Interview on RN Breakfast with Fran Kelly

Fran Kelly: Well it looks like the UK might not be quitting the European Union at the end of the month, after all. British MPs voting overnight to delay Brexit, but any delay still has to get the approval from every single of one of the 27 other EU member states. And all this chaos has repercussions here for Australia too, because threatening the future of a potential free trade agreement between the UK and Australia. Simon Birmingham is the Trade Minister, he's been working on this proposed free trade agreement for some time now. Minister, welcome back to Breakfast.

Simon Birmingham: Good morning, Fran. Good to be with you.

Fran Kelly: The Australian Government had hoped for clarity around Brexit so it could get on with negotiating a free trade agreement with Britain by the end of the year. The chances are that are just fallen significantly overnight, haven't they? With this confusion and delay around Brexit.

Simon Birmingham: Well, certainly the uncertainty does continue, that's if you pardon the pun there. The only certainty is uncertainty when it comes to the Brexit debate. But what we do know is that now, if by some chance the UK Parliament - Westminster - can agree to a deal by March 20, then the date for Brexit will be pushed out June 30. Otherwise it seems as if there's going to be some consideration of a longer term delay, exactly on what grounds that delay would be sought is still not clear. And obviously as you said in the introduction, the EU 27 member states would still have to agree with the UK on such a delay. And the default position remains that if there is no delay, then Brexit will occur still on March 29, and we're of course making and have made as many preparations for that as we possibly can.

Fran Kelly: Well, if Brexit goes ahead on March 29, it will be what's called a no deal Brexit, then Australian exporters could feel the brunt of that because Theresa May's government says that it would maintain a hefty European Union tariffs on lamb imports and impose a tariff equal to about 53 per cent of the EU rate on beef. That would be pretty disastrous for our farmers, wouldn't it?

Simon Birmingham: Well, Fran, that would actually be an improvement for our farmers because, of course, right now whilst the UK is a member of the EU, then their tariff rates are the same as the EU. So what they released yesterday were tariff rates that indicate that if they leave and if a no deal Brexit occurs, then for the next 12 months in no tariff line will we see an increase in those tariffs. And in a number of areas for Australia, beef - which you mentioned - as well as wine, as well as sugar, we would actually see either tariffs reduced or eliminated. Larger quotas available for Australian goods...

Fran Kelly: So the quotas would be larger, there wouldn't be a limit, the quotas would be larger for Australian goods?

Simon Birmingham: Well it depends. In the case of wine, it would be unlimited availability with zero tariffs and that would be a big lift for our wine industry. One in five bottles of wine sold in the UK already is an Australian wine, but our producers pay a tariff, those from France or Italy do not. In the case of beef, the proposal is an increase in relation to the tariff-free quota of the chilled beef. Australian producers would be able to compete for that, and then a reduction in the level of the tariff for anything above that quota, which again would probably be a much more commercial situation. But it doesn't eliminate other complications and concerns that we do have in relation to how tariff quotas would be split between the UK and the EU under other arrangements, and of course the complexity for businesses that currently operate across the UK and the EU. So there's some ups and some downs out of the crisis.

Fran Kelly: Okay. You're listening to RN Breakfast. Our guest is the Federal Trade Minister, Simon Birmingham. Simon Birmingham, if I could move to coal now, last month it was revealed that Australian coal exports were facing lengthy delays to get into northern Chinese ports. It was thought at first it was a ban, you said you didn't think it was a ban. Do we have any more clarity about what the problem is and how long these delays are going to last?

Simon Birmingham: Well, we do still have some delays, and we're monitoring that situation closely, Fran, and we take the Chinese authorities at their word that the Ministry of Foreign Affairs has given- that the Chinese ambassador has given to both myself and Foreign Minister Payne that these are not country-specific, they're not targeted at Australia.

Fran Kelly: So what are they about? Are you clear on that?

Simon Birmingham: Look, there is certainly a higher level of checking, quarantine checks and the like, that seems to be occurring. That may be driven...

Fran Kelly: For what reason, though?

Simon Birmingham: Look, some of the reasons being given are environmental reasons. If that's the case, then we have nothing to fear because Australia's coal is amongst the best in the world in terms of the environmental standards that come when it is used. We do know there are some other domestic protectionist-type pressures that exist around support for China's coal industry and possibly some interest in relation to limiting steel production. So we're trying to understand all of those different moving parts, and of course watching very closely what's happening at each of the ports in terms of the speed of processing times and seeking to try to get clarity around those factors.

Fran Kelly: Okay, but since that go-slow on processing of our coal shipments, China's Environment Minister has signalled further cuts to his country's use of coal, saying coal contributes 60 per cent of China's energy mix and that's still too high for the environment. Are you concerned that the restrictions on our coal are only going to get higher?

Simon Birmingham: Well, it's up to China as to how they set their environmental policies, and of course we do urge China to take ambitious commitments to the Paris Protocol to ensure that transition occurs in their economy just as it in ours. We keep seeing, however, more coal-fired power stations have been built in China and it's clearly a strong long-term demand for coal...

Fran Kelly: But it's waning, that's the point. And it seems to be the same in Japan, which is often quoted too by the Coalition. The construction of another coal-fired power plant's been cancelled in Japan. That brings to three the number of projects axed in the past few months. Is there a danger sign in terms of our thermal coal exports?

Simon Birmingham: And it's important that you do point out it's thermal coal that we're talking about here. Of course, coal is still a very important import in relation to coking coal. In terms of thermal coal, we knew that there will be a transition in parts of the global economy over time. That is something that our own economy has been doing, continues to do, and we work with that. And as I say we do urge countries to make as ambitious a commitment as they can. But the long term projections that there is a strong demand for Australian coal in these markets remain very, very strong, and it is in the best interests of the world in terms of emissions policy that in most of these cases, it's Australian coal that is used because of the high levels of efficiency when it's used and therefore the lower levels of emissions per megawatt hour of energy generated.

Fran Kelly: Alright, Simon Birmingham, thank you very much for joining us.

Simon Birmingham: Thank you, Fran.

Fran Kelly: Simon Birmingham is Australia's Trade Minister.