HardTalk, BBC

STEPHEN SACKUR: Welcome to Hard Talk. I'm Stephen Sackur. Just a few years ago, conventional wisdom had it that globalisation and free trade were unalloyed positive, enriching us all. Now the mood is different. Think Donald Trump, Bernie Sanders and the rise of protectionist politicians in many democracies, but not - it seems - in Australia, a vast land, rich in resources, still eager to expand the scope of free trade. My guest is Australia's Trade Minister, Steve Ciobo. Could Australia feel the fallout from growing disillusionment with globalisation? Steven Ciobo, welcome to Hard Talk.

STEVEN CIOBO: Pleasure to be with you.

STEPHEN SACKUR: Here you are, Australia's Trade Minister in London at an extremely sensitive time, post the Brexit vote. What is your message to the Theresa May Government?

STEVEN CIOBO: We look forward to working with the May Government. The May Government has made it clear, and the Prime Minister herself has said that she'd like the UK to be a beacon for free trade around the world. My view is not dissimilar. My view is that this is a form of engagement, liberalised trade, free trade, which has been policy orthodoxy for 40 or 50 years. It's driven global living standards and really is, in my view, the foundation stone a lot of the good health, the wealth that developed countries around the world enjoy.

STEPHEN SACKUR: But do you accept my premise in my introduction there-

STEVEN CIOBO: Sure.

STEPHEN SACKUR: That actually the tide is turning and that in many of the rich world's democracies no longer can it be a given that people actually want to further expand free trade, open market access and all that goes with globalisation?

STEVEN CIOBO: I don't know if I'd describe it as the tide is turning, but certainly there is an increase in sentiment and some sections of the community are opposed to free trade or at least what they believe to be the consequences of free trade. I think what's happening now at the moment is you're getting a real blend of different forces. In fact, one of the primary forces that I would contend that people are actually concerned about is globalisation and that aspect of automation, which has seen, for example, people in semi-skilled or low-skilled occupations finding increasingly that they're being outsourced to robots and automation.

STEPHEN SACKUR: We'll get back to that and the impact it's having on politics around the world and in Australia as well later on, but let's stick with Brexit for now and the fallout from it. Australia's immediate reaction was somewhat confusing. I want to just read to you what your own boss, Prime Minister Malcolm Turnbull, said. He said in his first meeting with Theresa May that he was hoping for a very strong, very open trade deal with Britain, and he said, "Australia will be getting on to deal with the British very early." Now you came out just a day or two later and gave a very different message suggesting that actually Australia's priority was doing a free trade deal with the European Union, not with Britain.

STEVEN CIOBO: No, I don't think I've ever said that. What I've said is that we want to pursue a free trade agreement with both the UK and with the EU. Certainly our discussions with the EU are more advanced. We're now near the closing stages of a scoping study with the EU. I've hoped that we'll be able to commence formal negotiations around a free trade agreement with the European Union toward the middle of next year. I'd put that to one side and say we're pursuing as well preliminary discussions with the UK around a free trade agreement, but the advice to me from the UK Government is that they cannot formally commence negotiations until such time as the UK exits the European Union.

STEPHEN SACKUR: Right, which we know, I mean they haven't even trigger Article 50 yet, so it can't be before March 2019. So when Prime Minister Malcolm Turnbull was asked - he was asked directly, "Could there be a trade deal with Britain within the lifetime of the Australian Parliament?" which was two years and nine months at the time. He replied, "Absolutely." That's nonsense.

STEVEN CIOBO: No, we're working toward that outcome with the simple fact that when I was-

STEPHEN SACKUR: So you think that you could actually do the deal from an opening gun going off more than two years from now. You'd have just a tiny few months to get a full, free trade deal with Britain done and you think you can do it.

STEVEN CIOBO: It depends on what our starting points are. Australia's starting point is to have as free and liberalised trade as possible. Liam Fox and I have met. We had what I would describe as warm and cordial discussions. We're both very committed towards trying to promote trade. By trade, I'm embracing that, trade in goods, trade in services, investment, digital economy, all of these sorts of matters as comprehensibly as possible. Ultimately, we've got a working group in place now that will help to steer our scoping around what a free trade agreement will look like. Ultimately, though, the speed at which we can conclude such an agreement is yet to be determined.

STEPHEN SACKUR: I love all these words you're using, like scoping and preparatory and all that. To me, it makes no sense. We in Britain, have no idea it seems. Our government ministers, and we've got three of them responsible for Brexit in different ways, they seem to have at the moment no clear idea of what Brexit will look like, so how on earth can you be having scoping talks with them?

STEVEN CIOBO: Because I think that you've got different forces at play and these things can happen in parallel. It's not that they've got to happen one after the other or concurrently. We can actually have a situation where the discussions between the Australian Government and the UK Government about what we'd be able to do in relation to tariff lines, what we'd be able to do in terms of having access to each other's markets, things around professional recognition in relation to services, all these types of issues. We could have those conversations.

STEPHEN SACKUR: Sorry to interrupt, but one example, just a specific thing, it is absolutely unclear whether the government in the end wants us to be inside the European Union customs union or outside. If we're inside it, there can't be-

STEVEN CIOBO: Correct.

STEPHEN SACKUR: …a bilateral customs deal with Australia because they'd be tied to the European Union deal.

STEVEN CIOBO: That's correct.

STEPHEN SACKUR: So how on earth could you be discussing with Britain when you don't know whether they're going to be inside or outside?

STEVEN CIOBO: There's some big calls still to be made by the UK Government, no doubt about it. And whether or not that's a customs union or a different approach is yet to be determined, but what we've done is commence a process, and that process is the joint working group to have discussions. We've got years. Let's not say this has got to be done inside the next few weeks. We literally have years to work on this and we will do so in good faith. As those major decisions are made, though, as we see the characteristics of what the UK exist from the EU ultimately looks like, that of course will inform the ultimate position that we adopt with respect to the UK.

STEPHEN SACKUR: Let's cut to the chase. Based on what you heard from Theresa May, from her lieutenants, Davis, Johnson, Fox, do you believe it's going to be a hard Brexit with Britain completely disassociated from the single European market and the Customs Union or do you believe they still want in some way or other to get a softer Brexit, which will allow them preferential access and stay inside the Customs Union?

STEVEN CIOBO: I think it's too early to tell. What's clear to me is that discussions are ongoing. There will need to be discussions had within the UK Government, a call made ultimately about what it might look like. And in many respects, this is also dependent upon the attitude of the Europeans. So from my perspective, as Australia's Trade, Tourism and Investment Minister, I'm going to work to secure the best deal I possibly can with the UK. It's still early days and I don't think that we need to be too concerned in the short term, as in over the next three to six months, about ultimately where that's going to end up because it will be what it is.

STEPHEN SACKUR: Is it confusing and chaotic talking to the Brits at the moment?

STEVEN CIOBO: No, not at all. I appreciate and understand the size of the challenge that confronts the UK. You're talking about disentangling decades of entrenched relationships in relation to Continental Europe. That's going to take time to work out.

STEPHEN SACKUR: Talking about challenges, you've got one heck of a challenge in Europe as well. An Australian Trade Minister, you've made it plain that your big ... One of your big ambitions. You've got several ... One big ambition is to sign next year or at least get to a place where you can begin to contemplate signing a major free trade deal with the European Union. You have just seen the collapse in chaos of the talks between Canada and the European Union after a huge effort to get a Canada-EU trade deal. Your heart must have sunk to your boots.

STEVEN CIOBO: Let me be a more moderate voice. I wouldn't characterise it as a collapse in chaos. What we saw was the one part of Belgium. It's part of the process that the EU had to move through because of what they call the mixed competencies of the Canada-EU agreement. In other words, it wasn't confined to purely being a decision of the EU Commission. It actually required passage through each of the member states-

STEPHEN SACKUR: But not even just the 28 member states, but actually regional governances within. Like in Belgium, which is where it all fell down.

STEVEN CIOBO: Correct. You had one there that was a thorn in the side so to speak.

STEPHEN SACKUR: It's impossible, isn't it, to do a deal with Europe in these circumstances?

STEVEN CIOBO: No, I don't think so. One of the options that I'll be turning my mind to is whether or not we stick to an agreement that is purely within the competence of the EU Commission. That of itself would overcome a significant challenge –

STEPHEN SACKUR: That would have to be a much smaller scale deal.

STEVEN CIOBO: These are all the kinds of issues –

STEPHEN SACKUR: So you're backing away from a big Aussie-Europe free-

STEVEN CIOBO: No, no, not at all. We want to pursue a comprehensive, free trade agreement. This is precisely why we have the scoping study that's underway. And look this will inform the Australian position as much as it informs, I've no doubt, the European Commission position. In many respects, there's a pending court case, as I'm informed, within the EU about where the competencies actually lay between Belgium, for example, or Brussels, I should say, and the balance of the member states.

STEPHEN SACKUR: Yeah, you see, Peter Mandelson, the former EU trade commissioner, he looked at what happened, the breakdown in the talks over Wallonia, the Belgian regional government's decision to reject the deal. He said, EU trade policy won't survive in this world where trade agreements have to be democratised by every single national parliament within the European Union including sub legislatures too. He says, "If this is the case, trade policy is impossible".

STEVEN CIOBO: Well it makes it challenging. It certainly does. Perhaps, for me as an Australian, coming from a federal system, where we have of course the central government and state governments, as well as territory governments, I'm perhaps a little more used to dealing across a federated system, which in many respects is also representative of the EU style. So these are challenging times. There's no doubt about it. But if I was pessimistic about it, I wouldn't be here. I wouldn't be having these conversations. I remain an optimist about what we can achieve together.

STEPHEN SACKUR: Well maybe you're optimistic because you're sort of ignoring reality. You only have to look at the street protests in Paris, in Berlin, across Europe. Actually you can consider what happened with Brexit, where the British public appeared to put restricting freedom of movement of labour far above access to the single European market. Look at all these trends and you have to say that the received wisdom about the positive effects of free trade, free markets and everything from labour to goods, those days are over.

STEVEN CIOBO: But you know Stephen, I grew up at a time when rioting and protesting farmers in Europe was on my news on a nightly basis anyway. I'm not sure things have changed –

STEPHEN SACKUR: It's not just the farmers now. It's people who work in industry. It's people who work in services. It's people who think that, as I say, this received wisdom that we've operated under for the last two, three decades no longer works for them.

STEVEN CIOBO: But let's contemplate the alternative. The alternative is a retreat into protectionism. The alternative is to put up tariff walls. The alternative is to see the continuation of substantial taxpayer subsidies of inefficient and comparatively disadvantaged products and businesses and manufacturing lines and all these sorts of things.

STEPHEN SACKUR: That message is precisely what we're hearing not just, as I mentioned at the beginning, Bernie Sanders, his message, which won some real support amongst Democrats in the United States in the primary phase of the US presidential election campaign, but now Hillary Clinton. Hillary Clinton has backed away from the Pacific Trade Partnership, which Australia wants to be part of, which was going to slash tariffs across 12 nations around the Pacific Rim. Clinton has declared she's now against it. It's effectively dead in the water.

STEVEN CIOBO: Well we've got to see, I think it's too early to make a call on that as well. Having spoken with many people who are, for lack of a better term, students of congressional politics, they tell me that they're cautiously optimistic –

STEPHEN SACKUR: So you think Hillary Clinton is not telling the truth about her change of heart?

STEVEN CIOBO: No, because the Congress is a different system to the presidents. Yes, there's a presidential campaign under way, but make no mistake, there's also the congressional process. And of course, it's the Congress that ratifies the TPP, or the Trans-Pacific Partnership. They say that they're cautiously optimistic about the chances of congressional ratification in what's called the lame duck session, that period post presidential election, prior to inauguration.

STEPHEN SACKUR: You said to me, "I'm an optimist", and my goodness, you're an optimist because I've just referred you to Hillary Clinton. Who knows what's going to happen in the US presidential election because we're speaking before it, but if you listen to the rhetoric coming from Donald Trump, which actually gets his crowd really fired up. In some of the parts of the United States where joblessness is high, where people feel neglected and ignored by the government. Coming back to this idea about a mood that has fundamentally changed, which you in Australia frankly seem to be slow to react to.

STEVEN CIOBO: It's not about slow to react to. I think the pervasive mood in Australia is different. Australia is part of the most dynamic growth region on the planet. Asia is enjoying strong levels of growth. Asia is enjoying an approach towards trade that still holds close the many myriad of benefits that flow from liberalised trade. The fact is that in Australia, for example, our agricultural sector exports two thirds of what they produce. We're a very trade exposed nation. We recognise the benefits that flow from engagement in liberalised trade.

STEPHEN SACKUR: It's very interesting you put it like that. I'm glad you've directed me toward Asia because we can't discuss Australia's trade and economic policies without thinking about you and China, your biggest trade partner. The government signed a free trade deal with the Chinese in December 2015. You are now charged with making sure it works well. The Economist magazine recently said this, "Australia is over-exposed to the fortunes of China." Do you agree?

STEVEN CIOBO: No, I don't. I think that we've been very conscious about the need to maintain balance in our relationships. In fact, in my respects, if you look at our approach on the trade front, yes, we've concluded a free trade agreement with China. We've also concluded a free trade agreement with South Korea, one with Japan. We're vigorously pursuing of course the Trans-Pacific Partnership and the 12 member countries of the TPP.

STEPHEN SACKUR: Vigorous is not a word I would apply to it anymore, but we've discussed that. Let's stick with China.

STEVEN CIOBO: Well we are vigorously pursuing it –

STEPHEN SACKUR: That's because you're an optimist, but let's get real. Let's talk about China.

STEVEN CIOBO: Likewise, we're also pursuing a thing called the Regional Comprehensive Economic Partnership, which is a 16-member-state regional agreement. Plus, we've got in place a comprehensive strategic partnership with Singapore. To go very directly to your question, the reason we have interests in all of these areas is directly because we are diversifying and continuing to focus on the myriad of opportunities that our region presents.

STEPHEN SACKUR: Yeah well great, but the thing is cracks have already started to develop in your trading and economic partnership with China. You only signed the agreement what? Ten months ago. Already, the Chinese are furious. You - I don't know whether it was your decision personally, but the Australian Government has blocked two key deals that China wanted to do in Australia, one concerning Ausgrid, one of the big power suppliers in New South Wales and another one I think concerning one of the biggest land holders in Australia, cattle ranchers across the country, which the Chinese wanted to buy. That was blocked too. And the Chinese say that this is Australian protectionism rearing its ugly head.

STEVEN CIOBO: Well again, I just don't agree with your characterisation. If you look at, for example, our framework that applies to foreign investment into Australia, Australia remains a very liberal democracy when it comes to foreign investment. We recognise foreign investment as being crucial to driving growth. If you look at the number of applications that are made to our Foreign Investment Review Board, which is the body charged with protecting the national interests with respect to foreign investment, they receive about a thousand applications a year. In the last 15 years, they've had roughly 15,000 applications, and we've said no five times. Five out 15,000 represents a fairly liberal approach.

STEPHEN SACKUR: Well you've said no twice in the very recent past and the Chinese are furious about it. To many people, including [inaudible], it makes no sense at all. Your Treasurer Scott Morrison and he said, "We blocked the Ausgrid deal ... The power deal". He said, "For reasons of national security". That made no sense at all because the Chinese already own substantial chunks of other major energy companies in the United States. How can it be a question of national security?

STEVEN CIOBO: Stephen, with the greatest respect, it made perfect sense. I've had the benefit of being briefed on what the national security concerns were with respect to that particular –

STEPHEN SACKUR: I'd like to know what they are.

STEVEN CIOBO: You understand I'm not to –

STEPHEN SACKUR: Despite all your warm words about Chinese, you just don't trust the Chinese. Is that national security?

STEVEN CIOBO: No, of course not. Like any country, we protect and uphold very closely our national security. You'd understand I'm not going to go into the full detail –

STEPHEN SACKUR: No, I'm sorry. I don't understand at all-

STEVEN CIOBO: I'm not going to go into things that are –

STEPHEN SACKUR: You're talking about the Chinese that are the closest economic partner you have. You are staking a lot of Australia's future on this warm relationship with China. You've got a free trade deal and now you're telling me, "Oh, the Chinese can't buy a stake in an Australian power company because of reasons of national security. I don't get it.

STEVEN CIOBO: Because there are particular features of this asset that did trigger concerns in relation to national security. Frankly, it wouldn't have mattered whether it was Chinese or Canadian interests or American interests. It would not have – or for that matter, or UK interests. It would not have mattered what the interests were. The particular features of this asset meant that it had to be retained within Australian hands.

STEPHEN SACKUR: And the land deal, let's just talk about that for a minute because the guy who was the chairman of the company, HAO Capital, huge Chinese company that wanted to buy this big, ranching cattle operation. He said when he was knocked back, "Turnbull's Government", that's your government, "Has got a protectionist attitude now towards Chinese and foreign investment, and it will discourage investors from taking further money into Australia".

STEVEN CIOBO: One, that's not accurate. Two, saying no five times out of roughly 15,000 is hardly protectionist. And three, we're continuing to see great interest and appetite for investment into Australia. We continue to see a diversified approach. The fact is that Chinese investment in Australia is quite small relative to, for example, UK investment into Australia, American investment into Australia. So ultimately, our economy does well from investment –

STEPHEN SACKUR: You've rather elegantly twisted that into an argument about inward investment. We're talking about overall economic and trading partnerships. China is number one by a mile.

STEVEN CIOBO: Absolutely.

STEPHEN SACKUR: It seems to me there's something interesting going on. Malcolm Turnbull has been very critical of China on the political level. In July, we had this major moment when your government, along with the Americans and the Japanese, condemned China for its policies in the South China Sea following an international court decision backing the Philippines' claims to certain disputed islands. Australia has made a strong stand on this. Seems to me, your government has decided that it needs to signal to the United States that despite your strong economic ties to China, you are still four square behind the US when it comes to your geo-political posture in the region. Am I right?

STEVEN CIOBO: Well Australia has always been able to pragmatically manage the different relationships and interests in the region.

STEPHEN SACKUR: Have your cake and eat it. Isn't that what you're trying to say?

STEVEN CIOBO: No, I'm saying we handle it in a mature way. Frankly, our relationship with China is a very mature relationship. There will from time to time be trade or political irritants in the same way that we have those irritants from time to time with Indonesia or with the United States. That is part and parcel of being a mature democracy. We've put forward our point of view in a consistent way.

STEPHEN SACKUR: It comes back to my point and The Economist magazine's point more to the point about a danger of being over-exposed to China. You know what one state newspaper in Beijing described Australia as the other day? "A paper cat that will not lash". So all these warm words that you've been talking about with Beijing of late, they could in a flash be turned into something much more negative.

STEVEN CIOBO: As I said, we continue to diversify our interests. We've got strong relationships throughout the region. We're fortunate. We are poised in the same time zone as, I said, the most dynamic region in the world and we continue to diversify our interests. Ultimately, what it comes down to is this, is the relationship with China one that's of mutual benefit? The answer clearly is yes. The great thing about the relationship that we have with China given it is our largest trading partner is that it is a very mature relationship. So we can have frank conversations around issues. We indeed held our position consistently in relation to the South China Sea, but by the same token, we could also have a great relationship with Japan, a great relationship with South Korea and maintain our very strong defence ties with our lifelong friend, the United States.

STEPHEN SACKUR: A final thought then, you've been steadfastly optimistic throughout this interview, and you've portrayed Australia as very open, very economically liberal.

STEVEN CIOBO: Sure.

STEPHEN SACKUR: But you're not immune to the pressures and political tensions I've talked about elsewhere. A very interesting poll recently on ABC Australia, they found that a clear majority of the public now favour a ban on Muslim immigration. You're a country that still need immigrants to feed your economic growth. What do you think about that, the changing mood in your country particularly with certain kinds of immigration like, it seems, Muslim immigration?

STEVEN CIOBO: I think the primary concern that really that poll reflects is a sentiment about values. I've consistently made the point in public life that Australians want are people that are emigrating who share our values. Where they believe there's an inconsistency in values, that's often the main point of conflict.

STEPHEN SACKUR: You're not trying to tell me that you believe Muslims can't share Australia's values, are you?

STEVEN CIOBO: No, I'm saying the exact opposite to that. What I'm saying is that where there is a sharing of values, that's where we get an alignment that people are comfortable with.

STEPHEN SACKUR: I'm just very unclear now whether you think that those Australians who want to see a ban on Muslim immigration are right or wrong.

STEVEN CIOBO: I'm opposed to a view that says, "Let's ban all Muslims." I think that that's a complete knee-jerk reaction. Let me be clear about that.

STEPHEN SACKUR: You're very worried about what's happen in Australia [inaudible] cultural opinion, public opinion I think.

STEVEN CIOBO: Part of my responsibility as a public leader is to be a clear advocate about what it is that Australia stands for and what it is that we want. You're right. We need immigration. In fact, Australia's population is still growing in part because of our natural birth-rate, but also because of immigration. That is crucial to the long-term economic interests of our country. When it comes to those immigrants that are coming into the country though, Australians expect of government that we have in place rules that ensure consistency of values. That's what I was talking about. That's not about precluding Muslims, and this is my point. If you're a Muslim and you share Australian values, fantastic, you should be able to get into the country, but if you're someone who doesn't share the pluralistic values that Australia has, then I think Australians expect us as a government to say look, "You shouldn't be coming in."

STEPHEN SACKUR: We have to end there, but Steven Ciobo, thank you very much for being on HardTalk.

STEVEN CIOBO: My pleasure. Thank you.

STEPHEN SACKUR: Thanks very much indeed.