Interview with Martin Soong, CNBC Squawk Box Asia

Martin Soong, host: Let's bring in Don Farrell right now, Australia's Minister of Trade and Tourism, here to talk about trade tensions between Australia and China. He joins us now live from the government seat in Canberra. Minister, great to see you and appreciate your time. Thank you for joining us, and I guess congratulations are in order. Tariffs on Australian barley coming off over the weekend. Tell me, though, I know that you were pretty confident that your case at the WTO, the complaint against those very tariffs, was going to succeed. Was that the thing when you whispered to the Chinese, look, either, you know, you guys let it go or you're going to hear from the WTO, was that pushed it over the edge?

Minister for Trade, Don Farrell: Look, we made a strategic decision Martin, that it was in our best interests to suspend that case, to give the Chinese government an opportunity to reconsider the tariffs. Because even had we won that WTO case, there was still a very long period of time before the issue would have been finalised. This way, we were able to demonstrate some goodwill towards the Chinese government and in return, they have now suspended the 80.5 per cent tariff on Australian barley, and that's obviously very good news for Australian barley producers.

Martin Soong: Indeed. So, we've got - if I'm not mistaken, we've got about a billion dollars' worth of trade in barley back in play. The official Chinese line is that conditions have changed in the Chinese barley market. Are you given to understand that duties that high, 80.5 percent, actually ended up hurting the Chinese as well? It was difficult for them to pivot and find alternative sources.

Minister for Trade: Look, I think what's happened here Martin, is that Chinese consumers who always liked, for instance, beer made with Australian barley, have made their position sort of very clear that they wanted barley back into the Chinese market. The importers also were very strongly in favour of reintroducing Australian barley. So, I think we had a range of factors at play here, all of which pointed in one direction, and that was the lifting of the tariffs, and allowing Chinese consumers to have the terrific experience of wonderful Australian produce.

Sri Jegarajah, host: How much confidence, Minister, do you have that China tariffs on Australian wine exports could be lifted next?

Minister for Trade: We've still got our WTO case proceeding in respect of wine. We haven't suspended that application, and my guess is that the decision is not very far away. We are extremely confident that the 220 per cent tariffs that were applied to Australian wine will be removed. But again, we are happy to have talks with the Chinese Government in respect of that case. We always saw the barley application and the suspension of the barley application before the WTO, as a template for dealing with the wine issue. So, I think now's the opportunity to have some further talks with the Chinese Government. We want all of the impediments removed that currently affect our trading relationship with China. Of course, the other thing we've been doing quite deliberately is diversifying our trading relationships. So, you will have seen in recent months, that we've negotiated a free trade agreement with India, with the United Kingdom, and we're still hopeful that there's a prospect of getting a free trade agreement with the European Union sometime soon.

Sri Jegarajah: I wanted to pick up on the prospect of face-to-face direct talks with your partners in China, Minister. We saw how beneficial that could be when US Treasury Secretary Janet Yellen visited China. Are you and the Prime Minister, or individually yourself or the Prime Minister planning a trip to China to get a feel of what is going on and what is happening on the ground and with a view to managing the relationship in the medium to longer term?

Minister for Trade: Our tactic over the last 15 months has been to try and stabilise our relationship with China, and with some perseverance and persistence, that's what's been happening. It happened last year when the Chinese President met Prime Minister Albanese, then just before Christmas, Foreign Minister Wong flew to China to meet her counterpart, and I've now had three direct meetings with my counterpart. In fact, on the last occasion, I invited him to come to Australia and he accepted that invitation. It's now just a question of time. I think our whole strategy throughout this process has been to de-escalate the issues, to try and resolve the issues between us through dialogue rather than disputation. We think, with some goodwill on both sides, that we can completely stabilise this relationship, and get all of the wonderful food and wine that Australia produces back onto the kitchen tables of Chinese consumers.

Martin Soong: Indeed. So, good news for Australian growers or farmers and also for Chinese consumers. They get that. And obviously, the relationship has improved noticeably, markedly. And what you and your other Cabinet Ministers, as well as the Prime Minister have been doing are starting to bear fruit. But to be fair, the trade situation with China with regards to these tariffs, it's a problem or a situation which your government inherited from the previous one, from the Morrison administration. So, you've had a lot of repair work to do, as I suggested, it seems like it's working. Would it be fair to say that should the tariffs on Aussie wine get lifted by China, that would be a green light and a go for an Albo visit to Beijing before the end of this year?

Minister for Trade: Look, I think the Prime Minister has made it clear, on two things, really. Firstly, he is keen to accept an offer from the Chinese Government to visit Beijing, and I'm sure at some point, given his very busy schedule, he will make that trip. The other point that he has made, and I've made also, is that this is not a transactional relationship. We're demonstrating, I think, goodwill in the way in which we are stabilising the relationship, and that's the way we'd like to proceed to resolve all of the outstanding issues. We've worked well with our officials in China, with industry, between our two governments, and that's what we want to continue to do.

Sri Jegarajah: Very good sir. We do hope that you and your department do keep us updated about the prospects of a visit. We appreciate your time sir. Thank you very much indeed. Don Farrell there, Australia's Minister of Trade and Tourism. Thank you.

Minister for Trade: Thank you.