investment, from whichever country it comes, has to be considered against the national interest and each decision ticked off.
DAVID SPEERS: And that won't change?
SIMON CREAN: What I - no, it won't change. That part of it won't change. That's a separate process, national interest application.
What I'm talking about though, is a new framework that recognises the new inter-dependency. There's large foreign investment from Australia into China. Equally there's large and growing interest by China into Australia. Let's develop a new framework that facilitates the two-way flow of investment.
Because in many senses, investment is the new trade David. No longer is trade simply about producing goods and shipping them. It's very much about investment in situ, in country, either to get access to domestic markets, or to be part of global supply chains.
DAVID SPEERS: Because, of course, the big deal that is currently before the Foreign Investment Review Board is Chinalco's bid to increase its stake in Australia's Rio Tinto.
Now I know the decision is pending on this. Whether it's in the national interests, or not. But can you give us a sense - can you understand China's concerns about this? They simply want to do what you're talking about, invest in Australia. But obviously there's some concern about that happening, about a Chinese state owned company buying up a resources firm in Australia?
SIMON CREAN: No, this is a major investment and it requires proper consideration. It's a decision for the Treasurer, on advice, taking into account national interest.
All of those tests, that consideration, separate issue to what I've been talking about. They're not connected, one's not contingent upon the other. But all I'm saying is, if this question of investment is important now, and will increasingly become important in the future, let's try and build a new framework for it, rather than simply deal with it on a case by case basis.
DAVID SPEERS: But if this case is rejected, surely the Chinese will see it as a sign that Australia doesn't want its investment minister?
SIMON CREAN: Well I think you're just going to await for the decision. I'm not speculating. It's not my call, it's the Treasurer's call. What I'm keen to do is to advance the FTA. From our point of view, the FTA has to be a comprehensively based one. It has to deal with agriculture. I don't see how we can accept any less a deal on agriculture, than New Zealand got.
We want - but we've also got interests in the services sector, very important, because it's a large part of our economy. And I think we've got to deal with this question in a sensible way going forward, on investment. So I'm going to be…
DAVID SPEERS: But you're going to be asked, when you're in China, surely by the Chinese, what's happening with this Chinalco bid? Why isn't it just being given the green light?
SIMON CREAN: ...The Chinese have not sought to link the Chinalco bid to FTA, nor have we, and nor should we. That's a process that has to stand in its own right.
But if we're to go forward, Chinalco won't be the last proposition, presumably, that China is interested in, in Australia. But if we're to go forward, why not develop a new framework against which we know better, the ground rules, on which to go forward. And not just Chinese investment into Australia. Australian investment back into China.
DAVID SPEERS: Simon Crean. Thank you.
SIMON CREAN: My pleasure.
[ENDS]
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